TORONTO, April 04, 2018 (GLOBE NEWSWIRE) -- Vision Capital Corporation (“Vision”), the manager of the Vision Opportunity Funds, in response to the news release dated April 3, 2018 from Electra America (“Electra”) and the wholly inadequate response in the news release by Pure Multi-Family REIT LP (“Pure”) of the same date, sent the following letter today to the Board of Directors of Pure’s governing general partner. Vision encourages all unitholders of Pure interested in realizing a significant cash premium for their holdings in Pure’s publicly traded units to express their support for Pure engaging with Electra to advance its proposal to acquire Pure’s units at an all-cash price of US$7.59 (CDN$9.72 at today’s exchange rate) per unit by writing to the Chair of Pure’s Nominating and Governance Committee, Mr. Fraser Berrill at fberrill@morguard.com.
The Board of Directors of Pure Multi-Family REIT (GP) Inc.
Attention: Mr. Fraser Berrill, Director, and Chair of the Nominating and Governance Committee
910-925 West Georgia Street
Vancouver, BC
V6C 3L2
Dear Mr. Berrill,
As a unitholder of Pure Multi-Family REIT LP (“Pure”), we have very much enjoyed and appreciated a positive, open and supportive relationship with your management team and Board of Directors over the past few years. We trust that our input and advice has been helpful to Pure in considering some of its strategic and capital market decisions.
However, at this juncture, in Vision Capital Corporation’s (“Vision”) capacity as the manager of the Vision Opportunity Funds (the “Vision Funds”) and related entities that, according to publicly available information, make us among the largest unitholders in Pure, we are duty-bound to express our deep concern about the outright refusal by Pure and the Board of Directors of its Governing General Partner (the “Board”) to engage in constructive dialogue with Electra America (“Electra”) about its publicly disclosed offer, which has now been extended to April 6, 2018.
Our perspective on the Electra proposal reflects the interests of not only Vision, acting in its fiduciary capacity as manager of the Vision Funds, but what we believe is in the best interests of Pure and all of its unitholders, many of whom have contacted us on an unsolicited basis since the issuance of Electra’s last press release that referenced Vision’s support for Electra’s latest offer.
Since the issuance of Electra’s press release disclosing that it has been seeking and continues to seek engagement with Pure in connection with an all-cash purchase of the outstanding units of Pure at US$7.59 per unit (CDN$9.72 based on today’s exchange rate), which identified Vision as a significant unitholder of Pure, Vision has received a plethora of unsolicited calls from many of the institutional shareholders of Pure as well as several retail investors and investment advisors, each of whom has expressed the view that the proposal from Electra is compelling and each of whom expressed concern that the Board had not been more responsive or willing to engage in a meaningful dialogue or negotiation with Electra.
The failure to respond both promptly and favourably to Electra raises several significant concerns which have been expressed to us, and which we share, including that:
- The Board is serving to entrench management and the Board by ignoring or putting off a compelling opportunity for unitholders that would supplant them. At a minimum, if the Board and its advisors believe that the Electra offer price is “inadequate”, in exercising their fiduciary and other obligations, it would be reasonable to expect them to engage with Electra to try negotiate a higher price (if one is justified), rather than to have abruptly rejected Electra’s offers and to have dismissed the prospect of any meaningful discussion.
- In our experience, boards wanting to entrench themselves often pursue and promote an alternative transaction that does not come in the form of an immediate premium to unitholders but rather is structured as an acquisition or business combination that may include the issuance of dilutive equity and/or the purchase of assets at a marked up value, but that keeps some or all of management and the Board in place. De facto, based on Pure’s own suggestion that the Electra proposal is inadequate, any issuance of equity below a minimum of US$7.59 per unit would be dilutive. Clearly cash is the ultimate form of liquidity and a material premium price with certainty today is compelling compared to an alternative that may serve to entrench management and the Board but is inferior to the balance of unitholders.
- The increase in Pure’s publicly traded unit price this week (likely based on investor enthusiasm that Pure will decide to serve unitholders’ interests by engaging with Electra) creates the (ironic but) opportunistic potential for Pure to issue new equity. For the Board to proceed with a dilutive equity financing at this time would be perceived to be an inflammatory and an unnecessary defense tactic to deter Electra.
Vision views Electra’s all cash proposal - at a very significant premium of approximately 25% to its recent trading price, and that represents a premium to every single independent valuation published by analysts and in fact the REIT’s own IFRS valuation – to be extremely beneficial to all unitholders, particularly when compared to the prospect of an alternative dilutive transaction.
At this stage, at the very least, the Board’s fiduciary and other obligations require it to engage in discussions with Electra on a timely basis prior to potential deterioration of real estate or capital markets or deterioration of Electra’s patience in its pursuit of a consensual transaction that result in it abandoning efforts to advance its most attractive current proposal. The Board is also duty-bound not to promote or seek out an alternative (dilutive) transaction at the expense of the prospect of an all-cash premium buy-out for existing unitholders.
Unitholders would be severely prejudiced should this not occur and/or should any of the inferior alternative paths noted herein, or other inferior alternatives be advanced. In any of these circumstances unitholders would need to consider all available recourse, including but not limited to: proxy solicitations to effect a change to the current Board to Directors aligned with serving the interest of all unitholders rather their own entrenched interests; objections in court and/or with regulators to oppose inferior alternative transactions; remedies that are available to unitholders under Pure’s limited partnership agreement; and/or legal action against the Board for breach of its fiduciary and other obligations and/or oppression.
Unitholders are very concerned that time is of the essence in these matters and trust that the Board will reconsider its position and engage with Electra to advance its proposal for a cash offer for unitholders at a price of US$7.59 or higher.
Yours truly,
VISION CAPITAL CORPORATION
| Jeffrey F. Olin | Frank B. Mayer | Andrew G. Moffs |
| President & CEO | Chairman | Senior Vice President |
| Portfolio Manager | Portfolio Manager | Portfolio Manager |
About Vision:
Vision Capital Corporation ("Vision"), a registrant under applicable securities laws, manages the Vision Opportunity Funds (the "Funds"), which are private equity funds focused on publicly-traded real estate securities. The Vision Funds focus on unique market inefficiencies that allow Vision to buy real estate more cheaply through the stock market than one can in the property market. The Funds target superior risk-adjusted returns through long and short investments.
The Vision Funds have received considerable industry recognition for their leading risk-adjusted total return performance. Since its inception in 2008, the Vision Opportunity Fund LP has delivered a total compound annual return of approximately 14%.
For more information, please visit www.visioncap.ca.
Cautionary Note Regarding Forward-Looking Statements
This news release may contain forward-looking statements (within the meaning of applicable securities laws) which reflect Vision’s current expectations regarding future events. These statements are based on Vision’s expectations, estimates, forecasts and projections and include, without limitation, statements regarding Pure and Electra’s offer.
The forward-looking statements in this news release are based on certain assumptions, including with respect to Vision’s beliefs, estimates and intentions, and similar statements concerning anticipated future events, results, circumstances, performance or expectations that are not historical facts. The forward-looking statements are not guarantees of future performance and involve risks and uncertainties that are difficult to control or predict. A number of factors could cause actual results to differ materially from the matters discussed in the forward-looking statements. Readers, therefore, should not place undue reliance on any such forward-looking statements. Further, these forward-looking statements are made as of the date of this news release and Vision assumes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.
This news release does not constitute advice to any person.
For information contact:
Mr. Jeffrey Olin
President and CEO, Portfolio Manager
Vision Capital Corporation
Email: Olin@visioncap.ca