Slate Asset Management on remaining ‘focused, prudent and patient’

This article is sponsored by Slate Asset Management

What were your firm’s key events in 2023?

This year was challenging for owners and operators, but despite the pressures facing the industry, we found ways to unlock new opportunities. In a tough fundraising environment, we were able to raise close to $500 million, and we were active in a challenging transaction market, completing $1.3 billion in acquisitions and dispositions globally.

Our largest transaction was the acquisition of 188 grocery-anchored properties in Germany – the largest property deal in the country in 2023. From start to finish the deal took 14 months to complete. We remained focused, prudent and patient.

In Canada, we were active with acquisitions and development of residential and industrial. We were also active on the debt side in the US.

What has the operating environment been like?

In 2023, we saw persistent inflation across Europe and North America, and in response came tightened monetary policy and higher interest rates. That combination made equity pricing challenging because nobody knew the cost of capital. Rising interest rates reprice real estate and banks become reticent to lend in that type of environment.

Together all these factors led to a significant bid-ask spread, bringing deal activity to a near standstill. To add to that, we saw major geopolitical conflicts unfold in places like Ukraine and the Middle East. The industry was grappling with a lot of uncertainty and that impacted the ability to get deals done.

What key challenges did you have to overcome?

We were really focused on staying disciplined. It was difficult to underwrite deals, so we needed to be patient and prudent.

We are thematic investors and one of our highest conviction investment themes is grocery-anchored real estate. In good and bad times, that real estate has performed well. To us, even though grocery is broadly categorized as retail, we see it as the distribution of necessity-based products.

Grocers themselves are very sophisticated. When operating a hub-and-spoke model, they need the real estate, but rent is not a grocer’s number one cost. They need to be close to rooftops to move products.

In markets with rising inflation, virtually all our grocery leases are CPI-linked, with net leases to capture rising energy costs. Our tenants were open through the pandemic, which can’t be said for all sectors. And in our experience, this is an asset class banks will still finance when others are struggling.

Who or what is responsible for your success?

We have built an exceptional global team, which has been our greatest asset. We started as a handful of people in 2005 and we have grown to over 170 specialized professionals globally.

We have both experienced industry vets and a young, bright, ambitious group with lots of drive, creativity and grit. That team has earned us the support and confidence of our investors and has been a key driver behind our ability to attract capital.

Open communication and transparency with your capital partners are also critical in challenging times. We view ourselves as fiduciaries; we are stewards of capital. We meet regularly with our investors so we can understand where their heads are at. It is a partnership for us in every sense, and we are really proud of the trust we have been able to build with so many global institutions over the last 20 years.