Slate Office REIT Reports Third Quarter 2020 Results Slate Office REIT (TSX: SOT.UN) (the "REIT"), an owner and operator of North American office real estate, reported today financial results for the three and nine months ended September 30, 2020.
“We are pleased to report strong third quarter results, reinforcing the stability of the REIT’s portfolio and strength of our tenants,” said Steve Hodgson, Chief Executive Officer of Slate Office REIT. “Leasing activity continued to exceed expectations, with over 142,000 square feet of leasing completed in the quarter at rates above expiring or in-place building rents.”
For the CEO’s letter to unitholders for the quarter, please follow the link here.
Third Quarter 2020 Highlights
- AFFO and AFFO payout ratio: Adjusted funds from operations (“AFFO”) was $11.8 million or $0.16 per unit for the third quarter of 2020. The AFFO payout ratio for the third quarter of 2020 was 62.0%.
- Same-property NOI: The REIT's same-property net operating income (“NOI") increased $0.2 million or 0.7% for the three months ended September 30, 2020 compared to the prior quarter.
- Significant refinancing activity: In September and October 2020, the REIT completed $395.7 million and US$161.1 million of debt refinancing, including its revolving credit facilities and certain term loans which enhanced the REIT's liquidity and addressed all 2020 debt maturities and the majority of 2021 debt maturities.
- Leading cash rent collections: From the onset of the COVID-19 pandemic through to September 2020, the REIT collected a market leading 96% to 98% of rent in cash each month. The residual rent is expected to be substantially collected through short-term deferral programs.
- Continued leasing activity: The REIT completed a total of 142,881 square feet of leasing, comprised of 92,757 square feet of renewals and 50,124 square feet of new lease deals. Notable leasing included a new lease deal with a law firm for approximately 25,800 square feet and an approximately 65,000 square foot renewal of a major Canadian bank, both at West Metro Corporate Centre in Toronto.
- Positive leasing spreads: Leasing spreads in the quarter were 3.2% above expiring or in-place building rents. Renewals were in line with expiring rents while new deals were 10.7% above in-place building rents.
- Office utilization rates: We continue to be encouraged by the number of employees returning to offices across our portfolio compared to our peers that have assets in major market downtown locations.
Summary of Q3 2020 Results
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| | Three months ended September 30, |
| (thousands of dollars, except per unit amounts) | 2020 | | 2019 | | Change % |
| Rental revenue | $ | 45,852 | | $ | 52,539 | | (12.7)% |
| Net operating income | $ | 24,040 | | $ | 25,435 | | (5.5)% |
| Net (loss) income | $ | 16,221 | | $ | 27,195 | | (40.4)% |
| Same-property NOI | $ | 24,088 | | $ | 24,213 | | (0.5)% |
| Weighted average diluted number of trust units (000s) | 73,227 | | 73,283 | | (0.1)% |
| Funds from operations ("FFO") | $ | 13,066 | | $ | 14,280 | | (8.5)% |
| FFO per unit | $ | 0.18 | | $ | 0.19 | | (5.3)% |
| FFO payout ratio | 55.9% | | 51.2% | | 4.7% |
| Core FFO | $ | 13,813 | | $ | 14,906 | | (7.3)% |
| Core FFO per unit | $ | 0.19 | | $ | 0.20 | | (5.0)% |
| Core FFO payout ratio | 52.8% | | 49.0% | | 3.8% |
| AFFO | $ | 11,777 | | $ | 12,420 | | (5.2)% |
| AFFO per unit | $ | 0.16 | | $ | 0.17 | | (5.9)% |
| AFFO payout ratio | 62.0% | | 58.8% | | 3.2% |
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| | September 30, 2020 | | December 31, 2019 | | Change % |
| Total assets | $ | 1,694,187 | | $ | 1,709,964 | | (0.9)% |
| Total debt | $ | 979,004 | | $ | 1,001,947 | | (2.3)% |
| Portfolio occupancy 1 | 85.4% | | 87.1% | | (1.7)% |
| Loan to value ratio | 57.8% | | 58.7% | | (0.9)% |
| Net debt to adjusted EBITDA 2 | 10.8x | | 10.1x | | 0.7x |
| Interest coverage ratio 2 | 2.3x | | 2.2x | | 0.1x |
| (1) Including redevelopment properties.
(2) EBITDA is calculated using trailing twelve month actuals, as calculated below. |
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Conference Call and Presentation Details
Senior management will host a live conference call at 9:00 a.m. ET on Friday, October 30, 2020 to discuss the results and ongoing business initiatives of the REIT.
The conference call can be accessed by dialing (647) 427-2311 or 1 (866) 521-4909. Additionally, the conference call will be available via simultaneous audio found at www.snwebcastcenter.com/webcast/slate/2020/1030. A replay will be accessible until November 13, 2020 via the REIT's website or by dialing (416) 621-4642 or 1 (800) 585-8367 (access code 6925089) approximately two hours after the live event