Dream Hard Asset Alternatives Trust (DRA-UN.TO) – Odd Lot Tender Offer – 4% Upside

Current Price: C$7.91

Tender Price: C$8.25

Upside: 4% (C$33 for odd-lots)

Expiration Date: 12 March 2020

Offer announcement

 

This situation likely applies more for the Canadians due to withholding taxes for non-residents.

Dream Hard has announced that it will make two substantial issuer bids:

• One for 4m shares (6% outstanding) at C$8.25/unit (4% upside). The offer will commence on the 7th of February and will be available for 35 days. Odd-lot holders will not be prorated.
• Another similar sized offer is expected to be announced later in 2020 for no less that C$8.50/unit (7.5% upside).

The Trust has already carried out one odd lot tender offer in mid’19 – also for 4m shares, but at C$8.00/unit. Almost half of the all outstanding units have participated in the last offer, so these upcoming tenders are expected to be heavily oversubscribed as well.

Withholding taxes (15%) should apply to non-Canadian citizens (last tender offer):

In effect, the entire amount paid to a Non Resident Unitholder on the purchase of its Units under the Offer will be subject to Canadian withholding tax. However, a Non Resident Unitholder may be able to obtain a refund in respect of its Mutual Fund Withholding Tax payable to the extent that the Non Resident Unitholder has Canadian property mutual fund losses, which generally would include any losses realized by the Non Resident Unitholder on the disposition of its Units under the Offer. A Non Resident Unitholder must file a Canadian federal return of income in prescribed form within the prescribed time in order to obtain such refund. Non Resident Unitholders should consult their own tax advisors with respect to the tax consequences of a disposition of Units under the Offer.

 

A few more points on the Trust

• DRA-UN.TO is a Canada-based open-ended trust. It is focused on investments in alternative assets consisting of real estate, real estate lending, real estate development and renewable power.
• These offers are a part of the strategic plan (Dec’18) to purchase C$100m units in three years (the sum is going to be filled up by these three tender offers).
• As of Sept’19 Trust’s NAV stood at C$8.43/unit.
• Dream Hard additionally also has an authorization to acquire over 7% of outstanding units in the open market from the 20th of Jan’20 to the 19th of Jan’21. The trust has not done any purchases yet and will not start them until the expiration of the current tender offer.