Brixmor and Everview agree to take Slate Grocery REIT private at $13 a unit

Brixmor Property Group and Everview have agreed to take Slate Grocery REIT private in an all-cash deal at $13.00 a unit, valuing the Toronto-listed grocery landlord at $2.3 billion. The offer is 20 percent above the last close before Slate suspended its distributions, and 13 percent above where the units traded when the trust announced a strategic review in May.

Those two premiums measure the same bid against different moments in the trust's year, and the distance between them carries the most useful number in the announcement. Slate's Toronto-listed shares fell 20 percent when the distribution was suspended, an announcement that came after the May review rather than before it, which means the close the offer is measured against was a price the market had already moved past. Run the arithmetic end to end — a bid 20 percent above that close, applied to units that had just dropped a fifth — and the offer implies roughly half again the level the stock reached after the cut.

For a unitholder who held through the suspension, that is the difference between the price available in the aftermath and the price on the table now. Anyone who sold into the decline accepted the mark. Anyone still holding is looking at $13.00 a unit in cash, an offer struck against the number that preceded the bad news rather than the one that followed it.

Coverage of the transaction does not describe closing conditions, financing or a timetable. What is established is the price, the split of the portfolio and the shape of the buyer group, not the path to a completed sale.

The $2.3 billion resolves into two purchases with two owners. Brixmor Property Group takes 23 centers for $636 million, and a joint venture between Everview and an ADIA subsidiary takes the remaining 92 for $1.71 billion.

Divided through, the direct leg works out to about $27.6 million a center against roughly $18.6 million on the joint venture's, so Brixmor is paying some $9 million more per property for a pool that is a fifth of the count and about 27 percent of the dollars. The announcement carries no center-level economics and no explanation for the gap; nothing in it describes how the 115 centers were sorted beyond how many went to each buyer.

The two legs also sit in different capital stacks. A direct purchase of 23 centers lands on a listed operator's own balance sheet, while 92 centers is the kind of commitment a buyer group takes on with a partner, which is where the joint venture with sovereign wealth capital appears. The structure suggests the group wanted the bulk of the portfolio held outside any single corporate balance sheet rather than carried by one.

Consideration is all cash. Unitholders are offered $13.00 a unit rather than equity in a buyer whose own capital structure could move before a closing, and a trust that has already stopped paying a distribution has less reason than most sellers to accept paper. Cash settles the question of what unitholders are being paid in, which is not a small thing when the payout itself has been suspended.

For anyone who reads listed real estate as reliably cheap to private marks, Slate is a specific counterexample. The units were repriced by a fifth, and the buyers agreed to pay above the level that preceded the repricing. A suspended distribution changes what the equity is worth; it does not by itself settle what the centers are worth, and this transaction prices the two separately.

Split structures of this kind are worth watching for a second reason. A public REIT can buy the centers that fit its existing platform, and an institutional partner can hold the remainder. If more suspended-distribution landlords reach the same point, the two-buyer solution now has a price attached to it: 23 centers at $636 million, 92 at $1.71 billion, all of it cash.

Grocery-anchored retail has other recent reference points. Newmark brokered the sale of Randhurst Village, a 931,798-square-foot Mount Prospect center anchored by Costco, Jewel-Osco and Home Depot, to Rhino Investment Group for $95 million; the seller, DLC, closed at its original contract price. That works out to about $102 a square foot on a center whose named anchors are the durable part of the underwriting, and the absence of a price cut on an asset that size is a sign that large-format grocery-anchored retail is still clearing at terms both sides agreed to.

Marcus & Millichap draws a different line through the market. Over the trailing 12 months, retail assets renovated in the past five years traded above $700 a square foot. Those are smaller, more capital-intensive properties than a 931,798-square-foot anchored center, and the per-foot figures are not interchangeable with the Randhurst number. What they do show is where buyers will pay up without argument: retail that has already absorbed its renovation spending.

Against both, the Slate transaction is the only one of the three that reprices an entire enterprise, and the only one where a distribution cut had already moved the seller's equity before the buyers arrived. Brixmor, Everview and the ADIA subsidiary are paying $2.3 billion in cash for 115 centers that the public market had marked down by a fifth when the payout stopped. The next suspended-distribution retail REIT to negotiate a sale will price against $13.00 a unit, and the range it sets will say more about where private capital thinks grocery-anchored income belongs than anything the public tape has produced since the suspension.