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Toronto-based H&R REIT (HR-UN-T) is to be acquired in a $6.7-billion deal which will see its portfolio divided amongst a group of buyers in Canada and the U.S.
The buyers' group is led by GO Residential REIT (GO-U-T) and an Ontario numbered company and includes Blackstone funds, Crestpoint Real Estate Investments, PSP Investments and a company (CRAL) controlled by the family of H&R executive chairman and CEO Tom Hofstedter.
The transaction will create Canada's second largest publicly traded residential REIT by enterprise value and the seventh largest in the U.S., H&R said in announcement this morning.
Under the terms, H&R unitholders will receive $4.28 per unit in cash plus 0.5688 GO REIT units per H&R unit, representing a value of $12.01 per H&R unit based on yesterday's closing unit price of GO REIT on the TSX and currency exchange rate.
The deal is subject to approvals but is expected to close in late Q4, at which time H&R REIT will be de-listed from the TSX.
As a condition of closing, GO REIT, which currently trades in U.S. dollars on the TSX, will introduce a Canadian-dollar denominated listing on the TSX.
Transaction highlights
- After completion, GO REIT will own 35 residential properties and over 13,300 residential suites across eight markets and four states, combining H&R's 27 properties and approximately 10,300 suites across seven Sunbelt markets and New York with GO REIT's ten properties comprising 3,034 suites in the New York City metro area. H&R unitholders will hold approximately 66.9 per cent of the newly created entity.
- The new pure play residential entity will be led by GO REIT's current executive team – Josh Gotlib (chief executive officer), Matthew Keller (president), Max Kaufman (chief operating officer) and Peter Sweeney (chief financial officer).
- Blackstone will acquire some of H&R's Canadian industrial properties, yet undisclosed, for cash.
- Crestpoint and PSP Investments will acquire H&R's Canadian industrial properties in which they already hold an existing co-ownership interest.
- CRAL will acquire H&R's remaining non-core assets for cash.
The GO REIT units H&R unitholders are receiving are expected to represent an attractive entry point into a combined entity with greater scale, a stronger balance sheet, significantly broader market reach, and significant growth potential, the announcement said.
The H&R board has unanimously recommended that unitholders support the transaction.
"This Transaction delivers immediate cash and GO REIT unit consideration at a meaningful premium and establishes H&R unitholders as significant partners in a larger, stronger, pure-play residential platform with considerable upside potential," H&R independent lead trustee Stephen Gross said.
"Following last year's exhaustive and independent review of H&R's strategic alternatives, the Independent Trustees are confident this transaction represents the best path forward for our unitholders."
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