Slate Grocery REIT

Good morning, ladies and gentlemen, and welcome to the Slate Grocery REIT second quarter 2022 financial results conference call. At this time, all participants are in a listen-only mode. Following the presentation, we will conduct a question and answer session. If at any time during this call you require immediate assistance, please press star zero for the operator. Today's call is being recorded on Wednesday, August the 3rd, 2022. And I would now like to turn the conference over to Mr. Paul Walensky, Senior Vice President, National Sales and Investor Relations. Please go ahead, sir.

Thank you, operator. And good morning, everyone. Welcome to the Q2 2022 conference call for Slate Grocery REIT. I am joined this morning by Blair Welch, Chief Executive Officer, Andrew Egateb, Chief Financial Officer, Connor O'Brien, Senior Vice President, Alan Gordon, Vice President, and Braden Lyons, an associate. Before getting started, I'd like to remind participants that our discussion today may contain forward-looking statements, and therefore we ask you to review the disclaimers regarding forward-looking statements as well as non-IFRS measures, both of which can be found in management's discussion and analysis. You can visit Slate Grocery REIT's website to access all of the REIT's financial disclosure, including our Q2 2022 investor update, which is now available. I will now hand over the call to Blair Welsh for opening remarks.

Thanks, Paul. Today, I'm pleased to share Slate Grocery REIT's strong second quarter results, which highlight our team's continued operational excellence and underscore, once again, the resiliency of grocery real estate. This quarter, Slate Grocery achieved significant growth through the acquisition of a $425 million grocery-anchored real estate portfolio. We acquired 14 high-quality properties, adding 2.5 million square feet or 18.6 of gross leaseable area to the REITs portfolio. The acquisition increases our exposure to leading markets for population growth in the U.S. with top-performing national and regional grocers. Importantly, The REIT's acquisition basis of $174 per square foot implies that in-place rents in this portfolio are well below market. We believe there is an opportunity to grow organically over the long term with this portfolio. The REIT also entered into a strategic joint venture with the Slate North American Essential Real Estate Income Fund or the North American Essential Fund. This partnership with the North American Essential Fund, which includes a leading sovereign wealth fund, provides institutional validation of the REITs platform. It also establishes the structure for a consistent source of private capital in addition to the REITs public funding strategies. As part of the joint venture, the North American Essential Fund made $180 million cash investment into the REITs assets at a valuation in line with the REITs Q1 2022 IFRS value. This once again validates the value of the REIT's real estate. The REIT allocated the entirety of the investment by the North American Essential Fund toward the $425 million acquisition, which was completed in July. Importantly, after the period, the REIT amended its existing revolving credit facility and term loans, totaling $608 million. The amendments enhance the REIT's liquidity position and financial flexibility through improved pricing terms and covenants. The REIT's debt profile mitigates near-term rising interest rate risk, as 91.4% of the REIT's debt is fixed. Finally, our operational performance continues to trend positively, even amid a broader economic slowdown. Our asset management team completed 440,000 square feet of leasing, Renewals were completed at a 5.9% rate above expiring rent, and new deals at a 26.6% above in-place rent. On a one-year, two-day basis, the REIT's total leasing spread is 12.4%, providing protection in an inflationary environment. Occupancy has increased 20 basis points over the past quarter, with net positive leasing expected through the second half. Additionally, our in-place average rents rate for the portfolio is only $11.82, which is significantly below market. We believe that limited supply of new construction and neighborhood centers in the market, coupled with increasing the cost of construction, will continue to drive demand at our location, which gives us the ability to push our rents over time. Slate Grocery is uniquely positioned to benefit from the current macroeconomic environment as grocers continue to be the focus where people are spending their money. Discretionary, this is non-discretionary items. With inflation rates at all-time highs, consumers are pulling back on discretionary purchases and spending more on groceries and essential goods. We also continue to see a deep pipeline of accretive opportunities. Our strategic joint venture with the North American Essential Fund, together with our recently upsized credit facility, gives us the flexibility to pursue strategically and opportunistically during challenging times. On behalf of the Slate Grocery team and the Board, I'd like to thank the investor community for their continued confidence and support. I will now hand it over for questions.