UPDATED: Artis REIT (AX-UN-T) plans to merge with Toronto-based RFA Capital Holdings Inc., creating a public entity known as RFA Financial. Its management plans to sell Artis' real estate assets and reinvest the proceeds into sectors offering higher returns.

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. 

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

The transaction creates an "exciting and transformational transaction for both Artis REIT and RFA” Manji said during an investor call Monday morning.

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 Corp., which originated over $2.9 billion in residential mortgages over the 12 months ending June 30.

Rodney said on the call the transaction is to close by Q1 2026.

RFA Financial and its goals

Artis is to become a subsidiary of RFA, and RFA will operate as RFA Financial. 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, multifamily and retail asset classes comprising 92 properties and approximately 10 million square feet of GLA. It has a market cap of approximately $728 million.

“This transaction combines a growing financial services platform centred on a Schedule 1 bank with Artis’ high-quality diversified real estate portfolio. The result is a structurally advantaged platform that pairs growth opportunities with capital creating a unique opportunity to unlock significant value creation potential for all shareholders,” Manji said on the call. There is a “simple but also creative and unique vision for the combined entity, which is to unlock value from the Artis portfolio through monetizing assets and to rotate this capital into potentially higher ROE growth opportunities identified within the RFA services platform.”

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

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."

Rodney noted annual equity investment returns in Canada's financial services sector have been consistently above 10 per cent. RFA has experienced 32 per cent CAGR in its revenue during the past three years.

“This is a platform built for scale,” he said, discussing the anticipated influx of equity from real estate transactions.

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 taking over as head of the trust.

Artis has since undergone two strategic reviews and has sold $1.5 billion of its assets across Canada and the U.S. in an aggressive debt reduction strategy.

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.

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. 

EDITOR'S NOTE: The original RENX Breaking News article has been updated with significant addition information, quotes and background following the call with investors Monday morning.