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be open for acceptance for a period of 35 days unless withdrawn or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)
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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.
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(ii)
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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.
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(iii)
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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.
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(iv)
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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.
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(v)
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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.
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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.