Slate Grocery REIT Q4 Earnings Call Highlights

Slate Grocery REIT (TSE:SGR.UN) reported what management described as strong fourth-quarter and full-year results, highlighting elevated leasing activity, continued rent growth opportunities across the portfolio, and refinancing and transaction activity aimed at simplifying the capital structure and reducing leverage.

Leasing activity and rent growth “runway”

Chief Executive Officer Blair Welch said the REIT completed more than 1.7 million square feet of total leasing during the year. The REIT delivered renewal spreads of 14.9% above expiring rents and new deal spreads of 34.9% above comparable average in-place rent, which Welch cited as evidence of demand for its grocery-anchored portfolio.

Portfolio occupancy was described as stable at 94.4%. Welch also emphasized the gap between the REIT’s in-place rents and market levels, noting an average in-place rent of $12.86 per square foot versus a market average of $24.24, which management said provides significant runway for future increases.

On the outlook for leasing in 2026, management said fewer than 10% of gross leasable area is expiring next year. Welch added that quarterly leasing results can vary based on expiries and in-place rent levels, but pointed to a multi-quarter track record of strong spreads and said the REIT is “not afraid of getting space back,” describing situations where tenant turnover can create opportunities to re-lease at higher rents.

NOI performance and expectations

Welch said that, adjusting for completed redevelopments, same-property net operating income increased by $3.3 million, or 2%, on a trailing 12-month basis.

When asked when strong leasing spreads would show up more meaningfully in NOI growth, Welch said the REIT has already been seeing the impact and expects to continue producing “single-digit NOI growth,” which he framed as approximately 2% to 5% over coming years. He described the business as “defensive” and “stable,” citing tight market conditions and leasing demand.

Management also provided an update on redevelopment-related leasing. In response to a question on earlier vacancies, the team said it expects certain leases to come online throughout 2026. One redevelopment at Culver Ridge was singled out, with management stating the third and final tenant in that project is expected to come online later this year, contributing to portfolio NOI in the second half of the year.

Balance sheet, refinancing, and leverage commentary

Welch said the REIT ended the period with a weighted average interest rate of 5%, and that more than 87% of its debt is fixed-rate, which he said supports a stable outlook for near-term financing costs.

Subsequent to quarter-end, the REIT completed a refinancing of an eight-property portfolio for $90 million to consolidate existing property-level mortgage loans. Management said lender demand for high-quality grocery-anchored real estate remains strong, and Welch noted the REIT’s weighted average capitalization rate remains above its weighted average interest rate, which he said allows it to maintain positive leverage.

Chief Financial Officer Joe Pleckaitis provided additional detail on the refinancing during the Q&A, calling out competitive pricing. The loan was described as SOFR plus 180. Management also said it entered into a 12-month pay-fixed swap at closing, bringing the all-in rate to 5.3%. Pleckaitis said recent deals suggest pricing in the range of roughly 170 to 185 basis points over SOFR, though he cautioned that terms depend on factors such as anchor creditworthiness and location.

On leverage, management said reported leverage increased on a “point in time” basis due to the timing of transactions and consolidation. Welch and Pleckaitis said leverage should normalize as the REIT uses proceeds and post-quarter-end actions to reduce debt, including using sale proceeds to delever and net proceeds from the refinancing to repay the revolving credit facility.

Transactions: JV consolidation and asset disposal

Welch said the REIT completed two strategic transactions in December intended to strengthen the tenant mix and delever the portfolio:

• Acquired the remaining minority interest in a 10-asset joint venture portfolio for $5.7 million, increasing ownership to 100%.
• Disposed of a non-grocery-anchored property in Flower Mound, Texas, with proceeds used to reduce leverage.

Pleckaitis said the JV buyout resulted in full consolidation of the assets on the REIT’s financial statements and helped simplify financing. He explained that once the remaining interest was acquired, the REIT was able to consolidate three separate mortgages into the portfolio refinancing that closed after quarter-end.

Asked whether the JV transaction was triggered by an option or other right, management said it was negotiated, describing a strong relationship with the partner and noting the partner had needs outside the portfolio. Welch said the REIT believed it negotiated a favorable price for unitholders.

Regarding the Flower Mound disposition, management said buyer interest was strong for a non-grocery-anchored asset in the Dallas MSA, and characterized the sale cap rate as approximately a mid-7% cap rate.

Market view and acquisition outlook

Management reiterated its conviction in grocery-anchored real estate, pointing to investments by leading grocers in store-based fulfillment as reinforcing the importance of physical stores. Welch also cited elevated construction costs and tight lending conditions as constraints on new retail development and availability, and argued that consumer spending on food and essentials supports the stability of the portfolio.

On the transaction market, management said the availability of debt financing is strong for the asset class in the U.S. Welch said transaction volumes have been restrained by bid-ask spreads and higher financing costs, but added that market participants are increasingly comfortable with where pricing has settled, which he expects could lead to more transactions. Management said it expects acquisition opportunities to be “interesting” to evaluate in 2026.

Welch said the REIT’s acquisition approach remains consistent: focusing on the top one or two grocers in a market and targeting properties with low in-place rents. He said the REIT would like to add scale in existing markets and, when entering new markets, look for the ability to buy more than one property over time. On potential future buyouts of remaining minority interests, Welch said the REIT would be opportunistic if it makes sense, but noted there is no trigger event or current need.

About Slate Grocery REIT (TSE:SGR.UN)

Slate Grocery REIT is an unincorporated, open-ended mutual fund trust focused on acquiring, owning and leasing a portfolio of diversified revenue-producing commercial real estate properties in the United States of America with an emphasis on grocery-anchored retail properties. The company’s properties include Bloomingdale Plaza, Errol Plaza, Meres Town Center, Oak Hill Village, Salerno Village Square, and many more.