A syndicate led by Blackstone Real Estate Investment Trust Inc., (BREIT) will invest $395 million in Toronto-based rental housing company Tricon Residential via a preferred equity investment to lower the firm’s overall debt by about 10 per cent.
The investment will take place via the purchase of new exchangeable preferred units in Tricon (TCN-T). The units will be issued by a Tricon subsidiary on a private placement basis and will be exchangeable into a minority investment of Tricon. BREIT will acquire $314.6 million of the preferred equity.
“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, in the release.
A spokesperson for Tricon told RENX no company officials would be available for comment on the deal.
Tricon’s stock was at $10.54 in morning trading on the TSX, up 64 cents or 6.5 per cent on the day. It had traded as high as $12.11 earlier in 2020 before plunging, along with most other stocks as the COVID-19 pandemic hit, to $5.45 in late March.
Proceeds to pay down Tricon’s debt
Tricon plans to use the full net proceeds of the investment to pay down debt, reducing its proportionate leverage by approximately 500 basis points to approximately 56 per cent net debt to assets (excluding convertible debentures) and enhancing balance sheet flexibility.
The company’s net debt as of its Q2 2020 financial report (excluding convertible debentures) was $4 billion, compared to total assets of $6.6 billion, for a net debt-to-assets ratio of 61.3 per cent. Tricon is attempting to reduce that ratio to between 50 and 55 per cent.
“Blackstone inherently understands our business and is exceptionally well-positioned to help us bring our tech-enabled operating platform to its full potential,” Berman said in the release. “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.”
The exchange price per share of $11.18 represents a 16 per cent premium to Tricon’s 30-day volume weighted average trading price as of Aug. 26. It is also in line with the company’s reported IFRS book value per share as of Q2 2020, Tricon says in the release.
Blackstone bought Tricon portfolio
This is the second time in recent years the firms have done business.
In 2018, Blackstone made its first foray into the U.S. manufactured housing sector, acquiring Tricon Lifestyle Communities in a $200-million-plus deal. The portfolio included 14 assets in Arizona and California.
“We are pleased to make this preferred equity investment in Tricon,” said Frank Cohen, chairman and CEO of BREIT, in the release. “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.”
Cohen will join Tricon’s board of directors.
Tricon Residential is focused on the mid-market housing demographic across North America. Founded in 1988, it owns and manages over 30,000 single-family rental homes and multifamily rental units. The vast majority of its investments are in the U.S., particularly the Sun Belt states.
However, Tricon does own the The Selby, a 500-apartment high-rise in Toronto, and is involved in a series of other major GTA multifamily developments.
Other terms of Blackstone’s investment
Other key terms of the investment include:
* a quarterly cash dividend of 5.75 per cent per annum for seven years, subject to subsequent increases;
* exchangeable for common shares of Tricon at $11.18 per share (subject to adjustment), representing approximately 14 per cent of fully diluted common shares at closing;
* the investment does not entitle the holders to vote as common shareholders of Tricon.
The closing date is expected to occur in late August or early September, subject to receipt of TSX approval.
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.
TORONTO – Canada’s main stock index was down more than 200 points in late-morning trading, weighed down by losses in the technology, base metal and energy sectors, while U.S. stock markets also fell.
The S&P/TSX composite index was down 239.24 points at 22,749.04.
In New York, the Dow Jones industrial average was down 312.36 points at 40,443.39. The S&P 500 index was down 80.94 points at 5,422.47, while the Nasdaq composite was down 380.17 points at 16,747.49.
The Canadian dollar traded for 73.80 cents US compared with 74.00 cents US on Thursday.
The October crude oil contract was down US$1.07 at US$68.08 per barrel and the October natural gas contract was up less than a penny at US$2.26 per mmBTU.
The December gold contract was down US$2.10 at US$2,541.00 an ounce and the December copper contract was down four cents at US$4.10 a pound.
This report by The Canadian Press was first published Sept. 6, 2024.
TORONTO – Canada’s main stock index was up more than 150 points in late-morning trading, helped by strength in technology, financial and energy stocks, while U.S. stock markets also pushed higher.
The S&P/TSX composite index was up 171.41 points at 23,298.39.
In New York, the Dow Jones industrial average was up 278.37 points at 41,369.79. The S&P 500 index was up 38.17 points at 5,630.35, while the Nasdaq composite was up 177.15 points at 17,733.18.
The Canadian dollar traded for 74.19 cents US compared with 74.23 cents US on Wednesday.
The October crude oil contract was up US$1.75 at US$76.27 per barrel and the October natural gas contract was up less than a penny at US$2.10 per mmBTU.
The December gold contract was up US$18.70 at US$2,556.50 an ounce and the December copper contract was down less than a penny at US$4.22 a pound.
This report by The Canadian Press was first published Aug. 29, 2024.
The crypto market has recently experienced a significant downturn, mirroring broader risk asset sell-offs. Over the past week, Bitcoin’s price dropped by 24%, reaching $53,000, while Ethereum plummeted nearly a third to $2,340. Major altcoins also suffered, with Cardano down 27.7%, Solana 36.2%, Dogecoin 34.6%, XRP 23.1%, Shiba Inu 30.1%, and BNB 25.7%.
The severe downturn in the crypto market appears to be part of a broader flight to safety, triggered by disappointing economic data. A worse-than-expected unemployment report on Friday marked the beginning of a technical recession, as defined by the Sahm Rule. This rule identifies a recession when the three-month average unemployment rate rises by at least half a percentage point from its lowest point in the past year.
Friday’s figures met this threshold, signaling an abrupt economic downshift. Consequently, investors sought safer assets, leading to declines in major stock indices: the S&P 500 dropped 2%, the Nasdaq 2.5%, and the Dow 1.5%. This trend continued into Monday with further sell-offs overseas.
The crypto market’s rapid decline raises questions about its role as either a speculative asset or a hedge against inflation and recession. Despite hopes that crypto could act as a risk hedge, the recent crash suggests it remains a speculative investment.
Since the downturn, the crypto market has seen its largest three-day sell-off in nearly a year, losing over $500 billion in market value. According to CoinGlass data, this bloodbath wiped out more than $1 billion in leveraged positions within the last 24 hours, including $365 million in Bitcoin and $348 million in Ether.
Khushboo Khullar of Lightning Ventures, speaking to Bloomberg, argued that the crypto sell-off is part of a broader liquidity panic as traders rush to cover margin calls. Khullar views this as a temporary sell-off, presenting a potential buying opportunity.
Josh Gilbert, an eToro market analyst, supports Khullar’s perspective, suggesting that the expected Federal Reserve rate cuts could benefit crypto assets. “Crypto assets have sold off, but many investors will see an opportunity. We see Federal Reserve rate cuts, which are now likely to come sharper than expected, as hugely positive for crypto assets,” Gilbert told Coindesk.
Despite the recent volatility, crypto continues to make strides toward mainstream acceptance. Notably, Morgan Stanley will allow its advisors to offer Bitcoin ETFs starting Wednesday. This follows more than half a year after the introduction of the first Bitcoin ETF. The investment bank will enable over 15,000 of its financial advisors to sell BlackRock’s IBIT and Fidelity’s FBTC. This move is seen as a significant step toward the “mainstreamization” of crypto, given the lengthy regulatory and company processes in major investment banks.
The recent crypto market downturn highlights its volatility and the broader economic concerns affecting all risk assets. While some analysts see the current situation as a temporary sell-off and a buying opportunity, others caution against the speculative nature of crypto. As the market evolves, its role as a mainstream alternative asset continues to grow, marked by increasing institutional acceptance and new investment opportunities.
