- The 'buyer' are a joint venture of Brooksville and Rockpoint
- If transaction successful, URF is anticipated to delist in July this year
- The purchase price is US$506,644,567
US Masters Residential Property Fund (ASX: URF) has entered into a conditional purchase and sale agreement with a joint venture between Brooksville Company and Rockpoint Group for the sale of URF’s 1-4 family property portfolio.
Some context
URF said that following a change in management in late 2019, the company set some goals in order to maximise the financial performance of the Fund’s portfolio.
The three listed in today’s statement included:
- Stabilising the portfolio’s cash flows via asset sales, reducing the portfolio’s debt levels, reducing overhead costs and improving property-level operations;
- Repaying the URF Notes debt tranches and refinancing the maturing debt facility with Wells Fargo(refinance completed in November 2020); and
- Exploring capital market opportunities.
Regarding the above goal three, the company said that in 2021 the responsible entity for URF engaged Ackman Ziff to review capital market options.
The conclusion of that review was that a “… portfolio sale that met the price range that its advisors were anticipating would present a more attractive outcome to unitholders than either continuing to manage the portfolio indefinitely or undertaking a lengthy asset-by-asset divestment program.
“Ackman Ziff [was] therefore mandated by the Responsible Entity to obtain the highest available offer that would provide investors with an immediate liquidity option and maximise the realisable value of the Fund across both URFPA and URF ordinary units.”
Brooksville and Rockpoint joint venture
The process of finding an offer saw over 80 potential investors contacted and 21 confidentiality agreements being executed to facilitate detailed due diligence and discussions.
In early 2022, the responsible entity on behalf of the fund entered into a period of exclusive, confidential negotiations with the buyer. The buyer is a joint venture between Brooksville Company and Rockpoint.
Following those negotiations, the responsible entity executed a purchase and sale agreement to formally document the proposed transaction.
The transaction has several key conditions::
- a 60 day Examination Period for the Buyer, during which the Buyer could terminate the Sale Agreement at their discretion;
- Global Atlantic agreeing to the assignment of the Fund’s outstanding loan to the Buyer; and
- URF ordinary unitholders approving of the Transaction via a single ordinary resolution.
Provided the pre-conditions for the transaction are met, including investors voting in favour of the sale, URF said that “… it is expected that the Responsible Entity will terminate the Fund, all the assets of URF will be divested, and all proceeds of realisation (net of transaction costs, US taxes and Fund wind-up costs) will be returned to investors.”
“URF will be de-listed from the ASX and wound up as part of this process. On wind-up, distributions are payable in the first instance to URFPA holders at the issue price of A$100 per URFPA unit (in accordance with the URFPA terms), with the residual amount then payable to URF ordinary unitholders.”
It is anticipated that, should all go smoothly, despatch of notice of meeting and explanatory memorandum occur in June 2022, with the meeting, settlement and delisting of URF in July 2022. First distribution to unitholders is also expected in July 2022, with final distribution in early 2023.
Additional details
URF said: “the transaction encompasses substantially all of URF’s 1-4 Family property assets, but does not include the Fund’s investments in large scale apartment complexes held with Urban American.”
The purchase price of US$506,644,567 represents a three per cent premium to the combined equity market capitalisation based on the three month volume weighted average price of URF convertible preference units (ASX: URFPA) and URF ordinary units (ASX: URF) and a 5% discount to the combined market cap based on the last traded prices of URFPA $81.00 and URF $0.345 as at 25 March 2022.
The 52 week price range of URFPA is $48.05 to $84.50, and for URF is $0.195 to 0.39.
