Post by
logicandinertia on Mar 26, 2021 9:15pm
What is likelihood of distribution increase in 2021?
the two most recent acquisitions add US$34 million in NOI (based on the cap rate disclosed for both deals). To put this into perspective, total NOI in 2020 was US$89.5 million so total growth from these two acquisitions is 38%. How were these financed? 17.7 million units were issued (assume sub receipts convert along with the Dec 20 bought deal), increasing units outstanding from 42.2 million to 60 million , growth of 42%. company also assumed US$300 million in debt, with a servicing cost of US$12.9 million.
company paid out US$35.4 million in distributions in 2020, or US$0.864 per unit. Because of the unit count increase to 60 million, the current run rate of US$0.864 in distributions/unit costs the company US$51.8 million, an increase of US$16.4 million over 2020 distributions. this analysis overestimates total weighted unit count for year due to timing of sub receipt deal, but just looking for ball park and run rate once deal closes. NOI less interest payments associated with last two deals is US$34 million less US$12.9 million, or US$21.1 million. This compares to distribution increase of US$16 million shown above. there are likely some tax/management fees/etc, that eat into the delta, but still should be a few million in the green for 2021, and base business should also increase its NOI in a more normal economy (and they intimated that recent mortgage deals would help to lower debt servicing costs).
assuming US$5-6 million in additional annualized distributable cash (which would appear doable) in 2H/21 pushes distribution from $0.072 to $0.08 per month, so annualizes up to US$0.96, or CDN$1.20 (at current exchange rates).
If this transpires, use your own assumption for trading yield to determine unit price prediction. $1.20/7.5% would equal CDN$16 unit price or CDN$15 at an 8% yield.
slate grocery has raised the distribution per unit every year since 2015. with the magnitude of the deals already done in early 2021, and unless i'm missing something, the accretion they will deliver, i actually don't think a distribution increase in 2021 is much of a question mark. IMO, probability is high...unless i'm totally off the mark. And with a number of new institutions on board, I think a distribution increase in 2021 sends a positive message and builds credibility which can be harnessed and utilized for future deals.
good luck and have a good weekend.
Comment by
logicandinertia on Mar 27, 2021 7:37pm
A number of good points. I don't disagree. Cheers!
Comment by
mariorizzi on Mar 28, 2021 9:34pm
Considering the current yield, I don't think they should increase the distribution. It would not make much of an impact in attracting new investors at this point. I wold rather they use the extra cash flow to pay down debt. Lowering the debt and showing a lower payout ration would actually attract investors who want a stable balance sheet rather than an extra few basis points in yield.
Comment by
Shirtlessnomore on Mar 29, 2021 2:38pm
I agree and the distribution is already fantastic so use it elsewhere. At least until the s.p recovers and we move out of the chaos we are currently in. Paying down debt to me is as much of a catalyst for the s.p. anyway. Who doesnt love to hear that a company paid off extra debt or did some upgrades to property?