- Contrary to the fairness opinion valuation range of $3.50 – $5.00 per Trust Unit, Melcor REIT has only written down Net Asset Value or NAV to $8.70 per Trust Unit.
- Minority Unitholders must ask this question: “Why didn’t management and the board of Melcor REIT reduce NAV further and take the valuation down to $4.95 per Trust Unit?”
- Despite Melcor REIT’s comments, Minority Unitholders should either sell Trust Units to the Tender Offer or Vote NO on the Take Under Offer.
- Minority Unitholders should contact Shorecrest Group Ltd., the information agent and depositary, at 1-888-637-5789 (North American Toll-Free), 647-931-7454 (calls outside North America) and/or [email protected] for more information.
TORONTO, Nov. 06, 2024 (GLOBE NEWSWIRE) — FC Private Equity Realty Management Corp. (“Firm Capital”) and Telsec Property Corporation (“Telsec” and, together with Firm Capital, the “Offerors”) are issuing this press release in response to the Q3/2024 results issued by Melcor REIT on November 4, 2024.
- Melcor REIT has written down NAV to $8.70 per Trust Unit – contrary to the fairness opinion valuation range of $3.50 – $5.00 per Trust Unit: For Q3/2024, Melcor Real Estate Investment Trust (“Melcor REIT”) reported NAV to be $8.70 per Trust Unit, or 4.2% lower than the $9.09 per participating trust unit (“Trust Unit”) of Melcor REIT reported as at Q2/2024. In summary, Melcor REIT only took a $12.9 million write down of their real estate portfolio. However, both the independent committee and the board of trustees of Melcor REIT have endorsed the proposal put forward by Melcor Developments Ltd. (“Melcor Parent”) to take Melcor REIT private at $4.95 per Trust Unit (the “Take Under Offer“) based, in large part, on the Ventum Financial Corp. (“Ventum”) formal valuation range of $3.50 to $5.00 Per Trust Unit. Furthermore, the language used by the independent committee and the board of trustees in the plan of arrangement for the Take Under Offer includes such tag lines as $4.95 Per Trust Unit is the: “Best Current Prospect for Maximizing Unitholder Value” and “No Prospects of Reinstituting the REIT’s Distribution in the Foreseeable Future”.If these comments are correct and the real estate is this impaired in value (despite Q3/2024 Net Operating Income or NOI being largely in line with Q2/2024 reported figures), then why didn’t management and the board of Melcor REIT reduce NAV further and take the valuation down to $4.95 per Trust Unit? Note that the published weighted average capitalization rates used by Melcor REIT remained unchanged from Q2/2024 to Q3/2024 at 7.19%, meanwhile Ventum used a weighted average capitalization rate in the 8.0% – 9.2% range.
From Firm Capital and Telsec’s perspective, it is obvious that Melcor REIT believes its underlying real estate portfolio is worth significantly more than the Take Under Offer price, (despite Melcor REIT’s recommendations to the contrary) and that holders of Trust Units other than Melcor Parent and any related party of Melcor REIT or Melcor Parent (“Minority Unitholders“) should not tender to the $4.95 per Trust Unit offer price.
- Minority Unitholders should either sell Trust Units to the Tender Offer or vote NO to the Take Under Offer: Minority Unitholders should either sell their Trust Units to the offer made by the Offerors to acquire up to 1,296,316 Trust Units (the “Tender Offer“) or vote “NO” to the Take Under Offer by Melcor Parent given the significant disconnect between the $8.70 per Trust Unit NAV and the Take Under Offer price of $4.95 per Trust Unit. Compounding this is a clear conflict of interest that is apparent between Melcor REIT and Melcor Parent given that taking the real estate private at a 43% discount to NAV would be a significant win for Melcor Parent who initially took the real estate public in 2013 at $10.00 per Trust Unit. Said differently, this would be a significant loss to Minority Unitholders if Melcor Parent were to succeed with the Take Under Offer.
Full details of the Tender Offer are now available in the offer letter, letter of transmittal and any ancillary documentation thereto (the “Tender Offer Documents”) made available to unitholders of Melcor REIT. Minority Unitholders can visit Melcor REIT’s SEDAR+ profile on www.sedarplus.ca to access the Tender Offer Documents as well as the Offeror’s prior press releases with respect to the Take Under Offer and Tender Offer.
Firm Capital and Telsec’s Advisors
The Offerors have engaged Norton Rose Fulbright Canada LLP as legal advisor and Shorecrest Group Ltd. as proxy advisor and depositary and information agent.
Unitholder Questions
For further information regarding the Tender Offer, please contact:
Shorecrest Group Ltd.
North American Toll-Free: 1-888-637-5789
Calls outside North America: 647-931-7454
Email: [email protected]
About Firm Capital
FC Private Equity Realty Management Corp. is a leading real estate private equity investment firm in Toronto, Canada.
About Telsec
Telsec Property Corporation is a leading real estate developer in Calgary, Canada with commercial flex industrial, retail, office, and residential property for lease and sale.
Additional Information
The Offerors are relying on the exemption under section 9.2(4) of National Instrument 51-102 – Continuous Disclosure Obligations to make this public broadcast solicitation.
Any solicitation made by the Offerors in advance of the upcoming special meeting (the “Special Meeting”) of unitholders of Melcor REIT to vote on the Take Under Offer is, or will be, as applicable, made by the Offerors, and not by or on behalf of management of Melcor REIT. All costs incurred for any solicitation will be borne by the Offerors, provided that, subject to applicable law, the Offerors may seek reimbursement from Melcor REIT for out-of-pocket expenses, including proxy solicitation expenses and legal fees.
Any proxies solicited by the Offerors may be solicited in reliance upon the public broadcast exemption to the solicitation requirements under applicable Canadian corporate and securities laws, conveyed by way of public broadcast, including press release, speech or publication, and by any other manner permitted under applicable Canadian securities laws. In addition, solicitation may be made by mail, telephone, facsimile, email or other electronic means as well as by newspaper or other media advertising and in person by representatives of the Offerors in accordance with Canadian securities laws and regulations. All costs incurred for such solicitation will be borne by the Offerors. The Offerors have also retained Shorecrest Group Ltd. as their proxy advisor and depositary and information agent under the Tender Offer. Shorecrest Group Ltd. will receive an anticipated fee of $75,000 for its services plus ancillary payments and disbursements. A registered Minority Unitholder (other than those attached to Trust Units taken up and paid for by the Offerors) may revoke a proxy by instrument in writing, including a proxy bearing a later date. The instrument revoking the proxy must be executed by the Minority Unitholder or Minority Unitholder’s attorney authorized in writing and deposited at the registered office of Melcor REIT at any time up to and including the last business day preceding the date of the meeting, or an adjournment or postponement thereof at which the proxy is to be used, or with the chair of the meeting on the day of the meeting or an adjournment of the meeting, or in any other manner permitted by law or set out in the amended and restated declaration of trust of Melcor REIT, provided that, in each circumstance, a copy of such revocation has been delivered to Shorecrest Group Ltd. at its principal office at 250 University Ave., Suite 211 Toronto, Ontario M5H 3E5 during business hours prior to the Trust Units relating to such proxy having been taken up and paid for under the Tender Offer. A beneficial Minority Unitholder may revoke a form of proxy or voting instruction form given to an intermediary at any time by written notice to the intermediary in accordance with the instructions given to the beneficial Minority Unitholder by its intermediary. Beneficial Minority Unitholders should contact their broker for assistance in ensuring that forms of proxies or voting instructions previously given to an intermediary are properly revoked.
Other than in respect of the Take Under Offer, none of the Offerors nor, to their knowledge, any of their associates or affiliates, have any material interest, direct or indirect, in any transaction since the commencement of Melcor REIT’s most recently completed financial year, or in any proposed transaction which has materially affected or will materially affect Melcor REIT or any of its subsidiaries. None of the Offerors nor, to their knowledge, any of their associates or affiliates, have any material interest, direct or indirect, by way of beneficial ownership of securities or otherwise, in any matter to be acted upon at any upcoming unitholders’ meeting (including the Special Meeting), other than as set out herein.
Based upon publicly available information, Melcor REIT’s registered office and head office is located at 900, 10310 Jasper Av., Edmonton, Alberta, T5J 1Y8, Canada. A copy of this press release may be obtained on Melcor REIT’s SEDAR+ profile at www.sedarplus.com.
Cautionary Statement Regarding Forward-Looking Information
Certain statements contained in this press release, including without limitation statements regarding completion of the Take Under Offer being a loss to Minority Unitholders and a win for Melcor Parent, and benefits associated with the Tender Offer or voting no on the Take Under Offer contain “forward-looking information” and are prospective in nature. Statements containing forward-looking information are not based on historical facts, but rather on current expectations and projections about future events, and are therefore subject to risks and uncertainties that could cause actual results to differ materially from the future outcomes expressed or implied by the statements containing forward-looking information. Often, but not always, statements containing forward-looking information can be identified by the use of forward-looking words such as “plans”, “expects”, “intends”, “anticipates”, or variations of such words and phrases or statements that certain actions, events or results “may”, “could”, “should”, “would”, “might”, or “will” be taken, occur or be achieved. Although the Offerors believe that the expectations reflected in statements containing forward-looking information herein made by it (and not, for greater certainty, any forward-looking statements attributable to Melcor REIT) are reasonable, such statements involve risks and uncertainties, and undue reliance should not be placed on such statements. Material factors or assumptions that were applied in formulating the forward-looking information contained herein include the assumption that the business and economic conditions affecting Melcor REIT’s operations will continue substantially in the current state, including, without limitation, with respect to industry conditions, general levels of economic activity, continuity and availability of personnel, local and international laws and regulations, foreign currency exchange rates and interest rates, inflation, taxes, that there will be no unplanned material changes to Melcor REIT’s operations, and that Melcor REIT’s public disclosure record is accurate in all material respects and is not misleading (including by omission). The Offerors caution that the foregoing list of material factors and assumptions is not exhaustive. Many of these assumptions are based on factors and events that are not within the control of the Offerors and there is no assurance that they will prove correct. Important facts that could cause outcomes to differ materially from those expressed or implied by such forward-looking information include, among other things, actions taken by Melcor REIT in respect of the Tender Offer, actions taken by Melcor REIT in respect of its distribution, a further write-down of Melcor REIT’s NAV, the perceived and actual value of Melcor REIT’s assets, the extension or variation of the Tender Offer by the Offerors, the content of subsequent public disclosures by Melcor REIT, the failure to satisfy the conditions to the Tender Offer or waiver thereof by the Offerors, the ultimate outcome of the Take Under Offer, general economic conditions, legislative or regulatory changes and changes in capital or securities markets. These are not necessarily all of the important factors that could cause actual results to differ materially from those expressed in any of the Offerors’ forward-looking information. Other unknown and unpredictable factors could also impact outcomes. Statements containing forward-looking information in this press release are based on Offerors’ beliefs and opinions at the time the statements are made, and there should be no expectation that such forward-looking information will be updated or supplemented as a result of new information, estimates or opinions, future events or results or otherwise, and the Offerors disclaim any obligation to do so, except as required by applicable law.
