City Office nears US$1B asset mark

Over the years, a number of real estate investment trusts that are based on foreign assets have found a welcoming market in Canada.

For instance, Milestone Apartment REIT and WPT Industrial REIT both have U.S. assets; Dream Global REIT, whose assets are in Germany, and Inovalis REIT, which owns office properties in France and Germany, have raised lots of capital from Canadian investors — and made regular distributions.

There is at least one company that’s gone the other way: it’s based in Vancouver, it’s listed on the NYSE, and while all of its assets are in the U.S, it does have some Canadian shareholders.

We are referring to City Office REIT, a company formed in 2013, when it was spun out of Second City Real Estate. (The two firms do retain some common management and directors including chief executive James Farrar and Sam Belzberg.) City Office REIT, which is internally managed, has elected to be taxed as a U.S. REIT — and is in the news because it is in the process of raising equity.

After the markets closed Monday, the issuer, whose properties are largely in the southern and western U.S. announced a deal to sell four million shares. Because of strong demand, the issue was upsized to 5 million shares. Before the markets opened on Tuesday, the price was US$12.4 a share — which represented a four per cent discount to Monday’s close. The shares (CIO) closed Tuesday at $12.43.

A financing was probably expected given that it has just purchased, for US$46.8 million, an office property in Dallas, helping to propel the REIT toward US$1 billion of assets under management.

It will reach that milestone when it combines the proceeds from the current equity offering — the deal closes Friday — with some debt. It now owns or has an interest in 4.4 million square feet of office properties, based in 18 office complexes comprising 37 office buildings.

When it went public in April 2014 (and raised US$72.5 million), it owned six office complexes (with 16 office buildings) with 1.85 million square feet of net rentable area.

Last July, it welcomed a new shareholder, Wealhouse Capital, a Toronto-based global investment firm, founded in 2008 by Scott Morrison and Scott Burk. The firm, which bought a 9.44 per cent stake, is also associated

If the first deal by a new registrant calls for a celebration, then the gang at Jefferies Securities can order the champagne. The firm, which became a member of IIROC last May, a status that allows it to distribute equity issued by Canadian companies into its existing system in the U.S., is one of the four bookrunners on the initial public offering by Freshii Inc. CIBC World Markets.

RBC Capital Markets and Robert W. Baird & Co. are the others. (There are four other underwriters.) Freshii, which filed an amended prospectus Monday, is planning to sell 10.9 million subordinate voting shares, though Robert W. Baird and another U.S. firm (Cowen and Co.) are only allowed to sell Class A shares to investors outside of Canada. Shares carry one vote, or one-tenth the heft of the Class B shares.

It seems Jefferies was late to the party. When Freshii filed a preliminary prospectus a week before Christmas, only CIBC and RBC, were listed as the co-lead underwriters. Since then, and after due diligence had been completed, Jefferies and the other firms were added to the syndicate. about Mexico’s internal economy, adding that while the initial boost from NAFTA came as a result of “labour arbitrage,” the country’s development and education system over the past 25 years has changed the type of work that has moved there.

As for the trade agreement, now nearly a quarter of a century old, perhaps “it’s time for a bit of a refresh,” Porter said.

Despite the mostly bullish outlook for the U.S. economy under Trump, U.S. growth could be somewhat contained by tepid growth in European markets, suggested Victor Dodig, chief executive of Canadian Imperial Bank of Commerce. CIBC is in the midst of making a large acquisition in the U.S., which was stalled by a run-up in the share prices of mid-sized U.S. banks following Trump’s election in November.

Dodig said CIBC is continuing to pursue regulatory approvals for the US$4 billion purchase of Chicagobased Private Bancorp, and expects shareholders to vote once the U.S. bank’s board approves the rescheduling of a meeting that was postponed late last year following the share price run-up.