National Post (National Edition)
Milestone REIT battle is on
Abattle is underway between two competing forces at Milestone Apartments REIT — a contest that will presumably continue until the unit-holder vote on the proposed takeover by Starwood is held in early March.
One force is Milestone’s management and BMO Capital Markets — the firm that is the company’s financial adviser — who are meeting with investors this week on a cross Canada tour.
In the other camp are a group of institutional investors who oppose the transaction in which unit-holders are being offered US$16.15 a unit. That group is seeking like-minded investors. The opposition is based presumably on the low price, the insufficient premium and, in part, the process by which the transaction arose.
The takeover was announced less than six weeks after the REIT acquired, for $106.5 million, the external asset management team that had been contracted to manage its operations.
The purchase of that contract was meant to cover the costs the external manager would have incurred over the next seven years and was based on a continued healthy spree of acquisitions. Instead of getting seven years of management services the unit-holders got about five months. If the unit-holders had known that they would have been so badly shortchanged when they overwhelmingly supported the contract buyout last summer there’s little doubt which way the vote would have gone.
But unit-holders went into that vote without being informed that Milestone had received “unsolicited advances” from a number of “sophisticated and well-capitalized real estate investors,” three of which led to the signing of “confidentiality agreements.” Instead they had to wait for the takeover circular to be released to find out such information.
Securities lawyers report that unit-holders need to be given enough relevant information to be able to make a decision, a test that was presumably met in that case.
But given the sequence of events — Milestone and Starwood worked together on a transaction that closed in early 2016, they got to know each other in the process, the management contract was internalized and Milestone arrived with a going-private interest in late October — one is left to wonder what a shareholder friendly Ontario Securities Commission would do given the new information.
A representative for Milestone, however, defended the process.
“They’re all separate transactions, the environment is becoming increasingly uncertain and the offer represents a very attractive opportunity for the unitholders to sell.”
While the duelling forces at Milestone each have advantages, those opposing the transaction have a slightly easier task — they only have to convince one quarter of those who vote to say no.
It’s not exactly a flood but there have been more initial public offerings completed and/or filed so far this year by operating companies than in all of 2016. Here’s a rider to that statement: maybe all the IPOs that have been filed won’t get completed but the climate has changed and potential issuers see the possibility of going public.
After a mere two deals above $5 million last year — a $460 million offering by Aritzia and a $69 million raise by CanniMed Therapeutics — 2017 has been decidedly different.
For instance, Freshii closed its IPO at the end of January with gross proceeds of $125.4 million, the bulk of which flowed to the selling shareholders.
Earlier Superior Gold marketed a $14.5 million offering that is understood to be within a few days of going final, while Fairfax Africa raised US$56.22 million. All those were filed in December 2016.
Two other issues, both from the oil patch recently field to go public this year: Source Energy Services is seeking $250 million while STEP Energy Services is also planning to go public and raise a similar amount. And on Wednesday, Canada Goose joined them, filing for a dual listed IPO that reportedly will attempt to raise up to $300-million.