Slate Asset Management has launched a $500-million fund to provide capital to the Canadian commercial real estate sector as companies struggle with the impact of COVID-19.
Toronto-based Slate plans to offer bridge financing, loan restructuring, as well as preferred equity purchases as the industry deals with a massive drop in rent payments. Tenants have suffered with drops in business owing to measures aimed at preventing the spread of the virus, hindering the ability for many to pay their landlords.
Slate said it already has capital to deploy, targeting borrowers, as well as lenders dealing with non-performing loans.
“It’s a pretty wide net we’re casting. Canada has many great real estate players – great real estate companies, exceptional real estate operators – that because of COVID and the dislocation, they’re going to need capital to get them through some trying times,” Blair Welch, founding partner of Slate, said in an interview.
“We see an opportunity to provide different sorts of real estate participants with that capital on a transitional basis.”
Slate, with more than $6.5-billion under management, runs private-equity and publicly traded investment vehicles that focus on office and retail real estate. It also invests in partnership with institutional investors such as pension funds. The company has two real estate investment trusts listed on the Toronto Stock Exchange: Slate Office REIT and Slate Retail REIT.
Slate made headlines last year when the asset-management arm of Wall Street investment bank Goldman Sachs Group Inc. bought a minority stake.
Like many sectors of the Canadian economy, commercial real estate has come under heavy pressure because of the economic slowdown that began in March as governments imposed restrictions on movement among consumers. For instance, owners of large malls collected just 15 per cent of their tenants’ rent for May, real estate services firm Jones Lang LaSalle Inc. reported earlier this month.
Mr. Welch said the downturn presents his company with an opportunity to help otherwise solid operators get through the rough patch. Another option for the fund is to provide capital to help real estate companies acquire rivals that may be on the ropes amid the pandemic.
The preferred size for a funding deal is in the $50-million to $100-million range, with the opportunity to go higher, said Mr. Welch, who started Slate with his brother, Brady, in 2005. Slate is already evaluating transactions as part of the program, he said.
“It’s really to help borrowers with good projects and good opportunities with the capital, because the healthier the whole system is, the healthier it is for all real estate participants,” he said.
To help with the effort, Slate has hired commercial real estate lending veteran Doug Podd, whose background includes a role as Canadian lead for the debt advisory business of Brookfield Business Partners unit BFIN. His responsibility will be originating deals.
Slate is taking aim at affected real estate businesses while the federal government also makes capital available to help companies in all sectors hang on through the downturn. Last week, Ottawa released details of its Large Employer Emergency Financing Facility (LEEFF) program, which will provide loans for distressed companies with at least $300-million in annual revenue.
Mr. Welch does not see it as a competing option, as it is not specific to one industry. “[LEEFF loans] would be unsecured facilities for large, large businesses, which I think is a great program. We’re focused on hard assets or real asset lending, and some of those will be smaller or deal-specific or asset specific,” he said.
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