Bermuda Crossroads in Richmond, Va., is one of seven grocery-anchored shopping centres to be acquired by Slate Retail REIT. (Google Street View)

UPDATE 2: On April 9, Slate issued an update informing the transaction likely would not proceed “as certain of the conditions to closing in favour of the REIT will not be satisfied.” However, on June 1, it provided a second update noting the sale did, in fact, proceed. It has now closed.

Slate Retail REIT (SRT-U-T) is back in growth mode, with a binding agreement to acquire a portfolio of seven properties in the United States for $147 million (all figures Cdn unless specified). The purchase will be the largest acquisition in the REIT’s history.

“We are focused on growth and are excited to build on the foundation we spent the last two years creating,” said David Dunn, the REIT’s incoming chief executive officer, in a release. “These properties are high-quality, stabilized grocery-anchored assets, which at US$106.5 million is the REIT’s largest acquisition to date.

“The acquisition hits several key investment criteria including adding scale in growth markets, expanding our relationship with top grocers and improving the overall quality of our portfolio.”

Slate says the transaction represents a capitalization rate of 7.6 per cent, and a price of $236 per square foot.

Slate Retail REIT had not expanded its portfolio since 2017.

The retail portfolio

The seven properties are located in the U.S. Southeastern and Mid-Atlantic states and comprise 623,770 square feet of gross leasable area. In addition, Slate has established presences in these regions, which will allow it to benefit from increased scale.

Each of the properties is anchored by “market-dominant, high-credit grocers” including Harris Teeter (Kroger), Food Lion (Ahold Delhaize) and Weis Markets. It has an existing occupancy of 92 per cent, with leasing upside according to Slate.

To finance the acquisition, Slate says it is redeploying capital from $232 million worth of dispositions of lower-tier assets. The REIT calls these seven properties “higher-quality grocery-anchored assets” with stronger retailers and better locations.

The properties being acquired are:

The acquisition is expected to be completed in Q2 2020. It is subject to customary closing conditions.

The REIT completed a significant refinancing of its debt and credit facilities during 2019, lowering its interest costs and extending the term.

In its 2019 year-end financial report, Dunn said the REIT created about $200 million in liquidity, and “we are poised to buy quality assets in growth markets.”

The transaction ends an extended period during which Slate Retail REIT focused on dispositions rather than acquisitions.

The REIT had not made any acquisitions since October 2017, when it purchased the National Hills shopping centre in Augusta-Richmond County in Georgia, according to its website.

During 2017, the REIT purchased 15 properties.

About Slate, Slate Retail REIT

Slate Retail REIT is focused on U.S. grocery-anchored real estate. It owns and operates approximately $1.8 billion of assets in top-50 U.S. metro markets.

The REIT’s diversified portfolio and quality tenant covenants provide a strong basis to continue to grow unitholder distributions and the flexibility to capitalize on opportunities that drive value appreciation. 

The REIT is a division of Slate Asset Management, a real estate-focused alternative investment platform with over $6.5 billion in assets under management.

Slate is a value-oriented manager and a significant sponsor of all of its private and publicly traded investment vehicles.

The firm’s investment approach is designed to create long-term value with an emphasis on capital preservation and outsized returns.