Slate Grocery REIT Class U Units T.SGR.UN

Strategy and positioning looks positive

[logicandinertia]

US grocery sales remained strong last month, up 7.5% YoY.  

SGR's top five customers (as % of base rent) include:

Kroger 8%
Walmart 6%
Ahold Delhaize 4%
Albertson's 3.8%
Publix 3.4%

so about 1/4 of  base rent, but key that these "anchors" remain healthy, as it creates a pull for traffic and benefits ancillary businesses (who pay SGR rent).  how are they doing?

In terms of US grocery market share, these same customers are as follows:

Kroger 11%
Walmart 22%
Ahold Delhaize 6%
Albertson"s 5%
Publix 4%

So about 48% of total grocery sales in the US is generated by these 5 giants.

All grew same store sales and each one generated at least $3.9 billion in EBITDA (Walmart the biggest at $36 billion).   So each has adequate liquidity to continue to refine its business for the future (better in store experience and omnichannel fulfillment).  

by hook or by crook, SGR management seems to have honed in on a strategy that is working, allocating capital on a timely basis (for both divestments and acquisitions) as it refines and rebrands its business.   The "pure play" grocery strategy (even though grocery is only one quarter of base rent) has been well received by investors, and the public market transactions in grocery over the past 18 months point to further compression of cap rate.

with over an 8% yield, exposure to us dollar strength (move in the USD/Loonie rate over past several months +++ for SGR and dividend into CDN dollars), not surprised BMO have finally thrown in the cautious towel and upgraded.   easy story to understand and a management team who should be applauded (despite the external management structure).  

actually think dividend yield could compress further to 6-7%, which along with some distribution growth in next 2-3 years, would suggest CDN $16-18 not unrealistic for the unit price...

Good luck to all.