UPDATED: Artis REIT (AX-UN-T) has an agreement to merge with Toronto-based RFA Capital Holdings Inc., with the combined company to become a public entity known as RFA Financial.

Founded in 1996 and based in Toronto under the leadership of Ben Rodney, who is also Artis REIT's board chair, RFA is a Canadian financial services firm in the residential and commercial real estate sectors. 

RFA's primary business is a licensed bank, RFA Bank of Canada, which held over $2.5 billion in assets as of June 30. RFA also operates a mortgage finance subsidiary, RFA Mortgage Corporation, which originated over $2.9 billion in residential mortgages over the 12 months ending June 30.

Artis is to become a subsidiary of RFA, and RFA will operate as "RFA Financial" according to the announcement Monday morning. Holders of Artis common units are to receive one share of the new corporation, RFA Financial, for each Artis unit they hold. RFA Financial plans to list its shares on the TSX.

Artis REIT is based in Winnipeg and owns a real estate portfolio across the office, industrial and retail asset classes. It has a market cap of approximately $728 million. Artis shares on the TSX closed at $7.56 on Friday, and have traded within a range of $8.38 and $6.27 over the past year. 

It has approximately 98.3 million shares outstanding.

Artis unitholders to own 68 per cent of RFA Financial

If the transaction is approved, current holders of Artis common units will own 68 per cent of the common shares of RFA Financial, while current holders of RFA common shares will own the remaining 32 per cent.  

The new executive team is to be led by: Rodney, the current chair of Artis' board of trustees and president, CEO and managing partner of RFA; and Samir Manji, the current president, CEO, and a trustee of Artis. 

"By combining Artis with RFA, we are creating a scalable and growing financial services platform that benefits from diversification and built-in access to substantial growth capital," Manji said in the announcement. "Following our decision to end Artis' strategic review process in December 2024, the board of trustees and management have continued to explore innovative ways of enhancing unitholder value, and we believe this transaction achieves that goal. 

“We are very excited to be partnering with Mr. Rodney and the team at RFA. Ben and his team have built an extraordinary organization and business over the past three decades. We believe RFA's various platforms, including RFA Bank of Canada and RFA Mortgage Corporation, are ripe for significant growth harnessing the substantial capital currently embedded in the Artis real estate portfolio.

"We believe that under Ben's leadership, scaling RFA's various businesses represents significant upside potential and value creation opportunity for the owners of Artis and RFA."

The Artis board of trustees is unanimous in its support for the transaction, the announcement states.

"We see a highly attractive opportunity to grow RFA's balance sheet and invest in existing and new product capabilities. Having served on the board of trustees since June 2019, I have developed a deep appreciation for Artis' asset management capabilities and the strength of its real estate portfolio,” Rodney said in the announcement. "As Artis continues to monetize its real estate holdings over the coming years, it is expected to release meaningful amounts of capital that can be redeployed into compelling investment opportunities."

Artis history, and its future management

RFA Financial intends to pay a quarterly cash dividend of $0.11 per share, $0.44 per share on an annualized basis. That would be a significant reduction from Artis' current monthly dividend of $0.05 per unit, or $0.60 on an annual basis.

Manji led an activist investor campaign against the former Artis REIT management in 2020 through his firm Sandpiper Group, unhappy with what he considered the poor financial performance of the REIT. The campaign led to the ouster of most of the REIT's senior management, with Manji then taking over as head of the trust.

Artis has since undergone two strategic reviews and has sold over a billion dollars of its assets across Canada and the U.S. in an aggressive debt reduction strategy. The REIT also secured $520 million in new credit facilities announced in December 2024.

The divestment strategy is to continue.

"Over the coming years, RFA Financial is expected to continue to rationalize its commercial real estate portfolio, generating substantial net proceeds from asset sales," the announcement states. "While the expectation is to offer investors a stable and attractive dividend, the combined platform also intends to reinvest asset sale proceeds to support the growth opportunities in RFA Financial's expanding financial services platform."

Rodney will be appointed president and CEO of RFA Financial, and Manji will be appointed executive chair of the board of directors. Other senior executives will include: Jaclyn Koenig, chief financial officer of Artis who will take on the same role with RFA Financial; and Melody Lo, managing partner of RFA, who will be appointed chief operating officer of RFA Financial. 

The board of directors will consist of Rodney, plus five directors identified by Artis (including Manji) and three directors identified by RFA.

The transaction remains subject to a series of court and regulatory approvals, as well as votes by shareholder groups of both Artis and RFA.

CHECK BACK FOR MORE: RENX will update this breaking article as new information becomes available.