REIT holders not all equal

It may not be a first but the extra complications of a Canadian real estate investment trust buying another Canadian-based REIT with non-Canadian investors played out Wednesday when Dundee REIT closed a $231.8-million financing.

Dundee raised capital to partially repay debt taken on to acquire the outstanding units of Whiterock REIT, a transaction announced two months back. In the financing, Dundee REIT also sold an additional 1.356 million units.

Those units were issued with the acquisition of Whiterock “and are being held for the benefit of former unitholders of Whiterock who are non-residents of Canada.” The reason: The non-Canadian unitholders “are ineligible to directly receive units as consideration in connection with the acquisition.” Given that inability to receive Dundee REIT units — unitholders were offered either $16.25 cash or 0.4729 units of Dundee REIT — the select group of Whiterock unitholders had to be offered an alternative.

The joint circular prepared by Dundee and Whiterock provides further clarification on this point given that Dundee’s offer was not made to those unitholders of Whiterock who are non-residents of Canada. “Upon the completion of the Acquisition, all Whiterock Unitholders who are non-residents of Canada will have their Whiterock Units redeemed by Whiterock and the Dundee Units to which they would otherwise be entitled will be issued to the Depositary, which shall as their agent … sell all such Dundee Units through the facilities of the TSX, and pay … the net proceeds of such sales…..”