GO Residential REIT will acquire 27 properties and expand its portfolio fourfold as part of a $4.8 billion transaction that breaks up Canada's H&R REIT, the company said Tuesday. The deal values H&R at about 6.7 billion Canadian dollars including assumed debt.
GO will take 23 Sun Belt residential properties, a 50 percent stake in a mixed-use Miami property, a New York office tower and a mixed-use Dallas office asset. The acquisition brings GO's total portfolio to 35 properties across eight U.S. markets. GO said the transaction makes it the second-largest publicly traded residential REIT in Canada.
GO Residential launched last year to invest in luxury high-rise multifamily properties, primarily in the New York metropolitan area. The transaction adds Sun Belt scale to that foundation, the company said.
"We have built one of the highest-quality luxury residential portfolios in New York City, and this transaction takes that foundation and adds Sunbelt scale, balance sheet strength, and earnings growth — transforming GO into one of Canada's largest publicly-traded residential REITs," GO Residential CEO Joshua Gotlib said in a statement. "It will be a platform with a greater opportunity set, and competing for a different category of investor."
A consortium of co-purchasers includes Blackstone Real Estate, Crestpoint Real Estate Investments, PSP Investments and a company controlled by the family of H&R CEO Tom Hofstedter. Blackstone, PSP and Crestpoint will acquire the Canadian industrial properties. H&R owned 66 industrial properties totaling 8.3 million square feet at the end of March.
The Hofstedter family will absorb H&R's remaining noncore assets. H&R investors will receive CA$4.28 in cash plus 0.57 GO REIT units for each H&R unit they hold.
Toronto-based H&R REIT owned about $5.8 billion of assets at the end of March. Residential assets made up 60 percent of the portfolio and industrial accounted for another 25 percent. The firm spent years pivoting away from underperforming office and retail assets and toward multifamily and industrial.
H&R significantly underperformed against other Canadian real estate companies over the past decade and went through an exhaustive review of its options last year, H&R Lead Independent Trustee Stephen Gross told Bloomberg. Blackstone was reportedly in talks in June to buy H&R and its portfolio of more than 20 million square feet of North American real estate.
The deal values H&R's equity at about $2.4 billion. That represents a 14.5 percent premium over H&R's closing price on June 10, when Blackstone was in early-stage talks, Bloomberg reported.