TD comment on updateSlate Office REIT (SOT.UN-T) C$2.08
Steve Hodgson Stepping Down as CEO )
Event
This morning, Slate Office announced that CEO Steve Hodgson has resigned, effective May 12, in order to pursue other opportunities. Brady Welch, a founding partner of Slate Asset Management (SLAM), has been appointed interim CEO.
Impact: NEUTRAL
Our take:
With Slate Office being externally managed by SLAM, we expect no change in strategy or hiccups in operations with this change. management role in late 2014 and follows Slate's recent 70% distribution cut earlier in April
While we view this morning's announcement as a surprise, we do note that this represents the fourth CEO transition since SLAM assumed the external (link). Mr. Welch, who is based in London, England, brings over 30 years of real estate experience across Canada, U.S., and Europe. Prior to Slate, he held senior management positions with an investment management firm in New York, where he was responsible for direct investments in real estate equity and debt portfolios. Following the succession, Mr. Welch will remain a Trustee of the Board of the REIT, a position he has held since 2014. Q1/23 results. Slate Office will report Q1/23 earnings before market hours on May 2, followed by a call at 9:00 a.m. AM ET (1-888-886-7786). \
We forecast $0.12 in FFO/unit, down from $0.13 in Q1/22. We will look to update our estimates, recommendation, and target price following quarterly results.
Valuation. Slate currently trades at 4.7x our 2023E AFFO/unit, below the smallcap average at 6.9x. Its 61% P/NAV discount is also well below the small-cap peer average of 40%. While the units appear attractive on both an absolute and relative basis, we believe the shares are range bound until such time as the REIT can demonstrate AFFO/unit growth and a meaningful reduction in its leverage.