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TORONTO, Aug. 27, 2020 /CNW/ - Tricon Residential
Inc. (TSX: TCN) ("Tricon", "Tricon Residential" or the "Company"),
a rental housing company focused on serving the middle-market
demographic in North America,
announced today that a syndicate of investors led by Blackstone
Real Estate Income Trust, Inc. ("BREIT"), a non-listed,
perpetual-life real estate investment trust advised by an affiliate
of Blackstone Real Estate, has agreed to make a $300 million (C$395
million) preferred equity investment (the "Investment") in
Tricon through the purchase of newly-created units (the "Preferred
Equity") which are issued by a Tricon subsidiary on a private
placement basis and are exchangeable into a minority investment of
Tricon. BREIT will acquire $240
million of the Preferred Equity. The Investment provides
several immediate benefits to Tricon:
Validation of Tricon's Business – The Investment
demonstrates the financial strength of Tricon and that Blackstone
Real Estate, a global leader in real estate investing, believes in
the value and stability of Tricon's rental housing portfolio.
Exchangeable Preferred Issuance at Attractive
Pricing – The exchange price of US$8.50 per share (approximately C$11.18) represents a 16% premium to Tricon's
30-day volume weighted average trading price ("VWAP") as of
August 26, 2020 and is in line with
the Company's reported IFRS book value per share as at Q2
2020.
Strengthens Tricon's Balance Sheet – Tricon expects
to use the full net proceeds of the Investment to repay its
corporate credit facility, reducing its proportionate leverage by
approximately 500 basis points to approximately 56% net debt/assets
(excluding convertible debentures) and enhancing its balance sheet
flexibility. Tricon remains committed to reducing its leverage to a
near-term target of 50-55% net debt/assets and expects the planned
syndication of an equity interest in its U.S. multi-family
portfolio to contribute further to this goal.
"This investment in Tricon illustrates Blackstone Real Estate's
confidence in our business fundamentals and the value in our
stock," said Gary Berman, CEO of
Tricon Residential. "Blackstone inherently understands our business
and is exceptionally well-positioned to help us bring our
tech-enabled operating platform to its full potential. We are
excited to have the support of one of the world's largest real
estate investors, and we are confident that this investment will
create significant value for both Tricon's and BREIT's
shareholders."
Frank Cohen, Chairman and CEO of BREIT, said, "We are
pleased to make this preferred equity investment in Tricon. We
continue to see strong underlying fundamentals in the rental
housing sector and believe the company's high quality,
income-generating assets are poised to generate stable performance
under the leadership of its best-in-class management team."
Summary Investment Terms
Key terms of the Investment and Preferred Equity include:
- Quarterly cash dividend of 5.75% per annum through to the
seventh anniversary of the Investment closing, subject to increases
thereafter.
- Exchangeable for common shares of Tricon ("Common Shares") at
any time at the option of the holder at an initial exchange price
of US$8.50 per share (approximately
C$11.18), representing a 16% premium
to the 30-day VWAP of the Common Shares on the Toronto Stock
Exchange (the "TSX") as of August 26.
On an as-exchanged basis, the Preferred Equity will represent
approximately 14% of the pro forma fully diluted outstanding Common
Shares at closing. The exchange price will be subject to adjustment
from time to time in accordance with the terms of the Preferred
Equity.
- The Preferred Equity will not entitle the holders to vote as
common shareholders of Tricon.
In connection with the Investment, Tricon and its subsidiary
will enter into an investor rights agreement with BREIT providing
for, among other things, customary registration rights,
participation rights, consent rights, certain standstill and
transfer restrictions and the right to nominate one director to
Tricon's board.
Tricon is pleased to welcome Frank
Cohen, who will join Tricon's board of directors (the
"Board") on the closing date of the Investment. Mr. Cohen, a
Blackstone Senior Managing Director and Chairman and CEO of BREIT,
will be appointed to the Board as BREIT's initial nominee in
connection with its investment.
Additional information regarding the Investment and the terms of
the Preferred Equity will be included in a material change report
to be filed by Tricon on www.sedar.com. This press release is
only a summary of certain principal terms of the Investment and is
qualified in its entirety by reference to the more detailed
information contained in the material change report.
The closing date is expected to occur in late August or early
September, subject to receipt of TSX approval.
Transaction Advisors
Morgan Stanley acted as Tricon's sole private placement agent.
Goodmans LLP acted as Tricon's legal advisor, with U.S legal
support provided by Paul, Weiss, Rifkind, Wharton & Garrison
LLP. Skadden, Arps, Slate, Meagher & Flom LLP acted as legal
advisor to Morgan Stanley. Simpson Thacher & Bartlett LLP and
Davies Ward Phillips & Vineberg LLP acted as BREIT's legal
advisor.
About Tricon Residential
Founded in 1988, Tricon Residential is a rental housing company
catering to the middle-market demographic throughout the United States and Canada. Tricon Residential owns and manages
over 30,000 single-family rental homes and multi-family rental
units through an integrated, technology-enabled operating platform.
More information about Tricon Residential is available at
www.triconresidential.com.
Additional Early Warning Disclosures of BREIT
BREIT is making the Investment through BREIT
Debt Parent LLC (the "Investor"), a subsidiary of Blackstone Real
Estate Income Trust, Inc. ("BREIT").
Pursuant to a subscription agreement with Tricon and Tricon
PIPE LLC, the Tricon subsidiary issuing the Preferred Equity
(the "Subsidiary"), dated August 26,
2020, the Investor has agreed to purchase 240,000 units of
the Preferred Equity for an aggregate purchase price of
US$240 million and one Common Share
at market price (collectively, the "Purchased
Securities").
Immediately prior to this Investment, the Investor and its
affiliates (including BREIT) owned no voting or equity securities
in the capital of Tricon. Upon closing of the Investment, the
Investor and its affiliates will own one Common Share and 240,000
units of the Preferred Equity, representing approximately 12%
of the currently outstanding Common Shares, assuming the
exchange of all of the Preferred Equity for Common Shares at the
initial exchange price of US$8.50, but on an otherwise non-diluted
basis. When acquired, the Purchased Securities, and any Common
Shares issued to the Investor on exchange of the Preferred Equity,
will be held by the Investor for investment purposes. Depending on
market conditions and other factors, including Tricon's business
and financial condition, the Investor or its affiliates (including
BREIT) may acquire additional securities of Tricon or dispose of
some or all of the securities of Tricon that it owns at such
time.
An early warning report with additional information in
respect of the foregoing matters will be filed and made available
on the System for Electronic Document Analysis and Review (SEDAR)
at www.sedar.com under Tricon's profile. The
Investor's address is 345 Park Avenue, New York, NY USA 10154. Tricon's head office
is located at 7 St. Thomas Street, Suite 801, Toronto, Ontario M5S 2B7.
Forward Looking Statements
Certain statements contained in this news release are
forward-looking statements and are provided for the purpose of
presenting information about management's current expectations and
plans relating to the future. Readers are cautioned that such
statements may not be appropriate for other purposes. These
forward-looking statements include: the expected pro forma
fully diluted ownership represented by the Preferred Equity, the
anticipated use of the net investment proceeds and associated
impact on Company leverage, the Company's leverage targets and
planned syndication of its U.S. multi-family portfolio, the
expected timing for completing transaction, the appointment of Mr.
Cohen as a member of the Board and the prospect of future strategic
opportunities between Tricon and BREIT.
Such statements are subject to significant known and unknown
risks, uncertainties and other factors that may cause actual
results or events to differ materially from those expressed or
implied by such statements and, accordingly, should not be read as
guarantees of future performance or results and will not
necessarily be accurate indications of whether or not such results
will be achieved. Forward-looking information herein is
based on various assumptions and expectations that Tricon believes
are reasonable in the circumstances. Such assumptions include the
timing of receipt of necessary TSX approval, that all
conditions to the closing of the Investment will be satisfied, that
the Investment will be completed on the terms set forth in the
relevant transaction agreements, and the anticipated impact of
COVID-19. Although management believes that it has a reasonable
basis for the expectations reflected in these forward-looking
statements, actual results may differ from those suggested by the
forward-looking statements for various reasons including but not
limited to the assumptions, risks and uncertainties described above
and under the heading "Risk Factors" in Tricon's annual information
form for the fiscal year ended December 31,
2019. These forward-looking statements reflect current
expectations of the Company as at the date of this news release and
speak only as at the date of this news release. The Company does
not undertake any obligation to publicly update or revise any
forward-looking statements except as may be required by applicable
law.
SOURCE Tricon Capital Group Inc.