RBC and Mill Pond Capital Oppose H&R REIT Breakup, Citing Unfair Terms for Public Unitholders
RBC Global Asset Management and Mill Pond Capital plan to vote against the proposed breakup and sale of H&R Real Estate Investment Trust, arguing the deal undervalues public unitholders while offering preferential terms to Executive Chairman Tom Hofstedter's family.
Two major institutional investors are moving to block the proposed breakup and sale of H&R Real Estate Investment Trust, setting up a clash with the company’s board over whether the transaction treats public unitholders fairly.
RBC Global Asset Management, which holds 9.3 million units of H&R and ranks among its largest equity investors, plans to vote against the deal. Mill Pond Capital, holding 2.2 million units, has also announced it will vote its shares in opposition. Mill Pond stated that the transaction does not deliver fair value to public unitholders while providing sweeter terms to H&R Executive Chairman Tom Hofstedter and his family.
The complex proposal would divide H&R’s portfolio among multiple buyers. Blackstone Inc. would acquire industrial properties in Canada. GO Residential Real Estate Investment Trust would purchase approximately two dozen residential properties in the United States sunbelt, along with H&R’s 50 per cent stake in the Jackson Park luxury high-rise apartment complex in New York. Meanwhile, CRAL, a company controlled by the Hofstedter family, would retain specific assets, including nine Canadian office properties and three Canadian development properties.
Under the proposed terms, H&R holders would receive $4.28 in cash plus 0.5688 units of GO REIT for every H&R unit they own. Based on GO’s closing price on Wednesday, the package is valued at roughly $10.16 per share, compared to H&R’s closing price of $9.26. However, GO’s stock has tumbled about 25 per cent since the transaction was announced, raising concerns among opposing investors regarding dilution and tax inefficiency for public unitholders.
H&R’s board and GO REIT have urged investors to vote in favor of the transaction. The board stated that Tom Hofstedter’s participation is an essential element of the deal. Opposing funds argue there is a conflict of interest, as the executive chairman's family receives different consideration than other shareholders through CRAL's retention of specific assets.
The transaction requires approval under Canada’s “majority of the minority” rules, meaning it must be supported by a majority of shareholders excluding interested parties. With RBC and Mill Pond publicly committing to vote against the proposal, the outcome remains uncertain.