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The final act: McCowan to buy out Partners REIT

Shareholder McCowan and Associates intends to purchase all the remaining shares in Partners REIT...

IMAGE: Partners REIT logo.Shareholder McCowan and Associates intends to purchase all the remaining shares in Partners REIT (PAR-UN-T) and take the trust private, the two firms announced on Thursday.

The transaction will be the final act in the wind-down of retail-oriented Partners, which has been steadily selling off its properties during the past couple of years. The REIT first disposed of virtually all its Western assets, and most recently sold its Quebec portfolio.

That left the REIT with a portfolio of a dozen retail and mixed-use community and neighbourhood shopping centres in Ontario and Manitoba, comprising about 600,000 square feet of GLA.

The purchase price of $0.78 per share represents an enterprise value of $102 million for the REIT and its remaining properties, Partners said in a release.

“With the sale of our Western Canadian properties last year, and sale of our Quebec properties earlier this year, we are pleased to announce the sale of Partners,” said Ian Ross, chairman of the Partners board, in the release. “The board believes that the all-cash transaction provides a significant premium for our unitholders and recommends that they vote in favour of the transaction.”

Details of the transaction

The purchase price represents a premium of 21.9 per cent to the closing price of the units on the TSX on Oct. 9 and a premium of 28.5 per cent to the 30-day price.

McCowan currently owns 9,229,704 shares, or just over 20 per cent of the trust’s outstanding units.

McCowan is based in Barrie and has been a real estate owner and developer for more than 40 years. The company was founded and is controlled by Ronald McCowan.

It currently owns, directly or indirectly, commercial properties in Ontario with more than 2.4 million square feet of gross leasable area.

Partners’ board of trustees, acting on the recommendation of its independent trustees Grant Anthony and Colin Chapin (who comprised a special committee set up to consider the offer), has approved the transaction.

A special meeting of shareholders will be called to vote on the transaction. Approval will be required from 66 2/3 per cent of all shareholders, and 50 per cent of minority shareholders (excluding McCowan and its associates).

The transaction is expected to close during Q4 2019.

BMO Capital Markets is acting as financial advisor to the REIT and McCarthy Tétrault LLP is acting as legal counsel to the REIT.

Blair Franklin Capital Partners Inc. is acting as independent financial advisor to the REIT’s independent committee and Blake, Cassels & Graydon LLP is acting as legal counsel.

Bennett Jones LLP is acting as legal counsel to MAA.

The winding down of Partners REIT

Partners has been in sell-off mode since mid-2018, when the REIT puts its Western Canada properties up for sale.

At its peak in 2016, Partners held 36 retail and commercial properties from Quebec to British Columbia, comprising about 2.5 million square feet of leasable area. The assets were valued at about $521 million, but the REIT carried a heavy debt load of $365 million. 

That eventually led to the decision to divest its Western Canada properties, raising about $50 million in net proceeds.

Soon after the Western Canada sale, Partners put its Quebec assets on the block and then-CEO Jane Domenico announced a “strategic review” of all remaining assets.  

The Quebec properties were sold in January and Domenico then resigned in the spring. She has since returned to the industry as senior vice-president and national lead, retail services, at Colliers International.


* Domenico resigns as CEO of Partners REIT

* Partners REIT finds buyer for 11 Quebec retail properties

* Partners REIT might be about to sell assets, shut down

* CEO Domenico creates ‘completely different’ Partners REIT

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