Terra Firma Capital Corporation (TII-X), a Toronto-based real estate finance company, announced it is being acquired by its chairman Y. Dov Meyer and managing director Seth Greenspan through affiliate company GM Capital Corp.
GM Capital will acquire all issued and outstanding common shares of Terra Firma, with each shareholder receiving $7.30 per share. The share price is a 5.8 per cent premium to the closing price of the shares on the TSX Venture Exchange on Aug. 31, 2023.
The transaction values Terra Firma’s equity at $46 million, the firm stated in the announcement Friday morning.
“We are pleased to have reached an agreement with Dov Meyer and Seth Greenspan for a sale transaction that provides a very favourable outcome for shareholders and will avoid some of the costs and inefficiencies of other potential alternatives for the company,” Glenn Watchorn, president and CEO of Terra Firma, said in the announcement.
The deal comes after Terra Firma said it was pursuing a review of “strategic alternatives” to maximize shareholder value and liquidity in December 2022.
The transaction requires approval of 67 per cent of company shareholders, as well as a majority of shareholders excluding the buyers.
About Terra Firma and acquisition plans
Founded in 2009, Terra Firma offers debt and equity funding solutions in Canada and the U.S. as a principal lender and investor with a focus on high-growth urban and suburban markets.
As of the end of 2022, its investment portfolio totalled $127.3 million according to an annual information form.
In the strategic alternatives announcement, Meyer said Terra Firma financed over $700 million of real estate transactions since its inception.
Terra Firma did not provide reasons for the sale, but before it announced the review Watchorn said the company would prioritize de-risking and “retaining balance sheet liquidity due to the significant softening of the U.S. housing market as a result of the combined effect of CPI inflation, ongoing supply chain issues and rapidly rising mortgage rates,” in its Q3 2022 financial results.
Its 2022 net income was US$1.5 million compared to US$3.3 million in 2021.
Since Q4 2022, Watchorn said Terra Firma has been managing its assets and selling certain investments with an eye to maximizing value for shareholders.
In July 2023, Comark Securities Inc. was named as a financial advisor to aid a Terra Firma committee through the strategic review.
As a result, Terra Firma monetized some of its major loans, considered offers and entered into discussions for buyers.
About Terra Firma’s acquirers
Meyer, Terra Firma’s executive chairman, has been with the company since 2011. He held roles at the Paul Reichmann Group of Companies including founder and chief investment officer of IPC US REIT.
He also served as managing director of Harbor Group International before joining Terra Firma.
Greenspan joined Terra Firma in 2013, managing its private co-lending platform and originating, underwriting and managing new loan transactions.