Northern Property to create $3B REIT in deal with True North

A Calgary-based real estate trust would control one the largest collections of rental apartments in Canada after a proposed three-way deal involving nearly 25,000 residential suites in eight provinces and two territories.

Northern would also acquire a 4,650-suite portfolio of multi-family properties managed by Starlight Investments Ltd., which is controlled by True North chairman Daniel Drimmer.

Northview is expected to be listed as NPR.UN on the Toronto Stock Exchange, where Northern Property and True North units are also traded. It would become Canada's third-largest publicly traded apartment-oriented real estate business after Canadian Apartment Properties REITand Boardwalk REIT.

"The benefits of the proposed transaction are significant," Northern Property president and CEO Todd Cook said in a conference call.

Better funding opportunities

"NPR's portfolio will expand into Eastern Canada while True North gains exposure to Canada's North and an expanded presence in Western Canada."

In addition, Cook said the larger, combined company would have better access to capital markets that provide funding and to real estate opportunities including through thousands of additional residential units through its relationship with Starlight.

"We anticipate providing the same quality of service (to residents) that we provide now. There may be different signs on the building but there will be little or no impact for our tenants," Cook said.

True North president and CEO Leslie Veiner, who would be operations chief for the combined business, said he plans to leverage the strength of each management team and a services agreement with Starlight over a three-year transition period.

He also said Northview will be looking at regional asset management, opportunities to stabilize occupancy, maximize revenue generation and improve profitability.

In total, the Northview would have suites in more than 60 markets in every province but Prince Edward Island and Manitoba, as well as about 800 employees. The largest number of suites is 8,235 in Ontario.

3-way deal

Under the proposed deal, True North shareholders would receive 0.3908 of a share of Northern Property for each share. Based on Friday's closing price, the offer was worth $9 per share when the deal was announced, which was 16 per cent above True North's closing price of $7.73 per share.

In addition, Northern Property would pay $535 million including $316 million cash, $49 million of assumed debt and $170 million equity issued by the trust to acquire a portfolio of apartment suites from a joint venture between Starlight and Public Sector Pension Investment Board, which manages funds for the RCMP, Canadian Forces and the reserves.