SGR.U Slate Grocery REIT

Slate Grocery REIT (TSX: SGR.U) (TSX: SGR.UN) (the “REIT”), an owner and operator of U.S. grocery-anchored real estate, announced today that it has agreed to acquire a high quality, grocery-anchored portfolio comprising 25 properties and 3.1 million square feet in major metro markets across the United States (the “Portfolio”). The Portfolio is valued at US$390 million (the “Acquisition”) and is being acquired for an equity purchase price of US$90 million and the assumption of existing debt. The Acquisition represents a 7.8% capitalization rate or US$127 per square foot.  

“This is a compelling and unique opportunity for the REIT to acquire US$390 million of quality grocery-anchored assets on an off-market basis that importantly generates immediate accretion for unitholders,” said David Dunn, Chief Executive Officer of Slate Grocery REIT. “This transaction increases our exposure to America’s largest metropolitan markets at an attractive cost basis and deepens our relationships with leading omnichannel grocers whose neighborhood stores will continue to serve as critical food distribution points for both in-store and online purchases.”

Transaction Highlights

• Significantly increases the size and scale of the REIT’s portfolio, with the REIT’s proforma portfolio aggregating 13.0 million square feet and US$1.7 billion of critical real estate infrastructure
• Expected to be immediately accretive to the REIT’s funds from operations per unit and adjusted funds from operations per unit
• Increases the REIT’s exposure to certain of America’s largest metropolitan statistical areas (“MSA”), with 83% of the Portfolio’s income derived from the top-50 MSAs
• Materially increases the REIT’s presence in New York and Dallas, two of the largest MSAs in America which account for 46% of the Portfolio’s income
• Omnichannel focused assets with 95% of grocers offering e-commerce fulfillment and strategically located in high density neighborhoods in close proximity to transportation routes
• Essential tenants comprise 74% of the Portfolio’s income including 39% from grocers
• Portfolio is anchored by market leading grocers including Tops and Market 32 (Price Chopper), Tom Thumb (Albertson’s), Kroger, Stop & Shop (Ahold Delhaize), Acme Markets (Albertson’s) and Walmart among others
• The Acquisition is expected to close by the middle of 2021
• The REIT will be purchasing majority interests between 85% and 95% ownership in each of the properties, with the remaining 5% to 15% ownership interests retained by three institutional operators

The Acquisition will be financed through the indirect assumption of approximately US$300 million of existing property-level mortgage debt (4.2% weighted average interest rate), the net proceeds from a C$133 million Offering (as described below) and existing balance sheet liquidity. Following the Acquisition, the REIT’s leverage is expected to be approximately 60.8%.

Summary of the Acquisition by Anchor Tenant

Anchor Tenant	State	Number of Properties	Square Feet
Tops + Market 32 (Price Chopper)1	New York	9	1,160,218
Tom Thumb (Albertson's)	Texas	8	664,162
Kroger	Georgia, Ohio	2	295,160
Stop & Shop (Ahold Delhaize)	New York	1	202,493
Acme Markets (Albertson's)	New York	1	126,379
Walmart	Florida	1	89,149
Other	California, Indiana, New York	3	526,947
Total		25	3,064,508
1 Tops and Market 32 (Price Chopper) publicly announced plans to merge on February 8, 2021. Information is pro forma such merger.

The REIT will acquire these assets from an institutional owner pursuant to a sale contract between the REIT, the vendor and an affiliate of Slate Asset Management. As a result of Slate Asset Management’s involvement as a separate purchaser of assets from the vendor, the board of trustees of the REIT (the “Board”) established a special committee composed entirely of independent trustees (the “Special Committee”) to, among other things, review and oversee the REIT’s negotiation of the Acquisition. The members of the Special Committee are Thomas Farley (Chair), Andrea Stephen, Colum Bastable and Patrick Flatley. The Special Committee retained Blair Franklin Capital Partners Inc. (“Blair Franklin”) as financial advisor with respect to the Acquisition. Blair Franklin has provided a fairness opinion to the Special Committee stating that, in their opinion, and subject to the assumptions, limitations and qualifications contained in the fairness opinion, as of the date of the fairness opinion, the consideration to be paid for the Acquisition is fair, from a financial point of view, to the REIT. Following its consideration of the fairness opinion, and after careful deliberation, the Special Committee determined that the Acquisition is in the best interests of the REIT and unanimously recommended approval of the Acquisition by the Board. Following receipt of the unanimous recommendation by the Special Committee, the Board (with interested trustees abstaining) has unanimously approved the Acquisition.

For more information, please refer to the REIT’s website for both the most recent investor presentation as well as a presentation summarizing the Acquisition, available at slategroceryreit.com/investors.

The Offering

In conjunction with the Acquisition, the REIT has entered into an agreement with a syndicate of underwriters led by BMO Capital Markets and RBC Capital Markets (collectively, the “Underwriters”) to sell, on a bought deal basis, 11,420,000 subscription receipts (the "Subscription Receipts") at a price of C$11.65 per Subscription Receipt for gross proceeds to the REIT of approximately C$133 million (the "Offering"). In addition, the REIT has granted the Underwriters an over-allotment option to purchase up to an additional 1,713,000 Subscription Receipts on the same terms and conditions, exercisable at any time, in whole or in part, up to the earlier of (i) 30 days after the closing of the Offering, and (ii) the date of a Termination Event (as defined below).

On satisfaction of the Escrow Release Conditions (as defined below): (i) one unit of the REIT (each, a "Unit") will be automatically issued in exchange for each Subscription Receipt (subject to customary anti-dilution protection), without payment of additional consideration or further action by the holder thereof, (ii) an amount per Subscription Receipt equal to the amount per Unit of any cash distributions made by the REIT for which record dates have occurred during the period that the Subscription Receipts are outstanding, net of any applicable withholding taxes, will become payable in respect of each Subscription Receipt, and (iii) the net proceeds from the sale of the Subscription Receipts will be released from escrow to the REIT.

The net proceeds from the sale of the Subscription Receipts will be held by an escrow agent pending the satisfaction or waiver of all conditions precedent to the Acquisition in accordance with the terms of the material agreements relating to the Acquisition, without amendment or waiver in a manner that would be materially adverse to the terms and conditions upon which the REIT is effecting the Acquisition, unless the consent of the lead underwriters is given to such amendment or waiver, other than (i) the payment of the consideration to be paid for the Acquisition for which the escrowed funds are required, and (ii) such conditions precedent that by their nature are to be satisfied at the time of the closing of the Acquisition (the “Escrow Release Conditions”). There can be no assurance that the requisite approvals will be obtained, closing conditions will be met or that the Acquisition will be consummated on the terms described herein, if at all.

If the Escrow Release Conditions are not satisfied or deemed to be satisfied by September 30, 2021, or the Acquisition is terminated at an earlier time, or the REIT announces by press release that it will not proceed with the Acquisition (each, a “Termination Event”), the gross proceeds of the Offering and pro rata entitlement to interest earned or deemed to be earned on the Subscription Receipts, net of any applicable withholding taxes, will be paid to holders of the Subscription Receipts and the Subscription Receipts will be cancelled.

The Subscription Receipts will be offered by way of a prospectus supplement to the REIT's short form base shelf prospectus dated March 2, 2020, 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 March 27, 2021. Further information regarding the Offering and the Acquisition, 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 March 31, 2021.

The Subscription Receipts 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 Subscription Receipts in the United States or to, or for the account or benefit of, U.S. persons.

About Slate Grocery REIT (TSX: SGR.U / SGR.UN)

Slate Grocery REIT is an owner and operator of U.S. grocery-anchored real estate. The REIT owns and operates approximately US$1.3 billion of critical real estate infrastructure across major U.S. metro markets that communities rely upon for their daily needs. The REIT’s resilient grocery-anchored portfolio and strong credit tenants provide unitholders with durable cash flows and the potential for capital appreciation over the longer term. Visit slategroceryreit.com to learn more about the REIT.

About Slate Asset ManagementSlate Asset Management is a leading real estate focused alternative investment platform with approximately C$6.5 billion in assets under management. Slate is a value-oriented manager and a significant sponsor of all of its private and publicly traded investment vehicles, which are tailored to the unique goals and objectives of its investors. The firm's careful and selective investment approach creates long-term value with an emphasis on capital preservation and outsized returns. Slate is supported by exceptional people, flexible capital and a demonstrated ability to originate and execute on a wide range of compelling investment opportunities. Visit slateam.com to learn more.

Forward-Looking StatementsCertain 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. Some of the specific forward-looking statements contained herein include, but are not limited to, statements with respect to the intention of the REIT to complete the closing of the Acquisition, the Offering and the related transactions contemplated herein on the terms and conditions described herein, the effect of the Acquisition, the Offering and the related transactions contemplated herein on the financial performance of the REIT, the expected timing for completion of the Acquisition, the closing date of the Offering and the use of proceeds of the Offering. 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. 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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