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On December 11, 2023, I published a newsletter edition here, where I started discussing office REITs. They were and still are highly ignored and despised. On June 18 of this year, I posted a podcast titled “Am I nuts to buy More of this Office REIT?” in which I discussed in detail my purchases of Slate Office REIT.
The stock has risen 115% since my purchases. What should I do now? Here are the points I considered when making my decision.
1. Forgetting the price increase, has anything material happened since my purchase that would suggest my investment is at risk? The company suspended some loan payments to debt holders, which is not good. An activist investor also purchased some 20% of the company and demanded changes to the board and the outside management company. Those wishes were granted. The investor had paid some $4 per share for his stake, significantly higher than the close of 76 cents on Friday. Those are mostly good, not bad, changes.
2. Has there been a significant change in the office real estate sector? There have been positive changes, with decreased interest rates and some realization in the industry that offices are needed to sustain employee productivity.
3. Are there tax implications to selling now? The shares are held in our TFSAs, so there are no tax implications to selling them. All are tax-free.
4. Has the company's value changed? The shares are currently selling for 18 cents on the dollar of the appraised value of the properties minus the debt owed by the company. This appears to continue to be a great cushion should the company stop paying other debts and need to be liquidated.
So, I decided to keep all the shares and buy more on dips. I see this as a 2–3-year turnaround, a concise window for a long-term investor.
Remember, Slate is a precarious investment, and there is no assurance that the stock won’t go to zero. However, following the first rule of the honeybee, that event, while not great, will have no impact on this investor's survival. Rather than earnings, surviving is always the most critical investment rule to remember.