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Partners Real Estate Investment Trust Announces Strategic Review Process and Provides Update
|By Marketwired .
|May 6, 2014 06:54 PM EDT
BARRIE, ONTARIO -- (Marketwired) -- 05/06/14 -- The Board of Trustees of Partners Real Estate Investment Trust (TSX: PAR.UN) ("Partners REIT" or the "REIT") today announced that it has commenced a process to review strategic alternatives to maximize value for unitholders. There are many potential outcomes of the strategic review process and there can be no guarantee that a transaction will take place. The Trustees are in the process of interviewing potential financial advisors and expect to engage one shortly.
Partners REIT also announces that it has extended its Unitholder Rights Plan, which would otherwise have expired this month, to its Annual General Meeting at which point unitholders will vote to extend or discontinue the Plan. As previously announced, the Toronto Stock Exchange has deferred approval of the Unitholder Rights Plan.
Partners REIT also provided an update regarding the matters raised by Orange Capital, a United States hedge fund, in its press releases issued on May 1 and May 5, 2014 concerning, among other things, the April 2014 transaction pursuant to which the REIT purchased three Ontario properties from Holyrood Holdings Limited (the "April Transaction") and the 10% second mortgage facility entered into by the REIT with Firm Capital.
Orange Capital's Opportunistic Financing Proposal
Partners REIT notes that on May 1, 2014, Orange Capital disclosed that it had provided a financing proposal to Partners REIT. The terms were very aggressive, including:
-- $15,000,000 of convertible securities (with no premium for the
conversion to equity)
-- Voting rights up to 15% of the outstanding units (without holding any
-- The appointment of three new Trustees, including one Orange Capital
Partners REIT had been pursuing various secured financing proposals. Prior to the issuance of Orange Capital's May 1, 2014 press release, the REIT accepted a financing proposal superior to that of Orange Capital's, and which is repayable without penalty on short notice. While the accepted Firm Capital proposal had the same interest rate as that offered by Orange Capital, it did not include the problematic highly dilutive conversion to equity, voting rights or appointment of Board nominees. The Firm Capital financing is expected to close on May 8, 2014.
Despite the REIT having entered into the superior financing proposal, Orange Capital has continued to pressure Partners REIT daily, including on May 5, 2014 just before its latest press release, to accept financing from it, with a conversion entitlement into equity and immediate voting rights.
Unitholders should be aware that Orange Capital's interest in the REIT pre-dates its current engagement, as it previously attempted to purchase 15% of the REIT's units held by League Assets Corp. at a price of $6 per unit through a CCAA restructuring process, in November of 2013. On that occasion, Orange Capital was outbid by McCowan and Associates Ltd. who purchased the units at a price of $7 per unit.
The REIT's Trustees have attempted to engage constructively with Orange Capital. Orange Capital refuses to disclose how many units it holds in the REIT. We have asked if Orange Capital is short our units, and they have said they are not.
In addition to the offer to provide an Orange Capital nominee with one Board seat, the REIT has discussed with Orange Capital the possibility of increasing the size of its Board and has welcomed its recommendations for independent candidates for these positions. However, attempts to reach an accommodation that would be in the interests of all unitholders have been met with hostility from Orange Capital.
Given its opportunistic financing proposal, refusal to disclose its own unit position in the REIT and increasingly hostile campaign, it is unclear to Partners REIT that Orange Capital wishes to be part of a plan that benefits all unitholders. For example, having all the incumbent trustees just resign, as called for by Orange Capital, does not seem to be a particularly practical or productive proposal.
The April Transaction
As previously announced by the REIT, the Board of Trustees engaged independent legal counsel and initiated an investigation into the circumstances surrounding the April Transaction. As a result of new material information that was obtained, the Board of Trustees is working diligently to address the issues raised by Orange Capital and to cause Holyrood to unwind the April Transaction or to achieve some other satisfactory resolution. While the REIT is pressing Holyrood to agree to unwind the April Transaction, the consent of third parties will be required. A sale by Holyrood of its units in the REIT to an arm's length third party may also be a possibility. The REIT is focused on securing an outcome that is in the interests of all unitholders.
Partners REIT will continue to provide updates as developments warrant. We would prefer, however, not to have to engage in dueling press releases with Orange Capital.
About Partners REIT
Partners REIT is a growth-oriented real estate investment trust, which currently owns (directly or indirectly) 42 retail properties, well-located in British Columbia, Alberta, Manitoba, Ontario, and Quebec, aggregating approximately 3.2 million square feet of leasable space. Partners REIT focuses on expanding and managing a portfolio of retail and mixed-use community and neighborhood shopping centres located in both primary and secondary markets across Canada.
Certain statements included in this press release constitute forward-looking statements. The forward- looking statements are not historical facts but reflect Partners REIT'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. Although Partners REIT 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.
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