Behind the Deal: Slate Office Portfolio Sale to FAM REIT
This week Slate Asset Management officially acquires Huntingdon Capital Corp. To mark the occasion, Slate is selling its entire $190M GTA suburban office portfolio to FAM REIT, a firm it will now own part of via the Huntingdon deal. Slate partner and co-founder Blair Welch tells us more.
The transaction—including Mississauga's Meadowpine Corporate Centre (seen below), and six other properties—will be paid for with $144M in cash. Slate will also acquire 5.1 million units in FAM REIT. Slate announced in August it would be acquiring Huntingdon Capital, and the deal closes this week. With it comes a 30% stake in FAM, which will add the Slate buildings to its portfolio of 28 industrial, office, and retail properties. Blair notes his company is selling all of the office assets that it 100% owns. By taking back equity in FAM, Slate is supporting the firm in its bid to become a “pure-play office REIT.”
The Slate office properties—comprising 1.1M SF of GLA total—will give FAM the opportunity to gain “significant exposure” in the GTA, Blair tells us. And there’s future upside here: “They’re buying these assets at a discount to many different appraisal values.” Non-core office assets are "a bit out of favour” at the moment, so there’s less competition on that side of the market compared to other asset classes, like industrial or retail, that are in demand from private investors, REITs and pension funds. “When other people aren’t participating, that’s probably a good time to buy.”
The Slate office property portfolio FAM will be acquiring—subject to unit-holder approval at a December meeting—is 90.2% leased. This includes non-core properties like Woodbine & Steeles Corporate Centre, Centennial Centre and 1 Eva Rd in Toronto, seen above. While the buildings may be mostly booked up, FAM REIT sees opportunities for cash flow growth through rent increases and occupancy expansions. Since FAM's 2012 IPO, three of its four acquisitions have been in the office market.