Brothers Blair and Brady Welch had a wide range of commercial real estate experience in North America, Europe and Asia before co-founding Slate Asset Management in 2005 and that has given the Toronto-based firm an international view of the industry.
Brady Welch, who is based in London, U.K., told RENX there are “huge opportunities” ahead for Slate, noting the alternative investment platform can invest outside of REITs by buying single properties and portfolios as well as assets from banks and loans at discounts.
“Slate is quite active although we haven’t been as active in Canada,” Welch observed. “That doesn’t mean that we’re not going to be in the future, but we’ve been quite active in growing our European business and in growing our credit business as well as our equity business in the U.S.”
Slate’s objective is to create long-term value for investors and partners through four diversified but synergistic pillars:
- real estate equity, which includes closed- and open-ended strategies, development and the publicly listed Slate Grocery REIT and Slate Office REIT;
- Slate Real Estate Capital, which provides transitional capital and flexible liquidity to sponsors and assets across the commercial real estate industry;
- a strategy focused on investing in companies and projects that provide critical and sustainable infrastructure;
- and Presima, a Montreal-based specialist asset manager focused on global-listed real estate securities that partners with institutional investors and has more than $1.5 billion in assets under management (AUM).
Diversity of investment options
“We can see movements of capital,” Welch said. “We can see pricing of different asset classes. We know what the debt markets are doing. When we’re looking at investing dollars for our investors, we can really understand what’s going on.”
Slate has about $13 billion of AUM through its different avenues and has approximately 150 employees in four Canadian, four American and five European offices.
“We want to have boots on the ground to build those relationships and understand what’s going on in those markets,” Welch said.
World Seafood Center acquisition
Slate has been an active investor in the European real estate market since 2016. Its European strategy is focused on acquiring, owning and operating cash-yielding, essential real estate — such as grocery, pharmaceutical or other health-care services assets — as well as affiliated warehouses and logistics assets.
Slate’s approximately $170 million off-market acquisition of the 592,000-square-foot World Seafood Center in Gardermoen, Norway this month is the latest example of its expanding reach. Welch said Slate has about $3 billion in European investments and that number is growing.
World Seafood Center is leased to some of the largest seafood tenants in the world. The facility derives all of its energy from green and renewable sources and is equipped with robotics and artificial intelligence technologies.
“We like the tenancy and a brand new asset, and it comes with land where we feel we can build in the future,” Welch said, crediting his team with building new relationships in the market over the past three years.
“We also love the location, right beside the airport.”
Slate has an Oslo office and owns close to 80 grocery-anchored assets in Norway. Welch calls the latest acquisition a natural evolution in its commitment to owning essential real estate.
“We’ve always thought that grocery is a distribution business,” Welch explained. “We’re big believers in it and we probably own close to $4.5 billion of grocery-anchored real estate in Europe and the United States.”
Other European activity
Slate entered into an agreement in August to acquire the grocery-anchored retail portfolio of Germany’s x+bricks Group; 188 properties valued at more than a billion euros.
“That was our largest deal to date in Germany, where we’ve done close to 40 portfolio deals,” Welch explained. “Typically where we’ve been buying are from smaller funds that are end of life, and private high-net-worth people.”
Welch pointed out synergies between Slate’s German electric vehicle charging and solar business through its infrastructure arm and its ownership of more than 300 grocery stores in the country.
“Our tenants are very conscious of energy costs, so solar very much helps them reduce those,” Welch said.
Slate will continue to seek business opportunities in European markets where it’s already established, which also includes Sweden, Denmark, the United Kingdom, Ireland, Austria, Belgium, the Netherlands and Luxembourg.
Welch said Slate has also looked at Spain and Italy, where it can get a handle on understanding property rights, liquidity and political dynamics.
“We spend a lot of time underwriting in the markets and understanding who the players are, both on the equity and debt sides, and what the economic drivers are,” Welch said. “If we can get comfortable with those things, that’s where we’d like to invest.”
Canada isn’t being forgotten
Welch said Slate will continue to seek opportunities and invest in Canada because that is where the company started, it understands the market and it has nationwide relationships.
Slate Office REIT announced a realignment plan in November to reposition its portfolio, seeking long-term stability and performance while raising liquidity to reduce its borrowings. It involves selling non-core assets, comprising about 40 per cent of the REIT’s gross leasable area, in certain Canadian cities.
While the plan hasn’t been helped by a slow transaction market, Welch remains positive about its prospects and the office sector in general.
“Office does have its challenges but, that said, on the ground our team is seeing a lot more tour activities in terms of showing space,” Welch said. “If you have assets that are well-located and are easy for people to get to, those are the assets that are going to perform best.”
Welch said he’s thankful Slate Office REIT doesn’t own downtown Toronto properties, where he sees more softness. He said employees come to the office five days a week more often at smaller, suburban properties tenanted by smaller companies.