NorRock Realty Finance Corporation and Partners REIT Enter into Acquisition Agreement
October 17 2011 - 8:00AM
PR Newswire (Canada)
Partners REIT to Acquire the Assets of NorRock VICTORIA, Oct. 17,
2011 /CNW/ - NorRock Realty Finance Corporation ("NorRock") and
Partners Real Estate Investment Trust ("Partners REIT") announced
today that they have entered into an acquisition agreement whereby
Partners REIT will acquire all the assets of NorRock, consisting of
cash, cash equivalents, mortgages and other assets from NorRock in
exchange for the issuance of Partners REIT units, certain rights to
acquire Partners REIT units and cash. The transaction will be
carried out by NorRock as a plan of arrangement (the "Arrangement")
under the Business Corporations Act (Ontario). It is anticipated
that, at closing, holders of NorRock preferred shares will receive
$23.75 per share in Partners REIT units (based on an agreed issue
price of $1.73 per Partners REIT unit), and holders of NorRock
Class A shares will receive $5.94 per share in Partners REIT units
together with Rights (described below) to receive additional value
of approximately $1.47 per share, resulting in proceeds potentially
totalling approximately $7.41 per NorRock Class A share. The Rights
will represent the right to receive a pro rata share of the net
value (determined as described below) of the mortgages and other
non-cash assets that Partners REIT will purchase from NorRock at
closing, to the extent that such net value exceeds $12.6 million.
If the net value of those assets so determined reflects NorRock's
current book value for those assets, then the Rights will have a
value of approximately $1.47 per NorRock Class A share. "We believe
the proposed transaction will provide Partners REIT with new growth
capital and we look forward to investing this new capital in
accretive growth initiatives that will increase cash flow and add
value for our unitholders," commented Lou Maroun, Chairman of the
Independent Committee and the Board of Trustees of Partners REIT.
"In addition to providing further capital to Partners which will
allow it to continue to acquire retail real estate assets, we are
pleased that we will also be expanding our unit holder base
substantially, and providing the shareholders of NorRock with the
opportunity to receive monthly distributions on their investment
and to grow with us," Mr. Maroun stated. "This transaction offers
the holders of both Class A and preferred shares of NorRock a
significant premium to the current market prices as well as the
opportunity to participate in a more liquid growth oriented
security which pays a monthly distribution" said Gordon Pridham,
Chairman of the Independent Committee and the Board of Directors of
NorRock. The Transaction At closing, Partners REIT will pay for the
cash and cash equivalents held by NorRock, currently valued at
approximately $38.3 million (the "Cash at Closing Payment").
In addition, it will pay for the non-cash assets of NorRock through
an initial payment of $12.6 million (the "Assets at Closing
Payment"), subject to adjustment as described below. To the
extent that assets are sold prior to closing, the amount of the net
proceeds will be deducted from the Assets at Closing Payment and
added to the Cash at Closing Payment. After closing, Partners REIT
may retain or may sell the non-cash assets acquired from NorRock.
Partners REIT will make the Cash at Closing Payment and Assets at
Closing Payment by transferring to NorRock the following units and
cash (excluding the accrued dividend and payments to stock
appreciation rights holders which will be funded by NorRock), which
would, under the Arrangement, be distributed to NorRock
shareholders on the following basis: (a) for each NorRock preferred
share, 13.72824 Partners REIT units, a number derived by dividing
$23.75 (the implied selling price of the preferred shares) by $1.73
(the implied issue price per Partners REIT unit) together with cash
equal to any accrued dividend, or, at the option of a holder,
12.71676 Partners REIT units and $1.75 in cash together with cash
equal to any accrued dividend; (b) for each NorRock Class A share,
that number of Partners REIT units calculated by determining the
amount of the Cash at Closing Payment and Assets at Closing
Payment, less an amount equal to the number of issued and
outstanding NorRock preferred shares multiplied by $23.75, and
dividing the result by the number of outstanding NorRock Class A
shares (the amount per share being the "NorRock Class A Share
Consideration") and then dividing by $1.73 (the implied issue price
per Partner unit); and (c) for each of the 150,000 NorRock stock
appreciation rights outstanding, an amount in cash equal to the
NorRock Class A Share Consideration minus $5.11. The NorRock
preferred shares will be cancelled in connection with the
distribution under the Arrangement. The holders of NorRock Class A
shares and the holder of the NorRock Class J share will continue to
hold their shares and be the sole shareholders of NorRock following
the transaction. The number of units of Partners REIT that holders
of NorRock shares will receive at closing is based on an agreed
price of $1.73 per Partners REIT unit, which issue price may be
higher or lower than the market price of such units on the date of
issue. As holders of the Partners REIT units, the current holders
of the NorRock Preferred and Class A shares will be entitled to
monthly distributions on the Partners REIT units received by them.
In addition, the holders of NorRock Class A shares and the holders
of stock appreciation rights may be entitled to receive additional
Partners REIT units as described below. At Closing, Partners will
issue non-transferable rights ("Rights") to NorRock and such Rights
will be distributed pro rata to the holders of Class A shares and
stock appreciation rights as part of the Arrangement. These Rights
will entitle the holder to receive Partners REIT units (or, in
Partners REIT's discretion, a cash payment in lieu of all or a
portion of such units) corresponding to that holder's pro rata
share of the Deferred Payment described below. The number of
Partners REIT units to be issued will be calculated based on the
five day volume weighted average trading price of the Partners REIT
units determined at the time of issue. It is expected that holders
of NorRock Class A shares and stock appreciation rights will
receive additional payments after closing pursuant to the Rights,
which will be paid on a pro rata basis based upon the number of
Class A shares and stock appreciation rights held by them at
closing. The aggregate of such payments (the "Deferred
Payment") will be equal to (A) the Liquidated Value, plus (B) the
Retained Value, less (C) the Assets at Closing Payment less (D)
20% of the amount (if any) by which the Liquidated Value
exceeds the Assets at Closing Payment. After closing, Partners REIT
may choose to sell the mortgages and other non-cash assets it has
purchased from NorRock. If Partners REIT chooses to sell any of
such assets before July 1, 2012, such assets will be valued at the
net sale price (in the case of a sale to parties that are
arm's-length to Partners REIT, or at a price equal to or above an
independent valuation if such asset is sold to a party that is not
arm's-length to Partners REIT) (the "Liquidated Value"). If
Partners REIT continues to hold any such assets on July 1, 2012, it
will have such assets valued as of July 1, 2012 by two independent
and qualified valuators by August 1, 2012. The average
valuation will be considered to be the "Retained Value" for such
assets. In accordance with the terms of the Rights, the Deferred
Payment will be made up to 90 days following the earlier of (i) the
liquidation of all non-cash assets acquired by Partners REIT from
NorRock and (ii) August 1, 2012. If the Deferred Payment
reflected the full principal amount of the mortgages and non-cash
assets, then it is estimated that this will result in additional
net value of approximately $1.47 per NorRock Class A share and
stock appreciation right. However, there can be no assurance that
$1.47 per NorRock Class A share will be realized. At closing, based
on the assumptions set out in this press release it is expected
that approximately 29,432,120 Partners REIT units will be issued at
closing (representing approximately 92% of the currently issued and
outstanding Partners REIT units). In payment of the Deferred
Payment (and assuming that in calculating the number of Partners
REIT units to be issued in payment of the Deferred Payment that the
five day volume weighted average trading price of the Partners REIT
units is $1.73), up to approximately another 2,543,352 Partners
REIT units will be issued (representing approximately 8% of the
currently issued and outstanding Partners REIT units).
Recommendation of the Boards A special committee of independent
trustees was established by Partners REIT and a special committee
of independent directors was established by NorRock to consider
this transaction. The NorRock board of directors has concluded,
based in part on the recommendation of the NorRock special
committee, a fairness opinion received from Cormark Securities
Inc., and the preliminary valuation of M Partners Inc. referred to
below, that the proposed transaction is in the best interests of
NorRock and is fair to holders of NorRock Class A shares and
holders of NorRock preferred shares and will recommend that NorRock
shareholders vote in favour of the Arrangement. The trustees of
Partners REIT have concluded, based in part on the recommendation
of the Partners REIT independent committee, a fairness opinion
received from Brookfield Financial Corp., and the preliminary
valuation of Capital Canada Limited referred to below, that the
acquisition of the Transferred Assets and the issuance of units in
Partners REIT is fair to holders of Partners REIT units and will
recommend that Partners REIT unit holders vote in favour of the
transaction and the issuance of Partners REIT units. Each of
NorRock and Partners REIT has obtained preliminary valuations from
M Partners Inc. and Capital Canada Limited, respectively, in
respect of the proposed transaction. Plan of Arrangement and
Shareholder Approval The transaction is structured as a plan of
arrangement and is subject to certain conditions precedent,
including the granting of interim and final orders of the Ontario
Superior Court of Justice, approval of regulatory authorities
including approval of the TSX Venture Exchange and the Toronto
Stock Exchange, and the approval by the shareholders of NorRock and
by the unit holders of Partners. The affirmative vote of 66-2/3% of
the votes cast by holders of NorRock preferred shares present in
person or by proxy at the NorRock shareholders' meeting, 66-2/3% of
the votes cast by holders of NorRock Class A shares present in
person or by proxy at the NorRock shareholders' meeting and the
affirmative vote of the NorRock Class J share, is required to
approve the Arrangement. In addition, the affirmative vote of a
majority of the holders of the NorRock preferred shares and the
NorRock Class A shares excluding votes attaching to the 966,160
NorRock Class A shares and the 3,500 NorRock preferred shares held
directly or indirectly by Green Tree Capital Management Corp.
(approximately 33% of the NorRock Class A shares and 0.2% of the
NorRock preferred shares issued and outstanding) will also be
required for reasons that will be set out in the meeting circular.
Green Tree and the holder of the NorRock Class J share have entered
into support agreements agreeing to support the Arrangement.
The proposed issuance of Partners REIT units as consideration for
the NorRock assets must be approved by the affirmative vote of
66-2/3% of the votes cast by holders of Partners REIT units present
in person or by proxy at the Partners REIT meeting. In
addition, the affirmative vote of a majority of the holders of the
Partners REIT units, excluding votes attaching to the 12,812,860
units (approximately 41% of the units issued and outstanding) held
by IGW Public Limited Partnership and its affiliates will also be
required for reasons that will be set out in the meeting circular.
IGW Public Limited Partnership has entered into a support agreement
agreeing to support the Arrangement and the issuance of Partners
REIT units. It is anticipated that the meetings of the NorRock
securityholders and the Partners REIT unitholders will be held on
or about November 30, 2011. The information circular and form of
proxy in respect of such meetings are expected to be mailed to
securityholders on or about October 31, 2011. The transaction is
expected to be completed in December, 2011. Conference Call On
Monday, October 17, 2011 at 11:00 a.m. Eastern Time Partners REIT
and NorRock will host a conference call to discuss the transaction.
The call can be accessed by dialing 1-866-400-2270 (North America)
or 416-849-2698 (Toronto). About NorRock NorRock is a mutual fund
corporation incorporated under the laws of the Province of Ontario.
It was created to obtain exposure to the investment performance of
an actively managed portfolio of mortgages and secured loans in the
Canadian commercial real estate sector on a tax-efficient basis.
About Partners REIT Partners REIT is a growth-oriented real estate
investment trust, which currently owns (directly or indirectly) 20
retail properties located in British Columbia, Ontario, Manitoba
and Quebec, aggregating approximately 1.6 million square feet of
leaseable space. Partners REIT focuses on expanding and managing a
portfolio of retail and mixed-use community and neighbourhood
shopping centres located in both primary and secondary markets
across Canada. Forward-looking Statements Certain statements
included in this press release constitute forward-looking
statements, including, but not limited to, those identified by the
expressions "believe", "expect," "will", "offers the
opportunity", "intend, "look forward" and similar expressions to
the extent they relate to Partners REIT and NorRock. The
forward-looking statements are not historical facts but reflect
Partners REIT's and NorRock's current expectations regarding future
results or events. These forward looking statements are subject to
a number of risks and uncertainties that could cause actual results
or events to differ materially from current expectations, including
the anticipated value to be received by holders of NorRock Class A
shares and stock appreciation rights; our ability to obtain court,
regulatory, securityholder and other approvals; the fulfillment of
conditions precedent to closing the transaction and the successful
completion of the transaction; our expectations regarding an
increase in funds available to Partners REIT as a result of
the acquisition, our expectations regarding the retention or sale
of the mortgages and other assets acquired by Partners REIT in
connection with the transaction; our expectations regarding an
additional payment to the holders of NorRock Class A shares and
stock appreciation rights after the closing of the transaction;
Partners REIT's intention to continue to grow and diversify
its portfolio, intended acquisitions and general economic and
industry conditions. Although each of Partners REIT and NorRock
believes that the assumptions inherent in the forward-looking
statements are reasonable, forward-looking statements are not
guarantees of future performance and, accordingly, readers are
cautioned not to place undue reliance on such statements due to the
inherent uncertainty therein. Neither the TSX Venture Exchange nor
its Regulation Services Provider (as that term is defined in
policies of the TSX Venture Exchange) accepts responsibility for
the adequacy or accuracy of this release. Partners REIT CONTACT:
Partners REIT:Patrick Miniutti, President and Chief Operating
Officer (250) 940-5500NorRock Realty Finance Corporation:
Jacqueline Boddaert, Chief Executive Officer (416) 479-9510 ext.
305
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