Good morning, ladies and gentlemen, and welcome to the Slate Grocery REIT First Quarter 2024 financial results conference call. At this time, all lines 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. This call is being recorded on Wednesday, May 1, 2024. I would now like to turn the conference over to Shivi Aggarwal, Manager, Finance of Slate Grocery REIT. Please go ahead. Thank you, operator, and good morning, everyone. Welcome to the Q1 2024 conference call for Slate Grocery REIT. I am joined this morning by Blair Welch, Chief Executive Officer, Joe Pleckaitis, Chief Financial Officer, Allen Gordon, Senior Vice President, and Braden Lyons, Vice President. Before getting started, I would 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 the 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 Q1 2024 investor update, which is now available. I will now hand over the call to Blair Welch for opening remarks. Thank you, Shivi, and hello, everyone. Slate Grocery REIT's first quarter results demonstrate the continued strong demand for our high-quality, grocery-anchored real estate and the rental growth embedded in our portfolio. Our team completed over 770,000 sq ft of total leasing in the quarter. Over 98,000 sq ft of new deals were completed at 31% above comparable average in-place rent. Non-option renewals were completed at 15% above expiring rents, and at quarter end, occupancy was 94.4%. Our positive leasing momentum at double-digit leasing spreads continue to translate to income growth for the REIT. Same property NOI increased by $1 million or 2.5% year-over-year. We expect NOI to continue to increase over the coming months, as the impact of new leases completed over the last 12 months is realized. At $12.49 per sq ft, our average in-place rent is well below the market average of $23.21, meaning we have significant runway to continue increasing our rents and growing our net operating income. Our team also continues to prudently manage the REIT's balance sheet to ensure we remain protected in the current interest rate environment. The REIT exercised a 6-month extension option on its $300 million revolver, and over 94% of the REIT's total debt remains fixed at a weighted average interest rate of 4.4% and a weighted average remaining term of 3.1 years on the REIT's interest rate swap contracts. This provides us with stability in today's interest rate environment. We continue to have strong conviction in the fundamentals of the broader grocery-anchored real estate sector. Vacancy levels in the neighborhood, community, and strip center segment continue to hover near record lows, and new retail supply remains muted. At the same time, tenant demand for well-located grocery-anchored spaces remains high, and grocers continue to see increases in sales and foot traffic. America's leading grocers like Walmart, Kroger, Publix, and ALDI continue to invest significant capital in both new and existing stores, underscoring the important role of physical stores as a local distribution hub. With in-place rents that are well below market, Slate Grocery REIT is uniquely and well positioned to capitalize on these fundamentals and increase rents over time to deliver long-term growth for our unitholders. On behalf of Slate Grocery REIT team and the board, I would like to thank the investor community for their continued support and confidence. I will now hand it over for questions. Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. Should you have a question, please press star followed by number one on your touchtone phone. You will hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press star followed by number two. If you are using a speakerphone, please lift the handset before pressing any keys. One moment for your first question. Once again, ladies and gentlemen, if you wish to ask a question, please press star followed by number one on your touchtone phone. You will hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press star followed by number two. Your first question comes from the line of Sairam Srinivas of Cormark Securities. Your line is now open. Thank you, operator. Good morning, guys. Morning, sir. My first question is on leasing. So when you look at the non-anchor renewal path as such, or renewal or new leasing paths, and when you compare the kind of tenants you're seeing in the last couple of years. How does that compare to the kind of tenant profile you saw maybe, you know, a couple of years ago pre-pandemic? Has there been any change in the profile over there? You know, I'll try and answer the question a little bit, Sai, but if I missed it, please ask again. We're seeing tenant demand from different types of tenants than we would've seen five or 10 years ago in the neighborhood anchored strip center. I think a couple reasons are for that. I think B and C enclosed malls have higher costs and less foot traffic, so tenants that typically weren't located in these types of centers are relocating to centers like ours, grocery anchored neighborhood strips. So that's creating more tenant demand than we've seen in the last decade. And I think that's because of foot traffic and our cost. But we're also seeing certain pad, typical pad users come in line. Or in other words, the cost required to build a pad, and therefore the rent they need to pay for that pad, is higher than perhaps they want to do. So we're seeing demand from pad users come in line as well. So, you know, I think we're seeing tenant demand from all sorts of, of retail tenants, and, and I think it's because of the traffic the anchors generate and the low cost of our rents. Does that, does that answer your question, Sai? Yep. No, that's exactly the color I was looking for. And actually, so the second question I had was on renewal spreads. Obviously, spreads this quarter looked really good, and as I've been looking the last couple of quarters as well. Can you guide us as to how we should think about option versus non-option renewals? Yeah, I think, you know, we'd like to quote our non-option renewal spreads like our U.S. peers do, because I think that when a tenant has, you know, control of the space, there's a little bit different of a negotiation. That being said, what we try and quote is, you know, you've seen over the past quarters and years, our non-option renewal spreads are quite high, and I think that speaks to the demand that I just talked about earlier. So, you know, given the entire market is pretty tight, there's not much vacancy and not much new construction, there's tenant demand. We anticipate those non-option spreads will continue to be double digit, and I think that's a combination of tenant demand, our teams, you know, really good work with tenants we know and being aggressive, and really our strategy of buying low in-place rents. You know, we quote it a lot, and we probably sound like broken records, but at $12.49 in-place rents, when the market average is over $23, you know, there's tons of room for growth, because we offer quality space at a discount to operators where they can improve their margins. That's good, Blair. So when you look ahead for 2024 now, how should we be thinking about the mix between, you know, option spreads, you know, those leases with options for renewals versus those that don't have it? Yeah, I mean, you know, I think if you look at our non-option renewals over the last 3 quarters, it's been in the mid-teens. So you know, we continue to see double-digit non-option renewal spreads. It gets a little bit choppy when you look at it on a quarterly basis, because certain tenants, you know, at certain times and certain market rents roll. But I think if you're thinking double-digit on that, you know, that's how we look at it, and renewals are gonna be high single digits. So it's significant rental growth. I'd just like to point out, like, we quote those spreads, and it's important, but Slate Grocery, when we do a lease deal, we pay the cash from a landlord's perspective and tenant inducement leasing commissions and any capital work at signing. Therefore, the net operating income derived from that lease comes on in the following quarters. The team did over 3 million sq ft of leasing in the last 12 months, and that NOI, you'll now start to see in 2024 and 2025. We're pretty excited about our NOI growth, because we can talk about leasing spreads, but I think our unit holders want to see some cash, and we're looking forward to delivering that to them in the coming years. Well, that makes sense, Blair. And probably, the last question I had was: so if you think about all the renewals that are coming up this year, what would be the proportion of those renewals that have options in them? You know, I think that if they renew... I would say the shop space, Sai, they're all gonna renew at market, so you can kind of think about it as like it's a non-option. A lot of them do have options. We're really talking about the difference between the grocers and the shop space, in those renewal numbers. So, you know, I would say that when we think of all the shop space, assume that they're gonna be renewing at the non-option spreads, just because they have less control, and we kind of manage our grocers. It's a little bit different, 'cause we want to control that anchor. We're still seeing great growth in our grocer rent. You know, to get more in the weeds, our grocer rent in our portfolio is $9 a foot. So if you add a 5%-10% lift, you're still under $10. And when you think about what a comparable industrial rents would be, say, for their main warehouse, we're inside that. So we think our real estate is extremely valuable for their supply chain. And Sai, I might just add one more piece. For the 2024 expiries, we have about 1.1 million sq ft remaining to be renewed. About 50% of that would be grocers, and the remaining 50% is kind of shop space. So I think that's kind of the 50/50 to what Blair said, that is what I would model. Awesome. Thanks, guys. That's actually a really good color. I'll turn it back. Thanks, Sai. Thank you. Your next question comes from the line of Brad Sturges of Raymond James. Your line is now open. ... Hey, guys. Hey, Brad. Just to go back to the leasing comment there, in terms of what you've done so far, obviously, you've had a lot of activity that hasn't been effective quite yet in the operating results. When would that start to really take effect? Is that back half of 2024? Yeah, I think we're starting to see it now, but if we kinda think of 2024, we, we think we're gonna get pretty, pretty good NOI growth. And that is for a new signing. It is booked. Like, we can see that, and that's going to be, you know, 2.5%-ish% or more, and that will continue into 2025. So, you know, I, I think that, you know, if we did all that leasing in 12 months, by the time you kind of pay for all that stuff, that starts coming on 6, 9 months later, and that's what we're starting to see right now. So it, it, it will be. It's a little bit muted now, even though it's not bad, but you'll start seeing it in the next 2 or 3 quarters for sure. That 2.5% going into 2025, that doesn't include redevelopment activity, right? Well, I mean, yeah, but I mean, there's not too much. I mean, I would say that of cash we've spent without any kind of new leasing, like, stuff, we can kinda look through on, on what we've already spent. That's how we kinda quote that number. I mean, there could be new stuff that could make it better, but, you know, that's kind of what we've already booked, that 2.5, everything. In terms of redevelopment, there was one project identified in your disclosures, East Little Creek. Just curious to get a sense of the budget, your timeline, and your expected return with the project. Yeah, this is Allen, Brad. We're still working through that redevelopment. We've got several national tenants that are interested in that location. So as we continue to work through that, finalize pricing, you know, we will certainly update that. But there's definitely interest from the city in that redevelopment, and, you know, multiple, like I said, multiple tenants that we're in discussions with about a potential redevelopment at that site as well. I think our development spreads historically have been, I mean, excuse me, yield on costs have been in the double digits. So I mean, that's kind of how we think about cash spend. Yep. Okay. Is there anything else at this point that would be earmarked for redevelopment, or is this the only project in the near term we should be thinking about? Hey, Brad, it's Braden. Good morning. So there is something coming online in the next little bit. We acquired a property in New York in 2021 that had a vacant grocery box, about 60,000 sq ft. We allocated no value to it at the acquisition. And we're now looking at, you know, backfilling that with three national tenants, and we expect that'll come online in the next little bit. Great. Just last question. Just on just looking at your debt maturities coming up, can you give us a sense of where cost of debt would be today, either from a, like, a secure debt basis, or if we're thinking about it, through the use of fixed interest rate swaps? Yeah. I'll let Joe correct me, as he usually does, 'cause, I mean, this is his thing. But we have swaps in place for the next several years. So we'll keep our effective rate of interest down, kinda where it is, between here and below 5, which is good. As it relates to, I think a bit of your question is, what's the market like? We have been extremely pleased with, you know, lender comment, lender interest in grocery-anchored retail, and I think the reason is, you know, when you look on a debt yield basis or rental growth basis, grocery-anchored retail is different than many types of real estate right now, 'cause we're talking NOI growth, NOI erosion. So that has been. We do not anticipate significant spread increases from where spreads were 2, 3, 4 years ago. What the difference is, is obviously the risk-free or the underlying rate, but we do not see spread increases. So for the next couple of years, our swaps will protect us from the cost of debt, and we think our NOI growth over that period will offset any kind of growth, you know, interest rate increases, 'cause the risk-free rate in years three, four, and five. Okay. Joe, how about that? Great. He took your spotlight there, Joe. That's helpful. I'll turn it back. Thanks. We don't have any further questions at this time. Shivi, you may continue. We have one question again from the line of Pammi Bir of RBC Capital Markets. Your line is now open. Thanks. Good morning. Can maybe try to sneak one in here? Just on the commentary around same property NOI growth. You know, it sounds like the outlook is stronger than what it's been for a little while. And wondering just how much of that is actually gonna be coming from the rent growth that you talked about on the renewal spreads versus occupancy pickup? And I'm just curious to see how many comments on the occupancy outlook. It sounds like it's been pretty firm or pretty constructive, so just wanted to get some thoughts there. Yeah. I'll let the team chime in, but thanks, Pammi. Good morning. But I think that there's gonna be a bit of both. I think that the team did a really good job of increasing occupancy. Well, we bought some assets several years ago that we thought were underperforming, and we did it strategically. The team then went to work and leased that and increased the occupancy, and that money was spent in the last, you know, 12-ish months or so. So NOI growth, it will be a combination that you're seeing in 2024 of kind of leasing to increase the occupancy. Now, that being said, the market's also tightened. So I would say when you look in the future, the NOI growth will be just because of the difference between $12.49 and $23. But right now, I would say it's a combination of the work the team did to increase the occupancy, 'cause we were strategic in buying the vacancy. So we're kind of seeing that come up. But, you know, even though everyone in real estate wants their assets to be 100% full, you know, that's kind of an impossibility with multi-tenant real estate. So I think the market's approaching stabilized occupancy. And, you know, I don't know what the technical term would be, so you're just gonna see that all in rental growth now. Great. Just on the, maybe switching gears and looking at, from a capital standpoint, what can you sort of share with, maybe what you're seeing in the transaction side of things? Anything of interest at this stage? And also just thinking, of course, you know, where you are relative to your, you know, where your cost of capital is, certainly with the, the discount to NAV. So I'm just curious how you're thinking about where to put money to work. Yeah. So I would say, like all real estate transactions have been--are down. But that being said, you know, there's 40,000 grocery stores in the United States, and it's a somewhat granular asset. So, you know, if the average deal size is $20 million-$25 million, we still see transactions because of, say, 1031 exchange buyers or locals, but it's not what it was. So I, I would say that, you know, there, there are transactions, but not like it was--it's not as bad as other asset classes, but it's, it's muted. But, you know, that it still creates liquidity for us. As it relates to our cost of capital, you know, 18 months ago, we brought in an institutional investor that at NAV, and we believe in our NAV, where our IFRS cap rate is just north of 7%. So we have positive leverage if you mark to market our whole debt, even when you think of our 4.5% debt now, I mean, it's a huge spread, and we have the cheapest rents of all of our peers. So we believe in our NAV, we think it's fair, and so we don't trade like that. At Slate, we always are in the market looking at opportunities, and the pipeline in the U.S. for grocery is massive, but we're not going to do anything foolish to dilute, you know, our existing unitholders. We're a large unitholder. We believe in our performance and focused on that, and we always talk to the board about allocating capital. I think, you know, just to say again, we thought it was a great idea to show our investor base that, you know, you're bringing someone at your NAV because we weren't trading there. And I think there is, you know, I think that was a great deal for the company. We'll continue to try and add value and create value for our unitholders, but we're not gonna do anything foolish because of where we trade. We think it's a great idea to buy the stock right now because our performance is excellent and the market is good. You know, we're always in the market looking at new deals just so we can always, you know, be able to do creative things. Got it. Thanks very much, that's helpful, Blair. I'll turn it back. Thanks, Pammi. Thank you. We don't have any further questions at this time. Shivi, please continue. Thank you, everyone, for joining the Q1 2024 conference call for Slate Grocery REIT. Have a great day! This concludes today's conference call. Thank you for your participation. You may now disconnect.