Beleaguered REIT Thrown A Lifeline By Canadian Hotel And Ferry Owner

Clarke Inc., a publicly traded Canadian real estate investment firm, reached a deal to buy out the struggling Ravelin Properties REIT, which was trading on the Toronto Stock Exchange on Thursday for 8 Canadian cents per share.

Clarke will issue 2.5 million new shares to Ravelin shareholders and lenders in a deal that will cut the REIT’s leverage, bringing its loan-to-value ratio from 94.2% to 68.5%.

The deal will also add 6.2M SF of office space in North America and Europe to Clarke’s relatively nascent real estate portfolio.

The N.M. Trans-Saint-Laurent ferry crossing the Saint Lawrence River
The Trans-Saint-Laurent Ferry Crossing The Saint Lawrence River In 2011

The all-stock transaction values Ravelin at $1.1B, including the assumption of debt, and values the combined firms at $1.7B, Clarke announced Friday.

Shares of Clarke slid by more than 1.5% following the announcement, leaving the stock up roughly 10% since the start of the year. Shares in Ravelin fell by more than 60% to 2 Canadian cents per share in Friday trading.

The deal will give Ravelin shareholders 0.582 shares in Clarke for every 1,000 REIT shares they own. Some of Ravelin’s lenders will receive 14.562 Clarke shares for each $1K in principal owed, while other lenders who agreed early in the process to support the deal are set to split a 150,000-share distribution relative to their share of the total debt weighing on Ravelin.

Ravelin had previously defaulted on some existing debt and capital requirements and disclosed it was exploring available alternatives amid continuing financial difficulties. Its secured debt is unaffected by the deal and will continue to be paid.

"The Transaction will be a great outcome for both companies. It gives Ravelin securityholders the benefit of Clarke's strong, well-capitalized platform and provides an immediate solution for the capital and liquidity pressures facing the REIT," Clarke Chief Financial Officer Tom Casey said in a statement.

Ravelin stopped making payments on its 9% convertible unsecured subordinated notes in March 2024. The REIT said in February it expected it would be unable to pay down the loan at the end of the month when the loan matured with a principal balance of $29M, along with $5M in unpaid interest.

Ravelin owned 45 assets at the end of the year, according to a fourth-quarter disclosure. Its holdings included 1.3M SF within three office assets in Chicago, 13 properties in and around Toronto and 750K SF of office space in Ireland. In addition, it owned two industrial assets in the UK, a retail center in Ireland and a Canadian data center.

The deal is expected to close in the second quarter and already has the unanimous approval of the board of directors at Clarke and board of trustees at Ravelin, unanimous recommendation from a special committee exploring the firm’s options, and the support of lenders.

Ravelin shareholders and lenders would end up with 16.2% of Clarke shares after the transaction. Ravelin’s management would continue overseeing the portfolio, Casey said.

The acquisition is a major expansion for Clarke, which currently has a market capitalization around $216M. Its investments include Holloway Lodging Corp., which owns or manages more than 20 hotels in Canada, a passenger ferry operating on the St. Lawrence River with the Quebec government since 1973, and a handful of multifamily properties in its home country.

"The acquisition will result in a company with diversified geographic exposure and scale, which will provide Clarke shareholders — new and existing — with significant upside and liquidity," Casey said.

The Ravelin portfolio was 75% occupied at the end of the year, and the firm posted a $5M loss on its adjusted funds from operations in the fourth quarter. The fund lost $2M on its core FFO for the year after posting a 15-cent FFO for 2024 and 28 cents for 2023.

G2S2 Capital Inc. extended the forbearance on nearly $600M worth of loans for Ravelin in December to allow “the REIT to continue to explore available alternatives to address its financial difficulties,” Canadian outlet Real Estate News Exchange reported.

"It's a bumpy recovery, but there’s a recovery underway," Ravelin CEO Shant Poladian told the publication at the time.

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