Artis REIT goes floating for first time
Fresh debt offering raises $200 million
Winnipeg-based Artis REIT is used to making a little financial history.
In 2012, it became the second Canadian REIT (after RioCan) to issue rate reset preferred trust units, a security that looks similar to an offering of rate reset preferred shares but with some different tax and structural features.
Since then Artis has completed four such offerings (including one in U.S. dollars and one for $125 million that closed this week) and has raised almost $ 500 million. The outstandings are set to fall given that Artis plans to use the proceeds from its latest issue to redeem the US$ 75 million of 5.25- percent units that were due for reset at the end of March.
The reset preferred units are effective for Artis because the coupon on the resets ( six per cent) is lower than the 7.75- per- cent yield on its trust units.
Friday, the issuer – it has a market cap of $ 2.04 billion — made more history: It launched and priced its first floating rate debt offering. It was seeking $125 million via an offering of two-year floating rate senior unsecured debentures. ( It ended up with $ 200 million.) The debentures came with a coupon of three months CDOR ( Canadian dollar offered rate) plus 107 basis points.
Cost savings was the main motivation behind the financings, given that Artis plans to use the proceeds to partially repay its revolving bank credit facilities. At the end of September, Artis had drawn $ 251.7 million of its $300-million borrowing capacity. Those borrowings at- tract a rate of either the rate on bankers’ acceptances plus 170 basis points or prime plus 70 basis points.
In an interview Friday, Jim Green, chief financial officer, said the current borrowing comes with 63 basis points of savings — about $1.26 million a year given that $ 200 million was placed. “We take the savings when we can get them,” said Green, noting Artis is replacing one floating rate debt with another but at a cheaper coupon. He is expecting “maybe one more,” domestic interest rate hike.
Other REITs, including H& R have issued floating rate debentures: in early 2017, it paid back $ 60 million of such debentures that came with a rate of three- month CDOR plus 165 basis points.
GREEN LIGHT FOR MULTI- CRYPTO FUND
It’s breakthrough time for the gang at Montreal- based 3iQ Corp. It recently agreed to terms and conditions with the regulatory authorities to act as a portfolio manager and investment fund manager for what is the country’s first multi- crypto currency fund. Known as the 3iQ Global Cryptoasset Fund it will invest directly in bitcoin, ether and litecoin.
Units in that fund will be available to accredited investors, advisers and dealers via Fundserv, and to pension funds, institutions and family offices via private placement. The units, to be acquired by investors across the country, will not be available to retail investors. But presumably an ETF that’s available to all investors is the ultimate prize. But that may take awhile as no North American regulator has given the green light.
At this stage the units are only available on the platforms of the non- bank owned firms. But Fred Pye, chief executive at 3iQ said he is working “diligently” to get it approved for sale on the platforms of the bank-owned dealers.
Calgary-based Ross Smith Asset Management is also active in the bitcoin world. It has a fund that invests in bitcoin and bitcoin gold. Its plan is to run a diversified portfolio of crypto currencies, a plan that requires regulatory approval.