In a complicated three-party transaction, NorthWest Value Partners Inc. has entered into a definitive agreement to purchase the outstanding units of GT Canada and then sell its 12 properties to minority-owned NorthWest Healthcare Properties REIT.
Privately owned NorthWest Value Partners will pay $2.05 per unit for GT Canada’s unit, although the price could be adjusted for dilution of additional units. If all the units were tendered, NorthWest’s offer is worth about $34 million.
The purchase offer has the unanimous consent of GT Canada’s directors. “This is a great opportunity for GT Canada unitholders,” said Andrew Shapack, CEO of GT Canada, in a statement. “The transaction provides liquidity, good value and affirms our disciplined focus on creating a portfolio consisting exclusively of medical office properties.”
GT unitholders are being offered a 61% premium to the price the units closed at on the TSX Venture exchange last Friday. A key condition of the offer is that the offer is accepted by two-thirds of unit holders.
NorthWest Value Partners does not sound like it would be upset if a rump of unitholders refused to sell and kept GT Canada in existence as a publicly traded entity.
The private holding company has international real estate investments in Australia, New Zealand, Brazil and Germany and they could potentially be offered to the public for investment under the GT Canada structure , although the name of the entity would almost certainly be renamed.
“One of the thoughts, depending on ultimately how the process goes here and how much of the company is left or not left, what the best thing to do is that this might be a future vehicle for [the international healthcare real estate],” said Paul Dalla Lana, President of NorthWest Value Partners. “If we were to use this platform it will be exclusively for international activities, not in competition with the Canadian REIT obviously.”
NorthWest Value Partners owns a 25% stake in NorthWest Healthcare and Dalla Lana is also the Chairman of the REIT.
Simple Deal for NorthWest Healthcare
While the takeover offer has uncertainties for NorthWest Value Partners and GT Canada shareholders, the benefits are straightforward and obvious for NorthWest REIT.
Already the dominant healthcare real estate company with 62 properties and an asset base of more than $1 billion, it will add GT Canada’s portfolio of 12 properties in Ontario for a purchase price of $87.3 million.
NorthWest also loses a major competitor in the bidding for medical buildings in the future.
“It is just another acquisition if a little complicated from the public market side. The REIT is pretty much removed from that process,” said Peter Riggin, President and CEO of NorthWest REIT.
Another benefit for NorthWest Healthcare is the inclusion of well-run, high-occupancy properties with plenty of overlap with its existing portfolio. “There are very reflective of what we already have in our portfolio,” said Riggin. “Both in terms of the product type, the multi-tenant medical office building, but also we overlap in several markets, Sudbury for example, Hamilton, London-St. Thomas, Guelph and Cambridge. So there is good synergy operationally.”
For NorthWest Healthcare, swallowing the portfolio of GT Canada is simply part of its relentless expansion rather than a major milestone. “We had looked to acquire hundreds of millions of dollars of medical buildings if we could this year so this is just a larger acquisition and it not the largest,” said Riggin. “We have bought single assets that are actually of value of more than this but it is rare that you get 12 of these to stand still at any one time.”
Riggin’s chairman, Dalla Lana, said that GT Canada has been in the acquisition crosshairs for some time. “Certainly over the course of GT’s and our existence in the space we have bumped into each other and had discussions but the reality it is this sort of come together fairly quickly over the last 30 days in terms of being in a position to reach this agreement.
“I think we have known each other for a long time and certainly we know the assets well.”