NOT FOR DISTRIBUTION TO UNITED STATES NEWSWIRE SERVICES OR FOR DISSEMINATION IN THE UNITED STATES
TORONTO, Oct. 17, 2022 (GLOBE NEWSWIRE) — Slate Office REIT (TSX: SOT.UN) (the “REIT”), an owner and operator of high-quality workplace real estate, announced today that it has agreed to acquire a newly retrofitted Class A office property located in Chicago, Illinois (the “Property”). The Property is valued at US$19.8 million (the “Acquisition”), which represents an 8.4% capitalization rate based on in-place net operating income (“NOI”). The Property is anchored by a long-term lease with one of the world’s premier innovative biopharmaceutical companies.
Highlights of the Acquisition
- Well-located, Class A office property – Newly retrofitted building comprising 197,527 rentable square feet located in a historically strong and stable office node
- Attractive basis – Purchase price of US$19.8 million represents an 8.4% capitalization rate based on in-place NOI and a 75.0% discount to the Property’s estimated replacement cost
- Long-term lease with investment grade tenant – The Property has a 10-year weighted average lease term, with the majority of income secured by a long-term, triple net lease with one of the world’s premier innovative biopharmaceutical companies
- Significant upside potential – Opportunity to lease up 65,197 square feet of remaining availability at the Property provides for long-term value creation
The REIT has also entered into an agreement with a syndicate of underwriters co-led by CIBC Capital Markets, BMO Capital Markets and RBC Capital Markets (collectively, the “Underwriters”) to issue C$45 million aggregate principal amount of 7.50% convertible unsecured subordinated debentures of the REIT on a “bought deal” basis (the “Offering”). The net proceeds from the Offering will be used to partially fund the Acquisition, reduce the REIT’s secured indebtedness, and for other general corporate purposes, which could include execution of the REIT’s normal course issuer bid (“NCIB”) program in accordance with applicable securities laws.
Steve Hodgson, Chief Executive Officer of the REIT, said: “In pursuing this Acquisition, we are continuing to enhance the quality and scale of our investments, highlighting Slate Office REIT’s long-term strategy of aligning its portfolio with the right credit tenants to provide both stable cash flow and yield to our unitholders. We are pleased with this offering as it proactively strengthens the REIT’s liquidity position, demonstrating our continued momentum and growth.”
Debentures
The REIT has agreed to sell to the Underwriters, on a bought deal basis, C$45 million aggregate principal amount of 7.50% convertible unsecured subordinated debentures of the REIT (the “Debentures”). The REIT has also granted the Underwriters an over-allotment option to purchase up to an additional 15% of the Debentures on the same terms and conditions, exercisable at any time, in whole or in part, up to 30 days after the closing of the Offering.
The Debentures will bear an interest rate of 7.50% per annum, payable semi-annually in arrears on June 30 and December 31 in each year commencing June 30, 2023. The June 30, 2023 interest payment will represent accrued interest for the period from closing of the Offering to June 30, 2023.
Each Debenture will be convertible into freely tradeable trust units of the REIT (“Units”) at the option of the holder at any time prior to the close of business on the earliest of (i) the last business day before December 31, 2027 (the “Maturity Date”); or (ii) if called for redemption, the business day immediately preceding the date specified by the REIT for redemption of the Debentures, at a conversion price of $5.50 per Unit (the “Conversion Price”), being a ratio of approximately 181.8182 Units per $1,000 principal amount of Debentures. The conversion right will be subject to standard anti-dilution provisions. Debenture-holders converting their Debentures will, in addition to the applicable number of Units to be received on conversion, receive accrued and unpaid interest, if any, for the period from the last interest payment date on their Debentures to and including the last record date set by the REIT occurring prior to the date of conversion for determining the REIT’s Unitholders entitled to receive a distribution on the Units. The Debentures may not be redeemed by the REIT prior to December 31, 2025. On and from December 31, 2025, and prior to December 31, 2026, the Debentures may be redeemed by the REIT, in whole at any time, or in part from time to time, at a price equal to the principal amount thereof plus accrued and unpaid interest on not more than 60 days’ and not less than 30 days’ prior written notice, provided that the volume weighted-average trading price of the Units on the Toronto Stock Exchange for the 20 consecutive trading days ending five trading days preceding the date on which notice of redemption is given is not less than 125.0% of the Conversion Price. On and from December 31, 2026, and prior to the Maturity Date, the Debentures may be redeemed by the REIT, in whole at any time or in part from time to time, at a price equal to the principal amount thereof plus accrued and unpaid interest on not more than 60 days’ and not less than 30 days’ prior written notice.
The net proceeds from the Offering will be used to partially fund the Acquisition, reduce the REIT’s secured indebtedness, and for other general corporate purposes, which could include execution of the REIT’s NCIB program in accordance with applicable securities laws.
The Debentures will be offered by way of a prospectus supplement to the REIT’s short form base shelf prospectus dated April 29, 2021, which prospectus supplement is expected to be filed with the securities commissions and other similar regulatory authorities in each of the provinces and territories of Canada on or about October 19, 2022. Further information regarding the Offering, including related risk factors, will be set out in the prospectus supplement. The Offering is subject to the receipt of all necessary approvals, including the approval of the Toronto Stock Exchange. Closing of the Offering is expected to take place on or about October 24, 2022.
The Debentures have not been, nor will they be, registered under the United States Securities Act of 1933, as amended, (the “1933 Act”) and may not be offered, sold or delivered, directly or indirectly, in the United States, or to, or for the account or benefit of, “U.S. persons” (as defined in Regulation S under the 1933 Act), except pursuant to an exemption from the registration requirements of the 1933 Act. This press release does not constitute an offer to sell or a solicitation of an offer to buy any Debentures in the United States or to, or for the account or benefit of, U.S. persons.
About Slate Office REIT (TSX: SOT.UN)
Slate Office REIT is a global owner and operator of high-quality workplace real estate. The REIT owns interests in and operates a portfolio of strategic and well-located real estate assets in North America and Europe. A majority of the REIT’s portfolio is comprised of government and high-quality credit tenants. The REIT acquires quality assets at a discount to replacement cost and creates value for unitholders by applying hands-on asset management strategies to grow rental revenue, extend lease term and increase occupancy. Visit slateofficereit.com to learn more.
About Slate Asset Management
Slate Asset Management is a global alternative investment platform targeting real assets. We focus on fundamentals with the objective of creating long-term value for our investors and partners. Slate’s platform has a range of real estate and infrastructure investment strategies, including opportunistic, value add, core plus and debt investments. We are supported by exceptional people and flexible capital, which enable us to originate and execute on a wide range of compelling investment opportunities. Visit slateam.com to learn more.
Forward-Looking Statements
Certain information herein constitutes “forward-looking information” as defined under Canadian securities laws which reflect management’s expectations regarding objectives, plans, goals, strategies, future growth, results of operations, performance, business prospects and opportunities of the REIT. The words “plans”, “expects”, “does not expect”, “scheduled”, “estimates”, “intends”, “anticipates”, “does not anticipate”, “projects”, “believes”, or variations of such words and phrases or statements to the effect that certain actions, events or results “may”, “will”, “could”, “would”, “might”, “occur”, “be achieved”, or “continue” and similar expressions identify forward-looking statements. Forward-looking statements include, without limitation, statements regarding the expected outcome of the Acquisition on the REIT’s operations and financial condition, the expected timing and completion of the Offering, and the anticipated use of proceeds of the sale of Debentures. Such forward-looking statements are qualified in their entirety by the inherent risks and uncertainties surrounding future expectations.
Forward-looking statements are necessarily based on a number of estimates and assumptions that, while considered reasonable by management as of the date hereof, are inherently subject to significant business, economic and competitive uncertainties and contingencies. When relying on forward-looking statements to make decisions, the REIT cautions readers not to place undue reliance on these statements, as forward-looking statements involve significant risks and uncertainties and should not be read as guarantees of future performance or results, and will not necessarily be accurate indications of whether or not the times at or by which such performance or results will be achieved. A number of factors could cause actual results to differ, possibly materially, from the results discussed in the forward-looking statements. Additional information about risks and uncertainties is contained in the filings of the REIT with securities regulators.
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For Further Information
Investor Relations
+1 416 644 4264
ir@slateam.com
