Current Price – C$23.4
Offer Price – C$24
Upside – 2.5% or C$60 for odd lot holders
Expiration Date – May 3, 2018
This is a rather straight forward tender offer by Canada based REIT – buying back 14% of shares at C$24/unit (C$240m in total). Odd lot holders will not be prorated. Due to tax consequences this offer is suitable for Canada residents only (see below).
Dream Office REIT has recently gone through business transformation and sold down more than half of portfolio to refocus on higher quality assets . The freed up cash and borrowing capacity is used to buy back shares.
Previous tender offer (Jun 28th, 2017) for C$440m was oversubscribed at the upper limit of $21/share resulting in proration factor of 85% (except for odd-lots which were not prorated). In this tender shares were being acquired below NAV. Thus, I would expected even more active participation when units are being repurchased above NAV in the current tender.
IMPORTANT: There seem to be adverse tax consequences for non-residents of Canada (from previous tender docs):
“A Non -Resident Unitholder will generally be subject to Canadian withholding tax at a rate of 15% (the “Mutual Fund Withholding Tax”) on any distribution in respect of a unit of a “mutual fund trust” that is a “Canadian property mutual fund investment” that is not otherwise subject to Canadian income tax under Part I of the Tax Act or Canadian withholding tax under Part XIII of the Tax Act. A REIT A Unit will be a “Canadian property mutual fund investment” to a Non Resident Unitholder. Assuming that the REIT A Units are not “taxable Canadian property” to the Non Resident Unitholder as described below and are therefore not subject to Part I tax on the disposition of the REIT A Units under the Offer, a Non Resident Unitholder will be subject to the Mutual Fund Withholding Tax on the amount of its payment by Dream Office REIT in connection with the purchase of its REIT A Units.
In effect, the entire amount paid to a Non Resident Unitholder on the purchase of its REIT A Units under the Offer will be subject to Canadian withholding tax.”