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

RE:RE:RE:RE:RE:GOING BACK UP- $5.04

[Altman1979]

Research report from National Bank: sorry for the messy "copy and paste"!

Resuming Coverage Following Offering Equity and Convert Offering On Nov 19, 2021, Slate Office closed its previously announced $60.8 mln equity offering consisting of 11.2 mln subscription receipts and a private placement of 1.2 mln receipts to Slate AM at a price of $4.90 / receipt, which represents a ~4.5% discount to the REIT’s Nov. 15, 2021 close price. SOT also issued a $75 mln extendible convertible debenture with an interest rate of 5.50%, a conversion price of $6.50 and expiration date of Dec. 31, 2026. Use of Proceeds SOT will use the proceeds of the offering to partially fund the acquisition of Yew Grove for ~$254.8 mln. Yew Grove is a publicly traded REIT with 23 office, life sciences and light-industrial properties in Ireland. The transaction is expected to close during the first quarter of 2022. Takeaways Slate’s acquisition of Yew Grove marks a significant change in its portfolio from both a geographic and asset type standpoint. While management had been prepping the market for the prospects of eventual European exposure, admittedly a transaction of this scale came as a surprise as did the issuance of equity at a deep discount to IFRS NAV. The resulting portfolio will generate 65% of its NOI in Canada, while the remaining 35% will be split evenly between Ireland and the US. Whereas prior acquisitions were oriented towards properties with value-add potential, this portfolio carries lower vacancy and is anticipated to be a stable income generation play. The financial impact is modestly higher leverage (that will come back down with anticipated property sales of $100 mln), slight NAV dilution as a result of the equity price discount but slight AFFO accretion when giving a fullyear benefit to the transaction and funding arrangements (timing will create some near-term noise). Maintaining Sector Perform but reducing our Target Price to $5.25 (was $5.50). This represents a ~15% discount to our NAV and a ~12x 2022E AFFO multiple.