Move Follows Criticism of REIT’s Board from Major Investor for Choosing Not To Work Out with Florida Bidder’s Unsolicited Deal
In the most recent development late Thursday, Pure Multi-Family REIT’s board agreed to initiate a formal process to explore the possible sale of the business. The procedure will be supervised by the unique committee of the REIT’s independent directors.
The decision to engage the unique committee follows criticism from some unitholders following the board’s choice to decline an unsolicited offer from Florida-based Electra America after Pure’s board concluded the proposals do not completely worth its multifamily portfolio which other possible buyers can paying a higher value.
” Research study experts widely support Pure Multi-Family’s decision to decline Electra’s propositions, highlighting they do not totally show the worth inherent in the REIT’s high quality portfolio,” the business said in a statement, which included supporting quotes from several research study analyst reports.
Scotiabank and Farris Vaughan Wills & & Murphy LLP are acting as financial and legal consultants to the REIT’s unique committee.
The choice by Pure’s board came after Vision Capital, one of the largest investors of Pure Multi-Family REIT LP, released a scathing release on Wednesday slamming the Vancouver-based business for choosing not to negotiate with a buyer making an unsolicited quote for all its units.
In a letter resolved to Fraser Berrill, a director and chair of the nominating and governance committee of the REIT, which is listed in Canada however purchases multifamily apartment or condos in significant U.S. Sun Belt markets, Vision implicated the board of “entrenching management” and suggested the business is taking a look at “alternative courses” that would not serve shareholders.
The letter, launched late Wednesday after markets had actually closed, is the most recent escalation in the significantly bitter fight that went public today when Lake Park, FL-based Electra America, which is owned by a Tel Aviv noted business, went public saying it has actually been attempting to take over the Canadian REIT because December 2017.
Electra, which together with its affiliates has acquired, run and offered more than 150 multifamily neighborhoods representing more than 40,000 home units valued at more than US$ 3 billion, stated that on March 26, 2018, it extended a deal to get 100 percent of the exceptional Class A systems of Pure for an all-cash cost per unit of US$ 7.59, representing a 24 percent premium to the last closing volume-weighted-average trading cost on the TSX Venture Exchange.
Electra said the latest deal is a premium to exactly what it wanted to pay on Dec. 12, 2017, but Pure has actually declined the bid as inadequate.
Vision, which owns about 6 percent of Pure, supports the bid and released a direct plea to shareholders.
” Our viewpoint on the Electra proposal reflects the interests of not only Vision, acting in its fiduciary capability as supervisor of the Vision Funds, but exactly what we believe is in the very best interests of Pure and all of its unitholders, a number of whom have contacted us on an unsolicited basis since the issuance of Electra’s last news release that referenced Vision’s assistance for Electra’s latest offer,” the company said. It added Vision has received other calls from institutional investors supporting the bid.
Bay St. experts have actually recommended a higher price might be the result of the battle but Dean Wilkinson, an analyst with CIBC World Markets, motivated the REIT to at least enter discussions with Electra.
” The offer is perhaps earlier than we would have otherwise expected, however we surmise most investors would likely be open to such a transaction and, in spite of the REIT’s current position as expressed by the unique committee, would perhaps prefer to see a higher level of engagement with Electra in regards to such proposition,” stated Wilkinson, in a note to clients, prepared with his research study personnel. “Absent such engagement, we think there is a possibility that Electra could take its offer to the unitholders directly, although we believe the best result for all parties would be a worked out agreement with board support.”
Vision has actually hinted that Pure will likely seek an alternative to fend off the hostile quote from Electra.
” In our experience, boards wishing to entrench themselves typically pursue and promote an alternative deal that does not come in the type of an immediate premium to unitholders, but rather is structured as an acquisition or company combination that may consist of the issuance of dilutive equity and/or the purchase of assets at an increased worth, but that keeps some or all of management and the Board in place,” stated Vision.
” The Board is likewise duty-bound not to promote or seek out an option (dilutive) transaction at the expenditure of the possibility of an all-cash premium buy-out for existing unitholders.”