Real estate vets return as PRO REIT seeking equity capital ...

The penultimate stage in the creation of a new real estate investment trust is being played out by a group of industry veterans.

By month end, PRO REIT, which filed a prospectus this week, is expected to have raised about $78-million in equity capital to help finance the acquisition of $155.6-million worth of properties that have been assembled by a team who worked previously with Canmarc REIT. Cash on hand plus debt, in various forms, will provide the rest of the resources to fund the acquisitions.

The properties that have been assembled by James Beckerleg and Gordon Lawlor (PRO REIT?s chief executive officer and chief financial officer respectively) are in Montreal and in the major cities of Atlantic Canada. In all the two executives (who occupied the same roles at Canmarc) have acquired a total of 28 commercial buildings that contain 1.6 million square feet of gross leasable space.

Canmarc was also a Quebec-based REIT that went public in May 2010 before being acquired less than two years later by Cominar REIT. Investors who bought at the IPO and sold into the offer, an offer that started out hostile before turning friendly, did well: aside from regular distributions, they also received a capital gain of $6.50 a unit ? or 65%. All up the REIT generated a 43% annual compound rate of return.

Aside from Beckerleg and Lawlor, PRO REIT is also home to a number of their former Canmarc colleagues. For instance, John Levitt, a trustee and chairman of PRO REIT was also a trustee at Canmarc while Gerald Limoges, a trustee at PRO REIT served a similar role at Canmarc. At the executive level, two former Canmarc staffers, Mark O?Brien and Alison Schafer, are now PRO REIT?s director of acquisitions and director of finance respectively.

We were unsuccessful in contacting Beckerleg, who was meeting with potential investors.

Beckerleg and Lawlor?s return to the real estate business continues to a trend for executives whose real estate-focused company has been acquired.?Of late there is at least one other example: the senior executives at Summit Industrial REIT, which defines itself as ?a closed-ended mutual fund trust focusing on growing and managing a portfolio of light industrial properties across Canada,? worked together at Summit REIT, which was acquired by ING Real Estate in 2006.

Paul Dykeman, chief executive at Summit Industrial REIT was the chief executive at Summit, while Lou Maroun, the chairman at Summit Industrial was president at Summit. This week Summit Industrial announced the acquisition of $37-million worth of properties in Ontario and Quebec.

There is another unusual element about PRO REIT: it has gone public by way of a reverse takeover. Last March it completed a transaction with Taggart Capital Corp. a capital pool company based in Toronto. Taggart went public in late 2011 when it raised gross proceeds of $484,700. The Taggart shares were listed on the TSX-Venture Exchange but were delisted when the Taggart/PRO REIT deal closed.

But PRO REIT won?t be the first REIT to have been created by a reverse transaction. For instance, Winnipeg-headquartered Artis REIT? (market cap of $1.9-billion) started life as a capital pool company. In June 2004, Westfield Properties Ltd., a TSX Venture listed CPC, completed its qualifying transaction when it purchased a commercial real estate property in Calgary. The Artis name emerged at the end of 2004.

Source: http://business.financialpost.com/2013/07/10/real-estate-vets-return-as-pro-reit-seeking-equity-capital/

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