Slate Grocery REIT: Strong Q3 Results and Investment Opportunities

Slate Grocery REIT (TSX: SGR.U / SGR.UN) has released its third quarter 2024 financial results, showcasing a robust performance driven by strategic leasing and debt refinancing. The REIT's grocery-anchored portfolio and strong credit tenants continue to deliver durable cash flows and capital appreciation potential. Let's dive into the key highlights and explore the investment opportunities these results present.


**Key Financial Metrics and Comparisons**

Slate Grocery REIT's Q3 2024 results demonstrate impressive growth and stability:

* Same-property Net Operating Income (NOI) increased by 6.2% year-over-year, driven by strong leasing volumes and attractive rent spreads.
* Total leasing reached 850,455 square feet, with new deals completed at 24.8% above comparable average in-place rent.
* Portfolio occupancy remained stable at 94.6%.
* The REIT's average in-place rent of $12.61 per square foot is well below the market average, providing significant runway for continued rent increases.
* Slate Grocery REIT's units trade at a 24.5% discount to Net Asset Value (NAV), presenting a compelling investment opportunity.


**Leasing Strategy and NOI Growth**

Slate Grocery REIT's leasing strategy significantly contributed to its 6.2% same-property NOI growth in Q3 2024. The REIT completed 850,455 square feet of total leasing, with new deals at 24.8% above comparable average in-place rent and non-option renewals at 14.1% above expiring rents. This aggressive leasing approach, coupled with strong demand for grocery-anchored spaces, drove revenue growth and boosted same-property NOI.

**Debt Refinancing and Balance Sheet Stability**

The REIT's debt refinancing played a significant role in its NOI growth. By refinancing $500 million of debt at interest rate spreads similar to the maturing debt, the REIT secured positive leverage and stability. This refinancing reduced the risk to the balance sheet, allowing the REIT to focus on maintaining strong operations and performance. The REIT's forecasted weighted average interest rate was 4.8% after accounting for in-place interest rate swap contracts, providing significant positive leverage and stability for the REIT.

**Portfolio Occupancy, Average Rent, and Redevelopments**

Slate Grocery REIT's portfolio occupancy remained stable at 94.6% as of Q3 2024, while average rent increased to $12.61 per square foot, well below the market average of $23.581. This contributed to a 6.2% year-over-year growth in same-property NOI, driven by strong leasing volumes at attractive spreads. The REIT's ability to maintain occupancy and increase rents, despite redevelopments, demonstrates the resilience of its grocery-anchored portfolio.

Slate Grocery REIT's redevelopments had a positive impact on its same-property NOI, contributing to a 6.2% year-over-year increase in the third quarter of 2024. The REIT's strategic redevelopment efforts, combined with strong leasing volumes at attractive spreads, drove this growth.

**Investment Opportunities**

Slate Grocery REIT's NAV discount and unit price trends in Q3 2024 present a compelling investment opportunity. As of September 30, 2024, the REIT's unit price represents a 24.5% discount to NAV, compared to a 26.1% discount in Q2 2024 and a 28.4% discount in Q1 2024. This narrowing discount indicates improving investor sentiment. However, Slate Grocery REIT's discount remains wider than the industry average of around 15%. Its unit price has also shown resilience, trading at $13.77 as of Q3 2024, up from $13.53 in Q2 2024 and $13.31 in Q1 2024. This steady price performance, coupled with the REIT's strong fundamentals, such as stable occupancy and increasing NOI, suggests that unitholders may benefit from investing in Slate Grocery REIT at current levels.

In conclusion, Slate Grocery REIT's strong Q3 2024 results highlight the REIT's ability to generate stable cash flows and capital appreciation potential. The REIT's strategic leasing, debt refinancing, and portfolio management have contributed to its impressive performance. As investors seek stable, income-focused investments, Slate Grocery REIT presents an attractive opportunity, particularly given its wide NAV discount and resilient unit price.