Ladies and gentlemen, thank you for standing by, and welcome to the SLAIT Retail REIT Second Quarter 2020 Financial Results Conference Call. At this time, all participants are in a listen only mode. After the speaker presentation, there will be a question and answer session. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Braden Lyons, Investor Relations.
Thank you. Please go ahead, sir.
Thank you, operator, and good morning, everyone. Welcome to the Q2 2020 conference call for SLAIT Retail REIT. I'm joined today by David Dunn, Chief Executive Officer and Andrew Agateff, Chief Financial Officer. Before getting started, I would like to remind participants that our discussion today may contain forward looking statements, and therefore, we ask you to review the disclaimers regarding forward looking statements as well as non IFRS financial measures, most of which can be found in management's discussion and analysis. You can visit SLAIT Retail REIT's website to access all of the REIT's financial disclosure, including our Q2 2020 investor update, which is available now.
I will now hand over the call to David Dunn for opening remarks.
Thank you, Braden, and thank you to all the participants for joining the call this morning. Before speaking to our quarterly results, I'd like to first acknowledge the ongoing impact of the COVID-nineteen pandemic. These last few months have presented us with a number of unique challenges that we have never experienced before. However, we are very pleased with the resiliency and defensiveness that our portfolio of grocery anchored assets has demonstrated over the same period. Our durable and quality portfolio was assembled to generate consistent cash flow and thrive in all market conditions.
And that is exactly what it has done over the last few months. As of June 30, all 77 of our assets have remained open during the pandemic, 62% of our tenants have been deemed essential by the government, 92% of our tenants are currently open and operating. Our investment thesis and solid foundation have allowed us to secure sector leading rent collections consistently from April through to July with collection levels ranging from 86 percent to 92% in cash over that time. In aggregate, we agreed to $1,300,000 of rent deferrals, which many tenants have already started to repay. We expect to substantially collect the residual rents by the end of 2020.
Now a few comments on the Q2. As part of our Q2 results, we are pleased to announce our planned name change to Slate Grocery REIT, which remains subject to final TSX approval. While our business will have a new name, our strategy will remain the same. Our new name better reflects our business and investment thesis, which have always been and will continue to be centered around the last mile of essential logistics, investing in high quality grocery anchored assets in major markets across the United States. We stand alone as the only pure play grocery business in the REIT sector and our name will now reflect that differentiation.
Despite a challenging environment, we achieved solid operational results this quarter. Our team completed over 518,000 square feet of leasing at a weighted average rental spread of 2.3%. This represents one of our best leasing performances since inception in 2014. Our grocery anchored partners were active this quarter. We completed 5 renewals and 2 net new leases.
Both of the new deals will see grocers invest significant capital into new stores as well as the REIT co investing in common area upgrades. Exclusive of termination fees, same property NOI was positive and occupancy remains stable within our historical range at 92.2%. Not included in our 2nd quarter reporting are 2 anchor and 1 junior anchor executed leases that will absorb approximately 79,000 square feet of vacancy with a pro form a portfolio occupancy of 93% and at $1,100,000 of annual base rent. Additionally, we completed the REIT's 2nd largest acquisition since inception during the quarter. The deal was attractive to us when it was initially announced in early March for 106,500,000 as it hit all of our investment criteria.
Well located assets anchored by market dominant high credit grocers including Harris Teeter, whose parent company is Kroger, Food Lion, whose parent is Ahold Delhaize and Wise Markets. The 7 grocery anchored assets added over 623,000 square feet of gross leasable area to our portfolio and are located in markets where we already have an established presence. We were able to complete this transaction on an opportunistic basis for $90,000,000 or $144 a square foot, which represents a 16% discount from the original contract price. The discount reflects a decrease in the price, not the value of the assets. There were no significant changes to the portfolio as a result of COVID-nineteen and rent collections for the acquired assets have been in line with ours.
This transaction will add $0.10 per square foot of FFO growth to our portfolio. I'm incredibly proud of the tireless effort that our team has put forth over the past few months. It's been a combination of both this effort and our portfolio's resilient tenant mix that has enabled our business' strong performance throughout this unprecedented landscape. Looking ahead to the Q3 and beyond, we will continue to work diligently with our Board to position our portfolio to create value for our unitholders and take advantage of the opportunities that lie ahead. On behalf of the entire slate retail REIT team, we wish you and yours good health.
We thank you for your continued support. I'll now hand it over for Q and
Your first question comes from the line of Himanshu Gupta with Scotiabank.
Thank you and good morning. So first of all, it sounds like a good decision to change the name to State Grocery. I think it's more reflective of the strategy. And then in terms of the question, in terms of rent collection, 89% to 90% in Q2. What are the tenant categories that has not paid?
And what kind of visibility do you have in terms of collecting the remaining amount?
Hey, good morning, Himanshu. Yes, we're certainly happy to have changed the name. It's something we've been talking about internally for some time and we're very appreciative of the Board for supporting our rebranding initiative. To your point, it aligns with exactly what our business is and we think that it will address any potential confusion in the market that we stand alone as an essential based tenant pure play grocery anchored vehicle. As it relates to your cash collections question, we have 62% of our business as essential based tenants.
But when you look at our collections, frankly, a lot of our tenants very much the majority of them are paying rent. We've been working on deferrals. We quoted $1,300,000 of deferral agreements, but this is now a discussion centered in the repayment of these deferrals. And for the month of July, our expectation was that $50,000 of deferred rent was to be due in payable and all of that cash has been received.
Okay. So thank you for that update. And then just switching gears on the $90,000,000 portfolio acquisition this quarter at 8.7% cap rate. So what is the weighted average lease term of this portfolio? Are there any anchor leases coming due in the next 1 year or so?
And in general, do you think is this reflective of the overall market? Has the pricing moved in the last few months?
So I'll address as many questions as I can remember from your series. Yes, that deal was a deal we're very happy to close. As I stated in my opening remarks, to get it at a 16% discount is a real win for us. We were able to provide liquidity the fastest to the seller and we do not believe that the cap rates the deal was done at is reflective of anything but an opportunistic value play for our business. There's several traditional grocers that are of investment grade quality.
These are the tenants we want to continue to improve our increase our position with and grow with. And no, there are no near term expiries from a grocery standpoint and we're extremely happy to have these assets within our portfolio.
One thing to make note is that the portfolio is very similar in terms of composition, actually a little more weighted with grocers. And the good news is in terms of collections, it's been quite similar to that of the REIT. In June, we collected about 95% of cash in terms of billings and in July it's about 90%. So it's in line with the REIT and it's following the same sort of cash collection trajectory.
Got it. And just switching, I mean, staying on the valuation theme on your IFRS valuation this quarter, The cap rate was 7.41 unchanged. Did you revisit the portfolio valuation this quarter? Or are you waiting for more transactions in the market to make an assessment on the packet?
No, we've done our homework, Himanshu. That have been completed within the COVID era were not discounted by even $1 I think we did 5 dispos. So that's a very good track record. From a new deal standpoint, what we're seeing, certainly there's less volume in the market, but there are deals starting to happen and none of those deals are selling at a discount to price. We're seeing prices come in higher than what brokers are guiding on.
And then we've been talking to our capital markets partners in America and they're not seeing any evidence in their worlds of discounted pricing either. So we're comfortable where we are. That said, we did make some adjustments to some of our lease up expectations and market rents. But from a cap rate standpoint, we're comfortable where we are.
Looking to as well from our disposition, our capital recycling of our capital recycling program, since 2019, those $200,000,000 proceeds of sales, that came in at a 7.2% cap. Also just thinking about our most recent quarter with the disposition of 2 properties that came in at a 6.9% cap. So to me, I think that's quite telling of the grocery property that we own as well as demand for our products.
Got it. Thanks for the color. And maybe last question from my side on the capital allocation. What are your priorities in the near term? And is it fair to say that you are looking to do more acquisitions in the next little while given that the disposition program is more or less complete now?
Yes. So for us, I think our we make an assessment quite regularly as to the best way we can provide holder return. The whole capital allocation strategy is something that we'll continue to assess with the Board more frequently in light of the pandemic. So it's something we'll assess on a case by case basis.
Okay. Thank you. Thank you, guys. And I'll turn it back.
Your next question comes from the line of Jenny Moll with BMO Capital Markets.
Thanks. Good morning. With regards to the $1,100,000 of additional rent from the leasing that's not captured in Q2, can you talk about the timing of when you expect that to hit the cash flow?
Typically, that can span between 6 months to about 18 months. So we expect to sort of trickle over that kind of period.
Is it front or back end loaded?
I see more on the back end.
Okay. That's helpful. With regard to the name change, I'm just wondering if you could share your thoughts on standalone grocery boxes versus the grocery anchor shopping centers? Is that something that you've explored or is it an opportunity that's readily available in the U. S?
Hey, Jenny, good morning. Yes, it's certainly something that we look at. We like deals that do have some in line space. That's how we create our value. Obviously anchoring in grocery, we want a high percentage of our rent roll to be comprised of grocery, but to create value and hit the returns that we're seeking, we do tend to like a shopping center that has maybe a half dozen to 10 shop tenants something that would be south of 100,000 square feet, where you can put a solid merchandising mix together and increase your NOI organically.
I guess that leads to my next question, which is when you think about these kinds of shopping centers, I know the slate retail portfolio is fairly defensive. But given the impact of the pandemic, is there a thought to, I guess, evolving your tenant mix a bit to reduce the exposure to restaurants and gyms? Or do you think this impact is more or less transitional and you're happy with the balance right now?
We like our tenant mix. I've said before these types of neighborhood grocery anchored centers have a very good variety of tenants. We are adding medical users. There are certain tenants we'd like to grow with, but overall, no, we're not looking to reposition this in any way. We're doing deals with regional healthcare providers that are supplying urgent care and primary care to communities and we continue to add a few of those deals.
I think we like where we are right now.
Okay, great. And then I'm just wondering in the U. S, has there been any talk about any sort of rent assistance or retailer assistance programs from the government? Not following it as closely. So I'm wondering if there's anything that I may have missed.
Happy to discuss that. So there is a large program in America to support families and to support small businesses. It is very different than Seacra here in Ontario and in Canada. It is purely government support. So the first act that was legislated in April was the CARES Act and the Paycheck Protection Program.
It was upwards of $3,000,000,000 of government support provided through banks but directly to small businesses. There's no participation. I mean owners such as SLA Retail REIT stand to benefit and we did early on. We received about 6% of our tenants received government support under the Paycheck Protection Program. There's currently new legislation working its way through Congress, the HEALS Act, which is the 2nd wave of support.
It's going to be smaller. There will be support for families and more support for small businesses. We're tracking that. It's still working its way through Congress right now.
Okay, great. That's really helpful. I guess I'll keep my eye out for that. That's all for me. Thanks.
I'll turn it back.
At this time, there are no further questions. I would like to turn the call back over to Braden Lyons for closing remarks.
Thank you everyone for joining the Q2 2020 conference call for SLAIT Retail REIT. Have a great day.
Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.