Slate Grocery REIT Q2 Earnings Call Highlights

Key Points

• Leasing momentum remained strong: Slate Grocery REIT leased more than 569,000 square feet in Q2, with renewal rents 16.7% above expiring rates and new leases 41% above comparable in-place rents. Portfolio occupancy was 93.6%, while average in-place rent of $13.10 per square foot leaves room for further growth.
• Operating performance improved: Same-property NOI rose 2.3%, or $3.8 million, on a trailing 12-month basis. More than 90% of the REIT’s debt is fixed-rate, with a weighted-average interest rate of 5%, supporting near-term financing stability.
• Vacancies and strategic actions remain in focus: Management is re-leasing approximately 260,000 square feet of recent vacancies and has already leased four of the 10 largest spaces. The strategic review continues without an update, while the Heritage Heights property sale is expected to close in Q3.

Slate Grocery REIT TSE: SGR.UN reported second-quarter leasing activity of more than 569,000 square feet, with management citing higher rents on both renewed and new leases and continued favorable conditions for grocery-anchored retail real estate.

Chief Executive Officer Blair Welch said renewal leases during the quarter were completed at rents 16.7% above expiring rates, while new leases were signed at rates 41% above comparable average in-place rent. The REIT’s portfolio occupancy stood at 93.6%, and its average in-place rent was $13.10 per square foot.

“Our portfolio's average in-place rent of $13.10 per square foot remains well below the market average,” Welch said, pointing to potential for further rent growth as leases roll over.

Same-Property NOI Rises

Adjusting for completed redevelopments, Slate Grocery REIT said same-property net operating income increased by $3.8 million, or 2.3%, on a trailing 12-month basis.

Welch said the grocery retail sector continues to benefit from elevated construction costs, tight lending conditions and limited new retail development. Those factors have constrained retail availability and strengthened landlords’ pricing power, he said, supporting tenant retention and rent increases upon lease expiration.

Management also highlighted its debt profile. The REIT reported a weighted-average interest rate of 5%, with more than 90% of its debt carrying fixed interest rates. Welch said this structure provides stability for near-term financing costs.

The REIT’s weighted-average capitalization rate remains above the weighted-average interest rate on its outstanding debt, allowing it to maintain positive leverage, according to Welch.

Vacancy Leasing Efforts Underway

During the question-and-answer session, Senior Vice President Allen Gordon said the REIT recorded roughly 260,000 square feet of tenant vacates during the quarter. He said management had anticipated most of those departures and had begun efforts to re-lease the space.

Gordon said Slate Grocery REIT has already leased four of its 10 largest vacated spaces and has prospects for several others. The company also has letters of intent in progress for some larger vacancies, he said.

Strategic Review Continues

Asked for an update on the REIT’s strategic review, Welch said there was no new information to provide. He said the special committee is continuing its process and that the company would communicate an update promptly when one becomes available.

Chief Financial Officer Joe Pleckaitis said costs associated with the review did not flow through funds from operations during the quarter, as they were added back to FFO.

Heritage Heights Sale Expected in Third Quarter

On dispositions, Pleckaitis said one property, Heritage Heights, was held for sale at the end of the second quarter. He said the REIT expects to close the transaction within the next several weeks, subject to normal due diligence, and plans to report the sale in the third quarter.

About Slate Grocery REIT (TSE:SGR.UN)

Slate Grocery REIT is an owner and operator of U.S. grocery-anchored real estate. The REIT owns and operates critical real estate infrastructure across major U.S. metro markets that communities rely upon for their daily needs. The REIT's resilient grocery-anchored portfolio and strong credit tenants are expected to provide unitholders with durable cash flows and the potential for capital appreciation over the longer term.

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