Slate Office REIT Cuts Distribution To Improve Liquidity
Slate Office REIT Cuts Distribution To Improve Liquidity
Toronto-based Slate Office REIT, which has holdings in Canada and Chicago, has become the latest publicly traded real estate investment trust to ditch its distribution to improve liquidity issues.
The REIT, which is dealing with an occupancy level of 78.6% across its portfolio, said the decision to eliminate the distribution gives Slate an additional CA$10.2 million of cash annually, which will be used to pay debt and fund ongoing business operations.
“We have made steady progress over the last quarter toward shoring up the REIT’s balance sheet, completing over CA$577 million of refinancings and loan amendments to preserve liquidity and financial flexibility for the REIT,” said Brady Welch, interim chief executive of Slate Office REIT, in a statement. “We have also maintained stable portfolio occupancy, supported by our positive leasing momentum at longer lease terms. Through the portfolio realignment plan we are introducing this quarter, we believe we can improve the REIT’s liquidity, strengthen its balance sheet through reduced debt, and improve portfolio composition to position the REIT for long-term stability and performance.”
Earlier this month, a different Toronto-based REIT, True North Commercial, said it would cut its distribution completely.
Slate has identified non-core assets in specific Canadian markets it plans to sell to use the cash to repay debt and provide general liquidity for the REIT. The assets make up 40% of the REIT’s total gross leasable area.
CoStar News first reported that the REIT was selling three assets in New Brunswick in early November.
The REIT said that as of Oct. 31, approximately two-thirds of the planned dispositions are either listed for sale, under discussions, or at varying contract negotiation stages. Depending on local market conditions, the remainder of the disposition assets will be put on the market in 2024.
Slate Asset Management, an external manager to the REIT, said it had expanded its investment in Slate Office to 10% to reflect its confidence in capital allocation decisions and strategy.
The moves did little to appease investors following the distribution cut as shares dipped to 77 cents this week, well below their 52-week high of $4.67.
Jonathan Kelcher, an analyst at TD Securities, expressed concern about Slate Office’s high financial leverage in the current interest rate and transaction market environment.
“Although we expect improvements in leverage as dispositions are completed, we see potential challenges on timing, coming from a more difficult financing environment and overall slower transaction market,” said Kelcher in a note to investors.
Source CoStar Click here to read a full story
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