GO Residential Real Estate Investment Trust (GO REIT) and a buyer consortium including Blackstone Real Estate, Crestpoint Real Estate Investments and Public Sector Pension Investment Board (PSP Investments) have agreed to acquire GO REIT’s TSX-listed peer H&R Real Estate Investment Trust, in a deal valuing the target at C$6.7bn (€5.8bn) enterprise value.
The buyer group, which also includes a vehicle, CRAL, controlled by the family of H&R chief executive Tom Hofstedter, is offering H&R unitholders C$4.28 in cash plus 0.5688 GO REIT units for each H&R unit, implying an equity value of approximately C$3.4bn.
As part of the transaction, GO REIT will gain 27 US residential and commercial assets from H&R valued at US$2.8bn (€2.42bn), expanding its footprint into seven US Sun Belt markets. Once the deal completes, H&R unitholders will hold a 66.9% stake in the combined GO REIT entity, which will control 35 properties comprising more than 13,300 residential suites across North America.
The remaining real estate will be carved out among the consortium for cash, with Blackstone taking selected Canadian industrial assets, while Crestpoint and PSP Investments will acquire Canadian industrial properties in which they already hold co-ownership stakes.
CRAL will acquire all remaining non-core assets and provide income and cost support payments to GO REIT subsidiaries as part of the transaction.
Stephen Gross, independent lead trustee at H&R, said: “This transaction delivers immediate cash and GO REIT unit consideration at a meaningful premium and establishes H&R unitholders as significant partners in a larger, stronger, pure-play residential platform with considerable upside potential.
“Following last year’s exhaustive and independent review of H&R’s strategic alternatives, the Independent Trustees are confident this Transaction represents the best path forward for our unitholders.”
Josh Gotlib, CEO of GO REIT, said: “This is a transformational transaction for GO REIT and H&R unitholders. GO REIT has built one of the highest-quality luxury residential portfolios in New York City, and H&R adds to that foundation with its portfolio of exceptional residential assets across the highest-growth Sun Belt markets in the US.
“Together, we are establishing GO REIT as a leading luxury residential real estate investment trust with New York City and Sun Belt exposure, a platform with the scale, balance sheet strength, and geographic diversification to compete for a broader category of investors. We are excited to welcome H&R unitholders as our partners.”
Meyer Orbach, chairman of GO Residential REIT, said: “The board has unanimously concluded that this transaction is in the best interests of GO. It addresses, in a single step, the issues that have limited GO’s valuation – concentration, leverage, and scale – while preserving the quality and integrity of the portfolio our team has assembled.”
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