Opinions
Gavin Graham
Slate Retail REIT
SRT.UN-T
TOP PICK
Sep 29, 2017
Stock price when the opinion was issued
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With their big property anchored by grocery stores, does Slate stand a chance against rising interest rates and Amazon entering the grocery space? Consolidation (Amazon buying Whole Foods) is occuring which is an inflation play--the big food stores pass on inflation to consumers. (Also, good REITs are going private and leaving the market, which is a concern.) His firm has a buy signal on this.
He likes it, but doesn't own it, because it's a small cap which he doesn't buy. It's gotten a little cheaper. They're grocery-anchored in secondary markets in the U.S. midwest. It's stable and operates well. He likes it, but liquidity is an issue for him (being a small-cap). They have a fortress around them (everyone will still walk into a grocery/drug store), so they can stave off the Amazon effect.
REI.UN vs. SRT.UN Never owned REI.UN, not because he dislikes it, but they're so large, it's hard to change what they own. For example, they bought then sold the U.S, and now they're buying Canada. He prefers SRU.U-T in the same space, but Walmart anchors them. In contrast, RioCan had to deal with the Sears and Target closings. SRT has rallied for the past few months, despite the Amazon effect, but still has room to grow. Nothing wrong with REI.UN, but he prefers SRT.UN. Managment are also large shareholders. SRT.UN-T focuses on grocers in mid-market US towns. They have reduced their leverage. He likes SRT's American operations and its defensiveness. The only negative is an external managed contract that seems to be going on forever.
This is food centred US retail malls. They own $1 billion worth in 23 states. Has a pretty good track record. Dividend yield of 7.6%. (Analysts’ price target is $11.75.)