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TORONTO--(BUSINESS WIRE)--Nov 1, 2022--
Slate Office REIT (TSX: SOT.UN) (the "REIT"), an owner and operator of high-quality workplace real estate, reported today financial results for the three and nine months ended September 30, 2022.
“Our transaction activity during and just after the third quarter further enhances the stability of the REIT’s portfolio and highlights the REIT’s ability to source attractive opportunities globally,” said Steve Hodgson, Chief Executive Officer of Slate Office REIT. “At the same time, we recognize that broader market headwinds continue to weigh on the valuations of publicly-traded REITs, creating a divergence between asset values and unit price. Our objective has always been to create long-term value for our unitholders, and we look forward to identifying additional opportunities to unlock the value in our portfolio through the Board’s ongoing strategic review.”
For the CEO’s letter to unitholders for the quarter, please follow the link here.
Highlights
Summary of Q3 2022 Results
| Three months ended September 30, | |||||
(thousands of dollars, except per unit amounts) |
| 2022 |
| 2021 | Change % | |
Rental revenue | $ | 50,959 | $ | 43,636 | 16.8% | |
Net operating income ("NOI") | $ | 26,860 | $ | 23,012 | 16.7% | |
Net income | $ | 18,357 | $ | 8,657 | 112.0% | |
Same-property NOI | $ | 21,912 | $ | 20,955 | 4.6% | |
Weighted average diluted number of trust units (000s) |
| 85,658 |
| 73,283 | 16.9% | |
FFO | $ | 10,299 | $ | 11,092 | (7.1)% | |
FFO per unit | $ | 0.12 | $ | 0.15 | (20.0)% | |
FFO payout ratio |
| 82.9% |
| 65.8% | 17.1% | |
Core-FFO | $ | 11,146 | $ | 11,888 | (6.2)% | |
Core-FFO per unit | $ | 0.13 | $ | 0.16 | (18.8)% | |
Core-FFO payout ratio |
| 76.6% |
| 61.4% | 15.2% | |
AFFO | $ | 11,253 | $ | 11,041 | 1.9% | |
AFFO per unit | $ | 0.13 | $ | 0.15 | (13.3)% | |
AFFO payout ratio |
| 75.9% |
| 66.1% | 9.8% | |
|
|
|
| |||
| September 30, 2022 | December 31, 2021 | Change % | |||
Total assets | $ | 1,955,525 | $ | 1,808,907 | 8.1% | |
Total debt | $ | 1,137,914 | $ | 1,045,542 | 8.8% | |
Portfolio occupancy |
| 81.9% |
| 83.8% | (1.9)% | |
Loan-to-value ratio |
| 58.4% |
| 59.7% | (1.3)% | |
Net debt to adjusted EBITDA 1 | 12.1x | 12.6x | (0.5)x | |||
Interest coverage ratio 1 | 2.0x | 2.0x | —x | |||
1 EBITDA is calculated using trailing twelve month actuals, as calculated below. |
Conference Call and Presentation Details
Senior management will host a live conference call at 9:00 a.m. ET on Wednesday, November 2, 2022 to discuss the results and ongoing business initiatives of the REIT.
The conference call can be accessed by dialing (416) 764-8658 or 1 (888) 886-7786. Additionally, the conference call will be available via simultaneous audio found at https://app.webinar.net/LM6R0wAyBXV. A replay will be accessible until November 16, 2022 via the REIT's website or by dialing (416) 764-8692 or 1 (877) 674-7070 (access code 890293#) approximately two hours after the live event.
About Slate Office REIT (TSX: SOT.UN)
Slate Office REIT is a global owner and operator of high-quality workplace real estate. The REIT owns interests in and operates a portfolio of strategic and well-located real estate assets in North America and Europe. The majority of the REIT’s portfolio is comprised of government and high-quality credit tenants. The REIT acquires quality assets at a discount to replacement cost and creates value for unitholders by applying hands-on asset management strategies to grow rental revenue, extend lease term and increase occupancy. Visit slateofficereit.com to learn more.
About Slate Asset Management
Slate Asset Management is a global alternative investment platform targeting real assets. We focus on fundamentals with the objective of creating long-term value for our investors and partners. Slate's platform has a range of real estate and infrastructure investment strategies, including opportunistic, value add, core plus, and debt investments. We are supported by exceptional people and flexible capital, which enable us to originate and execute on a wide range of compelling investment opportunities. Visit slateam.com to learn more.
Supplemental Information
All interested parties can access Slate Office REIT's Supplemental Information online at slateofficereit.com in the Investors section. These materials are also available on SEDAR or upon request at ir@slateam.com or (416) 644-4264.
Forward Looking Statements
Certain information herein constitutes “forward-looking information” as defined under Canadian securities laws which reflect management’s expectations regarding objectives, plans, goals, strategies, future growth, results of operations, performance, business prospects and opportunities of the REIT. The words “plans”, “expects”, “does not expect”, “scheduled”, “estimates”, “intends”, “anticipates”, “does not anticipate”, “projects”, “believes”, or variations of such words and phrases or statements to the effect that certain actions, events or results “may”, “will”, “could”, “would”, “might”, “occur”, “be achieved”, or “continue” and similar expressions identify forward-looking statements. Some of the specific forward-looking statements contained herein include, but are not limited to, statements relating to the impact of the COVID-19 pandemic. Such forward-looking statements are qualified in their entirety by the inherent risks and uncertainties surrounding future expectations.
Forward-looking statements are necessarily based on a number of estimates and assumptions that, while considered reasonable by management as of the date hereof, are inherently subject to significant business, economic and competitive uncertainties and contingencies. When relying on forward-looking statements to make decisions, the REIT cautions readers not to place undue reliance on these statements, as forward-looking statements involve significant risks and uncertainties and should not be read as guarantees of future performance or results, and will not necessarily be accurate indications of whether or not the times at or by which such performance or results will be achieved. A number of factors could cause actual results to differ, possibly materially, from the results discussed in the forward-looking statements. Additional information about risks and uncertainties is contained in the filings of the REIT with securities regulators.
Non-IFRS Measures
We disclose a number of financial measures in this news release that are not measures used under IFRS, including NOI, same-property NOI, FFO, FFO payout ratio, Core-FFO, Core-FFO payout ratio, AFFO, AFFO payout ratio, IFRS net asset value, adjusted EBITDA, net debt to adjusted EBITDA and the interest coverage ratio, in addition to certain measures on a per unit basis.
We utilize these measures for a variety of reasons, including measuring performance, managing the business, capital allocation and the assessment of risk. Descriptions of why these non-IFRS measures are useful to investors and how management uses each measure are included in Management’s Discussion and Analysis, which readers should read when evaluating the measures included herein. We believe that providing these performance measures on a supplemental basis to our IFRS results is helpful to investors in assessing the overall performance of our businesses in a manner similar to management. These financial measures should not be considered as a substitute for similar financial measures calculated in accordance with IFRS. We caution readers that these non-IFRS financial measures may differ from the calculations disclosed by other businesses, and as a result, may not be comparable to similar measures presented by others.
SOT-FR
Calculation and Reconciliation of Non-IFRS Measures
The tables below summarize a calculation of non-IFRS measures based on IFRS financial information.
The calculation of NOI is as follows:
| Three months ended September 30, | ||||
(thousands of dollars, except per unit amounts) |
| 2022 |
| 2021 | |
Revenue | $ | 50,959 | $ | 43,636 | |
Property operating expenses |
| (23,749) |
| (20,771) | |
IFRIC 21 property tax adjustment 1 |
| (2,943) |
| (2,368) | |
Straight-line rents and other changes |
| 2,593 |
| 2,515 | |
Net operating income | $ | 26,860 | $ | 23,012 | |
|
|
| |||
The reconciliation of net income to FFO, Core-FFO and AFFO is as follows: | |||||
|
|
| |||
| Three months ended September 30, | ||||
(thousands of dollars, except per unit amounts) |
| 2022 |
| 2021 | |
Net income | $ | 18,357 | $ | 8,657 | |
Add (deduct): |
|
| |||
Leasing costs amortized to revenue |
| 2,404 |
| 2,159 | |
Change in fair value of properties |
| 3,164 |
| (41) | |
IFRIC 21 property tax adjustment 1 |
| (2,943) |
| (2,368) | |
Change in fair value of financial instruments |
| (11,407) |
| 1,817 | |
Transaction costs |
| 1,218 |
| — | |
Depreciation of hotel asset |
| 243 |
| 257 | |
Deferred income tax expense |
| 320 |
| 823 | |
Change in fair value of Class B LP units |
| (1,585) |
| (740) | |
Distributions to Class B unitholders |
| 528 |
| 528 | |
Subscription receipts equivalent amount |
| — |
| — | |
FFO 2 | $ | 10,299 | $ | 11,092 | |
Finance income on finance lease receivable |
| (758) |
| (809) | |
Finance lease payments received |
| 1,605 |
| 1,605 | |
Core-FFO 2 | $ | 11,146 | $ | 11,888 | |
Amortization of deferred transaction costs |
| 1,374 |
| 778 | |
Amortization of debt mark-to-market adjustments |
| 971 |
| (39) | |
Amortization of straight-line rent |
| 189 |
| 356 | |
Interest rate subsidy |
| — |
| 108 | |
Normalized direct leasing and capital costs |
| (2,427) |
| (2,050) | |
AFFO 2 | $ | 11,253 | $ | 11,041 | |
|
|
| |||
Weighted average number of diluted units outstanding (000s) |
| 85,658 |
| 73,283 | |
FFO per unit 2 | $ | 0.12 | $ | 0.15 | |
Core-FFO per unit 2 | $ | 0.13 | $ | 0.16 | |
AFFO per unit 2 | $ | 0.13 | $ | 0.15 | |
FFO payout ratio 2 |
| 82.9% |
| 65.8% | |
Core-FFO payout ratio 2 |
| 76.6% |
| 61.4% | |
AFFO payout ratio 2 |
| 75.9% |
| 66.1% | |
1 In accordance with IFRIC 21, the REIT recognizes property tax liability and expense on its existing U.S. properties as at January 1 of each year, rather than progressively, i.e. ratably throughout the year. The recognition of property taxes as a result of IFRIC 21 has no impact on NOI, FFO or AFFO. | |||||
2 Refer to "Non-IFRS measures" section above. |
The reconciliation of cash flow from operating activities to FFO, Core-FFO and AFFO is as follows:
| Three months ended September 30, | ||||
(thousands of dollars) |
| 2022 |
| 2021 | |
Cash flow from operating activities | $ | 11,242 | $ | 12,329 | |
Add (deduct): |
|
| |||
Leasing costs amortized to revenue |
| 2,404 |
| 2,159 | |
Transaction costs |
| 1,218 |
| — | |
Working capital items |
| (155) |
| (670) | |
Straight-line rent and other changes |
| (2,593) |
| (2,515) | |
Interest and other finance costs |
| (14,078) |
| (10,585) | |
Interest paid |
| 11,733 |
| 9,846 | |
Distributions paid to Class B unitholders |
| 528 |
| 528 | |
FFO 1 | $ | 10,299 | $ | 11,092 | |
Finance income on finance lease receivable |
| (758) |
| (809) | |
Finance lease payments received |
| 1,605 |
| 1,605 | |
Core-FFO 1 | $ | 11,146 | $ | 11,888 | |
Amortization of deferred transaction costs |
| 1,374 |
| 778 | |
Amortization of debt mark-to-market adjustments |
| 971 |
| (39) | |
Amortization of straight-line rent |
| 189 |
| 356 | |
Interest rate subsidy |
| — |
| 108 | |
Normalized direct leasing and capital costs |
| (2,427) |
| (2,050) | |
AFFO 1 | $ | 11,253 | $ | 11,041 | |
1Refer to "Non-IFRS measures" section above. |
The calculation of trailing twelve month adjusted EBITDA is as follows:
| Trailing twelve months ended September 30, | ||||
(thousands of dollars) |
| 2022 |
| 2021 | |
Net income | $ | 83,896 | $ | 39,623 | |
Straight-line rent and other changes |
| 8,773 |
| 8,070 | |
Interest income |
| (445) |
| (505) | |
Interest and finance costs |
| 51,467 |
| 43,952 | |
Change in fair value of properties |
| (9,314) |
| (6,685) | |
IFRIC 21 property tax adjustment 1 |
| 611 |
| 45 | |
Change in fair value of financial instruments |
| (51,017) |
| (15,429) | |
Distributions to Class B shareholders |
| 2,112 |
| 2,112 | |
Transaction costs |
| 1,875 |
| 402 | |
Depreciation of hotel asset |
| 981 |
| 1,035 | |
Change in fair value of Class B LP units |
| (4,491) |
| 8,667 | |
Deferred income tax expense |
| 5,412 |
| 1,777 | |
Current income tax expense |
| 955 |
| 54 | |
Adjusted EBITDA 2 | $ | 90,815 | $ | 83,118 | |
1 In accordance with IFRIC 21, the REIT recognizes property tax liability and expense on its existing U.S. properties as at January 1 of each year, rather than progressively, i.e. ratably throughout the year. The recognition of property taxes as a result of IFRIC 21 has no impact on NOI, FFO or AFFO. | |||||
2 Adjusted EBITDA is based on actuals for the twelve months preceding the balance sheet date. |
The calculation of net debt is as follows:
(thousands of dollars) | September 30, 2022 | September 30, 2021 | |||
Debt, non-current | $ | 768,311 | $ | 818,095 | |
Debt, current |
| 369,603 |
| 167,964 | |
Debt | $ | 1,137,914 | $ | 986,059 | |
Less: cash on hand |
| 37,103 |
| 5,323 | |
Net debt | $ | 1,100,811 | $ | 980,736 |
The calculation of net debt to adjusted EBITDA is as follows:
| Trailing twelve months ended September 30, | ||||
(thousands of dollars) |
| 2022 |
| 2021 | |
Debt | $ | 1,137,914 | $ | 986,059 | |
Less: cash on hand |
| 37,103 |
| 5,323 | |
Net debt | $ | 1,100,811 | $ | 980,736 | |
Adjusted EBITDA 1 2 |
| 90,815 |
| 83,118 | |
Net debt to adjusted EBITDA 2 | 12.1x | 11.8x | |||
1 Adjusted EBITDA is based on actuals for the twelve months preceding the balance sheet date. | |||||
2 Refer to "Non-IFRS measures" section above. |
The interest coverage ratio is calculated as follows:
| Trailing twelve months ended September 30, | ||||
(thousands of dollars) |
| 2022 |
| 2021 | |
Adjusted EBITDA 1 | $ | 90,815 | $ | 83,118 | |
Interest expense |
| 44,472 |
| 40,372 | |
Interest coverage ratio 1 | 2.0x | 2.1x | |||
1 Refer to "Non-IFRS measures" section above. |
The following is the calculation of IFRS net asset value on a total and per unit basis at September 30, 2022 and December 31, 2021:
(thousands of dollars, except per unit amounts) | September 30, 2022 | December 31, 2021 | |||
Equity | $ | 734,903 | $ | 621,967 | |
Class B LP units |
| 22,991 |
| 26,426 | |
Deferred unit liability |
| 936 |
| 815 | |
Deferred tax liability |
| 7,743 |
| 2,750 | |
IFRS net asset value | $ | 766,573 | $ | 651,958 | |
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|
| |||
Diluted number of units outstanding (000s) 1 |
| 85,674 |
| 73,214 | |
IFRS net asset value per unit | $ | 8.95 | $ | 8.90 | |
1 Represents the fully diluted number of units outstanding and includes outstanding REIT units, DUP units and Class B LP units. |
View source version on businesswire.com:https://www.businesswire.com/news/home/20221101006311/en/
CONTACT: Investor Relations
Tel: +1 416 644 4264
E-mail:ir@slateam.com
KEYWORD: NORTH AMERICA CANADA
INDUSTRY KEYWORD: COMMERCIAL BUILDING & REAL ESTATE CONSTRUCTION & PROPERTY REIT
SOURCE: Slate Office REIT
Copyright Business Wire 2022.
PUB: 11/01/2022 06:09 PM/DISC: 11/01/2022 06:09 PM
http://www.businesswire.com/news/home/20221101006311/en