Slate Office REIT 9 00 Convertible Unsecured Subordinated Debentures Exp 28 Feb 2026 T.SOT.DB

One of my favourite excerpts from last Q4 earnings report

[northcoast]

On net asset value and possible NCIB:

"The current price for the REIT’s units reflects a substantial discount to the REIT’s IFRS net asset value per unit of $8.55 at December 31, 2018. Management believes that there is a substantive basis to support a net asset value of $8.55 per unit, including:

• Wafra's investment provides a market value for $527.2 million of the REIT’s assets: The price received from a large sophisticated global investor for six properties in the Greater Toronto Area provides validation for the net asset value of 28% of the REIT’s portfolio. Further, the REIT received appraisals for each property that were consistent with the REIT’s transaction price.
• Recent acquisition in the United States: The REIT’s acquisition of its two U.S. assets in Chicago, Illinois each occurred recently in 2018, and accordingly, represent recent market trading prices. Management continues to observe multiple comparable sales in the Chicago market at pricing parameters in excess of the REIT’s acquisition metrics.

The following is an illustration of the construction of the REIT’s net asset value:

(amounts in C$ millions, except per unit amounts)		Total
GTA JV Portfolio		$	527.2
Recent U.S. acquisitions		328.7
Other properties(1)		983.2
Debt and working capital		(1,195.5		)
Net asset value		$	643.6
Net asset value per unit		$	8.55
(1) Valuation is equal to a 6.6% capitalization rate on next twelve months expected net operating income. Properties have an in-place occupancy of 87.1%.

This gap between the prevailing trading price and net asset value has created a compelling investment opportunity to purchase units of the REIT. Specifically, the prevailing market price implies a 7.8% capitalization rate on next twelve months expected net operating income and in-place occupancy of 87.1%, which is significantly inconsistent with current valuation metrics for similar properties.

While the REIT intends to initially use the proceeds from asset sales and its capital recycling program to pay down debt and reduce leverage, if the existing unit price discount to net asset value continues, management may also seek to repurchase units of the REIT through its Normal Course Issuer Bid in order to reduce the number of outstanding REIT units.

Read more at https://stockhouse.com/news/press-releases/2019/03/04/slate-office-reit-reports-fourth-quarter-2018-results-and-positions-the-reit#KkmyruMeXUWZQ2Jj.99