Good morning, ladies and gentlemen, and welcome to the Slate Grocery REIT third quarter 2025 financial results conference call. At this time, all lines are in listen-only mode. Following the presentation, we will conduct a question-and-answer session. If at any time during this call you require immediate assistance, please press star zero for the operator. This call is being recorded on Thursday, November 6th, 2025. I would now like to turn the conference over to Shivi Agarwal, Manager with Finance, Slate Grocery REIT. Please go ahead.
Thank you, Operator, and good morning, everyone. Welcome to the Q3 2025 conference call for Slate Grocery REIT. I'm joined this morning by Blair Welch, Chief Executive Officer; Joe Pleckaitis, Chief Financial Officer; Connor O'Brien, Managing Director; Allen Gordon, Senior Vice President; Braden Lyons, Vice President. Before getting started, I would like to remind participants that our discussion today may contain forward-looking statements, and therefore we ask you to review the disclaimers regarding forward-looking statements as well as non-IFRS measures, both of which can be found in management's discussion and analysis. You can visit Slate Grocery REIT's website to access all of the REIT's financial disclosure, including our Q3 2025 investor update, which is available now. I will now hand over the call to Blair Welch for opening remarks.
Thank you, Shivi, and hello, everyone. We are pleased to report another quarter of strong financial and operating results for Slate Grocery . Our team continues to convert resilient demand for grocery-anchored retail spaces into robust leasing at attractive rental spreads: 417,000 sq ft of total leasing throughout the quarter. Renewal spreads were completed at 15% above expiring rents, and new deals were completed at 35% above comparable average in-place rent. Adjusting for completed redevelopments, same property net operating income increased by $4.3 million, or 2.7%, on a trailing 12-month basis. Portfolio occupancy remains stable at 94%. Our portfolio's average in-place rent of $12.82 per sq ft remains well below the market average of $24.09 per sq ft, providing significant runway for continued rent increases.
The REIT has a weighted average interest rate of 5%, with over 90% of its debt having a fixed interest rate on a proportionate basis. This provides a stable outlook for the REIT's near-term financing costs. The REIT's weighted average capitalization rate remains well above the REIT's weighted average interest rate for outstanding debt, allowing the REIT to maintain positive leverage. The REIT's attractive valuation, combined with continued net operating income growth, is expected to continue increasing the value of our portfolio over time. We continue to have strong conviction in the outlook for grocery-anchored real estate and the ability of this asset class to perform in today's economic environment. Recent consumer spending data shows that the essential goods are expected to remain a top priority for shoppers over the next three months, underscoring the stability and resilience of the grocery sector and grocery-anchored real estate.
At the same time, fundamentals remain favorable, with elevated construction costs and tight lending conditions continuing to constrain new retail development and overall availability. This dynamic creates a favorable environment for landlords to retain existing tenants and achieve meaningful increases in rents as leases expire. Against this backdrop, we are seeing focus on operational execution, prudent management of our balance sheet, and strong relationships with our tenants to position the REIT to deliver sustained growth and lasting value for all unit holders. On behalf of the Slate Grocery team and the board, I would like to thank the investor community for all their continued confidence and support. I will now hand it over for questions.
Thank you. As a reminder, if you do wish to ask an audio question, please press star one on your telephone keypad. If you wish to withdraw your question, you may do so by pressing star one again to cancel. Once again, please press star one to register a question. There will be a brief pause while questions are being registered. Our first question comes from the line of Brad Sturges at Raymond James. Your line is now open.
Hey, good morning. Good quarter. Obviously, the organic growth number has been trending where you expected. I think your trailing 12 months, I think you said you were at 3%-4%. Is that a level that you expect to continue to see continue over the course of 2026?
Hey, good morning, Brad. Yes, it is. I think that the moves into the really due to expiring leases when they come on, but that sort of 3%-4% is what we expect going forward.
Okay. What are you seeing from a market-rent perspective? Obviously, you continue to highlight and showcase the mark-to-market available as you're able to bring in-place rents to market. I guess what's happening from a market-rent perspective?
Yeah, great question. I think the easiest way to point to something is we quote the 20, it's just over $24 per sq ft now, the CBRE market average. That is increasing at the same or maybe above our in-place rent. I would say our rental growth is very strong, and the market is also growing. I think those are both positive things.
Okay. Last question for me, just maybe switching gears towards the investment or transaction market, any read-throughs in terms of pricing you're seeing as it relates to Slate Grocery's underlying NAV or valuation? Are there more trades starting to percolate, or how should we think about that?
Yeah, I would say we feel very comfortable with our IFRS cap rate, and I think we've been prudent on that. I think the rest of the market is kind of coming to a place where the execution where you have to do deals has moved up. I think that's why the transaction volume has been muted. I think it's really more situational. We are looking at the pipeline of new acquisition opportunities in the billions, and that could be platforms, it could be one-off deals. I think it really speaks to positive leverage. If you think of Slate Grocery balance sheet, we're around 200 basis points of positive leverage from our IFRS cap rate to our weighted average cost of financing. I think that's pretty attractive.
I think if we continue to see that with our peers and where transactions are, I think you'll see that volume pick up. I think the U.S. market is getting there. I think if you look at other international jurisdictions, Europe is also a positive leverage situation. I think Canada is getting there, but maybe not there yet. That's really how we look at the market. The fundamentals of grocery-anchored real estate are extremely strong. If you can buy an asset that's performing well and finance it well, I think that will show more volume in transactions.
Okay. I appreciate that. Thank you. I'll turn it back.
Thank you. Your next question comes from the line of Golden Nguyen-Half Yard at TD Cowen. Your line is now open.
Good morning, everyone. Just one question from my end. Nice to see occupancy move up a little bit in Q3. Can you talk a little bit about your progress on some of the vacancies that you had earlier in the year?
Yeah. Good morning, Golden. I'll pass it over to the team to talk about specific occupancy. Thanks for the question.
Yeah. This is Allen. Good morning. We continue to see a strong pipeline of new deals throughout the portfolio, both on junior-anchored leasing and small shop leasing. As you've seen, continue to do deals in both.
Thanks for the color. I'll turn it back.
Thank you. As a reminder, if you do wish to ask a question, please press star one on your telephone keypad. At this time, we have no further questions. I'd like to turn it back over to Shivi Agarwal for closing remarks.
Thank you, everyone, for joining the Q3 2025 conference call for Slate Grocery REIT. Have a great day.
Thank you, everyone, for attending. This does conclude today's presentation. You may now disconnect.