The only remaining hurdles for the restructuring of H&R’s portfolio are final court approval and a tax ruling from the Canadian Revenue Agency. A hearing to approve the arrangement is scheduled for Dec. 15.
The transaction will result in Primaris owning and operating a portfolio of 35 retail properties – 27 of which will be transferred from the existing H&R/Primaris portfolio and an additional eight from the Healthcare of Ontario Pension Plan (HOOPP), which will be a major investor in the new independent entity.
All of H&R’s enclosed malls are included in the transaction.
The unitholder vote resulted in 99.72 per cent of the votes cast being in favour of the spinoff. Existing holders of H&R units will receive one-quarter of a Series A unit of Primaris REIT for every one H&R unit held.
“I am very pleased with this transformative transaction, solidifying the progression of H&R’s repositioning and successfully positioning Primaris as a well-capitalized, fully independent REIT,” said Tom Hofstedter, president and CEO of H&R, in the announcement late Monday.
H&R unitholders will own 74 per cent of the new Primaris platform while HOOP will own the remaining 26 per cent. Shares will trade on the TSX under the symbol PMZ-UN-T as of Jan. 6, 2022.
H&R’s five-year strategic plan
“The scale and strength of the Primaris platform combined with its unique financial model provides significant flexibility and capacity to self-fund its strategy and positions it well to pursue investment opportunities,” Hofstedter said in the release.
“At H&R, our teams are working hard implementing our five-year strategic plan, where we are committed to efficient and effective execution to surface value, and drive growth.”
That plan also involves selling off, over the next few years, about $3.4 billion in other holdings as H&R moves to focus on the multiresidential and industrial sectors via acquisitions and development.
It is selling an additional $600 million of grocery-anchored and essential-service retail; will monetize its $470 million equity interest in U.S.-based Echo Realty LP; and will continue exiting the office segment, selling an additional $2.3 billion in properties.
The trust’s remaining $1.4 billion in office assets is to be held for redevelopment into class-A multiresidential and industrial assets.
Davloor to be Primaris CFO
H&R also announced Rags Davloor will be the chief financial officer for Primaris, joining Alex Avery, its incoming CEO, among the senior leadership team.
Davloor has many years of experience in the industry, holding previous CFO roles with Canadian REITs and real estate companies, including time as president and chief operating officer at RioCan REIT.
“We are thrilled to round out the senior management team of Primaris REIT with an executive of Rags Davloor’s calibre. He brings deep experience spanning public company reporting and accounting, M&A, operations and strategic planning,” Avery said in the announcement.
“Over the course of his career, Rags has cultivated broad and deep relationships in Canadian capital markets and we expect those relationships to enhance investor confidence in Primaris REIT.”
H&R’s regular cash distribution $0.0575 per unit remains payable on Jan. 12, 2022. It will also make a special distribution of $0.73 per H&R unit, payable in additional units ($0.63 per unit) and cash ($0.10 per unit).
H&R REIT is one of Canada’s largest real estate investment trusts with assets of $13.1 billion as of Sept. 30. It currently has ownership interests in a North American portfolio of office, retail, industrial and residential properties comprising over 40 million square feet.