Slate Grocery REIT Investor Update - Q1 2022
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Slate Grocery REIT Investor Update Q1 2022
Slate Grocery REIT – Overview
95% Grocery-anchored
TSX SGR.UN
SGR.U
107 Properties
All U.S. locations
13.2M Square feet
23 States
Legend
$1.9B
Asset
Asset value1 Presence in 23 of the top 50 U.S. Metropolitan Statistical Areas (“MSAs”)
1Includes the REIT’s proportionate share of its joint ventures
Note: As at March 31, 2022
Slate Grocery REIT | 2
Consumers Require Essential Goods in Good and Bad Times
Grocery retailers comprise 20 of the top 25 largest consumer good distributors globally
Retail Sales Country of Revenue Net Profit Countries of
Rank Company Origin (US$M) Margin (%) Dominant Format Operation
1 Wal-Mart Stores U.S. 523,964 2.9% Hypermarket/Supercenter/Superstore 27
2 Amazon U.S. 158,439 4.1% Non-Store 17
3 Costco U.S. 152,703 2.4% Cash & Carry/Warehouse Club 12
4 Schwarz Group Germany 126,124 n/a Discount Store 33
5 Kroger U.S. 121,539 1.2% Supermarket 1
6 Walgreens U.S. 115,994 2.9% Drug Store/Pharmacy 9
7 Home Depot U.S. 110,225 10.2% Home Improvement 3
8 Aldi Germany 106,326 n/a Discount Store 19
9 CVS U.S. 86,608 n/a Drug Store/Pharmacy 1
10 Tesco U.K. 81,347 1.5% Hypermarket/Supercenter 8
11 Target U.S. 77,130 4.2% Discount Department Store 1
12 Ahold Delhaize Netherlands 74,160 2.7% Supermarket 10
13 JD.com China 73,909 2.1% Non-Store 1
14 Aeon Japan 72,711 0.9% Hypermarket/Supercenter 11
15 Lowe's U.S. 72,148 5.9% Home Improvement 2
16 Albertsons U.S. 62,455 0.7% Supermarket 1
17 Edeka Germany 61,221 n/a Supermarket 1
18 Seven & i Japan 58,552 3.5% Convenience/Forecourt Store 18
19 Rewe Combine Germany 55,772 0.9% Supermarket 13
20 Auchan France 51,264 (2.7%) Hypermarket/Supercenter 14
21 Best Buy U.S. 43,638 3.5% Electronics Specialty 3
22 Centres Distributeurs E. Leclerc France 43,426 n/a Supermarket 6
23 LVMH France 41,810 14.5% Other Specialty 70
24 Woolworths Australia 41,778 1.9% Supermarket 3
25 TJX U.S. 41,717 7.8% Apparel/Footwear Specialty 10
Source: Deloitte Global Powers of Retail 2021.
Slate Grocery REIT | 3
World Class Grocery and Essential Based Tenants
Top grocery tenants1 Essential tenancies Omnichannel distribution
SGR’s portfolio is comprised of the world’s High concentration of essential and grocery SGR’s properties are key to the distribution
largest, most sophisticated, credit-worthy tenants of in-store, click-and-collect and home
grocers, including seven of the top 10 US delivery grocery sales
grocers by market share
18.0%
6.4%
8.8%
95% Grocery-anchored
properties
In store Click-and-collect Delivery
4.7%
4.3%
3.7%
3.6%
68% Essential
tenancies
2.4%
100%
39%
2.3%
Grocery of grocers employing
1.9% tenancies omnichannel
distribution
SGR Tenant
Not in SGR Portfolio
1Source: Numerator
Note: As at March 31, 2022
Slate Grocery REIT | 4
Outlook on Grocery
Strength of Grocery Real Estate
Amid rising inflation, grocery stores are leading in share of total consumer spending…
Share of total consumer spend 1, %
…And consumers intend to continue spending more on groceries and other essential goods in
the next 12 months, and less on discretionary expenditures
Consumers’ spending intentions for next 12 months2
1 Source: McKinsey & Company, “How US consumers are feeling, shopping, and spending—and what it means for companies” – Based on share of total credit card spending in February and March 2022
2 Source: Nielsen IQ Consumer Outlook 2022
Slate Grocery REIT | 6
Omnichannel Shopping Is Becoming the Norm
Consumers are returning to in-store shopping at a health clip
Retail spending growth, by channel,¹ (%)
70
2020 2021 2022
60
E-commerce
50
40
30
20
10 Brick and mortar
0
-10
-20
F M A M J J A S O N D J F M A M J J A S O N D J F M
Providing a seamless omnichannel experience has become table stakes for grocers
Three out of four US consumers say that they are shopping both online and in stores1, (% of respondents)
Online only Omnichannel In-store only
Grocery delivery is now among consumers’ top omnichannel activities1 (% of respondents participating)
1 Source: McKinsey & Company, “How US consumers are feeling, shopping, and spending—and what it means for companies”
Slate Grocery REIT | 7
Stores Remain Critical for Omnichannel Fulfillment
Neighborhood stores are essential to Grocery omnichannel model
minimizing grocers’ last mile logistics costs In-store purchasing
Labor and transportation comprise largest supply chain costs1
~1%
Savings in transportation
and labor Home
Grocery store delivery
=
~15%
Spend on logistics
real estate Customer
…So grocers are fulfilling sales through neighborhood stores
97%
Store pickup
Of all grocery sales (in-store
and online) are fulfilled
“Building a seamless omnichannel experience for customers and
through neighborhood stores2 prioritizing convenience is critical. Our stores have become
hybrid – they’re both stores and fulfillment centers.”
Doug McMillon, President & CEO, Walmart3
1 Prologis Research, 2021.
2 Per Mercatus and Incisiv’s research report “eGrocery Transformed” published in October 2021, online grocery sales will account for 11% of total grocery sales post-COVID in 2022., meaning 89%
of grocery sales will be executed through traditional in-store channels. Further, 75% of the online sales will be fulfilled through the store equating to 97% of all grocery sales being fulfilled through
neighborhood stores.
3 Walmart Q4 2021 Earnings Call, February 2022.
Slate Grocery REIT | 8
Grocers Are Enhancing the In-Store Experience
In addition to online fulfillment strategies, grocers are continuing to invest in their
in-store infrastructure to improve the customer experience
Smart Carts Automated Self-Checkout Automated Inventory Management
KroGo Smart Cart Walmart Automated, Full-Service Checkout Schnucks Tally Robot
“Future success in the grocery sector is about putting the customer first, getting all the basics right, embracing new
technologies and creating more innovative and rewarding in-store experiences.” 1
1 KPMG, Global Customer Experience Excellence Research, 2020.
Slate Grocery REIT | 9
Protection in an Inflationary Environment
Net leases act as an inflation hedge, providing protection against the rising cost of non-
controllable expenses
What is a Net Lease? SGR Portfolio
A net lease is a type of lease
agreement in which a tenant is
responsible for paying their
proportionate share of “net”
expenses on top of fees covered in
the lease agreement. Typical net
expenses include:
• Real Estate Taxes
97% 3%
• Insurance What is a Gross
• Common Area Maintenance Lease?
• Utilities A gross lease has a predetermined set
rental rate that does not fluctuate over
time regardless of the increase or
decrease in pricing caused by external
environmental factors
Net Lease Gross Lease
Slate Grocery REIT | 10Operations and Strategy Update
Operational Excellence
01 Strong leasing volumes and rental spreads +15.8% +38.3%
with a robust pipeline going forward Rental spreads on total Rental spreads on new
leasing in Q1 2022 leasing in Q1 2022
02 Stable occupancy demonstrates the continued 100% 93.2%
strong demand for grocery-anchored product Anchor occupancy as Occupancy as at
at Q1 2022 Q1 2022
03 Strong organic growth driven by leasing
activity and redevelopment initiatives
2.7%
Q1 2022 same-property
net operating income
growth, trailing twelve
month 1
12.0%
Estimated yield on cost
for ongoing
redevelopments
1 Includes the impact of redeveloped properties
Slate Grocery REIT | 12SGR was Highly Opportunistic During the Pandemic
$90M Acquisition $54M Acquisition $9M Acquisition from Kroger $390M Acquisition
7 properties (8.7% cap rate) and 5 properties (7.7% cap rate) from Concurrently executed new lease Transformational 25 property
~$17M price reduction motivated vendor with Kroger for 15-years acquisition (7.8% cap rate)
2020 2021
C$75M Equity Issue C$133M Equity Issue $15M Acquisition
Raised capital for deep pipeline of Raised capital in connection with Kroger-anchored center (Mariano’s)
opportunities $390M portfolio acquisition with 95% essential tenancies
Note: All amounts in US$ unless otherwise noted.
Slate Grocery REIT | 13Track Record of Creatively Sourcing Acquisitions
SGR has executed over $550 million of opportunistic acquisitions since June 2020
2 single asset
7 property portfolio 5 property portfolio 25 property portfolio
acquisitions
Date June 1, 2020 February 10, 2021 July 15 & September 9, 2021 September 22, 2021
Purchase price $90 million ($144 per sq. ft.) $54 million ($137 per sq. ft.) $24 million ($121 per sq. ft.) $390 million ($127 per sq. ft.)
Capitalization rate 8.7% 7.7% 8.1% 7.8%
% Essential /
64% / 42% 66% / 44% 80% / 66% 74% / 39%
grocery1
Geography VA, NC, MD NC, FL, GA IN, IL NY, TX, FL, GA, IN, OH, CA
Anchor tenant Kroger, Ahold Delhaize, Tops, Albertsons, Kroger, Ahold
Kroger, Ahold Delhaize Kroger
credit Southeastern Grocers Delhaize, Albertsons and Walmart
Investment thesis Creative and opportunistic off-market transactions located in growth markets that are accretive to key portfolio metrics
Note: All amounts in US$.
1 Based on annual base rent.
Slate Grocery REIT | 14Environmental, Social & Governance
ESG Priorities: Current ESG Initiatives
• Slate has always been committed to creating a world class
Managing climate change risks and opportunities environment for our people and being a leading corporate citizen
and industry participant
• Our stakeholders include our people, our investors, our tenants
Limiting our environmental impact and the communities in which we operate
• We have embraced the growing need to codify and exemplify
Engaging our tenants and stakeholders for social these standards through an ESG lens
impact
• Slate continues to deploy environmental improvements across its
portfolio to improve efficiency, sponsor employee wellness and
engagement initiatives, and contribute actively to community
Strong governance of ESG risks and opportunities improvement and advocacy efforts
“We are continuing to raise the bar on our ESG performance
and pursuing new and innovative ways to add further rigor to
our ESG approach.” – Bozena Jankowska, Global Head of ESG
Slate Grocery REIT | 15The Path Forward
The Investment Opportunity
Slate Grocery REIT is undervalued relative to US peers1
2022E AFFOx
24.5x
21.9x 21.2x 20.7x 20.0x 18.9x 18.6x 18.0x 17.1x 15.2x
12.6x
Federal Realty ROIC Urban Edge Regency Kimco Realty Phillips Edison Acadia Realty SITE Centers Brixmor Kite Realty Slate Grocery
Properties Centers & Company Trust Property Group Group REIT
…And provides investors with an attractive distribution yield1
Annualized distribution yield
7.5%
3.7% 3.3% 3.6% 3.7% 3.5%
2.8% 3.1% 3.2%
2.6% 2.2%
Federal Realty ROIC Urban Edge Regency Kimco Realty Phillips Edison Acadia Realty SITE Centers Brixmor Kite Realty Slate Grocery
Properties Centers & Company Trust Property Group Group REIT
1 S&P Capital IQ as at May 2, 2022.
Slate Grocery REIT | 17The Investment Opportunity
Slate Grocery REIT is undervalued relative to Canadian peers1
2022E AFFOx
29.1x
22.6x
17.5x 17.1x 16.7x 15.9x 15.7x 15.4x
12.7x 12.6x
Summit Granite Dream Industrial Choice Crombie SmartCentres First Capital RioCan Plaza Retail Slate Grocery
Industrial Properties REIT
Industrial REITs Retail REITs
…And provides investors with an attractive distribution yield1
Annualized distribution yield
7.5%
6.2% 5.9%
5.0% 5.1% 5.3%
4.2%
2.9% 3.4%
2.7%
Summit Granite Dream Industrial Choice Crombie SmartCentres First Capital RioCan Plaza Retail Slate Grocery
Industrial Properties REIT
Industrial REITs Retail REITs
1 S&P Capital IQ as at May 2, 2022.
Slate Grocery REIT | 18Closing Thoughts
01 Grocery-anchored real estate facilitates the last mile of food logistics and
has proven its resiliency and ability to perform in all market conditions
02 Accretive acquisitions and proactive asset management have enhanced
the scale and durability of the REIT’s portfolio
03 The REIT is well positioned to pursue organic growth and high-quality,
accretive acquisitions that will drive unitholder value
Slate Grocery REIT | 19Disclaimer
Forward-Looking Statements
This presentation contains forward-looking information within the meaning of applicable securities laws. These statements include, but are not limited to, statements
concerning the REIT’s objectives, its strategies to achieve those objectives, as well as statements with respect to management’s beliefs, plans, estimates, and intentions, and
similar statements concerning anticipated future events, results, circumstances, performance or expectations that are not historical facts. Readers should not place undue
reliance on any such forward-looking statements. Forward-looking information involves known and unknown risks, uncertainties and other factors which may cause the
actual results, performance or achievements of the REIT to be materially different from any future results, performance or achievements expressed or implied by the
forward-looking information. Actual results and developments are likely to differ, and may differ materially, from those expressed or implied by the forward-looking
statements contained herein. Such forward-looking statements are based on a number of assumptions that may prove to be incorrect, including, but not limited to, the
continued availability of mortgage financing and current interest rates; the extent of competition for properties; assumptions about the markets in which the REIT and its
subsidiaries operate; the global and North American economic environment; and changes in governmental regulations or tax laws. Although the forward-looking information
contained in this presentation is based upon what management believes are reasonable assumptions, there can be no assurance that actual results will be consistent with
these forward-looking statements. Certain statements included in this presentation may be considered “financial outlook” for purposes of applicable securities laws, and such
financial outlook may not be appropriate for purposes other than this presentation. Except as required by applicable law, the REIT undertakes no obligation to publicly
update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.
Non-IFRS Measures
This presentation contains financial measures that do not have a standardized meaning under International Financial Reporting Standards (“IFRS”) as prescribed by the
International Accounting Standards Board. Slate Grocery uses the following non-IFRS financial measures: Funds from Operations (“FFO”), Adjusted Funds from Operations
(“AFFO”), Net Operating Income (“NOI”), and Earnings Before Interest, Taxes, Depreciation and Amortization (“EBITDA”). Management believes that in addition to
conventional measures prepared in accordance with IFRS, investors in the real estate industry use these non-IFRS financial measures to evaluate the REIT’s performance
and financial condition. Accordingly, these non-IFRS financial measures are intended to provide additional information and should not be considered in isolation or as a
substitute for performance measures prepared in accordance with IFRS. In addition, they do not have standardized meanings and may not be comparable to measures used
by other issuers in the real estate industry or other industries.
Use of Estimates
The preparation of the REIT financial statements in conformity with IFRS requires management to make estimates, judgments and assumptions that affect the reported
amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses
during the reporting period. Management’s estimates are based on historical experience and other assumptions that are believed to be reasonable under the circumstances.
Actual results could differ from those estimates under different assumptions.
Slate Grocery REIT | 20Slate Asset Management 121 King Street W, Suite 200 Toronto, ON M5H 3T9 slateam.com
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