American Landmark/Electra America has called on the management of Vancouver-based Pure Multi-Family REIT to sever an exclusivity agreement with a potential suitor and move forward with separate negotiations toward a deal to sell all its shares.
The on-again, off-again sale process of Pure Multi-Family REIT LP (RUF.UN-X) switched back “on” earlier this week with news two potential buyers are vying for the trust. This comes in the wake of a second attempt by U.S.-based American Landmark/Electra America to buy the rental apartment owner and operator.
That unsolicited bid by ALEA offers US$7.61 per share (equivalent to Cdn$10.03 per share at Wednesday’s closing exchange rate). However, it was followed hours later by a release from Pure which stated it is already in exclusive talks with an “arms-length third party” regarding a potential sale of the trust.
Thursday night, ALEA issued its own follow-up release calling for Pure to suspend the exclusivity agreement.
“We are prepared to enter into negotiations with Pure and its advisors on a non-exclusive basis. We believe it is in the interest of Pure and its unitholders for Pure to terminate its existing exclusivity arrangement which it disclosed last night and to conduct negotiations with all prospective bidders on an equal, non-exclusive basis,” reads the note, which was sent to Pure’s chairman of the board Robert W. King.
The two parties spent almost eight months in 2018 discussing a possible sale before the process was terminated by Pure in August.
ALEA went public with its most recent enhanced bid after making a written proposal on June 18 for a cash price of US$7.54 per unit — the same amount it had offered a year ago. ALEA says the proposal expired “without a definitive response from Pure’s board.”
ALEA says its current offer represents a premium of:
* 15 per cent to the closing traded price of Pure shares on the TSX on June 25, 2019;
* 17 per cent to the REIT’s most recent appraisal-based IFRS valuation of US$6.53 per share;
* six per cent to average consensus research analyst net asset value of US$7.19 per share;
* four per cent to average consensus research analyst target price of US$7.29 per share.
ALEA ready to act “quickly”
In the earlier release, ALEA said if its bid were to be accepted it would “undertake expedited, limited due diligence.” ALEA also said the proposal is not conditional on financing and that it would be “able to move quickly and effectively to complete this proposed transaction once due diligence is completed.”
Pure Multi-Family Wednesday night said a special committee of independent directors of the REIT’s general partner, together with financial advisor Scotiabank, and independent legal advisor Farris LLP, is considering the latest ALEA offer.
The release did not identify the suitor with which it is already negotiating. Nor did it release any information about the potential offer.
“Although the letter of intent permits either party to terminate discussions at any time, Pure Multi-Family is precluded from, among other things, soliciting, facilitating or knowingly encouraging any inquiries or proposals for a competing transaction, or entering into any discussions with any person with respect to any such inquiry or proposal during the exclusivity period,” the release states.
During the previous bid process, Electra America had first approached Pure Multi-Family on Dec. 12, 2017 with a conditional proposal to acquire the trust, also for US$7.54 per share.
That process remained private until April 2018, when it was disclosed by ALEA the original bid had been rejected, and it was now offering US$7.59 per share. Electra’s proposal led to Pure Multi-Family undertaking a strategic review, including a formal sales process which concluded without a sale on Aug. 24, 2018.
At the time, Pure Multi-Family felt the offer continued to undervalue the trust and its assets.
The REIT says it will provide further updates “when it is able to.”
About Pure Multi-Family REIT LP
Pure Multi-Family is a Vancouver-headquartered, publicly traded vehicle which offers investors exposure to attractive, institutional quality U.S. multi-family real estate assets.
It owns 22 properties containing more than 7,000 residential units. The properties are located in five general geographic areas, Dallas-Fort Worth, Houston, Austin and San Antonio in Texas, and in Phoenix.
ALEA is a Florida-based established buyer of real estate with an extensive track record in the U.S. Sunbelt multi-family market. Together with its affiliates, ALEA has acquired, operated and sold over 150 multi-family communities, representing over 100,000 apartment units valued at over US$9 billion.
It’s a member of The ELCO Holdings family of companies.
It currently owns and manages approximately 28,000 units valued at over US$4 billion.
ALEA has been extremely active in mergers and acquisitions having completed, among others, the acquisition of Apartment Trust of America, a U.S. apartment REIT, and the sale of approximately US$2 billion of apartment assets to Starwood Capital Group and Milestone Apartments Real Estate Investment Trust.
* Bid dropped, Pure Multi-Family ends sale process
* Pure Multi-Family says Electra bid undervalues REIT