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NADG NNN REIT to sell its $138M portfolio, dissolve

Transaction will take 54 U.S. assets private into NADG limited partnership

NADG NNN REIT.NADG NNN Real Estate Investment Trust has an agreement to sell its 50 per cent interest in 54 income-producing U.S. commercial properties to NADG NNN Operating LP, pay out the proceeds to unitholders and dissolve the REIT.

The Toronto-based REIT and its wholly owned subsidiary, NADG NNN Holding LP, say in the announcement the transaction values the portfolio at $138.25 million (all terms in U.S. dollars). The REIT expects proceeds (pre-tax) after debt payments, transaction and closing costs to be approximately $26.33 million.

The REIT currently indirectly owns the 54 investment properties on a 50/50 basis with NADG NNN Property Fund, LP, which is registered in Delaware. 

As its name implies, NADG NNN REIT is an owner of what it terms “outparcel” freestanding retail and commercial properties throughout the U.S. which are leased on a triple-net basis to service-oriented tenants.

Its focus has been to acquire properties along busy roads with good visibility and tenants which are on long-term leases.

The announcement outlines what NADG considers benefits of the transaction for unitholders, including the certainty of an all-cash transaction, and that the valuation by Joseph J. Blake and Associates, Inc. is based on the date of April 1, 2023 "and market conditions have deteriorated since then."

It also states the valuation "compares favourably to the fair value of the REIT portfolio as set out in the REIT's financial statements for the three-month period ended March 31, 2023."

Distributions to NADG NNN REIT unitholders

Distributions to its unitholders, according to the announcement, are expected to be $9.00 per class-I unit.

Comparable class-A distributions are expected to be approximately $8.70 per unit, and comparable class-U distributions are expected to be approximately $8.23 per unit.

Those figures are before withholding taxes, but include an estimate for transaction and closing costs and other customary costs. 

The REIT intends to continue paying its distributions until the transaction closes.

The proposed transaction received the unanimous recommendation of an independent committee of the REIT’s board of trustees: Warren McClure, David Cooperman and Thomas Wheat, and the unanimous approval of the REIT’s board (with interested trustees abstaining).

Because the deal is considered a “related party transaction” it requires approval of a majority of disinterested unitholders in addition to the other regulatory requirements. A special meeting to conduct the vote is expected to be held in October.

The transaction is expected to close in Q4 2023.

The agreement also includes a “fiduciary out” clause which could come into play if NADG NNN REIT receives a superior offer for the properties.

NADG NNN Property Fund LP would retain a right to match the offer or a termination fee of up to $1.25 million. 

North American Development Group of companies

The REIT has been one of the investment vehicles under the North American Development Group of companies.

NADG has a 40-year track record in the industry and holds interests in a portfolio with an enterprise value of approximately $5 billion.

It has been involved in the acquisition, redevelopment and management of over 250 shopping centres comprising over 30 million square feet of gross space.

NADG is based in Markham in the Greater Toronto Area, and in West Palm Beach, Fla. It has 11 offices across Canada and the U.S. and employs about 300 people.

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