Link to news release Pure Multi-Family Announces Strategic Review Process and Potential Sale of the REIT
Canada NewsWire
VANCOUVER, April 5, 2018
VANCOUVER, April 5, 2018 /CNW/ - Pure Multi-Family REIT LP ("Pure Multi-Family" or the "REIT") (TSXV: RUF.U, RUF.UN, RUF.DB.U; OTCQX: PMULF) today announced that the board of directors (the "Board") as part of its review of strategic options has initiated a formal process to explore the potential sale of the REIT. The process will be overseen by the special committee of independent directors (the "Special Committee").
The Board is and has always been committed to maximizing unitholder value. The Special Committee and the Board have thoroughly assessed the proposals from Electra America ("Electra") and believe they undervalue Pure Multi-Family's high quality portfolio.
Rationale for Rejecting the Electra Proposals
The REIT has communicated with Electra since its initial proposal and the Board, on the recommendation of the Special Committee after receiving advice from its financial and legal advisors, determined that it was in the best interest of unitholders to reject the proposals. In making its determination, the Board concluded: (i) the proposals do not fully value Pure Multi-Family's highly attractive portfolio, (ii) that many other highly credible parties are capable of paying a higher value than the proposals, and (iii) Electra's proposals are highly conditional and require a 30-day exclusivity period. Electra's proposals also provided that they would be immediately withdrawn in the event the REIT publicly disclosed their existence.
Market Supportive of Pure Multi-Family
Research analysts widely support Pure Multi-Family's decision to reject Electra's proposals, highlighting they do not fully reflect the value inherent in the REIT's high quality portfolio. We have included below several quotes from research analysts following Electra's proposals:
"In our view, Pure Multi could garner substantial interest from other strategic bidders due to: 1) the digestible size of Pure Multi's platform; 2) its attractive exposure to growing US Sunbelt apartment markets such as Dallas Fort-Worth, Texas; and 3) the high-quality nature of its multifamily portfolio (average age: ~10 years). If consummated, we believe Pure Multi could achieve a takeover offer price of $8.00/unit or more, implying a cap rate of 5.0% or lower." – Industrial Alliance (04/04/18)
"We believe the offer price represents a good opening bid…Our outlook for RUF is constructive given its fully internalized platform, Class "A" assets, insider ownership (~4%) and the economic tailwinds from some of the strongest growth markets in the U.S. Hence, we believe there should be room to improve the bid to more fully reflect RUF's valuable platform, a portfolio premium and renewed operating momentum." – RBC (04/03/18)
"Because this is an all-cash bid at a reasonable premium to both the market price and to NAV, investors have good reason to seriously consider the proposal. However, in our view, RUF is worth more." – NBF (04/04/18)
"In our view, this bid is most likely not the 'best price' and we suspect Electra would raise the bid to acquire Pure's portfolio. Pure Multi-Family has assembled a high-quality portfolio of rental apartment properties in strong markets in the US, and we believe that there would be significant interest in acquiring the portfolio." – Canaccord Genuity (04/03/18)
Scotiabank and Farris Vaughan Wills & Murphy LLP are acting as financial and legal advisors to the Special Committee. There is no guarantee that the strategic review process will result in a transaction.