5Qs for David Dunn on necessity-based retail centers

In COVID-19’s relentless and ongoing devastation of our society and economy, most people in the retail business see tragedy. David Dunn and his colleagues at Slate Retail, however, see opportunity. During the pandemic, the REIT whose 76 grocery-anchored centers lie mostly in the eastern half of the United States completed a $90 million acquisition of seven Mid-Atlantic centers. We took note and asked Slate’s new CEO to tell us about the company’s strategic outlook.

Your recent deal was a significant one for Slate. Has the pandemic failed to move you off your acquisition strategy?
We tend to go where others don’t. We don’t play in the gateway cities. In this deal, six of the seven grocers had an investment grade value of $106 million. The seller needed liquidity and we considered it an opportunistic deal. We got it at a 16% discount with no meaningful vacancies. 

What’s the advantage of adhering to secondary markets?
Our investments are anchored on price per pound. We have the liquidity to partner with grocers and invest in a new parking lot for them. We’ve had grocers who gave us 10 more years of term if we built a new roof for them.

Strong supermarket chains appear to have made some online headway on Amazon during the pandemic. Does Slate view expanded online sales as a positive?
Absolutely. Walmart, Kroger, and Ahold all have the capabilities to sell online. Therefore, those are three chains we want to continue to do more business with. Kroger saw a 92% increase online during the pandemic. Ahold increased by 37%. Post-COVID, the reality is going to be about how grocers adjust their omnichannel operations. These three have the ability to expand and are going to be ever more important in the right markets. 

Have you had any problems installing or increasing curbside pick-up locations?
We make outbound calls our grocers that don’t have at least six parking spaces set aside for click-and-collect. We are 100% proactive in managing our assets in this way. We want to work with them to help them be as successful as possible.

As you hunt for new acquisitions, what areas of the country do you have your eyes on?
About 40% of our portfolio is in the Southeast: Florida, Georgia, the Carolinas. We want to be in the top secondary markets, the places that people are moving to. The Southeast is right now where people want to be. Jobs are available and the cost of living is reasonable.