Starlight Group Property Holdings and KingSett Capital have made an offer to acquire Calgary-based Northview Apartment Real Estate Investment Trust (NVU-UN-T) in a transaction which values the REIT at $4.8 billion.

In a release Thursday morning, Northview says the transaction represents a 25 per cent premium to the “consensus analyst net asset value per unit.”

Starlight and KingSett are offering $36.25 per unit in cash for all units not already held by Starlight, a major investor in Northview. The offer is a 17 per cent premium to Northview’s 30-day average price and a 12 per cent premium to Northview’s closing price on the TSX on Feb. 19.

Northview has secured a 60-day “Go-Shop” period to seek and negotiate bids with other possible suitors.

“This transaction is a testament to the business Northview has built, both through its original incarnation as Northern Property REIT and more recently since the 2015 transaction, as Northview,” said Todd Cook, president and CEO of Northview, in the release.

“We have successfully executed on our strategic priorities to build the portfolio in strong and growing markets and to create value for unitholders through organic growth and Northview’s development platform.”

A special committee of independent trustees of Northview has reviewed and unanimously recommends the transaction be approved.

Northview’s apartment portfolio

“This transaction provides significant value, certainty and liquidity to unitholders, while also allowing Northview to solicit superior proposals through a go-shop period of up to 60 days,” said Scott Thon, the chairman of Northview’s board, in the release.

“Following an unsolicited approach from Starlight and KingSett, the special committee led extensive negotiations which resulted in this attractive transaction.”

Northview is one of Canada’s largest publicly traded multifamily REITs with a portfolio of approximately 27,000 residential suites and 1.2 million square feet of commercial space.

It owns properties in more than 60 markets across eight provinces and two territories.

The offer represents a total equity value of approximately $2.5 billion and a total transaction value of approximately $4.8 billion including debt. The transaction is not subject to financing conditions.

Unitholders can opt to receive cash, or all or a portion of the offer in units of a new, multiresidential fund that would own a geographically diverse portfolio in six Canadian provinces and two territories.

The so-called “High Yield Fund” will apply to list its units on a Canadian securities exchange.

The arrangement contains a two-tier termination fee structure. If Northview attracts a superior offer during the go-shop period, there will be a termination fee of $37.7 million.

Should such an offer be received and accepted after the go-shop period, the fee would be $88 million. The purchasers also have the right to match any superior proposals.

Drimmer, Starlight own Northview units

Northview expects to continue to pay a monthly distribution of $0.1358 per unit through the close of the transaction, which is expected by Q3 2020.

Starlight CEO Daniel Drimmer, through Starlight and its affiliates, is Northview’s largest unitholder, holding approximately 13 per cent of its units. Drimmer also serves as a trustee of Northview.

As such, the transaction requires approval of 66.7 per cent of unitholders, as well as a majority of votes cast by disinterested unitholders. Standard regulatory approvals are also required.

Both Scotiabank, financial advisor to Northview, and National Bank Financial Inc., advising the special committee, have deemed the offer to be fair.

National Bank also prepared an independent valuation, determining fair market value of the units is in the range of $33.25 to $36.75 per unit.

A special meeting of unitholders will be held no later than June 5, 2020 to consider and vote on the transaction.

In addition to Starlight, Northview’s trustees and officers have entered into voting and support agreements in favour of the transaction.