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BVD.un - Boulevard Industrial Real Estate Investment Trust


snowball82
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HHT investment inc (HHT.P), Last trade 0.14 $, 4 M$ market cap., 30 M shares (33 M fully diluted basis)

 

Ex CEO and managers Dundee industrial REIT and Pure industrial real estate trust start a new REIT. They have to do a qualifying transaction, raise capital and become a real REIT.  The Company has no significant assets other than cash (2 M$) and proposes to identify and evaluate potential acquisitions or businesses with a view to completing a Qualifying Transaction.

I bought a position because they are successfull managers, know the sector very well and they have a proved business model.

 

So Scott Hayes and Mark Hogan are experienced in industrial real estate, a unique team for a microCap. If they growth the business like I think they can, the yield will be very interesting over time. Risks are about real estate market in Canada and their capacity to raise capital with good terms or potential modifications about fiscality for reits.

 

http://business.financialpost.com/2013/07/11/the-return-of-reit-veterans-part-ii/

 

Is someone here following the story ?

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HHT.p first acquisition : "Net operating income for the first year is expected to be approximately $1.36 million, resulting in a capitalization rate of approximately 9.06%."

 

Curious to know what will be profit per unit after the private placement and others fees. Opinion ?

 

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HHT.p first acquisition : "Net operating income for the first year is expected to be approximately $1.36 million, resulting in a capitalization rate of approximately 9.06%."

 

Curious to know what will be profit per unit after the private placement and others fees. Opinion ?

 

Appreciate the posts, snowball82. How about the current Canadian real estate bubble though?

 

Thanks.

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AJC,

 

I agree, from UK perspective residential is very hight here in many Canada cities (maybe too hight in Toronto and Vancouver), so they have a niche in Industrial real estate. They know that too.

 

Look the experience of CEO "While at Pure Industrial, Scott was instrumental in growing the market cap by 20 times. While Scott was at Dundee...Dundee acquired and managed over $1.5 billion of income producing industrial assets and its market cap grew to over $700 million."

 

So if this stock does well during 2014 like i think, maybe i could become a full member like you on this board :) lol

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  • 4 weeks later...

Here the last summary, general info. HHT Investments Inc. is a Capital Pool Company that will convert to a trust structure and is focused on the acquisition and management of light industrial properties in major Canadian markets. It is managed by Boulevard Capital Corporation, a private real estate asset management company founded and owned by capable and experienced real estate professionals. I believe HHT is a compelling investmentopportunity and has a unique team to execute the strategy. Scott Hayes and Mark Hogan are able managers and they will build a great business together. When a 42 years old successful ex CEO at Dundee Industrial REIT and Pure Industrial Real Estate Trust start a new REIT, you have to look the story.

 

See this extract from the prospectus : CEO, Scott Hayes "While at Pure Industrial, Scott was instrumental in growing the market cap by 20 times...While Scott was at Dundee acquired and managed over $1.5 billion of income producing industrial assets and its market cap grew to over $700 million."

 

The Corporation intends to reorganize into a real estate investment trust to be named Boulevard Industrial Real Estate Investment Trust.

 

Last December, the company announced a proposed acquisition of industrial properties as Qualifying Transaction. It has entered into anagreement with NBIMC Realty Corp. (a Provincial Pension Fund), pursuant to which the HHT will acquire from NBIMC the industrial lands and buildings located at 1070 St. George Blvd., 1180 St. George Blvd. and 205 Commerce Street in Moncton, New Brunswick for an aggregatepurchase price of $15,000,000. The Purchase Price equates to a value of approximately $63.40 per square foot and also includes excess land that will allow future expansion by over 100,000 square feet. Net operating income for the first year is expected to be approximately $1.36 million, resulting in a capitalization rate of approximately 9.06%.

 

The Purchase Price will be satisfied by way of mortgage financing, cash from existing working capital and the proceeds of a long for prospectus financing by the HHT to be completed in connection with the acquisition. Prior to the closing of the acquisition, HHT intends to complete a financing for a minimum of $4,500,000 and a maximum of $7,500,000 in gross proceeds. Further details in respect of the terms of the financing will be provided in a future press release.Shareholders will be asked to approve the Proposed Transaction at a special meeting to be held in mid-February.

 

A Real Estate Investment Trust (“REIT’) is a proven business model where a company acquire buy real estate and distribute most of cash flow to unitholderson a tax efficient basis. REITs didn’t pay corporate taxes and they distribute the money, very often every month. Theopportunity here could be to profite from both an attractive future divided as well as capital appreciation. It is often the case that as microand small cap REITs grow, they begin to attract attention from institutional investors, thereby increasing the unit price and hence lowering the REIT’s cost of capital. One example of that could be Pure industrial real investment trust (AAR.un, 4.67 $) where income start from 2 M$ during 2007 to 93 M$ for trailing twelve months (135 M shares). So if we use the average percentage distribution of last five years (126 % profits), we can see improving yield could be rewarding. Per unit cash distribution for the month of December 2013 was 0.026 (equivalent to 0.312 per trust unit on an annualized basis vs 0.25 during 2008).

 

Most Canadians think the Canadian real estate is overvalued and the average price will go down should interest rates rise. It is probably truefor residential real estate located in biggest cities in Canada. So, HHT.p is targeting a niche and intends to be the institutional aggregator of Canadian industrial properties. Returns on industrial real estate are attractive, as we can see with first transaction. On an historical basis for industrial real estate, the price of transactions is correlated to the cost of borrowing. So if the interest rates were to rise, it is typically the case that the price purchase will goes down. Industrial leases are typically fully net to the landlord, with the tenant responsible for all costs of operating the premises. In the instance where costs increase, that is a cost to the tenant, with no impact on the REIT’s net income. It is also important to note that HHT can acquire industrial assets at significantly below replacement costs. In other words, fully leased, income producing properties can be acquired for less than it would cost to build them today.

 

With regards to mortgage financing, the REIT’s target asset size is in the $5.0mm to $15mm range. Assuming 50% leverage, the loan amounts are quite modest, and there are many lenders with strong interest in the asset class, with chartered banks, life companies, publicmortgage funds, pension funds and credit unions all active in the space. Mortgage financing on attractive terms should be available to HHT.

 

The other major risk is about financing, they will have to raise capital very oftenon good terms to buy properties. By definition, market conditions are variable. Completion of the Qualifying Transaction and conversion from a CPC to a REIT is subject to TSX-V approval.

 

I bought a large position for a long term investment because it’s a unique opportunity to invest early with smart managers in a future REIT leader in Canada. Management noted that there is 1.7 billion square feet of industrial space in Canada, meaning that there will likely be ample opportunities for growth. A market capitalization in the hundreds in millions within a few years is probable. I’m confident than the company will generate stable and growing cash distribution.

 

This is not a recommandation.

 

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HHT.p first acquisition : "Net operating income for the first year is expected to be approximately $1.36 million, resulting in a capitalization rate of approximately 9.06%."

 

Curious to know what will be profit per unit after the private placement and others fees. Opinion ?

 

Appreciate the posts, snowball82. How about the current Canadian real estate bubble though?

 

Thanks.

 

I think the Canadian real estate bubble is more acute in the residential space, less so industrial. That said, there could be spillover effects in the event there was a crash on the residential side. Check out the FRMO Corp post - Gio recently posted a commentary on REITS from Murray Stahl that was really interesting

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  • 3 weeks later...

According to the appraisal made ​​public yesterday, the current market value estimated by Altus group for the first transaction is close to $ 17 million and the company paid $ 15 million. Good start ...

 

Will you attend to the 7 march shareholders meeting in Toronto ?

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Prem Watsa should invest all float money now :)

 

Last trade $ 0.11

 

Hht.p annonce .17 per unit & conversion debenture price of 0.25 per unit.

 

Description of the REIT Prospectus Offering

In connection with the Corporation’s Qualifying Transaction, the REIT will complete a concurrent public offering under and pursuant to the REIT Prospectus in all provinces of Canada, other than Quebec, of a total of 8,823,530 Units at an offering price of $0.17 per Unit for gross proceeds of $1,500,000.10 and 3,500 REIT Convertible Debentures at $1,000 principal amount per REIT Convertible Debenture for gross proceeds of $3,500,000, for total gross proceeds of $5,000,000.10 in the aggregate, and otherwise on terms and conditions satisfactory to the Board of Trustees of the REIT and Board of the Corporation in their sole, absolute and unfettered discretion and set out in the Trust Indenture and more particularly described in the REIT Prospectus.

Each REIT Convertible Debenture in the principal amount of $1,000 is an unsecured subordinated debenture of the REIT, bearing interest at 7% per annum, payable semi-annually in arrears, maturing on January 31, 2019, convertible by the holder thereof into Units at a conversion price of $0.25 per Unit.

 

After the last approval, the new name should be Boulevard Industrial Real Estate Investment Trust (BVD). The company is by far my favorite investment in this sector.

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  • 4 weeks later...

Yader, I saw few minutes ago shareholders have approved all matters voted on at the special meeting of shareholders held on March 7. The Arrangement was also approved pursuant to a final order issued by the Ontario Superior Court of Justice on Tuesday March 11, 2014, but remains subject to receipt of final approval of the TSX.

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Thanks Snowball,

 

I found the following:

 

"There is currently no market through which the Units or the Convertible Debentures may be sold and

purchasers of Units or the Convertible Debentures may not be able to resell the Units or Convertible

Debentures purchased under this prospectus. This may affect the pricing of the Units and the Convertible

Debentures in the secondary market, the transparency and availability of trading prices, the liquidity of the

Units and the extent of issuer regulation. See “Risk Factors”. The TSXV has conditionally approved the listing

of the Units and the Convertible Debentures. The REIT has reserved the symbol “BVD” on the TSXV."

 

I won't be participating directly but will be waiting for the shares to be listed on the TSXV.

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What did you think of the convertible debentures yielding 7%?  Are you going to look to purchase those?  Seems like an easy 7%, if not more should the stock rise above 0.25.

 

I'm not a huge fan of the 7% agent's fee on the units and debentures.  Is 7% pretty standard in these types of offerings?

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Why dividends over the convertible debenture?  They say nothing of how much will be paid in dividends do they?  It may only be a 1% distribution.  Furthermore, to reach the 100M assets I would assume they'll have to issue more stock and bonds (convertible or not) diluting the eps.  I don't see either as an investment for me right now unless I wanted the 7% interest.

 

At this point there's not enough to go on.  Scott may have grown a market cap 20x, but what was the bottom line growth?

 

 

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Still digging Snowball.  The first issuance of shares were 20 million at 0.10.  The latest was 0.17.  If this is any indicator future offerings should be at higher and higher prices.  So although there will be more shares outstanding, mine bought at lower prices will not in effect be "diluted."

 

While the above is a nice thought I've tried looking for Hayes' bottom line performance while at Pure Industrial.  Their annuals go back to 2007 and sedar info only goes back to 2007 as well.  Hayes was gone by then.  Do you have access to any of the reports while he was at Pure Ind.?

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Alert,

 

Here's the closest thing I see to a timeline...

 

"Listing is subject to the REIT fulfilling all of the listing requirements of the TSXV on or before May 1, 2014."

 

I'll be going through the 200 page prospectus this weekend.

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