A proposal to divvy up H&R Real Estate Investment Trust and its properties has fallen apart.
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The REIT’s shareholders voted against a plan that would have split up H&R’s properties among several buyers, Bloomberg reported.
The deal would have seen fellow Canadian company GO Residential Real Estate Investment Trust acquire H&R’s U.S. apartment portfolio. A consortium including Blackstone and the Canadian Public Sector Pension Investment Board would have acquired some of H&R’s industrial properties.
“We are disappointed by this outcome,” GO REIT CEO Josh Gotlib said in a statement provided to Bloomberg. “Our focus remains on protecting the interests of our unitholders and the long-term success of our business.”
The breakup’s rejection follows disclosures from five pension funds Wednesday, including the California State Teachers’ Retirement System and Norwegian pension fund KLP, that they intended to vote against the plan.
H&R unit holders would have received 4.28 Canadian dollars in cash and 0.57 shares in GO Residential REIT for each of their H&R shares in the event of a successful transaction. The REIT will not owe a termination fee for the deal’s failure, Reuters reported.
The deal’s most controversial component was that CRAL — a company controlled by the adult children of H&R Executive Chairman and CEO Tom Hofstedter, along with their spouses — would have been able to buy some of the REIT’s assets at a discount, Bloomberg reported.
CRAL’s potential purchase would have had an aggregate accounting value of around CA$1.98B and would have seen the company assume mortgages, liabilities and potentially additional obligations.
But that proposed purchase led to questions of whether that deal’s value would see the Hofstedter family make gains at a cost to the REIT’s other investors, which include pension funds and fund managers at RBC Global Asset Management.
H&R will remain public and continue to pursue asset sales, perhaps including its industrial portfolio, and will use the proceeds to reduce its debt, repurchase units or provide some returns to investors, the company told Bloomberg.
The company will replace up to four board members, who will have a mandate to figure out a CEO succession plan. It also plans to abandon a proposed purchase of a 70% interest in two joint venture developments owned by Lantower Residential Real Estate Development Trust.
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