Dissent is building. Sandpiper Group said it will vote no and has engaged Norton Rose Fulbright Canada LLP for legal counsel and Kingsdale Advisors for strategic advice.
Scheer, Rowlett joined the opposition Monday. In a statement, Brenna Phelan - a portfolio manager based in Toronto with the firm - said the firm, "representing clients that own approximately 4.6 million H&R REIT units, intends to vote against the proposed transaction." That stake amounts to more than 1.5% of H&R's equity, and the manager operates within Connor Clark & Lunn Financial Group.
Others have lined up against it too. Also opposing the plan are RBC Global Asset Management, which holds 9.3 million shares, along with Mill Pond Capital.
H&R would sell industrial properties to Blackstone and other buyers, while GO Residential Real Estate Investment Trust would take the housing portfolio, concentrated largely in the U.S. Sunbelt. Holders of H&R units would get a combination of cash and GO stock.
A company known as CRAL, controlled by the family of Executive Chairman and CEO Tom Hofstedter, would buy a bundle of H&R assets worth about C$2 billion. Sandpiper and other critics argue CRAL is paying far less than that. The pushback has intensified since H&R detailed an almost two-year sale process that included earlier cash offers that fell through.
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The team at RBC Capital Markets, headed by Jimmy Shan, calculated that CRAL is paying roughly C$500 million below the properties' value, while cautioning that many of those holdings are illiquid and come with significant potential liabilities. The team also questioned whether insisting on a single whole-company sale cost unitholders a better outcome. "We struggle to see how HR unitholders will approve the deal," Shan wrote last week.
Terms have also moved with the market. When it was announced in August, the proposal valued H&R at C$12.01 per share, pegging the enterprise's overall worth at C$6.7 billion. Since then, a drop in GO REIT's unit price has reduced the consideration to approximately C$10.50 per share, based on GO's price early Monday afternoon in Toronto.
As of 1:10 p.m., H&R traded at C$9.81. A spokesperson for H&R did not offer comment.
H&R's independent trustees backed the transaction unanimously, saying it was the best path after an extensive review did not yield another viable whole-company bid.
Unitholders vote on Nov. 13. To pass, the measure needs two-thirds of votes cast, plus a majority of the votes cast by minority holders.
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