Management of Firm Capital American Realty Partners Corp. (FCA.U-X) says it is exploring its conversion into a REIT structure.

Although few details have been immediately released, the Toronto-based company hopes to complete the conversion by the end of fiscal 2019, according to a Friday morning release. It has brought in legal and tax advisors to begin facilitating the move.

Firm says management believes conversion to a REIT would enhance shareholder value by:

* expanding the company’s investor base and investment profile with both retail and institutional investors as a REIT structure represents the preferred Canadian structure to own income-producing real estate;

* enhancing comparability with its peers;

* providing a more efficient vehicle to deliver the benefits of real estate debt and equity investing from the company’s business to investors;

* and maximize cash distributions to investors in the most tax-efficient way possible.

No changes to strategy, Firm says

Conversion to a REIT would not lead to changes in the company’s current strategy, portfolio nor its operations, it says.

A conversion would be subject to numerous conditions and approvals, including approval from the shareholders of the company.

Firm Capital American Realty Partners is a U.S.-focused real estate investment vehicle which bills itself as unique because of its structure and investment strategy. It pursues real estate and debt investments through the following platforms:

* income-producing real estate investments: Acquiring income-producing real estate assets in major cities across the U.S., either wholly owned or in joint ventures with local partners who retain property management responsibilities;

* and mortgage debt investments: Real estate debt and equity lending platform in major cities across the U.S., focused on bridge mortgage loans and joint venture capital.

American Realty Partners is one of three publicly traded companies under Firm Capital Corp. The others are Firm Capital Mortgage Investment Corporation (FC-T) and Firm Capital Property Trust (FCD-UN-X), with a combined 25-year track record in the industry. 

Firm Capital ARPC’s investments

Its portfolio is comprised of 1,574 residential units across 37 apartment properties in six U.S. states (New York, New Jersey, Connecticut, Maryland, Florida and Texas), and “provides a broad platform for further external growth opportunities” according to a report for investors released early in 2019.

It also issued $2.5 million of a $12-million loan by Firm Capital Corp. to a private real estate investment firm to purchase three Manhattan apartment properties. The three-year loan bears interest at 12 per cent.

In 2018, Firm Capital American Realty Partners made three major U.S. apartment purchases, totalling 11 properties and more than 550 units in New Jersey, New York and Texas.

It spend almost US$17 million on the acquisitions, while making one disposition (125 single-family rental homes in Florida, Georgia and New Jersey) for US$14.9 million.

During the past six quarters, Firm Capital says it has increased its net asset value by 15 per cent CAGR. The annual distribution now stands at $0.059 per share.