CALGARY, Alberta, Feb. 20, 2020 (GLOBE NEWSWIRE) -- Northview Apartment Real Estate Investment Trust (“Northview”) (TSX:NVU.UN) announced today that it has entered into an arrangement agreement (the “Arrangement Agreement”) with affiliates of Starlight Group Property Holdings Inc. (“Starlight”) and KingSett Capital Inc. (“KingSett”) (collectively, the “Purchasers”) pursuant to which the Purchasers will acquire Northview, and the holders of Northview’s outstanding trust units (the “Units”) (other than Starlight’s interest in Northview which will be rolled into the acquiring entities) will receive $36.25 per Unit (the “Offer Price”) in cash in a transaction valued at $4.8 billion including net debt (the “Transaction”).
TRANSACTION HIGHLIGHTS
- The Transaction provides attractive value for Northview unitholders, representing a premium of 25% to consensus analyst net asset value per Unit
- Northview unitholders to receive $36.25 per Unit in cash, representing a 17% premium to Northview’s 30-day volume weighted average Unit price and a 12% premium to Northview’s closing Unit price on the TSX, as at February 19, 2020
- Northview has secured a “Go-Shop” period of up to 60 days to actively solicit, evaluate and enter into negotiations with third parties that express an interest in acquiring Northview
- A special committee comprised of independent trustees of Northview (the “Special Committee”) unanimously recommended that the board of trustees of Northview (the “Board”) approve the Transaction. The Board unanimously recommends that unitholders vote in favour of the Transaction
- The Board has obtained a fairness opinion from Scotiabank and the Special Committee has obtained an independent fairness opinion and formal valuation from National Bank
“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 Mr. Scott Thon, Chair of the Board. “Following an unsolicited approach from Starlight and KingSett, the Special Committee led extensive negotiations which resulted in this attractive Transaction.”
“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 Mr. Todd Cook, President and Chief Executive Officer of Northview. “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.”
TRANSACTION DETAILS
Under the Arrangement Agreement, the Purchasers will acquire Northview, and the holders of Northview’s outstanding Units (other than Starlight’s interest in Northview which will be rolled into the acquiring entities) will receive $36.25 per Unit. The Offer Price represents a total equity value of approximately $2.5 billion on a fully diluted basis and a total transaction value of approximately $4.8 billion including the assumption of net debt. The Transaction is not subject to a financing condition.
Unitholders will be able to elect to receive 100% of the Offer Price in the form of cash (the “All-Cash Consideration”). Alternatively, unitholders may elect to receive all or a portion of the Offer Price in units of a new, multi-residential fund that would own a geographically diverse portfolio of Northview properties located in six Canadian provinces and two territories (the “High Yield Fund”). The High Yield Fund will apply to list its units on a Canadian securities exchange (the “Exchange”) concurrently with the close of the Transaction. The listing will be subject to the High Yield Fund fulfilling all of the initial listing requirements and conditions of the Exchange. Further details with respect to the High Yield Fund will be provided in the management information circular (the “Circular”) to be mailed to Northview Unitholders. Elections to receive High Yield Fund units will be subject to proration. All-Cash Elections will not be subject to proration. Unitholders not specifying an election will be deemed to have elected to receive the All-Cash Consideration.
Pursuant to the Arrangement Agreement, Northview has an initial 30-day go-shop period, beginning on February 19, 2020 and ending on March 20, 2020 (the "Go-Shop Period"), during which it is permitted to actively solicit, evaluate and enter into negotiations with third parties that express an interest in acquiring Northview. Northview has the option to extend the Go-Shop Period by up to 30 days (to April 21, 2020), in certain circumstances. Mr. Daniel Drimmer, Chief Executive Officer and President of Starlight, has committed to vote the Units he beneficially owns, controls or directs in favour of, or tender his Units into, any all-cash superior proposal received during the Go-Shop Period, subject to certain terms and conditions, pursuant to a voting and support agreement. The Arrangement Agreement also provides a two-tier termination fee structure such that if Northview is successful in completing a transaction pursuant to a superior proposal received during the Go-Shop Period, there will be a termination fee payable to the Purchasers of $37.7 million. If a transaction is completed pursuant to a superior proposal received following the expiry of the Go-Shop Period, the Purchasers will be entitled to a termination fee of $88.0 million. The Purchasers will have the right to match any superior proposals received either during or after the Go-Shop Period.
The Transaction is structured as a statutory plan of arrangement under the Alberta Business Corporations Act. Completion of the Transaction requires approval of at least 66 2/3% of the votes cast by unitholders and holders of special voting units, as well as the approval by a simple majority of votes cast by disinterested unitholders and holders of special voting units, excluding Starlight, its affiliates and any other unitholders required to be excluded under Multilateral Instrument 61-101 – Protection of Minority Security Holders in Special Transactions (“MI 61-101”). The Transaction is also subject to approval of the Alberta Court of Queen’s Bench, regulatory approvals, consents and approvals from Canada Mortgage and Housing Corporation (“CMHC”) and certain of Northview’s lenders and the satisfaction of other customary closing conditions.
Northview expects to continue to pay a monthly distribution of $0.1358 per trust unit through closing of the Transaction.
The Transaction is expected to close by Q3 of 2020.
The foregoing summary is qualified in its entirety by the provisions of the Arrangement Agreement, a copy of which will be filed under Northview’s profile on SEDAR at www.sedar.com.
SPECIAL COMMITTEE AND BOARD OF TRUSTEES RECOMMENDATION
Northview received an unsolicited proposal from Starlight and KingSett on October 2, 2019. As Mr. Drimmer, through Starlight and its affiliates, is Northview’s largest unitholder, beneficially owning approximately 13% of the issued and outstanding Units, and Mr. Drimmer serves as a trustee of Northview, the Transaction, if consummated, will constitute a “business combination” for purposes of MI 61-101. Consistent with its fiduciary duties, Northview’s Board formed the Special Committee to, among other things, review and evaluate the terms of the initial and subsequent proposals received from the Purchasers, make recommendations to the Board in respect of such proposals, negotiate the terms of any transaction, and supervise the preparation of a formal valuation of the fair market value of the Units in accordance with MI 61-101 (the “Formal Valuation”).
The Board, based on the unanimous recommendation of the Special Committee, has determined that the Arrangement is fair to unitholders and holders of special voting units who elect to receive, or are deemed to receive, the All-Cash Consideration (other than the Purchasers and their affiliates) and the Arrangement is in the best interests of Northview. The Board has also recommended that unitholders and holders of special voting units vote in favour of the Transaction and that unitholders accept the All-Cash Consideration. The Board has obtained an opinion from Scotiabank, financial advisor to Northview, and the Special Committee has obtained an opinion from National Bank Financial Inc. ("National Bank"), financial advisor to the Special Committee and independent valuator, that, as at February 19, 2020, subject to the assumptions and limitations described therein, the cash consideration to be received by unitholders who accept the All-Cash Consideration is fair, from a financial point of view, to such unitholders, other than the Purchasers and their affiliates. In addition, under the supervision of the Special Committee, National Bank has prepared an independent valuation in accordance with MI 61-101 and has rendered its opinion that, subject to the assumptions and limitations described therein, as at February 19, 2020, the fair market value of the Units is in the range of $33.25 to $36.75 per Unit.
Copies of the fairness opinions of Scotiabank and National Bank and a copy of a formal valuation of the fair market value of the Units in accordance with MI 61-101 prepared by National Bank, and other relevant background information, will be included in the Circular of Northview to be prepared in connection with a special meeting of unitholders to be held no later than June 5, 2020 to consider and vote on the Transaction. Northview will send the Circular and certain related documents to unitholders and copies will be filed under Northview’s profile on SEDAR at www.sedar.com. Until the Circular is sent, unitholders are not required to take any action in respect of the Transaction.
In addition to Starlight, Northview’s trustees and officers have entered into voting and support agreements in favour of the Transaction.
CERTAIN CANADIAN FEDERAL INCOME TAX CONSIDERATIONS
A holder of Units who is resident in Canada for Canadian tax purposes (a “Resident Unitholder”) who makes, or is deemed to make, the All Cash Election and holds Units as capital property will generally realize a capital gain on the redemption of such Units to the extent that the aggregate redemption price exceeds the adjusted cost base of the Resident Unitholder’s Units. A Resident Unitholder who receives High Yield Fund units or a combination of High Yield Fund units and cash consideration for the Resident Unitholder’s Units should be entitled to a partial tax-deferred rollover.
Northview expects that the entire amount paid to a holder of Units who is a non-resident of Canada for tax purposes (a "Non-Resident Unitholder") will be subject to Canadian Federal withholding tax. Northview will remit such tax to the Canada Revenue Agency on behalf of such Non-Resident Unitholders. A Non-Resident Unitholder who is a resident of the U.S. for purposes of the Canada-United States Tax Convention (1980), as amended, and entitled to the applicable benefits thereunder, will be subject to 15% withholding tax; other Non-Resident Unitholders may be subject to a higher blended rate of withholding tax.
ADVISORS
Scotiabank is acting as exclusive financial advisor and Borden Ladner Gervais LLP is acting as legal counsel to Northview.
National Bank is acting as independent financial advisor and Goodmans LLP is acting as independent legal counsel to the Special Committee.
CORPORATE PROFILE
Northview is one of Canada's largest publicly traded multi-family REITs with a portfolio of approximately 27,000 residential suites and 1.2 million square feet of commercial space in more than 60 markets across eight provinces and two territories. Northview's well-diversified portfolio includes markets characterized by expanding populations and growing economies, which provides Northview the means to deliver stable and growing profitability and distributions to Unitholders of Northview over time. Northview currently trades on the TSX under the ticker symbol: NVU.UN. Additional information concerning Northview is available at www.sedar.com or www.northviewreit.com.
NON-GAAP MEASURES
This press release uses the following non-GAAP measures: net asset value (“NAV”) per Unit. Northview believes this non-GAAP financial measure provides useful information to both management and investors in valuing Northview. NAV is a supplemental measure widely used in the real estate industry. Various methodologies are used by third party analysts to determine their assessment of NAV.
NAV per Unit does not have a standard meaning prescribed by GAAP and therefore may not be comparable to similarly titled measures presented by other publicly traded companies, and should not be construed as an alternative to other financial measures determined in accordance with GAAP. More information regarding non-GAAP measures and a reconciliation of each to the nearest IFRS financial measure is available in Northview's most recent management's discussion and analysis filed on SEDAR www.sedar.com.
CAUTIONARY AND FORWARD-LOOKING STATEMENTS
Certain statements in this news release constitute forward-looking statements within the meaning of applicable securities laws. Forward-looking statements generally can be identified by the use of terms and phrases such as “will”, “may”, “subject to”, “expected”, “if”, “option”, and similar terms and phrases, including references to assumptions and limitations. Some of the specific forward-looking statements in this news release include, but are not limited to, statements with respect to: the Transaction and the terms thereof; the expected date of completion of the Transaction; whether a superior proposal will be received during or after the Go-Shop Period; regulatory, court, unitholder, CMHC and lender approvals; the anticipated benefits of the Transaction to unitholders; and the payment of monthly distributions prior to closing. There can be no assurance that the proposed Transaction will be completed or that it will be completed on the terms and conditions contemplated in this news release. The proposed Transaction could be modified, restructured or terminated in accordance with its terms.
Forward-looking statements are based on information available at the time they are made, underlying estimates and assumptions made by management and management's good faith belief with respect to future events, performance and results. Such assumptions include, without limitation, expectations and assumptions concerning the anticipated benefits of the Transaction to unitholders, the receipt in a timely manner of regulatory, court, unitholder, CMHC and lender approvals for the Transaction, and the availability of cash flow from operations to meet monthly distributions
Forward-looking statements involve known and unknown risks, uncertainties and other factors, some of which are beyond Northview’s control, which may cause actual events, results or performance to be materially different from the events, results, or performance expressed in such forward-looking statements. Such risks and uncertainties include, but are not limited to, general economic, market and business conditions in Canada and globally, governmental and regulatory requirements and actions by governmental authorities, risks associated with investment in and development of multi-family and commercial real estate, competition in the real estate industry, financing and refinancing risks, changes in economic conditions, changes in interest rates, changes in taxation rules, reliance on key personnel and potential diversion of management time on the Transaction, environmental matters, tenant risks, fluctuations in commodity prices and other risk factors more particularly described in Northview’s most recent Annual Information Form available on SEDAR at www.sedar.com. The anticipated timeline for completion of the Transaction may change for a number of reasons, including the inability to secure necessary regulatory, court, unitholder, CMHC, lender or other approvals in the time assumed, third party litigation or the need for additional time to satisfy the conditions to the completion of the Transaction. Additional risks and uncertainties not presently known to Northview or that Northview currently believes to be less significant may also adversely affect Northview.
Readers are cautioned not to place undue importance on forward-looking statements. Northview disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required under applicable securities laws.
INVESTORS
Northview Apartment Real Estate Investment Trust
Mr. Todd Cook
President and Chief Executive Officer
(403) 531-0720
Mr. Leslie Veiner
Chief Operating Officer
(403) 531-0720
Mr. Travis Beatty
Chief Financial Officer
(403) 531-0720
MEDIA
Longview Communications & Public Affairs
Peter Block
416-649-8008
nvu@longviewcomms.ca