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Blackstone makes $395M equity investment in Tricon | RENX – Real Estate News EXchange

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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.

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China will boost investment in strategic industries: state planner – TheChronicleHerald.ca

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BEIJING (Reuters) – China said on Wednesday it will boost investment in strategic industries including core tech sectors such as 5G, artificial intelligence and chips.

China will accelerate development of new materials to ensure stable supply chains for aircraft, microelectronic manufacturing and deep-sea mining sectors, the National Development and Reform Commission (NDRC) said.

China will also speed development of vaccine innovation, diagnostic, testing reagents and antibody drugs, the NDRC said.

(Reporting By Ryan Woo and Lusha Zhang; Editing by Shri Navaratnam)

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Can Interest in ESG Investing Hold Up During a Pandemic? – Morningstar.ca

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Interest in sustainable investing has grown tremendously in recent years, and our research has shown that this applies to most investors, regardless of gender or age. Given this rise in popularity, a growing number of asset managers and public companies are making sustainability-focused changes. 

As Morningstar’s director of sustainability research Jon Hale noted in his Sustainable Funds U.S. Landscape Report, many “companies started off 2020 by issuing significant commitments to sustainability.” Along with these commitments, asset flows into sustainable funds increased fourfold in 2019 alone and continue to see record inflows so far this year.

Despite this unprecedented growth, some believe that interest in environmental, social, and governance investing is fickle and will dwindle when the going gets rough. In our research, we have found that interest in ESG investing can take the heat. 

Putting Interest in ESG Investing to the Test
To test the durability of investors’ interest in ESG, we conducted an online experiment during the beginning of the extreme market volatility caused by the COVID-19 pandemic (March 26, 2020 to March 29, 2020).

We asked 626 people to imagine they’d started a new job and were setting up a retirement account for which they needed to distribute assets among 15 fund options. The context of that choice varied in the experiment; the participants were randomly assigned into one of three groups:

  • Group 1: Participants received standard metrics about each investment: the name, Morningstar Category (large value, mid-cap growth, and so on), five-year total return, 10-year total return, annual reported net expense ratio, and Morningstar Rating (the star rating).
  • Group 2: Participants were offered the exact same lineup and information but were also given each investment’s Morningstar Sustainability Rating.
  • Group 3: Participants were given a questionnaire to help remind them of their personal ESG preferences (known as an identity prime questionnaire) and then received the exact same lineup and information as Group 2.

We then compared the average amount that each of the three groups invested in each option.

ESG Continues to Hold Investors’ Attention
One investment in this experiment that particularly required people to trade off between returns and a high sustainability rating was Royce Special Equity (RYSEX), which has a 5-globe rating but a fairly low five-year trailing return. 

Although Group 1 (which had no ESG information about the investment alternatives) largely ignored Royce Special Equity, Groups 2 and 3 invested substantially more money into it. In other words, this choice showed that investors do seem to be swayed by a fund’s sustainability rating when making asset-allocation decisions, and moreover that identity priming isn’t needed to encourage people to invest with sustainability in mind. 

The exhibit below shows the detailed results of the average amount that each group allocated to each investment option. The globe symbols denote the funds’ sustainability ratings, and the percentages are the funds’ five-year returns.

ESG chart 1

These results show that the individuals in Groups 2 and 3, who had access to fund options’ ESG information, increased the average sustainability rating of their portfolios by a statistically significant amount compared with Group 1. 

Also, and most importantly, we found that the investment allocations in Groups 2 and 3 were less correlated with returns overall, suggesting that participants focused less on returns when they made their investment selections.

ESG Investing Interest Is Here to Stay
This research suggests that even during a pandemic and extreme market volatility, investors continue to be interested and swayed by ESG information. In other words, interest in ESG investing is not going anywhere, and investment professionals would be well-served by incorporating it into their practices.

 

Learn More About This Experiment by Downloading “The Sustainability Stress Test”

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Warehouses Beat Malls as Virus Fuels Record Global Investment – BNN

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(Bloomberg) — Supply Lines is a daily newsletter that tracks Covid-19’s impact on trade. Sign up here, and subscribe to our Covid-19 podcast for the latest news and analysis on the pandemic.

Warehouse deals accounted for a record share of global commercial real estate investment in the first half of the year as the surge in e-commerce during lockdown fueled demand for logistics properties.

About $75 billion was spent on industrial and logistics properties in the first six months, or about 20% of total investment, according to broker Savills Plc. Warehouses surpassed stores to become the third-most-popular real estate asset class after offices and homes, the firm said in a report based on Real Capital Analytics Inc. data.

“The current global e-commerce boom, accelerated by consumers shifting their purchasing online throughout the pandemic, has been a major catalyst for this sector’s growth,” Paul Tostevin, world research director at Savills, said in a statement.

Online sales are forecast to increase by 31% in Western Europe this year, accounting for about 16% of total retail sales, according to the Centre for Retail Research. In the U.S., the e-commerce market share will reach 14.5%, eMarketer research shows. That’s led to “unprecedented levels of investor demand,” with companies such as Amazon.com Inc. on a leasing spree to support expansion, according to the Savills report.

The world’s biggest real estate investors including Blackstone Group Inc. and GIC Pte have made substantial and lucrative bets on warehouse properties over the past decade. Blackstone has spent about $40 billion on warehouses around the world in the past two years alone, RCA data show. The rise in demand for warehouse properties has also propelled companies including Prologis Inc. and Segro Plc to the top of real estate investment trust indexes, while mall landlords have tumbled in value.

The amount of capital invested in warehouses annually rose sixfold in the decade through 2019, when $196 billion of deals were completed, Savills said in the report. In the U.S., deals jumped tenfold in the period.

©2020 Bloomberg L.P.

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