FREDERICTON,
April 4, 2013 /CNW/ - Plazacorp
Retail Properties Ltd. (TSXV: PLZ) ("Plazacorp") announced
today that it has entered into a definitive agreement with KEYreit
(TSX: KRE.UN) ("KEYreit") to increase its offer to acquire
100% of the issued and outstanding trust units (the "Units")
of KEYreit. KEYreit unitholders will have the option to
tender their Units for either $8.35
per Unit in cash, subject to a maximum aggregate cash amount of
approximately $62.1 million,
representing approximately 50% of the consideration, 1.7041
Plazacorp shares or any combination thereof, subject to proration
(the "Improved Offer"). A tax-free rollover may be
available for KEYreit unitholders receiving Plazacorp shares. The
Improved Offer is valued at approximately $124 million. The Improved Offer represents
a premium of approximately 35% to the closing price of the KEYreit
units on the Toronto Stock Exchange ("TSX") on January 28, 2013, the last trading day before
Huntingdon Capital Corp. ("Huntingdon") announced its intention to
make an unsolicited partial offer for KEYreit units. The Improved
Offer is also a significantly more attractive offer than
Huntingdon's unsolicited amended
offer of $8.00 per Unit.
The acquisition is being made pursuant to the
terms of a revised support agreement (the "Revised
Agreement") entered into between Plazacorp and KEYreit. The
Board of Trustees (the "Trustees") of KEYreit, acting on the
unanimous recommendation of its Special Committee comprised solely
of independent trustees, has unanimously approved the Improved
Offer and unanimously recommends that KEYreit unitholders tender to
the bid. As part of the Revised Agreement, all Trustees of KEYreit
have indicated an intention to tender all of their Units to the
Improved Offer.
Full details of the Improved Offer will be
included in a take-over bid circular which is expected to be mailed
to unitholders of KEYreit around early to mid April, 2013. Once
mailed, the Improved Offer will be open for acceptance for a period
of 35 days unless withdrawn or extended and will be conditional
upon, among other things, Plazacorp acquiring such number of Units
that represent at least 66-2/3% of the outstanding Units and
receipt of customary regulatory consents and approvals. The
Revised Agreement entered into by KEYreit and Plazacorp contains,
among other things, a termination fee or "break fee" of
$6.5 million payable by KEYreit in
certain circumstances, including the acceptance of an unsolicited
superior proposal from a third party. Plazacorp has also been
granted a right to match in respect of competing proposals.
John Bitove, CEO
of KEYreit and who beneficially owns or controls approximately
16.5% of the issued and outstanding Units, has entered into a lock
up agreement to tender all of his Units to the Improved
Offer. Mr. Bitove, as owner of JBM Properties Inc.
("JBM") (the external asset and property manager of
KEYreit), has also agreed to terminate the asset and property
management agreements between KEYreit and JBM upon closing of the
transaction for a termination fee, which will be funded 50% in cash
and 50% in Plazacorp shares, cash, or any combination thereof, at
the discretion of Plazacorp.
Plazacorp will fund the acquisition with a
secured term credit facility from RBC Capital Markets that will be
in place on close of the acquisition, and the issuance of shares
for up to 50% of the consideration. Plazacorp does not intend to
issue shares to the public to fund this acquisition.
Plazacorp believes the Improved Offer will bring
a number of benefits to its shareholders and to KEYreit unitholders
who elect to receive Plazacorp shares under the Improved Offer,
including:
(i) |
Immediate Accretion: The acquisition is estimated to
immediately deliver high single digit percentage accretion to
Plazacorp's 2013E Adjusted Funds From Operations ("AFFO")
per share. Such accretion assumes completion of the
acquisition, the secured term credit facility financing, and
anticipated synergies as a result of Plazacorp's internalized
management team. Plazacorp's debt-to-gross-book-value ratio
is estimated to be between approximately 57% to 58% post
transaction (including KEYreit's convertible debentures, but
excluding Plazacorp's well-in-the-money convertible debentures),
which is close to its target debt-to-gross book value ratio of
55%. Modest de-levering may occur after the transaction as a
result of a small number of property sales. Given the higher coupon
rates on many of KEYreit's mortgages and its convertible
debentures, it is expected that many favourable refinancing
opportunities will exist over time, which are expected to augment
AFFO per share accretion. |
|
(ii) |
Compatible Properties: KEYreit's properties are
compatible with Plazacorp's portfolio. Plazacorp is acquiring
227 properties (the "Properties"), comprising approximately
1.2 million square feet of gross leasable area (or "GLA") in
nine provinces. Many of KEYreit's leases are "quadruple net"
and the portfolio has an attractive weighted average lease term of
approximately 8 years, which is approximately equal to that of
Plazacorp. Post closing, Plazacorp will own approximately 345
retail properties totaling approximately 6.4 million square
feet. Shoppers Drug Mart will remain as Plazacorp's largest
tenant on a pro forma basis, representing approximately 26% of
Plazacorp's combined minimum rent. Both KEYreit's and
Plazacorp's portfolios are approximately 96% to 97% leased. |
|
(iii) |
Enhanced Geographic Diversification: The integration of
the Properties will enhance the pro forma geographic
diversification of Plazacorp. Plazacorp's properties in
Atlantic Canada will change from approximately 71% to 60% of GLA
and its Ontario properties will change from approximately 5% to 12%
of GLA. |
|
(iv) |
Improved Profile for KEYreit Unitholders: KEYreit
unitholders who elect to receive Plazacorp shares are expected to
benefit from: a pro forma market capitalization that is
approximately 3.3x that of KEYreit, a pro forma asset base that is
approximately 3x greater than that of KEYreit, greater tenant and
geographic diversification, a sustainable AFFO payout ratio, a
lower debt level, internal management, and access to lower cost
debt and equity to fuel growth. KEYreit unitholders who receive
Plazacorp shares will be investing in a public company that has
raised its dividends at least once every year for the past 10 years
with an average annual growth rate of over 10%. Since the time of
KEYreit's IPO in 2005, Plazacorp has provided approximately 123%
appreciation in its share price and a total return of approximately
223%. Plazacorp has received a positive ruling from Canada
Revenue Agency in respect of converting to a real estate investment
trust ("REIT") structure on a tax-deferred basis and intends to
complete this conversion in 2013, subject to shareholder
approval. |
|
(v) |
Highly Aligned Management Team: Plazacorp's management
team and board of directors will collectively own approximately 34%
of Plazacorp (based on estimated pro forma basic shares
outstanding) upon completion of the transaction, making them highly
aligned with the long-term interests of both Plazacorp's
shareholders and KEYreit's unitholders. In addition,
Plazacorp has a fully-internalized management platform, which is
attractive to its shareholders given there are no additional fees
paid to Plazacorp's management team. |
ADVISORS
RBC Capital Markets is acting as exclusive
financial advisor to Plazacorp and has committed to provide the
secured term credit facility to Plazacorp. Davies Ward
Phillips & Vineberg LLP is acting as legal advisor to
Plazacorp.
NON-IFRS OR NON-GAAP MEASURES
Adjusted Funds From Operations (AFFO) is an
industry measure widely used to help evaluate dividend or
distribution capacity. AFFO as calculated by Plazacorp may
not be comparable to similar titled measures reported by other
entities. AFFO primarily adjusts FFO for non-cash revenues
and expenses and operating capital and leasing requirements that
must be made merely to preserve the existing rental stream.
Most of these maintenance capital expenditures would normally be
considered investing activities in the statement of cash
flows. Capital expenditures which generate a new investment
or revenue stream, such as the development of a new property or the
construction of a new retail pad during property expansion or
intensification would not be considered as maintenance capital
expenditures and would not be included in determining AFFO.
ABOUT PLAZACORP
Plazacorp is a mutual fund corporation and is
one of Atlantic Canada's leading
retail property owners and developers. Plazacorp's current
portfolio includes interests in 118 properties totaling 5.2 million
square feet and additional lands held for development.
Plazacorp's properties include a mix of strip plazas, stand-alone
small box retail outlets and enclosed shopping centres anchored by
approximately 90% national tenants including Shoppers Drug Mart,
Dollarama, Staples, Mark's Work Warehouse, Sobeys, and
others. Our top ten tenants contribute just over 53% of total
rent. Plazacorp is fully internalized, therefore providing
shareholders directly with the synergies that come with an
internalized management structure. Plazacorp has proven its
strong "value-add" capabilities to develop, redevelop and acquire
retail real estate throughout Atlantic
Canada, Quebec and
Ontario. Plazacorp has a
strong track record of generating growth in distributions, having
increased its distributions at least once every year in the last 10
years. As a result of its capabilities, its performance and
its ability to increase dividends, Plazacorp's share price has also
increased significantly since inception.
More information about Plazacorp can be found on
our website at: www.plaza.ca or at www.sedar.com.
CAUTIONARY STATEMENTS REGARDING FORWARD
LOOKING INFORMATION
This news release contains forward looking
statements relating to our operations and the environment in which
we operate, which are based on our expectations, estimates,
forecasts and projections. These statements are not future
guarantees of future performance and involve risks and
uncertainties that are difficult to control or predict. Therefore,
actual outcomes and results may differ materially from those
expressed in these forward looking statements. Readers, therefore,
should not place undue reliance on any such forward looking
statements. Further, a forward looking statement speaks only as of
the date on which such statement is made. We undertake no
obligation to publicly update any such statement, to reflect new
information or the occurrence of future events or circumstances,
except for forward-looking information disclosed in prior
disclosures which, in light of intervening events, requires further
explanation to avoid being misleading.
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.
SOURCE PLAZACORP RETAIL PROPERTIES LTD.