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Slate Grocery REIT (SGR-UN-T) announced Wednesday evening that it is suspending its distributions following a recommendation of the special committee undertaking a strategic review of the REIT.
The REIT, which owns and operates a US$2.5-billion portfolio of U.S.-based grocery-anchored retail, announced the strategic review in May.
Slate Grocery said the distribution suspension was intended "to enhance the REIT’s financial and strategic flexibility, pending the outcome" of the review.
The REIT's August distributions were U.S.$0.072 per class U unit of the REIT, or U.S.$0.864 on an annualized basis, with holders of class A units of the REIT receiving a distribution equal to the Canadian dollar equivalent.
"The Board’s decision was not taken in response to a change in the underlying fundamentals or long-term outlook of the REIT’s portfolio," Slate Grocery said in the announcement.
"Management’s views regarding the strong underlying fundamentals and long-term prospects of the portfolio remain unchanged."
Strategic review
The strategic review was announced in May in response to a buyout proposal from Slate Grocery's external manager, Slate Asset Management, a Toronto-based private equity firm co-founded by Blair and Brady Welch.
No details of the proposal were released.
Slate Grocery said yesterday the review remains active and ongoing, looking at a broad range of strategic alternatives available to the REIT.
"The REIT continues to benefit from its portfolio of high-quality grocery-anchored real estate, including an embedded mark-to-market opportunity from below-market in-place rents and continued demand for grocery-anchored space," the announcement said.
"There can be no assurance that the Special Committee’s review will result in a transaction, that any transaction will be approved or consummated, or that any other strategic alternative will be pursued."
Slate Grocery portfolio
Slate Grocery has a portfolio of 115 properties across 23 states, with 57 per cent of its gross leasable area concentrated in U.S. Sunbelt states.
Kroger, Walmart and Publix are among its top five tenants in the portfolio, which boasted a 94.4 per cent occupancy rate at the close of Q1, according to a letter to unitholders on May 12 from CEO Blair Welch.
“We continue to have strong conviction in the enduring strength and resilience of grocery-anchored real estate,” Welch wrote in May. He said the REIT’s average in-place rent was US$12.98 per square foot, well below the market average of US$24.59, leaving “meaningful runway for continued rent increases.”
Slate Grocery said yesterday it does not intend to comment further regarding the special committee’s review unless and until the committee or the board determines that further disclosure is appropriate or required by applicable law.
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