GREY:MSTUF - Post by User
Post by
retiredcfon Mar 27, 2017 8:17am
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Post# 26034444
CIBC
CIBC Milestone Apartments REIT
When You Wish Upon A Star...
What's Changed
With Q4 results, Milestone announced that the purchase price pertaining to the agreement to be acquired by Starwood Capital Group was increased ~0.6% to ~$16.25, from $16.15 per unit previously. More notably, a block of institutional holders, representing ~16% of Milestone's outstanding units have agreed to support the updated transaction.
Our Take: We view the revised purchase price as arguably somewhat anti-climactic, given that the 0.6% increase is well below the S&P TSX REIT index gain of 1.6% increase since the acquisition announcement and the ensuing delay of the originally scheduled vote. However, with the support of a larger institutional base, we believe the transaction is now more likely to be approved.
Received Support From Institutional Holdings, Representing 16%: The special meeting is scheduled for March 28th with the transaction subject to approval of ~67% of Milestone unitholders and special voting unitholders and the majority of votes, excluding affiliated entities.
Management Concessions Drives $0.10 Unit Price: Milestone's management waived severance and bonus payments and guaranteed certain working capital amounts, amounting to ~$7 million, and Milestone management's class B unitholder agreed to receive the original $16.15/unit, foregoing $1 million of proceeds. It appears Starwood was more passive (or perhaps even absent) in negotiations as the offer price remains effectively unchanged.
Solid Q4 Results: Milestone's reported FFO of $27.7 million ($0.31/unit) compared to $18.7 million ($0.26/unit, $0.28 excluding subscription receipts) in Q4/15 and above our $25.5 million ($0.29/unit) estimate.
Valuation
At C$21.67, Milestone trades at ~13.2x our 2017E FFO (F/X adjusted), a 2% discount to our $16.50/unit NAV estimate, and yields 3.7%. Our 12- to 18-month price target is C$22.00 (unchanged), reflecting the current $16.25 bid and CIBC WM F/X assumptions (Q2/17). We rate Milestone as Neutral