Shares issued: Class A - 16,618,819 Class B - 3,148,538
HALIFAX, Dec. 16 /CNW/ - Richard Homburg, Chairman and Chief Executive Officer of Homburg Invest Inc. ("HII" or the "Company"), (TSX: HII.A, HII.B; NYSE Euronext Amsterdam: HII) announced today that the Board of Directors has authorized a major reorganization of the Company's real estate assets in order to unlock value for shareholders.
To accomplish its goal of unlocking value, HII will divide its assets among five new entities owned or initially controlled by the Company. Three of the five new entities will be geographically focused real estate companies, each structured as either a real estate corporation or a real estate investment trust ("REIT"), and each listed on a stock exchange located in proximity to the assets of the spun-off company. HII will henceforth be structured as a public holding company with, initially, significant equity interests in each of the five new entities. The Board of Directors has set a target date of December 2010, subject to market conditions and necessary regulatory approvals, to complete the reorganization and have each new entity fully operational.
As the initial step in the reorganization, HII also announces that it will move immediately to create the Homburg Canada Real Estate Investment Trust ("Homburg Canada REIT") to hold all of the Company's Canadian income producing real estate properties. Homburg Canada REIT will become a publicly traded REIT by way of an initial public offering ("IPO") in the first half of 2010, subject to market conditions and necessary regulatory approvals.
The decision to reorganize HII on this basis is a refinement of the Company's strategic initiatives announcement of June 12, 2009.
"The strategy we are announcing today enables the Company to more effectively unlock the value in each of our geographical operating areas by matching our local real estate assets to investors who understand their local markets," said Richard Homburg. "This structure will highlight the intrinsic value of our assets and enable us to access capital from a variety of different markets."
Homburg Canada REIT
The Board of Directors of HII has approved the immediate creation of the Homburg Canada REIT, which will hold all of Homburg's Canadian income producing real estate properties.
With approximately $1 billion in initial assets, Homburg Canada REIT will be among the larger publicly traded REITs in Canada, with a national and diversified asset base. Homburg Canada REIT will have a new and separate Board of Trustees, its own fully internalized management (both asset management and property management), and its head office in Montreal, Quebec. Homburg Canada REIT will initially have a debt-to-equity ratio consistent with that of its Canadian publicly traded peers, but will target a debt-to-equity ratio of 50:50 over time.
Homburg Canada REIT's initial assets will include landmark income producing real estate properties like the Place Alexis Nihon commercial centre and the CN Central Station Complex, both in Montreal, Quebec, the Confederation Court Mall complex in Charlottetown, P.E.I., along with other high quality assets in Alberta, Ontario, Quebec and Atlantic Canada.
It is contemplated that Homburg Canada REIT will go public by way of an IPO sometime during the first half of 2010, subject to market conditions and necessary regulatory approvals. Details of the transaction, including strategy, management team and other relevant operating and financial information, will be fully disclosed by way of prospectus to be filed in connection with the IPO. Homburg Canada REIT will apply to list its units on the Toronto Stock Exchange. TD Securities Inc. has been engaged by HII to act as the exclusive lead bookrunner of the IPO of Homburg Canada REIT.
Homburg Development Company
In order to unlock the hidden value in its land holdings, particularly in Calgary, Alberta, HII is creating Homburg Development Company ("HDC") to hold all development properties and lands held for development in Alberta and other Canadian markets. For the immediate future, HDC will remain a wholly-owned subsidiary of HII. However, HII may consider additional measures to surface value in HDC, including the possibility of merging the company with an appropriate partner.
A newly incorporated entity will be created to hold all German and Dutch assets of the Company, as well as any new assets that may be acquired in
Western Europe. At the appropriate time, the new subsidiary will be taken public and listed on the NYSE Euronext Amsterdam and/or another European exchange.
It is contemplated that all Eastern European assets of HII will eventually be transferred to a separate company whose shares will be listed on an appropriate exchange in Europe.
All U.S. properties and U.S. joint venture interests of the Company will remain in a wholly owned U.S. subsidiary of HII.
Homburg Invest: Structure, cash flow and dividends
HII will remain a publicly traded holding company with equity interests of varying levels in each of the five new entities. Although HII will hold majority equity interests in each of the new publicly traded entities at the time of listing, the Company intends to reduce its equity interests to below 50% over time.
As the ultimate holding company, HII will collect its share of dividends and/or other cash distributions from its investments in the publicly traded subsidiaries of the Company. This cash flow from the operating divisions will be used to pay interest on outstanding HII bonds, to redeem bonds or finance the redemption of bonds as they come due and at the appropriate time, to restore dividends on the Company's shares. In the event that HII sells shares in any of its divisions, the proceeds may also be used to redeem outstanding HII bonds.
The new structure is intended to ensure that the market is more readily able to value each of HII's portfolios, to increase market liquidity and financial flexibility.
"Unlocking value via a spin-off of assets, regular dividend payments and/or distributions from the subsidiaries to HII and by the pay-down of debt will all contribute to enhancing value at HII," said Mr. Homburg. "This program will enable us to build value for shareholders in a transparent manner, and to consider a dividend program for our shareholders at HII at an early opportunity."
"Think Global, Act Local"
The new structure will enable investors to choose between investing in a wide range of global assets through an investment in HII shares, or in specific geographically focused real estate portfolios, such as the Homburg Canada REIT.
"By focusing on attracting greater local investment to each geographical asset class, this new structure enables HII to ensure that our assets in any one geographical area are fully valued by investors who understand the market. Through our retained equity interests in each of the five entities, HII shareholders will benefit from the full valuation of our local assets, while enabling us to continue investing along the global skyline," continued Richard Homburg.
"We are excited about the opportunities and flexibility that our new structure will provide. In particular, we are excited about the creation of Homburg Canada REIT, which will be among the larger, more diversified, and higher quality publicly traded REITs in Canada."
Class A and Class B shares
Following consultation with a number of shareholders and advisors, HII also announced today that the Company is withdrawing its proposal to reorganize its multiple and single voting shares into a single class of common shares. Key shareholders echoed what governance experts have acknowledged in recent years: there is significant added value in having a strong founding shareholder with a majority of voting shares, whose experience and expertise provide stability and long-term vision. In addition, some shareholders expressed concern that the proposed share reorganization was coming at a time when Homburg Invest shares were trading at a substantial discount to net asset value, thereby opening the way for a potential hostile takeover of the Company.
About Homburg Invest
Homburg Invest Inc., with its head office in Halifax, Nova Scotia, owns and develops a diversified portfolio of quality real estate including office, retail, industrial and residential apartment and townhouse properties throughout Canada, the United States and Europe.
SOURCE Homburg Invest Inc.
For further information: For further information: Mr Richard Homburg, Chairman and Chief Executive Officer; Mr Richard Stolle President and Chief Operating Officer; Contact in North America: Paul de la Plante, NATIONAL Public Relations, (514) 843-2332; Contact in Europe: +31 (20) 573 3855