Killam Properties Inc. announced that its Board of Directors has unanimously approved the proposed reorganization of Killam into a real estate investment trust to be named Killam Apartment Real Estate Investment Trust.
The reorganization will be accomplished by way of a plan of arrangement and, among other approvals, will be subject to shareholder approval at a special meeting to be held on or about December 8, 2015.
“The proposed REIT conversion is expected to enhance long-term shareholder value by maximizing cash distributions to investors in the most tax efficient way possible”, said Philip Fraser, Killam’s President and CEO. “The proposed REIT structure will not result in a change in Killam’s strategy, portfolio or operations. The strategy of Killam Apartment REIT will remain consistent with Killam’s existing strategy, maximizing its value and long-term profitability by concentrating on three key areas of growth: 1) increasing the earnings of its existing portfolio, 2) expanding its portfolio and diversifying geographically through accretive acquisitions, with an emphasis on newer assets, and 3) developing high-quality properties in its core markets.”
“Killam Apartment REIT’s distribution policy will also remain consistent with Killam’s current dividend policy; initially the monthly distribution will be $0.05 per REIT unit per month, or $0.60 per REIT unit on an annualized basis, the same level of Killam’s current dividend rate per common share.”
Reasons for reorganizing
The proposal to convert Killam to a REIT structure is the result of an extensive review of Killam’s business model conducted by its Board of Directors. The Board of Directors intends to recommend, in an information circular for the Killam shareholder meeting, that the shareholders vote in favour of the plan of arrangement.
The Board of Directors believes that the conversion of Killam to a REIT will enhance long-term shareholder value for the following reasons:
1. The REIT provides a tax efficient vehicle to deliver cash flow from Killam’s business to investors.
2. The REIT structure represents the preferred Canadian public market structure for owning real estate.
3. The REIT structure allows Killam to be more comparable to its peers and increases its investment profile to REIT investors.
The proposed reorganization will be effected pursuant to an arrangement under the Canada Business Corporations Act. The arrangement is subject to the approval of 66 2/3 per cent of the votes cast by holders of Killam’s common shares. Directors and officers of Killam, who collectively control 5.8 per cent of Killam’s common shares, have indicated their intention to vote in favour of the arrangement.