Portfolio Acquisition - Northview Apartment REIT - KWM Global Real Estate Solution

Alex Dolesky - Feb 24, 2020
The morning of Feb. 20th, 2020,  Northview Apartment REIT (Northview) announced that it has entered into an agreement with Starlight Group Property Holdings Inc.

The morning of Feb. 20th, 2020,  Northview Apartment REIT (Northview) announced that it has entered into an agreement with Starlight Group Property Holdings Inc. (Starlight) and KingSett Capital Inc. (KingSett) whereby Starlight and KingSett will acquire Northview for $36.25 per unit in cash, which translates into a transaction value of $4.8 billion (including the assumption of net debt). This price implies a cap rate of ~5.0% (CG estimate) and represents a 25% premium to consensus analyst NAV per unit.

In our view, we believe this transaction will close at the current offer price of $36.25 per unit.

We view the agreement to be a fair price for the REIT, and believe that investors should be pleased with the outcome.

The transaction reflects an attractive value for Northview’s real estate portfolio and represents a 25% premium to the latest NAV estimate of $30.00.

Northview has been our core holding for a number of years, with the majority of clients crystalizing a gain in the 50% -130% range (including the dividend) depending on the length of ownership. We have been net buyers of the REIT till the day prior to the announcement. We featured Northview in our 2017 newsletter when the stock was trading around $20.00 and we were aggressive buyers. Total return (including the dividend) has been over 100% since then.

The REIT takeover (being the 8th friendly acquisition among our portfolio holdings in the last 3 years) is yet another validation on our theory that publicly traded REITS not only serve as a great income producing instrument but also are a great way for achieving substantial capital by investing in undervalued assets across North America and Europe. In the case of NorthView Apartments these assets were comprised of properties in smaller urban markets across Canada.

 

Feel free to contact our team as we evaluate new prospective positions with the proceeds of this success.