Blake, Cassels & Graydon LLP and Winston & Strawn LLP acted as legal counsel to the REIT. Canaccord Genuity Corp. acted as financial advisor to the Special Committee.
R&R Real Estate Investment Trust (TSXV: RRR.UN), through certain of its subsidiaries, entered into an agreement to purchase eight properties for an aggregate purchase price of approximately US$52.0 million from entities controlled by an arm’s length third party and that Majid Mangalji, Executive Chairman and Trustee of the REIT and the largest beneficial unitholder of the REIT (on a fully diluted basis), and Michael Klingher, President and Chief Executive Officer of the REIT (as well as certain employees of Westmont Hospitality Group – “WHG”, which is controlled by Mr. Mangalji), have minority interests in.
As partial consideration, the Vendors will receive approximately US$9.6 million of Class B limited partnership units of a newly-formed limited partnership that will indirectly hold the Acquisition Properties (economically equivalent to and exchangeable for units of the REIT), at a price of C$0.20 per Class B LP Unit, and attached special voting units in the REIT, which, since these units are expected to ultimately be owned by entities controlled by Mr. Mangalji and Mr. Klingher (and in which the other WHG employees have an interest), will increase Mr. Mangalji’s, Mr. Klingher’s and their affiliates’ effective aggregate interest in the REIT, assuming conversion of all Class B LP Units, from approximately 88% to approximately 90% (assuming an exchange rate of C$1.31 to US$1.00).
A special committee of independent REIT trustees was established to consider the Acquisition and reviewed independent appraisals of the Acquisition Properties from Cushman & Wakefield, Inc. and received a fairness opinion from Canaccord Genuity Corp.
The total acquisition cost of approximately US$53.6 million (including closing costs), subject to adjustment, will be satisfied by a combination of a mortgage loan of approximately US$34.0 million aggregate principal amount from a third party lender; the issuance of approximately US$9.6 million of Class B LP Units, at a price of C$0.20 per Class B LP Unit, and attached special voting units in the REIT; a US$7.0 millionvendor-take back loan (which loan is ultimately expected to be held by entities controlled by Mr. Mangalji and Mr. Klingher (and in which entities the other WHG employees have an interest)); and approximately US$3.0 million in cash.
The VTB Loan will be separated into two tranches. The first tranche of US$3.5 million will be due March 2020 and will bear interest at a rate of 5.0% per annum. The second tranche of US$3.5 million will be due September 2021 and will bear interest at a rate of 6.0% per annum. The REIT will have the option to repay both tranches at any time without penalty.
The Winston deal team was led by Partner Andy White (Picture) and included Christina George.
Law Firms: Winston & Strawn;
Clients: R&R Real Estate Investment Trust ;