Post by
logicandinertia on Jun 21, 2022 8:38pm
Interesting twist to new deal
Given that the ability to complete a transaction of this size thru a public issue of new units was highly questionable and would have been dilutive (in other words, a no go), SLATE GROCERY has elected to use one of its private equity funds to provide the equity part of this deal (and created a JV with Slate Grocery), with the remainder of the purchase price coming from debt.
Note that SLATE Real Estate PE fund investment implies a valuation for SLATE Grocery at IFRS Q1/22 valuation, which is 22% premium to the current share price. Smart and sends the right message to shareholders.
They may be deal junkies but as long as they are paying the right price and the funding mechanism is not damaging to existing unit holders, i will give them the benefit of the doubt. I'm not oblivious to the additional fees accruing to SLATE management. But it is currently earning its yield (barely) and this should be an accretive transaction. In addition to the falling share price, the trading yield has also been bumped by the appreciation of the US dollar against the CDN loonie. About a 8% yield (US$0.864 per unit annualized).
We will see how quickly they can bring rent up on this new acquisition and lift occupancy, both key to offset higher cost of capital (cost of debt+equity) for REITs.
Good luck...
Comment by
DanielDarden123 on Jun 22, 2022 9:59am
While the JV is a new twist, the ability to buy properties at the right price is not. The 6.9% cap rate almost assures that the deal is accretive. A move to 6%, which is realistic in those states, would imply a ~15% increase in market value without dilution.