Slate Grocery REIT (SGR) 2016年年度報告「TSX」.pdf

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1、Q4 2016TSX:SRT.U and SRT.UN“We think real assets will be a base of institutional client portfolios over the next 10 years”Bruce FlattDEAR FELLOW UNITHOLDERSWe are pleased with our 2016 year end results and excited about the opportunities that lie ahead in 2017.While we tend to err on the side of cau

2、tionas it relates to reviewing short-term performance,we do think its important to measure the progress along the way.The table below helps measure some of the progress we made in 2016.In reviewing these results,we think 2016 was a year of solid improvement:More leasing executed at higher rents whic

3、h drove an increase in incomeIncrease in income drove our ability to increase distributions by 4.0%Increase in income also drove our property values higher and as a result,NAV per unitMeaningful progress made on our redevelopment activities with an expected increase in progress and investment headin

4、g into 2017Q4 results which saw a double digit increase in renewal spreads accompanied by solid same property NOI growthWe remain very bullish on the U.S.economy and specifically the markets in which our properties are located and our future investments will be made.Regardless of the distractions in

5、 the media as of late,it is hard to look around the globe and find a much more attractive place to invest than Americaright now,based solely on fundamentals.Please refer to the following link here,as we were able to find someone slightly more qualified than us toarticulate this view.The most valuabl

6、e asset we have which doesnt show up in the figures below is our people.These results dont happen without them.The hard workthey put in and the relationships theyve built with our counterparties who trust them and enjoy doing business with them is the backbone of ourgrowth.Year ended December 31,201

7、62015VarianceNAV per unit$13.36$13.171.4%FFO per unit(1)$1.32$1.32%Distributions per unit(2)$0.81$0.783.8%FFO payout ratio(1)60.1%57.6%4.3%AFFO per unit(1)$1.08$1.12(3.6)%AFFO to FFO ratio(1)81.8%84.8%(3.5)%Total development capital per unit$0.25$%Gross Revenue$97,036$79,78021.6%Net Operating Income

8、(NOI)$69,465$56,51222.9%NOI margin71.6%70.8%1.1%New leases-square feet297,63697,214206.2%New leases-rent per square foot$9.22$13.61(32.3)%Weighted average portfolio in-place rent$10.32$10.171.5%Renewed leases-square feet617,807604,0922.3%Renewal spread-per square foot$0.75$0.26188.5%Occupancy93.5%94

9、.7%(1.3)%Debt/GBV55.8%57.0%(2.1)%Debt%fixed67.2%26.9%149.8%Weighted avg.interest rate3.1%3.0%3.3%Number of properties69664.5%Total GLA8,335,6257,581,8469.9%CumulativeTotal return-SRT.U16.8%7.1%23.9%Total return-TSX Capped REIT21.9%(20.5)%1.4%Total return-MSCI U.S.REIT8.6%2.5%11.1%(1)Excludes the imp

10、act of the loss on the defeasance of a mortgage.The REIT completed a defeasance of a mortgage during the fourth quarter,at a cost of$4.5 million representing theexcess of the U.S.Treasury securities required to be funded over the outstanding principal balance of the mortgage.A$2.8 million charge to

11、income was recorded which was determinedas the$4.5 million cost,less$1.7 million,representing the unamortized mark-to-market premium associated with the mortgage.FFO was impacted by the$2.8 million charge to incomeand AFFO was impacted by the aggregate amount of$4.5 million.(2)Monthly distribution a

12、s of December 31,2016 annualized.Thank you for your continued support.We value your trust in us and look forward to the opportunity to build wealth together in the future.Pleaselet us know if you have any questions or comments.With appreciation,Greg StevensonChief Executive OfficerFebruary22,2017 Ma

13、nagements Discussion and AnalysisSLATE RETAIL REITDecember31,2016 TSX:SRT.U and SRT.UN CONTENTSFINANCIAL AND INFORMATIONAL HIGHLIGHTS.4PART I OVERVIEW.5PART II LEASING AND PROPERTY PORTFOLIO.8PART III RESULTS OF OPERATIONS.18PART IV FINANCIAL CONDITION.32PART V ACCOUNTING AND CONTROL.38PART VI PROPE

14、RTY TABLES.41 SLATE RETAIL REIT Q4 2016 MD&A 2FORWARD-LOOKING STATEMENTSCertain information in this managements discussion and analysis(“MD&A”)constitutes“forward-looking statements”within the meaning ofapplicable securities legislation.These statements reflect managements expectations regarding obj

15、ectives,plans,goals,strategies,future growth,results of operations,performance and business prospects and opportunities of the REIT including expectations for the current financial year,andinclude,but are not limited to,statements with respect to managements beliefs,plans,estimates and intentions,an

16、d similar statements concerninganticipated future events,results,circumstances,performance or expectations that are not historical facts.Statements that contain words suchas“could”,“should”,“would”,“can”,“anticipate”,“expect”,“does not expect”,“believe”,“plan”,budget”,“schedule”,“estimate”,“intend”,

17、“project”,“will”,“may”,“might”,“continue”and similar expressions or statements relating to matters that are not historical facts constitute forward-lookingstatements.These forward-looking statements are not guarantees of future events or performance and,by their nature,are based on the REITs current

18、estimates and assumptions,which are subject to significant risks and uncertainties.The REIT believes that these statements are made based onreasonable assumptions;however,there is no assurance that the events or circumstances reflected in these forward-looking statements will occuror be achieved.A n

19、umber of factors could cause actual results to differ materially from the results discussed in the forward-looking statementsincluding,but not limited to the risks that are more fully discussed under the“Risk Factors”section of the annual information form of the REIT forthe year ended December 31,20

20、16(“Annual Information Form”).Factors that could cause actual results to differ materially from those contemplatedor implied by forward-looking statements include,but are not limited to:risks incidental to ownership and operation of real estate properties includinglocal real estate conditions;financ

21、ial risks related to obtaining available equity and debt financing at reasonable costs and interest rate fluctuations;operational risks including timely leasing of vacant space and re-leasing of occupied space on expiration of current leases on terms at current oranticipated rental rates;tenant defa

22、ults and bankruptcies;uncertainties of acquisition activities including availability of suitable property acquisitionsand integration of acquisitions;competition including development of properties in close proximity to the REITs properties;loss of key managementand employees;potential environmental

23、 liabilities;catastrophic events,such as earthquakes and hurricanes;governmental,taxation and otherregulatory risks and litigation risks.Forward-looking statements included in this MD&A are made as of February22,2017,and accordingly are subject to change after such date.TheREIT does not undertake to

24、 update any forward-looking statements that are included in this MD&A,whether as a result of new information,futureevents or otherwise,except as expressly required by applicable securities laws.Certain statements included in this MD&A may be considered“financial outlook”for purposes of applicable se

25、curities laws,and such financial outlook may not be appropriate for purposes other than this MD&A.Investors are cautioned against placing undue reliance on forward-looking statements.SLATE RETAIL REIT Q4 2016 MD&A 3FINANCIAL AND INFORMATIONAL HIGHLIGHTS(in thousands,except per unit amounts and as ot

26、herwise stated)Q4 2016Q3 2016Q2 2016Q1 2016Q4 2015Summary of Portfolio InformationNumber of properties6964686666Gross leasable area(GLA)8,335,6257,841,4017,941,6997,726,0557,581,846GLA occupied by grocery-anchors3,909,7163,669,5953,776,1053,691,6543,585,268Occupancy93.5%93.6%95.0%94.4%94.7%Grocery-a

27、nchor occupancy99.1%99.0%99.1%99.0%99.0%Non-anchor occupancy89.2%88.7%91.2%90.2%90.7%Grocery-anchor weighted average lease term(years)5.85.75.95.96.2Portfolio weighted average lease term(years)5.15.15.25.15.2Square feet(SF)leased258,168117,805255,623283,847150,365Summary of Financial InformationIFRS

28、 gross book value(GBV)(1)$1,114,606$1,076,668$1,072,823$1,033,985$1,013,481Total debt621,442585,773586,134588,702577,280Revenue25,04423,69924,08824,20523,104Net loss(12,397)(15,309)(605)(760)(1,057)Net operating income(NOI)(2)17,93117,01917,43817,07716,248Funds from operations(FFO)(2)(3)8,68811,1931

29、1,99810,68510,543Adjusted funds from operations(AFFO)(2)(3)5,5579,20510,1947,5988,647Distributions declared$7,179$6,990$6,894$6,201$6,090Per Unit Financial InformationClass U equivalent units outstanding35,45635,44035,42531,85831,829WA class U equivalent units outstanding(WA units)35,49435,46934,627

30、31,87231,957FFO per WA units(2)(3)$0.24$0.32$0.35$0.34$0.33AFFO per WA units(2)(3)0.160.260.290.240.27Declared distributions per unit$0.2025$0.1947$0.1890$0.1890$0.1890Financial RatiosAFFO payout ratio(2)(3)(4)129.2%75.9%67.6%81.6%70.4%FFO payout ratio(2)(3)(5)82.6%62.4%57.5%58.0%57.8%Debt/GBV56.1%5

31、4.7%55.0%57.4%57.5%Weighted average interest rate(6)3.10%3.00%3.00%3.05%2.97%Interest coverage ratio(7)3.35x3.31x3.57x3.27x3.19xAll operational amounts are for the three month period ended and all other amounts are as at the end of the period.(1)GBV is defined as total assets.(2)Refer to non-IFRS fi

32、nancial measures on page 5.(3)The REIT completed a defeasance of a mortgage during the fourth quarter,at a cost of$4.5 million representing the excess of the U.S.Treasury securities required to be funded overthe outstanding principal balance of the mortgage.A$2.8 million charge to income was recorde

33、d which was determined as the$4.5 million cost,less$1.7 million,representing theunamortized mark-to-market premium associated with the mortgage.FFO was impacted by the$2.8 million charge to income and AFFO was impacted by the aggregate amount of$4.5million.(4)Distributions declared divided by AFFO.(

34、5)Distributions declared divided by FFO.(6)Includes the impact of pay-fixed receive-float swaps.(7)NOI less other expenses,divided by interest on debt.SLATE RETAIL REIT Q4 2016 MD&A 4PART I OVERVIEW SLATE RETAIL REIT Q4 2016 MD&A 5INTRODUCTIONThis MD&A of the financial position and results of operat

35、ions of Slate Retail REIT(TSX:SRT.U and SRT.UN)and its subsidiaries(collectively,theREIT)is intended to provide readers with an assessment of performance and summarize the financial position and results of operations of theREIT for the year ended December 31,2016.The presentation of the REITs financ

36、ial results,including the related comparative information,contained in this MD&A are based on the REITs consolidated financial statements for the year ended December 31,2016,which have beenprepared by management in accordance with International Financial Reporting Standards(IFRS).This MD&A should be

37、 read in conjunction withthose financial statements.All amounts are in thousands of United States dollars,unless otherwise noted,which is the functional currency of theREIT and all of its subsidiaries.The information contained in this MD&A is based on information available to the REIT and is dated a

38、s of February22,2017,which is also the datethe Board of Trustees,upon the recommendation of its Audit Committee,approved the contents of this MD&A.PROFILEThe REIT is an unincorporated open-ended real estate mutual fund trust constituted in accordance with the laws of the Province of Ontario pursuant

39、to an amended and restated Declaration of Trust dated as of April 15,2014,as amended on May 11,2016.As of December31,2016,the REITowns 69 grocery-anchored retail commercial properties located in the United States of America(the U.S.)comprising 8.3 million square feet ofGLA.The REIT is externally man

40、aged and operated by Slate Asset Management L.P.(the Manager”or Slate).The Manager has an experienced anddedicated team of real estate professionals with a proven track record of success in real estate investment and management.Managementsinterests are aligned with the unitholders of the REIT throug

41、h its sponsorship and as a significant unitholder of the REIT.Slate is the largestunitholder in the REIT,with an approximate 6.7%interest,and accordingly,is highly motivated to increase the value to unitholders and providereliable growing returns to the REITs unitholders.Additional information on th

42、e REIT,including its Annual Information Form,is available on SEDAR at and on the REITs websiteat AND OUTLOOKOur strategy is to own quality grocery-anchored retail properties located in major markets in the United States that are visited regularly by consumersfor their everyday needs.We believe that

43、our diversified portfolio,quality tenant covenants,coupled with a conservative payout ratio,provides astrong basis to continue to grow unitholder distributions and flexibility to capitalize on opportunities to provide value appreciation.We are focused on the following areas to achieve the REITs obje

44、ctives through 2017 and 2018:Be disciplined in our acquisition of well-located properties that provide opportunity for future value creation;Maintain a conservative AFFO payout ratio to continue to provide steady and reliable distributions to unitholders;Proactive property and asset management that

45、results in NOI growth while minimizing property and portfolio vacancy exposure;Prudent and disciplined management of capital outlays that will maintain and increase the attractiveness of the REITs portfolio and achieveincreased rents;andContinue to increase the REITs financial strength and flexibili

46、ty through robust balance sheet management.Overall,the REIT has established a premier platform of diversified grocery-anchored properties that creates meaningful cash flow for unitholdersand the continued opportunity for future growth.NON-IFRS FINANCIAL MEASURESWe disclose a number of financial meas

47、ures in this MD&A that are not measures determined in accordance with IFRS,including NOI,same-property NOI,FFO,FFO payout ratio,AFFO,AFFO payout ratio,adjusted earnings before interest,tax,depreciation and amortization(AdjustedEBITDA)and the interest coverage ratio,in addition to certain measures on

48、 a per unit basis.We utilize these measures for a variety of reasons,including measuring performance,managing the business,capital allocation and the assessment of risk.Descriptions of why these non-IFRSmeasures are useful to investors and how management uses each measure are included in this MD&A.W

49、e believe that providing these performancemeasures on a supplemental basis to our IFRS results is helpful to investors in assessing the overall performance of our businesses in a mannersimilar to management.These financial measures should not be considered as a substitute for similar financial measu

50、res calculated in accordancewith IFRS.We caution readers that these non-IFRS financial measures may differ from the calculations disclosed by other businesses,and as aresult,may not be comparable to similar measures presented by others.Reconciliations of these non-IFRS measures to the most directly

51、comparablefinancial measures calculated and presented in accordance with IFRS are included within this MD&A.The definition of non-IFRS financial measures are as follows:NOI is defined as rental revenue less operating expenses,prior to straight-line rent and IFRIC 21 adjustments.Same-property NOI inc

52、ludethose properties owned by the REIT for each of the current period and the relevant comparative period excluding those properties underdevelopment.FFO is defined as net income(loss)adjusted for certain items including IFRIC 21 property tax adjustments,transaction costs,unit expense,change in fair

53、 value of investment properties,change in fair value of interest rate caps,goodwill impairment and deferred income taxes.AFFO is defined as FFO adjusted for certain items including straight-line rental revenue,income support payments received by the REIT butnot recognized in income,non-cash adjustme

54、nts related to the REITs accounting for its TIF notes,amortization of finance and mark-to-market charges in interest,tenant improvements and leasing commissions and landlord work.FFO payout ratio and AFFO payout ratio are defined as distributions declared divided by FFO and AFFO,respectively.Adjuste

55、d EBITDA is defined as NOI less other expenses.Interest coverage ratio is defined as adjusted EBITDA divided by cash interest paid.SLATE RETAIL REIT Q4 2016 MD&A 6RISK AND UNCERTAINTIESThe REITs business is subject to a number of risks and uncertainties which are described in its most recently filed

56、 Annual Information Form forthe year ended December 31,2016,available on SEDAR at .Additional risks and uncertainties not presently known to the REITor that the REIT currently considers immaterial also may impair its business and operations and cause the price of the units to decline.If any ofthe no

57、ted risks actually occur,the REITs business may be harmed and the financial condition and results of operation may suffer significantly.Inthat event,the trading price of the units could decline,and unitholders may lose all or part of their investment.RECENT DEVELOPMENTSThe following is a summary of

58、the key financial and operational highlights and recent developments for the REIT for the year ended December31,2016:The REIT took meaningful steps to mitigate the risk of increasing interest rates during the fourth quarter of 2016.On November 2,2016,theREIT fixed$300 million of its floating rate de

59、bt with an interest rate swap through to April 2021.At December 31,2016 that swap had a fairvalue of$7.0 million due to increases in interest rates following the U.S.Presidential election.During 2016 the REIT continued to execute on its capital recycling and deployment program.Since the beginning of

60、 the second half of theyear the REIT has acquired 9 properties for an aggregate purchase price of$94.8 million.These acquisitions fully deployed the$36.6 millionraised from the sale of class U units through a rights offering in April 2016 and the$36.3 million of proceeds from the sale of 7 propertie

61、sduring 2016.In the fourth quarter of 2016,the REIT completed 258,168 square feet of leasing.Notably,the REIT renewed 36 tenants at an 9.7%spreadover expiring rents and in addition,10 new shop space tenants less than 10,000 square feet at an average rental rate of$16.48 per squarefoot which is$4.66

62、per square foot or 38.8%higher than the weighted average in-place rent for comparable space across the portfolio.On September 15,2016,the REIT declared a distribution of$0.0675 per class U unit,or$0.81 on an annualized basis for the month ofSeptember.This distribution represents a 4%increase in the

63、monthly distribution to unitholders.The increased distribution is the thirdconsecutive annual distribution increase by the REIT since listing on the TSX in 2014.Management continues to target a 70%AFFO payoutratio.On December 15,2016,the REIT entered into an agreement(the Defeasance Agreement)provid

64、ing for the defeasance of$26.7 million ofmortgage debt due April 30,2021 with an annual interest rate of 5.8%(the Defeasance”).At the inception of such debt,the REIT had pledgedto the lender five of its properties as security.Under the terms of the Defeasance Agreement,these five properties were rel

65、eased as collateralfor debt and a third party assumed the REITs obligation of the mortgage debt,as well as the ownership interest in the related securities.TheDefeasance allows the REIT to pursue potential dispositions and redevelopment opportunities at these properties.As a result,the REIT recogniz

66、ed a loss on the Defeasance of a mortgage due of$2.8 million,which is the difference between the purchaseprice of U.S.Treasury Securities and the outstanding principal balance of the mortgage due of$4.5 million,net of unamortized mark-to-market premiums of$1.7 million.The determination of FFO was im

67、pacted by the$2.8 million charge to income or$0.08 per unit and AFFOwas impacted by the aggregate amount of$4.5 million or$0.13 per unit.The defeasance was financed through a draw on the REITs revolverand cash on hand,which Management expects that over the original term to maturity of the REITs debt

68、 will reduce aggregate interest costs.Subsequent to 2016,the REIT completed a public offering and private placement for an aggregate of 5.6 million class U units at a price of$10.89 or C$14.35 per unit for gross proceeds to the REIT of approximately$60.5 million or C$79.8 million.This total includes

69、 an over-allotment option that was fully exercised by the REITs underwriters.The public offering and private placement were completed on January20,2017 with the net proceeds from the offering initially being used to reduce leverage,but is expected to be redrawn as needed to fundfuture acquisitions.O

70、n a pro-forma basis following the public offering and private placement the REITs available liquidity increased to over$150 million and its loan-to-value ratio was reduced to 50.6%.Rental revenue was$25.0 million and$97.0 million for the three and twelve month period ended December 31,2016,respectiv

71、ely,whichrepresents an increase of$1.9 million and$17.3 million compared to the same periods in the prior year.The increase is primarily due to rentalrate growth and acquisitions activity,partially offset by dispositions during the year.Net loss of$29.1 million for the year ended December 31,2016,wh

72、ich represents a$29.5 million decrease from the comparative period.Netloss for the three month period ended December 31,2016 decreased by$11.3 million from the same period in 2015 to$12.4 million.Thedecrease is attributed to the increase in fair value of REIT units and exchangeable units of subsidia

73、ries,change in fair value of investmentproperties and increased distributions,partially offset by the aforementioned increases in rental revenue.NOI was$17.9 million for the three month period ended December 31,2016,compared to$17.0 million in the third quarter of 2016.Theincrease is primarily due t

74、o accretive acquisitions of five investment properties for a total purchase price of$49.8 million($101 per squarefoot)at an average capitalization rate of 7.35%.Each asset is anchored with strong covenants.FFO on a per unit basis has decreased to$0.24 which is a$0.08 per unit or 25.0%lower from the

75、third quarter.AFFO on a per unit basis was$0.16,which represents a$0.10 per unit or 38.5%increase from the third quarter and a$0.11 per unit or 40.7%decrease compared to the same quarter in 2015.As a result,the REITs AFFO pay-out ratio for the fourth quarter and annual basis for 2016was 129.2%and 83

76、.8%,respectively.SLATE RETAIL REIT Q4 2016 MD&A 7PART II LEASING AND PROPERTY PORTFOLIO SLATE RETAIL REIT Q4 2016 MD&A 8LEASINGThe REIT strives to ensure that the REITs properties are well tenanted with tenants who have space that allow them to meet their own businessobjectives.Accordingly,the REIT

77、proactively monitors its tenant base with the objective to renew in advance of tenant maturities,backfill tenantvacancies for instances where a tenant will not renew,or if there is an opportunity to place a stronger or more suitable tenant in our properties,we endeavor to find a suitable solution.Th

78、e following table summarizes our leasing activity for the four most recent quarters:Square feetDeal typeQ4 2016Q3 2016Q2 2016Q1 2016Less than 10,000RenewalLeases signed33282529Total square feet75,91867,45856,06767,300Average base rent$17.27$20.83$17.79$15.13Rental spread10.1%8.4%6.9%5.8%Greater than

79、 10,000RenewalLeases signed3242Total square feet55,02833,974147,588114,474Average base rent$8.11$10.60$8.13$8.76Rental spread9.2%9.6%2.4%1.7%Total renewals(square feet)130,946101,432203,655181,774Less than 10,000New leaseLeases signed10111614Total square feet21,99916,37321,96841,427Average base rent

80、$16.48$16.56$17.47$15.89Rental spread38.8%39.2%50.3%34.7%Greater than 10,000New leaseLeases signed113Total square feet105,22330,00060,646Average base rent$3.00$4.25$10.32Rental spread53.7%(27.0)%34.7%Total new leases(square feet)127,22216,37351,968102,073Total leasing activity(square feet)258,168117

81、,805255,623283,847During the fourth quarter,management completed 130,946 square feet of renewals.The weighted average rental rate increase on renewalscompleted for leases less than 10,000 square feet was$1.58 per square foot or 10.1%higher than expiring rent.The weighted average rental rateincrease

82、on renewals completed for leases greater than 10,000 square feet was$0.68 per square foot or 9.2%higher than expiring rent.Theweighted average base rent on all new leases completed less than 10,000 square feet was$16.48 per square foot which is$4.61 per square footor 38.8%higher than the weighted av

83、erage in-place rent for comparable space across the portfolio.These transactions compare favorably to thecurrent weighted average in-place rent for the portfolio of$10.32.In addition,a new 20-year ground lease with Kroger was executed at Hocking Valley during the quarter.As a result,Kroger will buil

84、d a new largeformat store and move onto the former Kmart parcel,increasing their square footage from 56,160 square feet to 105,223 square feet,an increaseof 87%.Hocking Valley was purchased in June 2015 with the execution of this lease being an integral part of the business plan so we are pleasedwit

85、h the completion of this milestone.We believe this lease will serve as a template for future deals going forward and ultimately decrease thetime to execution.Kroger is estimated to continue to occupy their existing space until December 2017 when their new space is complete.We areactively working wit

86、h tenants to back-fill their former space in advance of construction completion that would complement the Kroger use andincrease the overall lease term and credit quality of the centre.Lease maturitiesThe REIT generally enters into leases with initial terms to maturity between 5 and 10 years with ou

87、r grocery-anchor tenants.Accordingly,theaverage in-place lease remaining term to maturity is shorter than the initial term.The initial terms to maturity for non-anchor space tends to be ofa shorter duration between 3 and 5 years.The weighted average remaining term to maturity at December31,2016 of t

88、he REITs grocery-anchorand non-grocery-anchor tenants was 5.8 years and 4.4 years,respectively,not including tenants on month-to-month leases.On a portfolio basisthe weighted average remaining term to maturity is 5.1 years.The following table summarizes the composition of the remaining term to matur

89、ity of the REITs leases at December31,2016:Weighted averageterm to maturityGLAGLA%Grocery-anchor5.83,909,71646.9%Non-anchor4.43,808,96745.7%Total occupied5.17,718,68392.6%Month-to-month76,7050.9%Vacant540,2376.5%Total GLA8,335,625100.0%The following table summarizes the composition of the remaining

90、term to maturity of the REITs leases at December31,2015:Weighted averageterm to maturityGLAGLA%Grocery-anchor6.23,585,26847.3%Non-anchor4.33,516,02946.4%Total occupied5.27,101,29793.7%Month-to-month74,3141.0%Vacant406,2355.4%Total GLA7,581,846100.0%The following table shows the change in occupancy d

91、uring the three month period ended December 31,2016:Total GLAOccupied GLAOccupancySeptember 30,20167,841,4017,336,35093.6%Acquisitions493,152457,73992.8%Leasing changes1,299N/AOther1,072N/ADecember 31,20168,335,6257,795,38893.5%Occupancy has decreased from 93.6%at September30,2016 to 93.5%at Decembe

92、r31,2016.The 0.1%decrease is primarily lower due tooccupancy rates of the REITs newly acquired properties,including North Hixson Marketplace at an 80%occupancy rate,and both Robson Crossingand Mooresville Town Square at 90%occupancy rates.The following is a profile of the REITs leases excluding the

93、impact of tenant extension options:Grocery-anchorNon-anchorTotalGLA expirationGLAPercentageof occupiedportfolioAveragein-placerentGLAPercentageof occupiedportfolioAveragein-placerentGLAPercentageof occupiedportfolioAveragein-placerentMonth-to-month$76,7050.9%$14.0276,7050.9%$14.022017200,9322.4%6.29

94、533,6686.4%11.25734,6008.8%9.892018528,0216.3%8.07478,2475.7%13.731,006,26812.1%10.762019540,1936.5%7.06480,4675.8%14.811,020,66012.2%10.712020300,0643.6%7.1550,2586.6%10.97850,32210.2%9.602021215,6252.6%6.53510,0486.1%12.09725,6738.7%10.442022 and later2,124,88125.5%9.351,256,27915.1%11.723,381,160

95、40.6%10.23Vacant36,0750.4%N/A504,1626.1%N/A540,2376.5%N/ATotal/weighted average3,945,79147.3%$8.374,389,83452.7%$12.278,335,625100.0%$10.32 SLATE RETAIL REIT Q4 2016 MD&A 9The following is a table of lease expiries at December 31,2016 and pre-existing future maturities that were leased in advance du

96、ring 2016.The REIT endeavors to proactively lease upcoming expiries in advance of maturity to maintain high occupancy levels,ensure a proper mix oftenants at each property and reduce risk in the cash flow certainty related to the property.At December31,2016,remaining 2017 expiries totaled8.8%of tota

97、l GLA,with 6.4%of that space related to non-anchor tenants.Comparatively,at September30,2016 and June 30,2016,GLA expirationfor the remaining 2017 year was 10.1%,respectively 793,149 square feet of GLA of the REITs portfolio,with 7.6%related to non-anchor tenants,and 10.2%,respectively 809,422 squar

98、e feet of GLA of the REITs portfolio,with 7.4%related to non-anchor tenants,respectively.Retention ratesThe REITs asset management team strives to maintain strong relationships with all tenants,especially our grocery-anchored tenants.Sinceinception in 2011,the REIT has had a 100%retention rate of on

99、 grocery-anchored renewals.We believe that this success has been as a result ofour strong relationships with tenants,but also as a result of our diligent underwriting which in part considers the relative strength of grocery-anchorsin the respective market,recent capital investment by grocers and,whe

100、re possible,the profitability of the store.We expect a lower retention ratefor our non-grocery-anchored tenants as a result of the dynamics and natural turnover of certain businesses over time which gives us opportunityto release space and improve overall credit and tenant mix.The following are the

101、REITs retention rates for year ended December 31,2016 and year ended December 31,2015 for both grocery-anchor andnon-grocery-anchor tenants:Retention rate(1)20162015Grocery-anchor100.0%100.0%Non-grocery-anchor83.8%84.6%Net total/weighted average91.9%92.6%(1)The grocery-anchor retention rate excludes

102、 the impact of A&P,the parent company of Food Basics,at County Line due to bankruptcy.The retention rate for non-grocery-anchor spaceexcludes non-renewals where the REIT has reacquired the space to accommodate an expansion or lease with another tenant through active repositioning of the existing ten

103、ant mix.The following are the REITs incremental change in base rent for the four most recent quarters:For the three months ended,December 31,2016September 30,2016June 30,2016March 31,2016Renewals SF130,946101,432203,655181,774Renewals weighted average expiring rent per SF$12.22$16.02$10.34$10.72Rene

104、wals weighted average rent spread per SF$1.21$1.38$0.45$0.40Vacated SF(1)19,60931,07815,88238,132Vacated weighted average expiring rent per SF$16.83$5.64$6.69$18.03New SF127,22216,37351,968102,073New weighted average rent per SF$5.33$16.56$9.84$12.58Total base rent retained$1,270$1,450$2,000$1,261To

105、tal incremental base rent increase$837$411$603$1,357(1)Adjusted for lease buyouts and vacancies due to redevelopment.SLATE RETAIL REIT Q4 2016 MD&A 10In-place and market rentsThe REITs leasing activity during the three month period ended December 31,2016 is as follows:GLANumber of unitsWeighted aver

106、ageexpiring rentWeighted averagenew rentRenewed leases130,94636N/A$13.42New leases127,22211N/A5.33Total/weighted average258,16847N/A$9.43Less,leases not renewed/vacated during term(19,609)(13)16.83N/ANet total/weighted average238,55934$9.43The REITs leasing activity during the year ended December 31

107、,2016 is as follows:GLANumber of unitsWeighted averageexpiring rentWeighted averagenew rentRenewed leases617,807126N/A$12.53New leases297,63656N/A9.22Total/weighted average915,443182N/A$11.45Less,leases not renewed/vacated during term(1)(104,701)(58)12.41N/ANet total/weighted average810,742124$11.45

108、(1)Excludes the impact of Kmart lease buyouts due to redevelopment at North Augusta and Hocking Valley,totaling 186,408 square footage that relates to tenants vacated during theterm.Refer to the section Development costs within Part II-Leasing and Property Portfolio of this MD&A for more detail.Duri

109、ng the fourth quarter the REIT completed 258,168 square feet of leasing activity,which represents 3.1%of the REITs portfolio.For the yearended December 31,2016,the REIT completed 915,443 square feet of leasing activity,which represents 11.0%of the REITs portfolio.This levelof leasing is consistent w

110、ith our strategy of actively managing our properties to create value through a hands-on approach.Leases not renewed or vacated during the term for the year ended December 31,2016 of 104,701 square feet relates to non-anchor tenants.SLATE RETAIL REIT Q4 2016 MD&A 11ACQUISITIONSThe REIT acquired 10 pr

111、operties during the year ended December 31,2016,as summarized below:Investment propertyPurchase dateMSAPurchase priceSFPrice per SFAnchor tenantCharles Town PlazaMarch 30,2016Wash.Baltimore$20,900206,146$101WalmartAbbotts VillageMay 19,2016Atlanta15,200109,586139PublixFlowers PlantationJune 3,2016Ra

112、leigh6,30053,500118Food LionSunset PlazaJune 29,2016Johnson City9,000143,75263KrogerTaylorsville Town CentreAugust 8,2016Salt Lake City14,450127,231114Fresh MarketEastpointe Shopping CentreOctober 13,2016Morgantown11,600181,01664KrogerMooresville Town SquareNovember 14,2016Charlotte16,70089,824186Lo

113、wes FoodsRobson CrossingNovember 21,2016Atlanta11,000100,220110PublixArmstrong PlazaNovember 30,2016Greenville5,25057,83891BI-LO North Hixson MarketplaceDecember 14,2016Chattanooga5,25064,25482Food CityTotal/weighted average$115,6501,133,367$102The aforementioned properties were acquired by the REIT

114、 for a total of$115.7 million,totaling 1,133,367 square feet($102 price per square foot)at an estimated weighted average capitalization rate of 7.4%.Each asset is leased with strong anchor tenants.The acquisitions undertaken by the REIT fully deployed cash from the REITs rights offering of$36.6 mill

115、ion,cash from operations in excess ofdistributions and the$36.3 million of proceeds from the sale of seven assets.Subsequent to December 31,2016,the REIT completed the sale of 5.6 million class U units for gross proceeds of approximately$60.5 million onJanuary 20,2017.Net proceeds from the offering

116、were initially used to reduce leverage,but are expected to be redrawn as needed to fund futureacquisitions.On a pro-forma basis,including the impact of the sale of class U units,at December 31,2016,the REIT has over$150 million ofliquidity available to fund its acquisition pipeline.If the REIT acqui

117、red an additional$150 million of properties using its available liquidity,its debt-to-equity ratio would increase to approximately 56%.DISPOSITIONSThe REIT disposed of seven properties during the year ended December 31,2016 as follows:Madison CentreOcean Plaza Food Lion Portfolio(1)TotalDisposition

118、dateMarch 28,2016June 30,2016July 20,2016LocationMadison,AlabamaNorth Myrtle Beach,South CarolinaVariousNumber of properties1157Sale price$9,100$6,500$21,920$37,520Working capital(30)(41)(126)(197)Disposition costs(140)(224)(666)(1,030)Net proceeds$8,930$6,235$21,128$36,293(1)Food Lion anchored asse

119、ts(Food Lion Portfolio)dispose of include Madison Plaza,Lovingston Plaza and Bowling Green Plaza,each located in Virginia,Gaston Marketplace locatedin South Carolina and Triangle Food Lion located in North Carolina.These sales exemplify the REITs strategy to purchase well located properties that can

120、 be enhanced through leasing,extending term and proactiveasset management to increase cash flow and as a result value.Capital gains related to the REITs property dispositions have been deferred forU.S.tax purposes under Section 1031 of the U.S.Internal Revenue Code(a Section 1031 Deferral),whereby t

121、he proceeds from dispositionsare reinvested in acquisitions of the REIT.Any capital gains deferred for U.S.tax purposes using a Section 1031 Deferral are not deferred forCanadian taxation purposes in determining taxable income allocations for holders of REIT units.For the year ended December 31,2016

122、,the REITreinvested all proceeds from dispositions to fund the acquisition of Charles Town Plaza,Taylorsville Town Centre,Eastpointe Shopping Centre,Mooresville Town Centre and Robson Crossing.There are no fees incurred by the REIT to the Manager in relation to the disposition of properties.SLATE RE

123、TAIL REIT Q4 2016 MD&A 12PROPERTY PROFILEThe REITs property portfolio at December31,2016 comprises 69 grocery-anchored retail commercial properties with 8.3 million square feet ofGLA located in the U.S.For a listing of all of the REITs properties refer to PART VI PROPERTY TABLES of this MD&A.SLATE R

124、ETAIL REIT Q4 2016 MD&A 13Geographic overviewThe REITs portfolio is geographically diversified.As of December31,2016,the REITs 69 properties were located in 21 states with a presencein 23 major MSAs.The REIT has 26 properties,or 37.7%of the total portfolio,located in the U.S.Sunbelt region.Markets w

125、ithin this region benefitfrom strong underlying demographic trends,above average employment and population growth.This provides the REIT opportunities toprogressively drive operational efficiencies and sustainable growth.The following is a summary of the geographic location and relative dispersion o

126、f the REITs property portfolio:StateNumber ofassetsTotal SFOccupied SFPercentage ofrevenueOccupancyFlorida8804,672742,12010.4%92.2%Georgia7772,351705,9329.1%91.4%North Carolina6757,340727,4988.9%96.1%Pennsylvania5769,626719,3777.5%93.5%South Carolina6580,761550,3486.4%94.8%Michigan4501,359478,6086.2

127、%95.5%Tennessee5559,187531,7355.7%95.1%Ohio5685,784557,7995.7%81.3%Minnesota3422,032407,8875.5%96.6%North Dakota2261,578261,5784.9%100.0%Maryland1147,803136,1053.9%92.1%Wisconsin3294,233288,3283.6%98.0%West Virginia2387,162380,7023.4%98.3%Illinois3269,847237,1943.3%87.9%Colorado2203,829190,6042.9%93

128、.5%New Hampshire1187,001173,6812.9%92.9%Connecticut1141,443141,4432.6%100.0%Virginia2203,434190,3842.4%93.6%Texas1167,961164,3612.0%97.9%Utah1127,231124,0131.5%97.5%Kentucky190,99185,6911.2%94.2%Total698,335,6257,795,388100%93.5%Anchor tenantsThe REIT endeavors to own properties with anchors who are

129、 dominant in their respective regions in terms of operational scale and sales.Accordingly,our anchor tenants typically are either the first or second dominant store in their respective area in terms of market share.The following tableidentifies the REITs largest anchor tenants including their annual

130、 minimum rent,the number of stores,GLA as a percentage of the total portfolioand the percentage of base rent.The Kroger Co.represents the REITs largest tenant by base rent with a total of 18 stores and 7.9%of baserents.The largest 15 tenants account for 48.3%of total GLA and 43.2%of base rent as fol

131、lows:Parent companyStore brandsGrocery Stores%GLABaserent%BaserentThe Kroger Co.Kroger,Pick n SaveY1812.1%$6,3277.9%Southeastern GrocersWinn Dixie,BI-LOY105.5%4,3875.5%Walmart Inc.Wal-Mart,Sams ClubY58.0%3,9014.9%Koninklijke Ahold Delhaize N.V.Stop&Shop,GIANT,Food Lion,HannafordY42.8%3,8014.8%SuperV

132、alu Inc.Cub Foods,Farm Fresh,Save-A-Lot,County MarketY63.7%3,1533.9%Publix Supermarkets,Inc.PublixY73.7%2,6343.3%Alex Lee Inc.Lowes FoodsY42.1%1,9352.4%Coborns,Inc.CashWiseY21.4%1,8532.3%AlbertsonsJewel-Osco,SafewayY32.0%1,1641.5%Dollar Tree Inc.Dollar Tree,Family DollarN121.4%1,0961.4%Schnuck Marke

133、ts,Inc.SchnucksY21.4%1,0821.4%Giant Eagle Inc.Giant EagleY21.4%8551.1%Sun Capital Partners,Inc.ShopKoN11.0%8221.0%K-VA-T Food Stores,Inc.Food CityY21.1%7230.9%LA FitnessLA FitnessN10.7%6930.9%Total7948.3%$34,42643.2%SLATE RETAIL REIT Q4 2016 MD&A 14Development costsDevelopment capital spent during t

134、he three and twelve month period ended December 31,2016 is as follows:Three months endedDecember 31,2016Year endedDecember 31,2016Hocking Valley(1)$663$2,732North Augusta(1)2,5356,197Other development costs(2)2445$3,222$8,974(1)Includes lease termination fees related to the buyout of existing Kmart

135、leases to facilitate the redevelopment of Hocking Valley and North Augusta which occurred during the secondquarter of 2016.(2)Other development costs relate to new outparcel development as well as other planning and work completed in advance of potential redevelopment projects.Hocking Valley is a cu

136、rrent 179,415 square foot centre located in Lancaster,Ohio,which is anchored by the Kroger Co.in an existing 55,160square foot store layout.The REIT has undertaken a redevelopment of the property in order to expand the existing Kroger format into a KrogerMarketplace,the premier format for the grocer

137、.Kroger Marketplaces are typically characterized by 120,000 plus square foot formats containingmultiple departments in addition to a full-service grocer,including pharmacy,health and beauty care,home furnishings,bed and bath,and toysand apparel.The proposed Kroger Marketplace would feature a dedicat

138、ed pharmacy with drive-through and grocery pick-up lanes(Click Pick),under a 20-year ground lease.The REIT expects to invest approximately$6.7 million of addition development capital in order to complete theredevelopment by mid-2018.North Augusta is a Publix anchored centre that the REIT purchased a

139、t an existing estimated 8.8%capitalization rate.The property was leased toKmart,whose lease was strategically terminated,which provided for the redevelopment and releasing of the existing space to five new tenants,anchored by Ross Dress for Less,a strong investment grade covenant,and Burkes Outlet,P

140、etsmart and Rack Room Shoes.The addition of thenew junior anchor tenants has spurred interest from other national tenants including Chipotle who will be opening a 2,300 square foot drive-throughrestaurant at the entrance of the property.The REIT is also undertaking to provide a new modern facade,as

141、well as other improvements throughoutthe centre that will meaningfully improve the appearance and layout.The redevelopment is expected to require an additional$5.3 million and becompleted by mid-2017.The redevelopment,when complete,will significantly increase the weighted average term and result in

142、a 114%increasein base rents for our new tenants relative to what Kmart was paying prior to termination.North Augusta Plaza redevelopment renderingThe REIT continued to make progress at both Hocking Valley and North Augusta in the fourth quarter of 2016.Each of these redevelopmentsprovides the opport

143、unity for the REIT to dramatically change the footprint and appearance of the assets,with strong anchor tenants operatingimproved formats under long-term leases and growing cash flows.County Line is a well located,former grocery-anchored center in the Philadelphia MSA.The previous grocer vacated the

144、 location due to its parentcompanys bankruptcy.While Management continues to have discussions with competing grocers,there is also a redevelopment opportunity tore-purpose the vacant anchor box as well as a vacant out-parcel building that together comprise approximately 55%of the GLA.Management isin

145、 the early stages of evaluating the redevelopment scenario and are in discussions with a number of potential tenants.SLATE RETAIL REIT Q4 2016 MD&A 15IFRS FAIR VALUEThe REITs property portfolio at December31,2016 had an estimated IFRS fair value of$1,072.9 million,using a weighted average capitaliza

146、tionrate of 7.12%.Overall,the average estimated IFRS value per square foot of the REITs portfolio is$129.The following table presents a summary of the capitalization rates used to estimate the fair value of the REITs properties at December31,2016and December31,2015:Direct capitalization ratesDecembe

147、r 31,2016December 31,2015Minimum6.00%6.00%Maximum9.00%9.00%Weighted average7.12%7.12%The year ended December 31,2016 weighted average capitalization rate remained unchanged from the prior year at 7.12%.Management decreasedthe weighted average capitalization rates during the year at North Augusta Pla

148、za,in South Carolina and Hocking Valley,in Ohio.These decreaseswere offset primarily from 10 new acquisitions with slightly higher capitalization rates,net of the impact of dispositions and certain other charges.The REIT continues to make progress at both North Augusta and Hocking Valley.At North Au

149、gusta,the REIT is re-tenanting the space with RossDress for Less,Burkes Outlet,Petsmart,and Rack Room Shoes.The weighted average increase in rental rate will be 114.0%and the lease termwill increase to 10.0 years from 2.6 years.At Hocking Valley,the REIT commenced redevelopment and expects to re-lea

150、se the shop space atmeaningful rent increases as a result of these improvements.Subsequent to completing these transactions we decreased the capitalization rateapplied to the property to reflect the reduced risk and enhanced cash flow certainty.The fair value of properties is measured individually w

151、ithout consideration to their aggregate value on a portfolio basis.No consideration is givento diversification benefits related to single property tenant risk and geography,the value of assembling a portfolio or to the utilization of a commonmanagement platform,amongst other benefits.As a result,the

152、 fair value of the REITs investment properties taken in aggregate may differ fromthe fair value of investment properties measured individually in the REITs consolidated statements of financial position.The change in investment properties is as follows:Three months ended December 31,Year ended Decemb

153、er 31,2016201520162015Beginning of the period$1,022,445$942,448$978,526$622,295Acquisitions50,89931,632118,209338,171Tenant improvements and leasing commissions8511,2804,7922,712Capital costs funded by vendor135Landlord work and maintenance capital4402862,2411,444Development and expansion capital3,2

154、22818,97481Straight-line rent2874121,5821,670Dispositions(37,520)(3,825)IFRIC 21 property tax adjustment3,0553,0354142,573Change in fair value(8,276)(648)(4,295)13,270End of the period$1,072,923$978,526$1,072,923$978,526The fair value of the REITs income-producing properties and properties under red

155、evelopment for the year ended December31,2016 and 2015,respectively,is as follows:December 31,2016December 31,2015Income-producing properties$1,023,424$940,050Properties under redevelopment49,49938,476Total$1,072,923$978,526During the year ended December 31,2016,the REIT incurred$7.0 million on tena

156、nt improvements,leasing commissions,landlord work and capitalexpenditures.Such costs are generally expended for purposes of tenanting and extending existing leases,which create value at the REITsproperties and the portfolio as a whole by increasing contractual cash flow through new and extended leas

157、es.The REIT will continue to capitalizeon opportunities to revitalize,undertake space improvements and generally maintain the high quality of our properties and tenants,such as theprograms we have undertaken at North Augusta and Hocking Valley.These expenditures can vary from period to period,at tim

158、es significantly,depending upon the timing of lease expiries,re-leasing and our capital plan for the period.Fair value adjustments on investment propertiesFor the three month period ended December 31,2016 and 2015,the REIT recorded a fair value loss on investment properties of$8.3 million and$0.6 mi

159、llion,respectively.The fair value loss for the periods are mainly attributed to changes in IFRIC 21,Levies(IFRIC 21)property taxadjustments,and change in valuation parameters and cash flows.The REIT recorded a fair value loss of$4.3 million and a fair value gain of$13.3 million on investment propert

160、ies for the year ended December31,2016 and 2015,respectively.For the December 31,2016 year end,the fair value loss is primarily due to transaction costs capitalized onacquisitions and straight-line rent.For the December 31,2015 year end,the fair value gain is mainly attributed to changes in valuatio

161、n parametersand cash flows.The fair value change of investment properties is impacted by IFRIC 21 property tax adjustments recorded on the REITs portfolio.The REIT hasdetermined that the obligating event for property taxes is ownership of the property on January 1st of the fiscal year.As a result,th

162、e annual propertytax liability and expense has been recognized on the properties owned as at January 1,2016,with a corresponding increase to the fair value ofinvestment properties that is reversed as the liability is settled through property tax installments.The change in fair value of investment pr

163、operties recorded in income excludes the impact of tenanting and leasing costs,landlord work,anddevelopment and expansion capital,not all of which are additive to value but are directly capitalized to the property.SLATE RETAIL REIT Q4 2016 MD&A 16The following table presents the impact of certain ac

164、counting adjustments on the fair value gain recorded versus managements estimate of futurecash flows and valuations assumptions:Three months ended December 31,Year ended December 31,2016201520162015Valuation parameters and cash flows$(3,835)$3,308$260$20,289Transaction costs capitalized(1,099)(509)(

165、2,559)(2,776)IFRIC 21 property tax adjustment(3,055)(3,035)(414)(2,573)Adjusted for straight-line rent(287)(412)(1,582)(1,670)Total$(8,276)$(648)$(4,295)$13,270 SLATE RETAIL REIT Q4 2016 MD&A 17STRATEGIC ACQUISITION LOANSManagement has identified,in consultation with certain of its existing tenants,

166、non-grocery-anchored retail properties that have the potential for aconversion to grocery-anchored retail malls.These acquisition targets are primarily characterized by under-managed properties,often with under-capitalized owners,where the opportunity exists to re-imagine and modernize the asset.Thi

167、s conversion opportunity involves bringing a currentgrocery store format and size to the property coupled with improvements and re-tenanting of the shop space.The REIT has undertaken an arrangement to take advantage of these opportunities in conjunction with a U.S.based entity in which Slate has asi

168、gnificant interest.These loans will provide the REIT with the opportunity to earn an 8%return on the capital committed,establish a pipeline ofnew format grocery-anchored retail assets,strengthen its relationships with tenants as a strategic partner,and limits the risk to the REIT of anunsuccessful c

169、onversion and development of an asset from its current format to a modern format and size grocery-anchored retail mall.Under this arrangement,the REIT has the option to provide loans,secured by the properties,to an entity in which Slate has a significant interest,whereby Slate will undertake the acq

170、uisition and conversion of the assets to grocery-anchored retail malls.In cases where the REIT provides aloan in respect of a conversion property it will earn an 8%return on the amount advanced and will,in turn,have the ability,but not the obligation,to purchase the property upon conversion of the p

171、roperty to a grocery-anchored retail mall.Additionally,prior to Slate purchasing any property,the REIT has the right of first refusal to purchase the property and undertake the conversion itself.One loan has been made to date.The loan,advanced in October 2015,is in the amount of$7.7 million,bears in

172、terest at 8.0%and matures onOctober 19,2020.This loan is recorded as a note receivable within the other assets account balance on the REITs consolidated statements offinancial position.PART III RESULTS OF OPERATIONS SLATE RETAIL REIT Q4 2016 MD&A 18SUMMARY OF SELECTED QUARTERLY INFORMATIONThe select

173、ed quarterly information highlights performance over the most recently completed eight quarters and is reflective of the timing ofacquisitions,leasing and maintenance expenditures.Similarly,debt reflects financing activities related to acquisitions which serve to increaseAFFO in the future,as well a

174、s ongoing financing activities for the existing portfolio.Accordingly,rental revenue,NOI,NAV,FFO and AFFO arereflective of changes in the underlying income-producing asset base and changing leverage.Quarter endedQ4 2016Q3 2016Q2 2016Q1 2016Q4 2015Q3 2015Q2 2015Q1 2015Rental revenue$25,044$23,699$24,

175、088$24,205$23,104$22,416$17,913$16,347Property operating expenses(1)(3,771)(3,221)(3,158)(15,425)(3,409)(2,953)(2,379)(10,284)Straight-line rent revenue(287)(453)(415)(427)(412)(490)(363)(406)IFRIC 21 property tax adjustment(1)(3,055)(3,006)(3,077)8,724(3,035)(2,666)(2,269)5,397NOI$17,931$17,019$17,

176、438$17,077$16,248$16,307$12,902$11,054Class U units outstanding35,45635,44035,42531,85831,82931,97732,58825,167WA units35,49435,46934,62731,87231,95732,25327,73220,928Net(loss)income(12,397)(15,309)(605)(760)(1,057)2,936(16,956)15,542Net(loss)income per WA units$(0.35)$(0.43)$(0.02)$(0.02)$(0.03)$0.

177、09$(0.61)$0.74NAV$473,804$470,565$468,718$427,324$419,338$413,908$417,912$337,763NAV per unit$13.36$13.28$13.23$13.41$13.17$12.94$12.82$13.42Distributions$7,179$6,990$6,894$6,201$6,090$6,070$5,227$4,138Distributions per unit$0.2025$0.1973$0.1947$0.1947$0.1890$0.1890$0.1890$0.1890FFO(2)$8,688$11,193$

178、11,998$10,685$10,543$10,793$8,518$7,515FFO per WA units(2)$0.24$0.32$0.35$0.34$0.33$0.33$0.31$0.36AFFO(2)$5,557$9,205$10,152$7,598$8,647$8,812$7,712$6,590AFFO per WA units(2)$0.16$0.26$0.29$0.24$0.27$0.27$0.28$0.32Total assets$1,114,606$1,076,668$1,072,823$1,033,985$1,013,481$971,721$919,249$690,824

179、Debt$621,442$585,773$586,134$588,702$577,280$538,423$483,504$339,580Debt/GBV55.8%54.4%54.6%56.9%57.0%55.4%52.6%49.2%Number of properties6964686666645943%leased93.5%93.6%95.0%94.4%94.7%95.1%95.3%96.0%GLA8,335,6257,841,4017,941,6997,726,0557,581,8467,359,0966,972,0015,085,885Grocery-anchored GLA3,909,

180、7163,669,5953,776,1053,691,6543,585,2683,501,9353,212,0613,082,087(1)In accordance with IFRIC 21,the REIT recognizes the annual property tax liability and expense on its existing properties on January 1st,rather than progressively,i.e.ratably,throughoutthe year.(2)The REIT completed a defeasance of

181、a mortgage during the fourth quarter,at a cost of$4.5 million representing the excess of the U.S.Treasury securities required to be funded overthe outstanding principal balance of the mortgage.A$2.8 million charge to income was recorded which was determined as the$4.5 million cost,less$1.7 million,r

182、epresenting theunamortized mark-to-market premium associated with the mortgage.FFO was impacted by the$2.8 million charge to income and AFFO was impacted by the aggregate amount of$4.5million.REVENUERevenue from investment properties includes base rent from tenants,straight-line rental income,proper

183、ty tax and operating cost recoveries andother incidental income.Rental revenue for the three and twelve month period ended December 31,2016 was$25.0 million and$97.0 million,respectively,which representsan increase of$1.9 million and$17.3 million since the same periods in the prior year.The increase

184、 is primarily due to rental rate growth and theacquisition of 10 investment properties,partially offset by the loss of revenue from seven dispositions since December31,2015.The following table is a summary of revenue for the three most recent financial years of the REIT:201620152014Revenue$97,036$79

185、,780$41,443 SLATE RETAIL REIT Q4 2016 MD&A 19PROPERTY OPERATING EXPENSESProperty operating expenses consist of property taxes,property management fees,and other expenses including common area costs,utilitiesand insurance.The majority of the REITs operating expenses are recoverable from tenants in ac

186、cordance with the terms of their respective leaseagreements.Operating expenses fluctuate with changes in occupancy and levels of repairs and maintenance.Property operating expenses increased by$0.4 million and$6.6 million for the three and twelve month period ended December 31,2016,respectively,comp

187、ared to the same periods in 2015.The increase is primarily due to incremental costs associated with 10 properties acquired and the applicationof IFRIC 21 property tax adjustments,partially offset by seven dispositions since December31,2015.With the adoption of IFRIC 21,the REIT recognizes the annual

188、 property tax liability and expense on its existing properties as at January 1 of eachyear,rather than progressively,i.e.ratably,throughout the year.The recognition of property taxes as a result of IFRIC 21 has no impact on NOI,FFO or AFFO.OTHER EXPENSESOther expenses include fees for asset manageme

189、nt,legal,trustee services,tax compliance,reporting,marketing,franchise tax,business tax,andbad debt expenses.Franchise and business taxes are typically billed in the following calendar year.Three months ended December 31,Year ended December 31,20162015Variance20162015VarianceAsset management and inc

190、entive fees$1,002$1,172$(170)$4,211$3,493$718Professional fees and other5543332212,3152,426(111)Franchise and business taxes1688880998355643Total$1,724$1,593$131$7,524$6,274$1,250%of total assets0.2%0.2%0.7%0.7%of total revenue6.9%6.9%7.8%7.9%(0.1)%Other expenses for the three month period ended Dec

191、ember 31,2016 increased by$0.1 million since the comparative quarter.The increase isdue to variations in franchise and business taxes,legal fees,trustee fees,bad debt expense and travel costs.Other expenses for the year ended December 31,2016 was$7.5 million,which represents a$1.3 million increase f

192、rom the prior year.This increasein asset management fees and franchise and business taxes are primarily due to the acquisition and operation of 10 investment properties,partiallyoffset by seven dispositions since December31,2015.INTEREST EXPENSE AND OTHER FINANCING COSTSThree months ended December 3

193、1,Year ended December 31,20162015Variance20162015VarianceInterest income on investments$(16)$(2)$(14)$(58)$(11)$(47)Interest income on notes receivable(154)(122)(32)(612)(122)(490)Interest on debt and finance charges4,8404,60024018,36814,6153,753Interest rate swap,net settlement164164164164Amortizat

194、ion of finance charges331247841,143889254Amortization of mark-to-market premium(188)(188)(848)(756)(92)Interest income on TIF notes receivable47(57)104(101)(233)132Interest expense on TIF notes payable(38)68(106)149245(96)Amortization of deferred gain on TIF notesreceivable(12)(22)10(78)(88)10Change

195、 in fair value of interest rate caps2(2)Total$4,974$4,524$450$18,127$14,541$3,586Interest expense and other finance costs consists of interest paid on the various credit facilities,the standby fee paid on the REITs revolving creditfacility,term loan and mortgages,as well as the amortization of mark-

196、to-market adjustments.Interest expense of$5.0 million for the three month period ended December 31,2016 increased by$0.5 million compared to the same quarter inthe prior year.Increases are due to payments on the REITs interest rate swap,slightly higher interest rates and higher average borrowings pa

197、rtiallyoffset by the interest income earned in the quarter and amortization of mark-to-market premiums.Interest on debt was$3.8 million higher for the year ended December 31,2016 at$18.4 million,compared to the year ended December 31,2015.The increase is primarily due to revolver drawdowns for the a

198、cquisition of certain investment properties since the comparative period,and thereplacement of$114.5 million secured credit facility assumed as part of the SUSO 3 transaction with borrowings from the revolver,partially offsetby a$33.4 million pay down in the revolver funded by the REITs rights offer

199、ing completed on April 19,2016.SLATE RETAIL REIT Q4 2016 MD&A 20FAIR VALUE ADJUSTMENTS ON REIT UNITS AND EXCHANGEABLE UNITS OF SUBSIDIARIESREIT units and exchangeable units of subsidiaries are classified as financial liabilities under IFRS and are measured at fair value with any changesin fair value

200、 recognized in unit expense in the consolidated statements of comprehensive income.The fair value is re-measured at the end of eachreporting period.An unrealized gain represents a decrease in the fair value per unit whereas an unrealized loss represents an increase in the fairvalue per unit.The fair

201、 value per unit on December31,2016 was$11.21(December 31,2015$10.45).Changes in fair value of REIT units andexchangeable units of subsidiaries are non-cash in nature and are required to be recorded in income under IFRS.For the three month period ended December 31,2016,the REIT recognized an unrealiz

202、ed fair value loss of$7.4 million and$0.6 million on theREIT units and exchangeable units of subsidiaries respectively,as a result of an increase in the fair value per unit.For the year ended December31,2016,the REIT recognized an unrealized fair value loss of$25.7 million and$1.9 million on the REI

203、T units and exchangeable units of subsidiariesrespectively,as a result of an increase in fair value per unit.IMPAIRMENT OF GOODWILLOn June 1,2015,the REIT completed a unitholder approved transaction to acquire the net assets of SUSO 3.The allocation of the considerationexchanged to the net assets ac

204、quired in the SUSO 3 transaction gave rise to goodwill of$8.9 million.The goodwill arises primarily from thedifference between how deferred tax is calculated for accounting purposes and the value ascribed to it in negotiations.The former is based on thedifference between the values of the assets and

205、 liabilities concerned for accounting purposes and those applying for taxation.The latter is basedon tax payments likely to be made on the sale of the investment properties.In managements opinion,the carrying amount of this goodwill cannotbe justified by reference to future cash flows and the ongoin

206、g business plan to operate and own the properties in the foreseeable future.As aresult,it has been determined that the goodwill has been impaired and an impairment charge has been recognized in the consolidated financialstatements.NET(LOSS)INCOME Net loss for the three month period ended December 31

207、,2016 decreased by$11.3 million to$12.4 million compared to the same period in 2015.The decrease is due to the change in fair value of investment properties of$7.6 million,increase in fair value of the REIT units and exchangeableunits of subsidiaries of$4.4 million,loss on defeasance on a mortgage o

208、f$2.8 million,increased distributions of$1.1 million and seven dispositionsin the year,partially offset by the NOI contribution of 10 investment properties acquired in the year.Net loss for the year ended December 31,2016 was$29.1 million,which represents a$29.5 million decrease from the comparative

209、 period.Thedecrease is attributed to the increase in fair value of REIT units and exchangeable units of subsidiaries of$24.4 million,change in fair value ofinvestment properties of$17.6 million,increased distributions of$5.7 million and seven dispositions in the year,partially offset by the aforemen

210、tionedacquisitions.The following table is a summary of net(loss)income for the three most recent financial reporting years of the REIT:201620152014Net(loss)income$(29,071)$465$25,555 SLATE RETAIL REIT Q4 2016 MD&A 21NOINOI is a non-IFRS measure and is defined by the REIT as property rental revenue,e

211、xcluding non-cash straight-line rent,less property operatingexpenses after adjusting for the impact of IFRIC 21 property tax accounting adjustments.Rental revenue excludes revenue recorded as a resultof recording rent on a straight-line basis for IFRS which management believes reflects the cash gene

212、ration activity of the REITs properties.NOIis an important measure of the income generated from the REITs properties and is used by the REIT in evaluating the performance of its properties.NOI may not be comparable with similar measures presented by other entities and is not to be construed as an al

213、ternative to net income or cashflow from operating activities determined in accordance with IFRS.The following is a calculation of NOI for the three and twelve month period ended December 31,2016 compared to the same periods in the prioryear:Three months ended December 31,Year ended December 31,2016

214、2015Variance20162015VarianceRental revenue$25,044$23,104$1,940$97,036$79,780$17,256Straight-line rent revenue(287)(412)125(1,582)(1,670)88Property operating expenses(3,771)(3,409)(362)(25,575)(19,025)(6,550)IFRIC 21 property tax adjustment(3,055)(3,035)(20)(414)(2,573)2,159NOI$17,931$16,248$1,683$69

215、,465$56,512$12,953NOI margin71.6%70.3%1.3%71.6%70.8%0.8%NOI for the three and twelve month period ended December 31,2016 was$17.9 million and$69.5 million respectively,which represents an increaseof$1.7 million and$13.0 million for the same periods in 2015.This increase is primarily due to the acqui

216、sition of 10 investment properties,partiallyoffset by seven dispositions since December31,2015 and increased same-property performance from rent increases and embedded contractualstep-ups.SAME-PROPERTY NOISame-property NOI is a non-IFRS measure and is defined by the REIT as rental revenue,excluding

217、non-cash straight-line rent,less propertyoperating cost expenses after adjusting for the impact of IFRIC 21 property tax accounting adjustments for those properties owned by the REITfor the entirety of each of the current period and the relevant comparative period excluding those properties under de

218、velopment.For the threemonth period ended December 31,2016,the same-property portfolio is comprised of a portfolio of 49 properties owned and in operation for eachof the entire three month periods ended December31,2016 and 2015.Same-property NOI is an important measure of the income generated from t

219、he REITs properties period-over-period,but without consideration ofacquisition and disposition activity,and is used by the REIT in evaluating the performance of its properties.The REIT seeks to increase or maintainsame-property NOI through high-occupancy,increasing rents on renewal to market rents a

220、nd by signing leases with embedded rent increasesthroughout the term of the lease.The following is a summary of same-property NOI and the related occupancy rates for the three month period ended December 31,2016 ascompared to the same period in the prior year reconciled to total NOI:Number ofpropert

221、iesThree months ended December 31,20162015Variance%changeSame-property NOI49$15,229$14,854$3752.5%NOI attributed to properties under development3343707(364)(51.5)%NOI attributable to acquisitions172,359172,34213,776.5%NOI attributable to dispositions7670(670)(100.0)%Total NOI$17,931$16,248$1,683Occu

222、pancyOccupancy,same-property4995.6%95.7%(0.1)%Occupancy,properties under development366.0%87.8%(21.8)%Occupancy,acquisitions1794.0%89.9%4.1%Occupancy,dispositions796.1%93.4%2.7%Total occupancy93.5%95.1%(1.6)%Same-property NOI increased by$375 thousand for the three month period ended December 31,201

223、6 over the comparative period.The increaseis due to higher rental rates and recoveries,partially offset by the renewal of the grocery-anchor tenant at Buckeye Plaza at lower rental rates,effective at the end of the 2016 year and Uptown Station vacancy of non-anchor tenants that began in the first qu

224、arter of 2016.Same-property NOI by quarter and percentage change over the relevant comparative period for the respective quarter is as follows:Number ofpropertiesSame-propertyNOISame-property%changeQ1 201640$10,409(1.0)%Q2 20164111,101(1.0)%Q3 20164913,7910.7%Q4 201649$15,2292.5%SLATE RETAIL REIT Q4

225、 2016 MD&A 22FFOFFO is a non-IFRS measure and real estate industry standard for evaluating operating performance.The REIT calculates FFO in accordance withthe definition provided by the Real Property Association of Canada in its White Paper on FFO,as revised in April 2014.FFO is an important measure

226、of the operating performance of real estate investment trusts and is used by the REIT in evaluating the combined performance of its operationsand the impact of its capital structure.The following is a reconciliation of FFO for the three and twelve month period ended December 31,2016 compared to the

227、same periods in theprior year:Three months ended December 31,Year ended December 31,20162015Variance20162015VarianceNet(loss)income(1)$(12,397)$(1,057)$(11,340)$(29,071)$465$(29,536)IFRIC 21 property tax adjustment(3,055)(3,035)(20)(414)(2,573)2,159Transaction costs(30)301,0301,187(157)Unit expense1

228、5,3609,6445,71655,17024,75930,411Change in fair value of interest rate caps2(2)Change in fair value of investment properties8,2766487,6284,295(13,270)17,565Impairment of goodwill8,870(8,870)Deferred income taxes5044,373(3,869)11,55417,929(6,375)FFO(1)$8,688$10,543$(1,855)$42,564$37,369$5,195FFO per

229、WA unit(1)$0.24$0.33$(0.09)$1.24$1.32$(0.08)WA number of units outstanding35,49431,9573,53734,37128,2596,112(1)The REIT completed a defeasance of a mortgage during the fourth quarter,at a cost of$4.5 million representing the excess of the U.S.Treasury securities required to be funded overthe outstan

230、ding principal balance of the mortgage.A$2.8 million charge to income was recorded which was determined as the$4.5 million cost,less$1.7 million,representing theunamortized mark-to-market premium associated with the mortgage.FFO was impacted by the$2.8 million charge to income and AFFO was impacted

231、by the aggregate amount of$4.5million.FFO decreased by$1.9 million for the three month period ended December 31,2016 compared to the same quarter in the prior year.The decreasein the fourth quarter is primarily attributable to the loss on the defeasance of a mortgage,resulting in a change to income

232、of$2.8 million or$0.08per unit,increased financing costs and other expenses,relating to franchise and business tax,partially offset by the aforementioned increases inNOI.FFO for the year ended December 31,2016 was$42.6 million which represents a$5.2 million increase from the comparative period.The i

233、ncreasemainly due to the aforementioned increases in NOI,partially offset by the loss on the defeasance of a mortgage,increased financing costs andother expenses,relating to franchise and business tax.SLATE RETAIL REIT Q4 2016 MD&A 23AFFOAFFO is a non-IFRS measure that is widely used by the real est

234、ate industry and investors to measure the cash generated from operations,afterdebt service and certain capital and leasing costs and also after reversing the impact of non-cash interest and revenue amounts.It is also ameaningful measure used to evaluate the cash available for distribution to unithol

235、ders.In calculating AFFO,the REIT makes adjustments to FFO for certain items including straight-line rental revenue,income support payments receivedby the REIT but not recognized in income,non-cash adjustments related to the REITs accounting for its TIF notes,amortization of finance andmark-to-marke

236、t charges in interest,tenant improvements and leasing commissions and landlord work.The method applied by the REIT to calculateAFFO may differ from methods applied by other issuers in the real estate industry and therefore may not be comparable with measures reportedby such issuers.A reconciliation

237、of FFO to AFFO for the three and twelve month period ended December 31,2016 compared to the same periods in the prior yearis as follows:Three months ended December 31,Year ended December 31,20162015Variance20162015VarianceFFO(1)$8,688$10,543(1,855)$42,564$37,3695,195Straight-line rental revenue(287)

238、(412)125(1,582)(1,670)88Mark-to-market amounts on defeased debt(1)(1,696)(1,696)(1,696)(1,696)Finance charge and mark-to-market adjustments1437370295189106Income support payments9(9)629(23)Tenant improvements and leasing commissions(851)(1,279)428(4,792)(2,712)(2,080)Landlord work and maintenance ca

239、pital(440)(287)(153)(2,241)(1,444)(797)AFFO(1)$5,557$8,647$(3,090)$32,554$31,761$793AFFO per WA unit(1)$0.16$0.27$(0.11)$0.95$1.12$(0.17)WA number of units outstanding35,49431,9573,53734,37128,2596,112(1)The REIT completed a defeasance of a mortgage during the fourth quarter,at a cost of$4.5 million

240、 representing the excess of the U.S.Treasury securities required to be funded overthe outstanding principal balance of the mortgage.A$2.8 million charge to income was recorded which was determined as the$4.5 million cost,less$1.7 million,representing theunamortized mark-to-market premium associated

241、with the mortgage.FFO was impacted by the$2.8 million charge to income and AFFO was impacted by the aggregate amount of$4.5million.AFFO was$32.6 million for the year ended December 31,2016,which represents a$0.8 million increase from the 2015 year.This increase is dueto aforementioned increases in F

242、FO,partially offset by increased landlord work and maintenance capital.AFFO for the three month period ended December 31,2016 and 2015 was$5.6 million and$8.6 million,respectively,which amounts to a$3.1million decrease from the comparative period.The decrease is due to the loss on the defeasance of

243、a mortgage,resulting in a$4.5 million or$0.13per unit decrease in AFFO,partially offset by the aforementioned increases in FFO and lower tenant improvement and leasing commissions.Capital improvements may include,but are not limited to,items such as parking lot resurfacing and roof replacements.Thes

244、e items are recordedas part of investment properties.Tenant improvements,leasing commissions,landlord work and maintenance capital expenditures can vary fromperiod to period,at times significantly,depending upon the timing of lease expiries,releasing and our capital plan for the period.Such costs ar

245、egenerally expended for purposes of tenanting and extending existing leases,which create value at the REITs properties and the portfolio as awhole by increasing contractual cash flow through new and extended leases.The REIT will continue to capitalize on value-add opportunities torevitalize,undertak

246、e space improvements and generally maintain the high quality of our properties and tenants.As a result of the natural variabilityof such costs,the REITs calculation of AFFO will be volatile when comparing current period results to prior periods.Landlord work and maintenance capital,and tenant improv

247、ements and leasing commissionsDuring the fourth quarter capital improvements were completed across the portfolio.The majority of capital improvements were completed concurrentto leasing at our properties with the remainder as minor improvements.The remaining leasing costs were generally related to t

248、he high volume ofnew and renewal activity totaling 47 leases executed and generally well spread out across each deal with no one deal representing a largepercentage of the total spend.Leasing costs to secure new tenants are generally higher than the costs to renew in-place tenants.In addition toprop

249、erty reinvestment,the leasing capital was comprised of fees related to tenant improvement allowances and other direct leasing costs,suchas broker commissions and legal costs.To date the REIT has funded capital and leasing costs using cash flows from operations.SLATE RETAIL REIT Q4 2016 MD&A 24Reconc

250、iliation of net(loss)income to AFFOThe following is a reconciliation of net(loss)income to AFFO:Three months ended December 31,Year ended December 31,20162015Variance20162015VarianceNet(loss)income(1)$(12,397)$(1,057)$(11,340)$(29,071)$465$(29,536)IFRIC 21 adjustment(3,055)(3,035)(20)(414)(2,573)2,1

251、59Acquisition and disposition costs(30)301,0301,187(157)Unit expense15,3609,6445,71655,17024,75930,411Fair value adjustments to interest rate caps2(2)Fair value adjustments of investment property8,2766487,6284,295(13,270)17,565Impairment of goodwill8,870(8,870)Deferred taxes5044,373(3,869)11,55417,9

252、29(6,375)FFO(1)$8,688$10,543$(1,855)$42,564$37,369$5,195Straight-line rental revenue(287)(412)125(1,582)(1,670)88Debt defeasance costs(1)(1,696)(1,696)(1,696)(1,696)Finance charge and mark-to-market adjustments1437370295189106Income support payments9(9)629(23)Tenant improvements and leasing commissi

253、ons(851)(1,280)429(4,792)(2,712)(2,080)Landlord work and maintenance capital(440)(286)(154)(2,241)(1,444)(797)AFFO(1)$5,557$8,647$(3,090)$32,554$31,761$793(1)The REIT completed a defeasance of a mortgage during the fourth quarter,at a cost of$4.5 million representing the excess of the U.S.Treasury s

254、ecurities required to be funded overthe outstanding principal balance of the mortgage.A$2.8 million charge to income was recorded which was determined as the$4.5 million cost,less$1.7 million,representing theunamortized mark-to-market premium associated with the mortgage.FFO was impacted by the$2.8

255、million charge to income and AFFO was impacted by the aggregate amount of$4.5million.Reconciliation of NOI to AFFOThe following is a reconciliation of NOI to AFFO:Three months ended December 31,Year ended December 31,20162015Variance20162015VarianceNOI$17,931$16,248$1,683$69,465$56,512$12,953Other e

256、xpenses(1,724)(1,593)(131)(7,524)(6,274)(1,250)Cash interest expense(4,840)(4,600)(240)(18,368)(14,615)(3,753)Debt defeasance costs(1)(4,528)(4,528)(4,528)(4,528)Interest,net9149(140)536265271Income support payments9(9)629(23)Tenant improvements and leasing commissions(851)(1,280)429(4,792)(2,712)(2

257、,080)Landlord work and maintenance capital(440)(286)(154)(2,241)(1,444)(797)AFFO$5,557$8,647$(3,090)$32,554$31,761$793(1)The REIT completed a defeasance of a mortgage during the fourth quarter,at a cost of$4.5 million representing the excess of the U.S.Treasury securities required to be funded overt

258、he outstanding principal balance of the mortgage.A$2.8 million charge to income was recorded which was determined as the$4.5 million cost,less$1.7 million,representing theunamortized mark-to-market premium associated with the mortgage.FFO was impacted by the$2.8 million charge to income and AFFO was

259、 impacted by the aggregate amount of$4.5million.SLATE RETAIL REIT Q4 2016 MD&A 25Reconciliation of cash flow from operations to AFFOThe following is a reconciliation of cash flow from operations as included in the REITs consolidated cash flow statement to AFFO:Three months ended December 31,Year end

260、ed December 31,20162015Variance20162015VarianceCash flow from operations$4,725$9,223$(4,498)$38,735$33,129$5,606Changes in non-cash working capital items1,9508621,088(884)1,307(2,191)Transaction costs(30)301,0301,187(157)Interest,net17314924700265435Income support payments9(9)629(23)Tenant improveme

261、nts and leasing commissions(851)(1,280)429(4,792)(2,712)(2,080)Landlord work and maintenance capital(440)(286)(154)(2,241)(1,444)(797)AFFO(1)$5,557$8,647$(3,090)$32,554$31,761$793(1)The REIT completed a defeasance of a mortgage during the fourth quarter,at a cost of$4.5 million representing the exce

262、ss of the U.S.Treasury securities required to be funded overthe outstanding principal balance of the mortgage.A$2.8 million charge to income was recorded which was determined as the$4.5 million cost,less$1.7 million,representing theunamortized mark-to-market premium associated with the mortgage.FFO

263、was impacted by the$2.8 million charge to income and AFFO was impacted by the aggregate amount of$4.5million.SLATE RETAIL REIT Q4 2016 MD&A 26DEBT DEFEASANCEOn December 15,2016,the REIT entered into the Defeasance Agreement providing for the defeasance of$26.7 million of mortgage debt dueApril 30,20

264、21 with an annual interest rate of 5.8%.At the inception of such debt,the REIT had pledged to the lender five of its properties assecurity.The Defeasance was completed to facilitate possible dispositions and redevelopment opportunities which were restricted under the termsof the existing debt.The De

265、feasance was financed through a draw on the REITs revolver and cash on hand,which Management expects thatover the original term to maturity of the REITs debt will reduce aggregate interest costs.The cash outlay required for the Defeasance in the amount of$31.2 million was required to purchase U.S.Tr

266、easury securities,the maturities ofwhich will satisfy the remaining interest and principal repayments of the debt from the effective date of the Defeasance through to the repaymentof the mortgage debt maturity date.In consideration for delivering the U.S.Treasury securities to the servicer,the five

267、properties were releasedas collateral for the debt.Under the terms of the defeasance agreement,a third party assumed the REITs obligation under the mortgage debt,as well as the ownershipinterest in the related securities.As a result,the REIT recognized a loss on the defeasance of a mortgage due of$2

268、.8 million,which includes thedifference between the purchase price of the U.S.Treasury securities and principal balance of the mortgage due of$4.5 million,offset by$1.7million of unamortized mark-to-market premiums.The defeasance reduces annual interest costs and provides the REIT with the flexibili

269、ty to potentially dispose of certain properties and undertakeredevelopment opportunities that would have been restricted by the lender.Additionally,the REIT received$2.7 million required to be held inescrow that was not otherwise available to the REIT until maturity of the mortgage in 2021.The defea

270、sance had an impact on net loss,FFO and AFFO for the three months and year ended December 31,2016 as follows:Three months endedDecember 31,2016Year endedDecember 31,2016(in thousands of U.S.dollars except,per unit amounts)Including impact ofdefeasanceExcluding impact ofdefeasanceIncluding impact ofd

271、efeasanceExcluding impact ofdefeasanceNet loss$(12,397)$(9,565)$(29,071)$(26,239)IFRIC 21 property tax adjustment(3,055)(3,055)(414)(414)Transaction costs1,0301,030Unit expense15,36015,36055,17055,170Change in fair value of investment properties8,2768,2764,2954,295Deferred income taxes50450411,55411

272、,554FFO8,68811,52042,56445,396Straight-line rental revenue(287)(287)(1,582)(1,582)Mark-to-market amounts on defeased debt(1,696)(1,696)Finance charge and mark-to-market adjustments143143295295Income support payments66Tenant improvements and leasing commissions(851)(851)(4,792)(4,792)Landlord work an

273、d maintenance capital(440)(440)(2,241)(2,241)AFFO$5,557$10,085$32,554$37,082FFO per WA units outstanding$0.24$0.32$1.24$1.32FFO pay-out ratio82.6%62.3%64.1%60.1%AFFO per WA units outstanding$0.16$0.28$0.95$1.08AFFO pay-out ratio129.2%71.2%83.8%73.5%SLATE RETAIL REIT Q4 2016 MD&A 27DISTRIBUTIONSThe R

274、EITs monthly distribution to unitholders is$0.0675 per class U unit or$0.81 per class U unit on an annualized basis.Distributions paid onREIT units and exchangeable units of subsidiaries are recorded as unit expense.Distributions were$7.2 million and$27.3 million for the three and twelve month perio

275、d ended December 31,2016,respectively.The distributionamount has increased by$1.1 million and$5.7 million over the respective comparative periods primarily due to the issuance of REIT units fromthe June 1,2015 acquisition of net assets of SUSO 3(SUSO 3 transaction),the April 19,2016 rights offering

276、and 4%distribution increase inSeptember 2016,partially offset by the repurchase and subsequent cancellation of class U units since the comparative period under the REITsNCIB.The following table summarizes the monthly distributions declared to unitholders by year:Month201620152014January$0.06489$0.06

277、300$February0.064890.06300March0.064890.06300April0.064890.063000.03000May0.064890.063000.06000June0.064890.063000.06000July0.064890.063000.06000August0.064890.063000.06000September0.067500.063000.06000October0.067500.063000.06000November0.067500.063000.06300December0.067500.064890.06300Total$0.7891

278、2$0.75789$0.51600In April of 2014 the REIT listed its class U units on the TSX.In conjunction with the REITs listing of its class U units on the TSX the REIT commenceda distribution policy,with a monthly distribution of$0.06 per unit.In November 2014,the REIT increased the distribution rate by 5%to$

279、0.063 andagain in November 2015 increased the distribution 3%to$0.06489.Beginning with the September 2016 distribution,the REIT increased thedistribution to$0.0675 a month,or$0.81 annually,which represents an increase of 4%.Class A and I unitholders of REIT units are entitled to a distribution equal

280、 to a class U unit distribution multiplied by 1.0078 and 1.0554,respectively.Exchangeable units of subsidiaries unitholders are entitled to a distribution equal to a class U unit distribution.SLATE RETAIL REIT Q4 2016 MD&A 28FFO payout ratioThe FFO payout ratio is a non-IFRS measure that provides a

281、representation of the distributions generated by the REIT compared to FFO.Management uses this measure on a total and per unit basis to evaluate the REITs ability to sustain its distributions.The FFO payout ratio iscalculated by dividing aggregate distributions made in respect of REIT units and exch

282、angeable units of subsidiaries by FFO during the period ofmeasurement.The FFO payout ratio was 82.6%and 64.1%for the three and twelve month period ended December 31,2016,representing a 24.8%and 6.5%increase respectively,compared to the same periods in the prior year.The increase is the result of the

283、 loss on the defeasance of the mortgage,increased distributions and disposal of seven properties since December31,2015,partially offset by accretive acquisitions.On a pro forma basis,using annualized fourth quarter FFO and current distribution rate of$0.0675 per month,the FFO payout ratio would be84

284、.4%.Adjusting fourth quarter FFO for the loss on defeasance on a mortgage of$2.8 million or$0.08 per unit,the pro forma FFO payout ratiowould be 62.3%.The table below illustrates the REITs cash flow capacity,based on FFO,in comparison to its cash distributions:Three months ended December 31,Year end

285、ed December 31,2016201520162015FFO(1)$8,688$10,543$42,564$37,369Distributions declared(2)(7,179)(6,090)(27,264)(21,525)Excess of FFO over distributions declared1,5094,45315,30015,844Cash retained from DRIP1753129651,047Excess of FFO over cash distributions$1,684$4,765$16,265$16,891FFO payout ratio(1

286、)82.6%57.8%64.1%57.6%FFO payout ratio after DRIP(1)80.6%54.8%61.8%54.8%(1)The REIT completed a defeasance of a mortgage during the fourth quarter,at a cost of$4.5 million representing the excess of the U.S.Treasury securities required to be funded overthe outstanding principal balance of the mortgag

287、e.A$2.8 million charge to income was recorded which was determined as the$4.5 million cost,less$1.7 million,representing theunamortized mark-to-market premium associated with the mortgage.FFO was impacted by the$2.8 million charge to income and AFFO was impacted by the aggregate amount of$4.5million

288、.(2)Distributions declared represent distributions on REIT units and exchangeable units of subsidiaries.AFFO payout ratioThe AFFO payout ratio is a non-IFRS measure that provides a representation of the distributions generated by the REIT compared to AFFO.Management uses this measure on a total and

289、per unit basis to evaluate the REITs ability to sustain its distributions.The AFFO payout ratio iscalculated by dividing aggregate distributions made in respect of REIT units and exchangeable units of subsidiaries by AFFO during the period ofmeasurement.One of the REITs key objectives is to maintain

290、 a conservative AFFO payout ratio to continue to provide steady and reliable distributions tounitholders.As a result,the REIT is focused on maintaining a policy that provides a high level of certainty that the distribution will be maintainedover time.The AFFO payout ratio was 129.2%and 83.8%for the

291、three and twelve month period ended December 31,2016,respectively,compared to anAFFO payout ratio of 70.4%and 67.8%for the same periods in the prior year.On a pro forma basis,using annualized fourth quarter AFFO andthe current distribution of$0.0675 per month,the AFFO payout ratio would be 126.6%.Ad

292、justing fourth quarter AFFO for the loss on the defeasanceof a mortgage,which is the difference between the purchase price of the U.S.Treasury securities and principal balance of the mortgage due,of$4.5 million or$0.13 per unit,the pro forma AFFO payout ratio would be 72.3%.The cost of the defeasanc

293、e was funded through drawings on theREITs revolver,and distributions were paid through earnings from operations.As described above,the REITs determination of AFFO includes actual tenant improvements,leasing commissions,landlord work and maintenancecapital expenditures,which can vary from period to p

294、eriod,at times significantly,depending upon the timing of lease expiries,re-leasing and ourcapital plan for the period.As a result of the natural variability of such costs,the REITs calculation of its AFFO payout ratio will be volatile whencomparing current period results to prior periods,and accord

295、ingly,inherently more volatile than the REITs FFO payout ratio which does not includesuch costs.Management continues to target a 70%payout ratio.The table below illustrates the REITs cash flow capacity,based on AFFO,in comparison to its cash distributions:Three months ended December 31,Year ended De

296、cember 31,2016201520162015AFFO(1)$5,557$8,647$32,554$31,761Distributions declared(2)(7,179)(6,090)(27,264)(21,525)Excess of AFFO over distributions declared(1,622)2,5575,29010,236Cash retained from DRIP1753129651,047Excess of AFFO over cash distributions$(1,447)$2,869$6,255$11,283AFFO payout ratio(1

297、)129.2%70.4%83.8%67.8%AFFO payout ratio after DRIP(1)126.0%66.8%80.8%64.5%(1)The REIT completed a defeasance of a mortgage during the fourth quarter,at a cost of$4.5 million representing the excess of the U.S.Treasury securities required to be funded overthe outstanding principal balance of the mort

298、gage.A$2.8 million charge to income was recorded which was determined as the$4.5 million cost,less$1.7 million,representing theunamortized mark-to-market premium associated with the mortgage.FFO was impacted by the$2.8 million charge to income and AFFO was impacted by the aggregate amount of$4.5mill

299、ion.(2)Distributions declared represent distributions on REIT units and exchangeable units of subsidiaries.SLATE RETAIL REIT Q4 2016 MD&A 29Impact of interest rate changesAs described above,one of the REITs key objectives is to maintain a conservative AFFO payout ratio in order to continue to provid

300、e steady andreliable distributions to unitholders.We continue to target an industry leading AFFO payout ratio of 70%over time.We expect there will be normaldeviations from this rate due to timing and natural volatility in the operations of the business.Management evaluates various factors in determi

301、ningthe appropriate distribution policy including estimates of future NOI,near-term grocery-anchor lease turnover,future capital requirements andinterest rate changes.As it relates to potential interest rate changes,management believes that notwithstanding any reasonably expected changesin interest

302、rates,the REITs AFFO payout ratio should continue to be fully covered.In order to mitigate interest rate risk the REIT entered into a$300 million pay-fixed receive-float interest rate swap on November 2,2016.Theinterest rate swap has a fixed rate of 1.10%and a maturity of April 2021.As a result of t

303、he interest rate swap,67.2%of the REITs debt is nowsubject to fixed rates,compared to 26.9%at December 31,2016.The following table provides a sensitivity analysis of the REITs AFFO payout ratio to changes in interest rates,both prior to and after the interestrate swap.For illustrative purposes,the s

304、ensitivity analysis has been calculated using annual AFFO and distributions:Prior to interest rate swapAfter interest rate swapChange in interest rates(bps)(1)AFFO(2)AFFO payout ratio(2)AFFO(2)AFFO payout ratio(2)(50)$33,18482.2%$32,80683.1%(25)32,86982.9%32,67983.4%32,55483.8%32,55283.8%2532,23984.

305、6%32,42484.1%5031,92485.4%32,29784.4%10031,29487.1%32,04285.1%200$30,03490.8%$31,53286.5%(1)Based on a twelve month period ended December 31,2016 AFFO of$32.6 million.(2)The REIT completed a defeasance on a mortgage during the fourth quarter,at a cost of$4.5 million representing the excess of the U.

306、S.Treasury securities required to be funded tothe servicer over the outstanding principal balance on the mortgage.A$2.8 million charge to income was recorded which was determined as the$4.5 million cost,less$1.7 million,representing the unamortized mark-to-market premium associated with the mortgage

307、.The determination of AFFO was impacted by the aggregate amount of$4.5 million.SLATE RETAIL REIT Q4 2016 MD&A 30DEFERRED INCOME TAXThe REITs operations and the associated net income occur within partially owned,flow through entities such as partnerships.Any tax liability ontaxable income attributabl

308、e to the Slate Retail exchangeable unitholders is incurred directly by the unitholders as opposed to Slate Retail InvestmentL.P.,the REITs most senior taxable subsidiary.Accordingly,although the REITs consolidated net income includes income attributable to SlateRetail exchangeable unitholders,the co

309、nsolidated tax provision includes only the REITs proportionate share of the applicable taxes.For the three and twelve month period ended December 31,2016,the deferred income tax expense was$0.5 million and$11.6 million,respectively.The REITs deferred tax expense relates mainly to changes in the diff

310、erences between the fair value of the REITs investment properties and thecorresponding undepreciated value for income tax purposes.RELATED PARTY TRANSACTIONSPursuant to the terms of a management agreement dated April 15,2014,the Manager provides all management services to the REIT.The Manageragreed

311、to provide certain services in connection with the business of the REIT,including:the structuring of the REIT,liaising with legal and taxcounsel;identifying properties for acquisition;maintaining ongoing relationships with the lenders in respect of the mortgage loans for the Properties;conducting co

312、ntinuous analysis of market conditions;and advising with respect to the disposition of the Properties.In return for its service,theManager receives the following fees:ian asset management fee equal to 0.4%of the total assets of the REIT;iian acquisition fee in an amount equal to 0.75%of the gross pu

313、rchase price of each Property(or interest in a Property),including the price,due diligence costs,closing costs,legal fees,and additional capital costs for all Properties indirectly acquired by the REIT;andiiian annual incentive fee,calculated in arrears,in an aggregate amount equal to 15%of the REIT

314、s funds from operation per class U unit asderived from the annual financial statements of the REIT in excess of$1.28,subject to ordinary course adjustments for certain transactionsaffecting the class U units and increasing annually by 50%of the increase in the U.S.consumer price index.These transact

315、ions are in the normal course of operations and are measured at the exchange amount which is the consideration established andagreed to by the parties.Three months ended December 31,Year ended December 31,20162015Variance20162015VarianceAsset management fees$1,096$979$117$4,211$3,300$911Acquisition

316、fees3812371448851,071(186)Incentive fees(94)193(287)193(193)Total$1,383$1,409$(26)$5,096$4,564$532Related party transactions incurred and paid to Slate for the three and twelve month period ended December 31,2016 amounted to$1.4 millionand$5.1 million respectively.These transactions are in the norma

317、l course of operations and are in accordance with the management agreementand are measured at the exchange amount.The exchange amount is the consideration established under contract and as approved by the REITsBoard of Trustees.The management agreement provides for an incentive fee to be earned base

318、d on an FFO per unit target that grows annually,in part,with inflation,whereby the Manager is entitled to 15%of the excess of FFO above the target.For the year ended December 31,2016,no incentive fee wasrecognized as the target threshold was not met.See also discussion of the REITs strategic acquisi

319、tion program in PART II-LEASING AND PROPERTY PORTFOLIO of this MD&A.SLATE RETAIL REIT Q4 2016 MD&A 31MAJOR CASH FLOW COMPONENTSThe REIT is able to meet all of its obligations as they become due and have sufficient liquidity from the following sources:(i)cash flow from operatingactivities and(ii)fina

320、ncing availability through the REITs revolving credit facility and conventional mortgage debt secured by income producingproperties.Three months ended December 31,Year ended December 31,2016201520162015Operating activities$4,725$9,223$38,735$33,129Investing activities(37,631)(33,877)(93,135)(138,098

321、)Financing activities30,26723,66855,976103,650Increase(decrease)in cash$(2,639)$(986)$1,576$(1,319)Cash flows from operating activities relate to the collection of rent and payment of property operating expenses.Cash flows from operating activities,net of interest expense are able to satisfy the REI

322、Ts distribution requirements,and will be used to fund on-going operations and expenditures forleasing capital and property capital.Cash flows used in investing activities relate to property acquisitions and property dispositions made the by the REIT,and additions to the propertiesthrough capital and

323、 leasing expenditures.Cash flows from financing activities relate to the servicing of mortgages,additional drawdowns on the REITs revolver for the acquisition of investmentproperties during the year and distributions paid to unitholders.PART IV FINANCIAL CONDITION SLATE RETAIL REIT Q4 2016 MD&A 32DE

324、BTThe REITs overall borrowing strategy is to obtain financing withterms to maturity that are appropriate having regard to the lease maturity profilesof the underlying properties andwhich allows the REIT to(i)stagger debt maturities that reduce its exposure to interest ratefluctuations and re-financi

325、ng risk in any particular period,(ii)minimize financing costs,and(iii)maintain flexibility with respect to property operations.The success ofthis strategy is dependent upon debt market parameters existing at thetime of borrowing,as well as the particular features and quality of theunderlying assets

326、being financed.If this strategyis unsuccessful,mortgage principal repayments would be funded by operating cash flows,additionaldraws underthe REITs revolver,financing of income-producing properties or by issuances of equity.Debt held by the REIT as of December31,2016 and December 31,2015 is as follo

327、ws:December 31,2016December 31,2015MaturityWeightedaverage debtmaturity(years)Effective rate Principal Mark-to-marketadjustments and costs Carryingamount CarryingamountRevolver(1)Feb.26,20203.2(2)2.51%$211,455$(1,218)$210,237$198,820Term loan(1)Feb.26,20214.22.52%292,500(2,405)290,095223,108Mortgage

328、Mar.1,20214.25.75%13,5061,32414,83015,484Mortgage(3)Apr.30,20215.80%29,222MortgageJan.1,20258.03.80%50,000(772)49,22849,131MortgageJun.15,20258.54.14%57,950(898)57,05257,979MortgageMar.18,20165.25%3,536Total/Weighted average(4)4.5(2)2.85%$625,411$(3,969)$621,442$577,280(1)The weighted average intere

329、st rate has been calculated using the December31,2016 U.S.LIBOR rate for purposes of the revolver and term loan.(2)Excludes a one-year extension option exercisable at the REITs option.With the one-year extension the weighted average debt maturity is 4.9 years.(3)Effective December 15,2016 the REIT d

330、efeased this mortgage.See section Debt Defeasance section for additional details.(4)The weighted average interest rate including the impact of pay-fixed receive-float swaps is 3.10%.The carrying amount of debt was$621.4 million at December31,2016,representing an increase of$44.2 million compared to

331、December31,2015.On February 26,2016,the REIT amended and increased its revolver and term loan available amount to an aggregate of$585.0 million.The termto maturity for the revolver and term loan were extended from December 19,2017 and 2018 to February 26,2020 and 2021,respectively.Thenew terms of th

332、e facility further enhance the REITs liquidity,reduce the cost of capital,and allow the REIT to capitalize on acquisition andredevelopment opportunities going forward.On March 18,2016,the REIT extinguished a mortgage of$3.4 million,bearing interest of 5.25%,with borrowings from the REITs revolver.Dr

333、awdowns on the revolver during the year ended December 31,2016 primarily related to the acquisition of certain properties and defeasance of$26.7 million of mortgage debt completed on December 15,2016.These increases were partially offset by a$33.4 million revolver principal paydown funded by the REITs rights offering completed on April 19,2016.Subsequent to the year end,the REIT paid down$58.1 mil