TORONTO, May 12, 2014 /CNW/ - Return On Innovation Advisors Ltd. ("ROI Capital") announced today that its board of directors has approved a management information circular (the "Circular") in connection with the meetings of unitholders of ROI Canadian High Income Mortgage Fund (TSX: RIH.UN), ROI Canadian Mortgage Income Fund (TSX: RIL.UN) and ROI Canadian Real Estate Fund (TSX: RIR.UN) (collectively, the "Listed Funds") to be held on June 16, 2014.
ROI Capital expects to mail the Circular to the unitholders of the Listed Funds, and file it under the profile of each Listed Fund on SEDAR, at www.sedar.com, on or about May 15, 2014. The Circular contains the background to and details of the proposed Reorganization (as defined below), ROI Capital's recommendation and information relating to the newly-formed Dream Hard Asset Alternatives Trust ("Dream Alternatives Trust") and its intention to reposition the combined portfolios of the ROI Funds (as defined below) to build and maintain a growth-oriented portfolio of real estate, real estate lending and infrastructure (including renewable power) assets.
ROI Capital also announced today that, in the event that the Reorganization is not approved by unitholders of the Listed Funds or does not close for any other reason, ROI Capital will review the liquidity of the Listed Funds and privately-held ROI Institutional Private Placement Fund ("ROI IPP" and, collectively, the "Investor Funds") and will reduce monthly distributions in order to set sustainable distribution levels going forward for the Investor Funds.
The Meetings and the Reorganization
The meetings and Circular are being undertaken in connection with the previously announced agreement between, among others, ROI Capital and DREAM Asset Management Corporation ("DREAM"), pursuant to which DREAM has agreed to acquire the rights to manage the Investor Funds. In connection with this agreement, it is proposed that the Investor Funds will undertake a reorganization whereby substantially all of the assets of the Investor Funds and the relevant underlying reference funds (together, the "ROI Funds") will be indirectly transferred into and combined in publicly-listed Dream Alternatives Trust in exchange for units of Dream Alternatives Trust (the "Reorganization"). Pursuant to the Reorganization, unitholders of the Investor Funds will receive pro rata units of Dream Alternatives Trust based on the relative net asset values of the Investor Funds.
ROI Capital's agreement with DREAM is a result of a process undertaken by ROI Capital to address significant changes to the tax treatment of forward contracts and the proposed CSA modernization regulatory changes announced in 2013. These two regulatory changes are expected to have a negative impact on each fund's ability to meet its investment objectives and adhere to its strategy, concentration restrictions, diversification and liquidity requirements on a going-forward basis. This is further impacted by the portfolio composition changes resulting from the significant liquidity obligations of the Listed Funds since listing at the end of 2012.
Dream Alternatives Trust will be managed by DREAM, a subsidiary of DREAM Unlimited Corp. (TSX: DRM). DREAM is an innovative real estate manager and developer primarily focused on the commercial and residential sectors in Canada and Germany and renewable power in Canada.
"We believe that the proposed Reorganization is in the best interests of each Investor Fund and its unitholders, and that DREAM is in the best position to execute on the Reorganization and deliver long-term benefits to unitholders" said Wilfred Vos, President of ROI Capital. "With over $13.5 billion in assets under management and extensive experience as a public issuer, DREAM would be a strong manager for our unitholders."
In order to become effective, the Reorganization must be approved by a majority of the unitholders of each of the Listed Funds who vote at the applicable meeting. In addition, the Reorganization is subject to regulatory approvals and other customary conditions to closing. Upon completion of the Reorganization, the Listed Funds will be terminated and delisted.
The Potential Reduction in Distributions
Having funded over $446 million in liquidity for the Listed Funds' unitholders since December 2012, the portfolio composition of each of the Listed Funds has changed. Liquidity needs were largely met by the early prepayment of the most liquid mortgage investments in the portfolio. Consequently, there is currently a greater allocation to private real-estate and private real-estate development assets within the Listed Funds which limits the cash flow available to pay distributions to unitholders. Therefore, in the event that the Reorganization is not approved by unitholders of the Listed Funds or does not close for any other reason, ROI Capital will review the liquidity of the Investor Funds and will reduce monthly distributions in order to set sustainable distribution levels. In such event, ROI Capital will reduce distributions to unitholders of the Investor Funds to a level equal to the cash income from the underlying assets of each fund, with such cash income to include cash flow generated from investments held in the funds as at December 31, 2013 (excluding any principal repayments, cash on hand or accrued interest amounts), net of required expenses incurred by the funds (including but not limited to management fees). Once it is determined that the Reorganization will not proceed, for whatever reason, the decrease in distributions would take effect as of the next monthly distribution of the applicable fund. Any reduction of distributions will be announced by press release. If such reduction was applied to the last monthly distribution (April 2014), based on a net asset value per unit as at May 2, 2014, such distributions would have been:
ROI IPP unitholders would expect an Adjusted Distribution per Unit change of 50% for all Series as follows: Series A Unit = $0.36 Current Distribution per Unit to $0.18 Series F, I , O, R Units = $0.39 Current Distribution per Unit to $0.195.
DREAM is an innovative real estate manager and developer primarily focused on the commercial and residential sectors in Canada and Germany and renewable power in Canada. From its creation, DREAM has successfully identified and executed on opportunities for the benefit of the business, shareholders and clients.
DREAM provides asset management for over $13.5 billion of assets. DREAM is the asset manager for three publicly listed real estate investment trusts in Canada including: Dream Office Real Estate Investment Trust, Canada's largest office REIT, Dream Global Real Estate Investment Trust, Canada's largest REIT that invests only outside of Canada and Dream Industrial Real Estate Investment Trust, one of Canada's largest dedicated industrial REITs.
DREAM also manages $345 million of infrastructure assets with a focus on wind and solar renewable power projects. The total value of these projects is approximately $1.45 billion, including debt. DREAM's asset management team consists of 178 real estate professionals with backgrounds in property management, architecture, engineering, construction, finance, accounting, sales and marketing and law. The team brings experience from virtually all the major real estate organizations in Canada and has expertise in capital markets, structured finance, real estate investments and management across a broad spectrum of property types in diverse geographic markets. It carries out its own research and analysis, financial modeling, due diligence and financial planning. DREAM has an established track record for being innovative and for its ability to source, structure and execute on compelling investment opportunities. DREAM has completed over $17 billion of commercial real estate transactions and $1.45 billion of renewable power investments over the last 20 years. Website: www.dream.ca
About ROI Capital
Established in 2002, ROI Capital is a privately held Canadian investment management firm that specializes in commercial mortgages, loans and private real estate investments. With a deep understanding of the fundamentals of the commercial real estate market, ROI Capital strives for capital preservation while seeking to deliver sustainable income and long-term returns for investors. This is achieved by primarily focusing on income-producing properties in large urban markets. ROI Capital has created a bridge between investors seeking the income potential from alternative investments and borrowers in Canada's flourishing commercial real estate sector seeking non-bank financing. In just over a decade, ROI Capital has financed over $1.7 billion (as of December 31, 2013) across approximately 200 private commercial real estate investments and has continuously delivered value and income to investors. Website: www.roicapital.ca
Certain statements included in this news release constitute forward-looking statements, including statements relating to the Reorganization and its completion, the ability of the Investor Funds to meet their objectives and make distributions, ROI Capital's intentions regarding distributions to unitholders of the Investor Funds if the Reorganization is not completed, and the plans, portfolio and intentions of DREAM and Dream Alternatives Trust. The forward-looking statements are not historical facts but reflect current expectations regarding future results or events. These forward-looking statements are subject to a number of risks and uncertainties that could cause actual results or events to differ materially from current expectations and, accordingly, readers are cautioned not to place undue reliance on such statements due to the inherent uncertainty therein. Readers are directed to review the risk factors described in Schedule C of the Circular under "Risk Factors" and elsewhere in the Circular. ROI Capital undertakes no obligation to update publicly or otherwise revise any forward looking statement whether as a result of new information, future events or other such factors which affect this information, except as required by law. Investment funds are not covered by the Canada Deposit Insurance Corporation or by any other government deposit insurer. There is no guarantee that an investment in any Investor Fund will earn any positive return in the short or long term nor is there any guarantee that the Investor Fund's investment objectives will be achieved or that the net asset value per unit will appreciate or be preserved.
SOURCE: ROI Capital
For further information:
Wilfred Vos, Bcs, FMA, CIM, CFP, FCSI, DMS, CBV, MBA, CFA
President and Founding Partner