However, when compared to the leverage ratio of free standing retail segment, SRRTF carries approximately 12% more leverage than the more direct peers. Compared to other segments of retail REITs such as regional malls and shopping centers, the SRRTF's leverage profile is in line with the corresponding benchmark levels. SRRTF holds a relatively debt-saturated balance sheet with a leverage ratio of 49%. #2 High debt, but with already priced in impact Moreover, SRRTF management has pushed for embedded rent escalators (i.e., inflation-indexation) in new and renewed leases, which again should steepen the FFO growth trajectory. The combination of ~26% of leases expiring until 2024 and solid rentals spreads (especially on new leases) should definitely boost the FFO figure. In SRRTF's case, the lease expiries come in handy and provide an opportunity for growth. Considering the previous track record, secular demand for non-discretionary (defensive) retail properties, and that already going into the 2023, there was a notable chunk of leases already renewed, we may safely assume that vacancies will not be an issue for SRRTF. In 20, 8.9% and 17.6% of leases will expire, which means that either there will be lease renewals with the existing tenants or completely new tenants coming in. In my opinion, SRRTF has a significant potential to deliver strong like-for-like growth in 2023 and especially in 2024. Such a stellar performance was attributable to the combination of lease renewals and well-structured redevelopment activities, which warranted higher rents. On a quarter-to-quarter basis, Q4, 2022 resulted in 10% growth. In 2022, the same-property NOI increased by 27% compared to the year prior. So, now once we have a clear picture about the underlying strength of SRRTF cash flows, let's turn to the story of growth. Namely, given that the current size of SRRTF's portfolio is rather small (as can be noticed by looking at the below $1 billion market cap), SRRTF has a strong potential to render its holdings even more resilient to idiosyncratic shocks. The higher the number of properties under management, the more pronounced diversification benefits SRRTF enjoys (per definition). In addition to the aforementioned, we have to factor in the relatively active M&A strategy, which helps SRRTF expand its portfolio of properties and tenants. The retention rate of grocery-anchored lease renewals has been 100% over the same period.The in-place rents have increased by ~13% in the period from Q1, 2029 to Q4, 2022.In other words, the pandemic, sharp cost inflation and fears of economic recession have not impacted the demand for SRRTF's properties. Since the Q1, 2019, the occupancy rate has remained unchanged at a solid 93%. Here are some of the key facts that should comfort any investor about durability of SRRTF's cash flows: The historical figures of SRRTF also serve as the proof of the underlying strength in the portfolio. An additional positive factor is that SRRTF has little single tenant concentration risk, and by looking at the top 3 tenants, it is clear that the underlying credit risk associated with these tenants is extremely small. The largest 15 tenants, which constitute ~35% of the total base rent, are largely well established companies with strong balance sheets and reputation. SRRTF's cash flows are backed with leases paid by companies operating in durable and defensive sectors of the economy.Īs of year-end 2022, the tenant category breakdown was not only diverse but also heavily skewed towards non-discretionary segments, which inherently offer greater safety in times of economic recessions and even pandemics. Below are three main reasons, which back my opinion. In my opinion, it is the right time to buy SRRTF to capture stable and almost double digit dividends as well as to tap into the capital appreciation potential. equity retail (free standing) benchmark has also managed to march on a positive direction by 4.4% On a YTD basis, there is, however, a divergence from the historical pattern, where SRRTF is down ~9% on a total return basis, while O and the broader REIT market have gone up by 0.6% and 1.9%, respectively. REIT market, but also highly favoured Realty Income (NYSE: O), which is classified in the same segment as SRRTF. Over the trailing three year period, SRRTF has significantly outperformed not only the aggregate U.S. 96% of the portfolio is grocery-anchored, and as of year-end 2022 carried a healthy occupancy level of 93%. SRRTF owns and manages 121 properties, which are spread across 24 states of which 23 are located in the top 50 U.S. grocery-anchored REIT with a market cap of ~ $800 million. Slate Grocery REIT ( OTC:SRRTF) is a pure play U.S. Oliver de la haye/iStock Editorial via Getty Images
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