- Artis defines value investing strategy with a goal of
becoming an equity compounder;
- Plan for monetization of Artis' real estate assets to
redeploy capital in active real estate capital markets investments,
value-add real estate, and developments to drive significant value
creation;
- Ben Rodney is appointed Chair
of the Board of Trustees;
- Senior Management Changes: Samir
Manji is appointed permanent CEO, Jaclyn Koenig is appointed CFO, and Kim Riley is appointed COO; Frank Sherlock (Executive Vice-President) to
retire;
- An increase in common unitholder distributions to
$0.60 per unit annually, representing
a cumulative increase of 11.1% since November 2020; and
- Artis' Business Transformation Plan presentation is
available at
https://www.artisreit.com/investor-link/investor-presentations/ and
virtual investor presentation will be held today at 10 AM Central Time (see news release below for
participation details).
WINNIPEG, MB, March 10, 2021 /CNW/ - Artis Real Estate
Investment Trust ("Artis" or the "REIT") (TSX: AX.UN, AX.PR.A,
AX.PR.E, AX.PR.I) is pleased to announce a business
transformation plan that will shift Artis from a diversified real
estate investment trust to an organization focused on growth in net
asset value ("NAV") per unit and distributions through value
investing in real estate (the "Business Transformation
Plan").
As part of the implementation of the Business Transformation
Plan, changes in leadership and key management positions are
announced as follows:
- Ben Rodney is appointed
Chair of the Board of Trustees of the REIT (the "Board") effective
immediately;
- Samir Manji is appointed
Chief Executive Officer ("CEO") effective immediately;
- Jaclyn Koenig, Senior
Vice-President of Accounting, is appointed Chief Financial Officer
("CFO") to be effective following the retirement of Jim Green at the conclusion of the REIT's 2021
annual and special meeting of unitholders (the "AGM"); and
- Kim Riley, Executive
Vice-President of Investments and Developments, is appointed Chief
Operating Officer ("COO") (a newly created position at Artis)
effective April 1, 2021.
With these changes, Artis takes important steps towards the
implementation and execution of the Business Transformation Plan
and has promoted two senior leaders with impressive capabilities
well suited to driving the future success of Artis. Further details
are below under 'Senior Management Team Changes'.
Additionally, Frank Sherlock,
Executive Vice-President, will be retiring effective June 30, 2021.
"It is with confidence and optimism that we are presenting the
results of Artis' 100-day review, including our bold new vision and
strategy," said Samir Manji, CEO of
Artis. "We have an incredible opportunity to transform Artis into
an organization committed to growing its NAV per unit and
distributions for the owners of the REIT through value investing.
Our new vision and strategy is pioneering in the Canadian capital
markets, harnessing what we have observed over many years and
capitalizing on the structural issues and valuation inefficiencies
that exist in the broader public real estate space. We believe our
roadmap is the right strategy to create long-term value for Artis'
owners. Artis has traded at a material discount to its underlying
NAV for many years and we will focus on eliminating this gap and
then growing and maximizing long-term unit price performance. I
want to thank our Trustees for their significant contributions and
incredible level of engagement over the past three months. I also
want to acknowledge and thank our dedicated and committed team
members at Artis, many of who will play an instrumental role in
implementing our new vision and strategy on behalf of our
owners."
"On behalf of the Board, we are pleased with where we have
landed strategically and are appreciative of the thoughtful,
rigorous, and detailed level of work and analyses undertaken by
Sandpiper over the past 100+ days," said Ben Rodney, Chair of the Board. "Under the
Business Transformation Plan, we believe Artis has a bright future
and will become a stronger and more valuable organization.
Furthermore, one of the Board's top priorities is to ensure we have
the leadership team, expertise, and resources in place to execute
on our go-forward vision and strategy. We are pleased with the
progress made in a short period of time under Samir's leadership
and are excited to have him continue as permanent CEO of Artis. The
Board is delighted to promote two strong internal candidates on
Artis' senior leadership team, Jaclyn
Koenig and Kim Riley. The
Board also wishes Jim and Frank well in their upcoming retirements
and thanks them for their many years of dedicated hard work."
100-Day Review and Distribution Increase
Under the stewardship of the newly reconstituted Board, Artis
undertook a 100-day review of the REIT commencing on November 30, 2020. The comprehensive review led
by Sandpiper Group ("Sandpiper"), at no cost to Artis, included
in-depth due diligence and analyses of Artis' assets and corporate
operations and consultation with the REIT's legal and tax advisors.
The results were presented to the Board. The review concluded with
a bold new vision and strategy that seeks to: (1) bridge the 24%
discount to its $15.03 International
Financial Reporting Standards ("IFRS") NAV per unit; and (2) drive
long-term outperformance through NAV per unit and distribution
growth. The 100-day review and resulting Business Transformation
Plan concludes a protracted strategic review process that has
contemplated a range of alternatives and permutations since 2019,
including the previously announced retail spin-off proposal which
preceded the current review, and which has been terminated. It is
the opinion of the Board that the current Business Transformation
Plan represents the right path forward for Artis and is in the best
interest of its unitholders.
Since November 30, 2020, the REIT
has completed or substantially advanced, all of the initiatives set
out publicly by Sandpiper in 2020, including the replacement of
five trustees with new individuals who bring diverse experiences
and perspectives to the Board, a 25% reduction in Board fees, and
enhancements to the REIT's governance framework and practices. The
100-day review has also identified other efficiencies and cost
reduction opportunities that are expected to generate over
$3.0 million per annum of general and
administrative ("G&A") and property-level savings moving
forward. These initial savings are anticipated to contribute to a
sustainable increase in our common unitholder distribution to
$0.60 per unit annually from
$0.5562 per unit annually effective
for the March 2021 monthly
distribution payable on April 15,
2021. This results in a total distribution increase of 11.1%
from the distribution in-place when Sandpiper presented its 'Case
for Change' last October.
Creating Canada's
Pre-Eminent Asset Management and Investment Platform Focused on
Value Investing in Real Estate
Artis' Business Transformation Plan includes:
1. Strengthening the balance sheet to provide
significant liquidity and flexibility
- Unlocking substantial value by monetizing Artis'
institutional-grade industrial portfolio;
- Maximizing value of Artis' office and retail assets by
improving operating performance and pursuing a measured,
opportunistic and patient strategy for divestitures;
- Maintaining strong liquidity to capitalize on opportunities;
and
- Maintaining low leverage and debt metrics within the DBRS
defined parameters.
2. Focusing on value investing by identifying
real estate opportunities that are mispriced, misunderstood or
mismanaged
- Identifying investments that are undervalued and can produce
above average risk-adjusted returns over the medium-to-long
term;
- Evaluating opportunistic investments that can be fixed or
turned around;
- Acting as a catalyst to influence positive change; and
- Capitalizing on mispricing in the public markets.
3. Driving organic growth
- Improving the income profile of assets to the highest
potential;
- Developing a recurring, high-margin fee stream for management
of assets through future joint ventures;
- Optimizing the value of existing properties through operational
efficiencies; and
- Focusing on operating in a cost-efficient manner across the
organization.
4. Institutionalizing the new platform
- Establishing an entrepreneurial culture that supports and
promotes the execution of Artis' long- term vision and
strategy;
- Continuously raising the bar for financial reporting and other
disclosures;
- Developing a robust environmental, social and governance
strategy;
- Enhancing the investor relations and communications program;
and
- Rebranding – new name, new image, new future.
We estimate a two-to-three-year period to implement the Business
Transformation Plan.
Artis intends to maintain its corporate operations headquartered
in Winnipeg and will evaluate its
satellite offices going forward based on geographical presence and
ongoing job functions.
Unlocking Value in Artis' Existing Real Estate Assets
Artis has an extremely attractive industrial portfolio,
representing 35% of our Q4-20 property net operating income
("Property NOI"), which is significantly undervalued when mixed in
with Artis' office (45% of Q4-20 Property NOI) and retail assets
(20% of Q4-20 Property NOI), which also generates strong cashflow
for our unitholders. It is widely known that diversified real
estate investment trusts are out of favour and that their real
estate trades at dramatically lower valuations in the public
markets than it does in the private markets. We believe bridging
the value gap while building a best-in-class real estate entity
with a clearly defined vision and strategy and long-term growth
potential requires ingenuity and pursuit of an unconventional
path.
First, our priority will be to unlock the trapped value in
Artis' hard real estate assets, including the monetization of our
industrial portfolio which we will aim to complete on a
tax-efficient basis.
Second, over the short-to-medium term, we will evaluate the sale
of office and retail assets in an opportunistic and disciplined
manner, with the goal of maximizing value on a tax-efficient
basis.
Third, by focusing on value maximization of our office and
retail holdings, we will deploy the proceeds into active capital
markets investments, value-add investments, and developments.
After selling assets, the net proceeds are expected to be used
as follows:
- Capital growth investments (undervalued public real estate
investments, and value-add acquisitions and development
opportunities); and
- Capital structure enhancements (debt repayment, common unit
repurchases and preferred unit repurchases).
Value Investing in Real Estate to Position Artis for
Long-Term Success
Under the Business Transformation Plan, Artis will become
agnostic as to how it owns real estate and will embrace opportunism
and the inefficiencies that the public markets provide, leveraging
and capitalizing on opportunities that exist today or will surface
in the future.
Artis seeks to convert its assets into liquid, strategic
investments in portfolio companies (i.e., undervalued public real
estate entities), as well as high-conviction hard assets. We seek
to drive performance both in our hard assets and portfolio
companies though active management to enable us to generate strong
operating cashflow for distributions while continually recycling
excess capital over the long term. Additionally, we will reduce our
leverage and take an owner-centric approach in capital allocation
that will build investor confidence and brand equity through
execution and performance.
We believe our new vision and strategy will generate meaningful
long-term growth in NAV per unit and distributions by monetizing
assets, strengthening the balance sheet and scaling-up through
value investing. Artis will concentrate its ownership in the
highest and best return opportunities to maximize long-term value
for our unitholders.
With respect to public real estate entities, Artis will seek to
acquire meaningful and influential ownership positions in
undervalued entities. Our near-term focus will be on publicly
listed Canadian real estate entities. Artis will unlock value in
its portfolio companies through active management, which may
include pursuing board representation and engaging constructively
with boards and management teams of its portfolio companies to
effectuate long-term value creation. Artis may serve as a catalyst
for privatizations, merger and acquisition ("M&A")
opportunities, strategic transformations, and operational and
governance improvements for its portfolio companies, with a focus
on maximizing value for the owners of Artis. Artis has not selected
any specific portfolio companies at this time.
Key Performance Indicators ("KPIs")
Artis will focus on the following KPIs to maximize long-term
value: NAV per unit, cash distribution per unit, adjusted funds
from operations per unit, adjusted funds from operations payout
ratio and debt to gross book value ratio. By focusing on these key
metrics and linking them to executive compensation, we believe
Artis will outperform over the long term. Furthermore, by
meaningfully reducing our leverage and increasing our liquidity
profile over the next five years, we will enable Artis to focus on
its portfolio companies and act opportunistically in special
situations, including leveraging our financial and intellectual
capacity to pursue potential M&A opportunities.
Annual and Special Meeting
In order to allow Artis to complete the Business Transformation
Plan, Artis will seek approvals at its upcoming annual and special
meeting of unitholders to amend the declaration of trust of Artis
to, inter alia: (1) remove certain provisions that prevent
Artis from making investments or taking actions that would result
in a loss of "REIT" status under the Income Tax Act
(Canada) (the "Tax Act"); and (2)
providing a right of redemption to the common units of Artis to
allow Artis to become an "open-ended trust" under the Tax Act.
However, Artis would not effect amendment (2) until a later
date.
Sandpiper and Halcyon International Limited (formerly Jetport
Inc.) and Steven Joyce have advised
the REIT that they intend to vote in favour of the foregoing
amendments relating to the Business Transformation Plan. Sandpiper
owns or controls approximately 11% of the REIT's issued and
outstanding common units ("Units"). Halcyon International Limited
and Steven Joyce collectively own or
control approximately 11% of the issued and outstanding Units. In
addition, the REIT has support from four unitholders representing
approximately 9% of the issued and outstanding Units, for total
support of 31% of the issued and outstanding Units.
Engaging Sandpiper's Expertise
In connection with the Business Transformation Plan, Artis
intends to engage Sandpiper to provide certain advisory services to
Artis. Sandpiper brings extensive real estate and investment
experience and a proven track record of value creation to Artis.
The services expected to be provided by Sandpiper include: (1)
identifying, evaluating and recommending to Artis active
investments in real estate public securities; and (2) providing
advice and assistance to Artis in connection with its active
engagement with its portfolio companies. Sandpiper will provide
advice to Artis and the Board, which remains responsible for all
investment and divestment decisions.
In connection with such engagement, Sandpiper will agree to
present to Artis, for its consideration, any new investment
opportunity in real estate public securities which may reasonably
fit within Artis' investment objectives and strategy, and involve
active participation by Artis. The definitive terms of the
engagement (including compensation and expense reimbursements) will
be considered and approved by the Board at the relevant time.
"We look forward to working with Sandpiper to leverage its
experience with active engagement in public securities investments
in the real estate sectors of interest to Artis, core competencies
and experience in shareholder engagement," said Mr. Rodney. "This
will allow us to move forward expeditiously with our new vision and
plan, while focusing on maximizing value in our existing real
estate assets."
Senior Management Team Changes
Changes in leadership and key management positions are announced
as follows:
- Samir Manji is appointed
CEO effective immediately. Samir will continue as a member of the
Board. Samir is also the CEO of Sandpiper and will commit 80% of
his time to Artis. Samir has over 25 years of experience in real
estate. Samir was the founder, Chairman and CEO of Amica Senior
Lifestyles (formerly Amica Mature Lifestyles Inc.), a TSX-listed
company from 1997 until its sale to Ontario Teachers' Pension Plan
in 2015. Samir founded Sandpiper in 2016, currently serves on the
board of Extendicare Inc. and previously served on the board of
Granite REIT. Samir graduated from the University of Waterloo and received his CPA, CA
with KPMG LLP in Toronto.
- Jaclyn Koenig, Senior
Vice-President of Accounting, is appointed CFO to be effective
following the retirement of Jim
Green. Jaclyn joined Artis in 2007 and has led the growth of
the accounting team and developed and maintained strong controls
and accurate reporting. Jaclyn holds a CPA, CA designation and a
Bachelor of Commerce degree from the University of Manitoba. Jaclyn articled with
Grant Thornton, LLP prior to joining
Artis.
- Kim Riley, Executive
Vice-President of Investments and Developments, is appointed COO (a
newly created position at Artis) effective April 1, 2021. Kim has 15 years of commercial
real estate experience. Since joining Artis in 2005, Kim held
various positions in accounting, valuation, and investments and
developments. As Executive Vice-President of Investments and
Developments at Artis, Kim has been directly involved in
transactions totalling $5B across
Canada and the US. Kim holds a
Bachelor of Commerce (Hons.) degree from the University of Manitoba and holds a CPA, CMA
designation.
- Frank Sherlock, Executive
Vice-President, will be retiring effective June 30, 2021.
Slide Presentation and Zoom Meeting
A slide presentation detailing Artis' Business Transformation
Plan is available here:
https://www.artisreit.com/investor-link/investor-presentations/
Management will host a virtual meeting via Zoom today,
Wednesday, March 10, 2021, at
10 A.M. CT.
Please register for the event at the following link:
https://us02web.zoom.us/webinar/register/WN_spG3wAOfSZq2XMB_MOTlzw.
A replay of the event will be available on Artis' website at
https://www.artisreit.com/investor-link/conference-calls/ until
June 7, 2021.
CAUTIONARY STATEMENTS
This press release contains forward-looking statements. For
this purpose, any statements contained herein that are not
statements of historical fact may be deemed to be forward-looking
statements. Without limiting the foregoing, the words
"expects", "anticipates", "intends", "estimates", "projects",
"seeks", and similar expressions or variations of such words and
phrases or state that certain actions, events or results ''may'',
''would'' or ''will'' occur or be achieved are intended to identify
forward-looking statements. Particularly, statements
regarding expected distributions by the REIT, the
Business Transformation Plan, the steps required to implement the
Business Transformation Plan, planned divestures, the use of
proceeds from divestitures, prospective investments and investment
strategy, Artis' plans to optimize the value and performance of its
assets, Artis' goals to grow NAV per unit and distributions,
efficiencies and cost savings, executive compensation, tax
treatment of divestitures, and the engagement of Sandpiper are
forward-looking statements.
Forward-looking statements are based on a number of factors and
assumptions which have been used to develop such statements, but
which may prove to be incorrect. Although Artis believes that the
expectations reflected in the forward-looking statements are
reasonable, it cannot guarantee future results, levels of activity,
performance or achievement since such expectations are inherently
subject to significant business, economic, competitive, political
and social uncertainties and contingencies. Assumptions have been
made regarding, among other things: the general stability of the
economic and political environment in which Artis operates,
treatment under governmental regulatory regimes, securities laws
and tax laws, the ability of Artis and Sandpiper to obtain and
retain qualified staff, equipment and services in a timely and cost
efficient manner, currency, exchange and interest rates, global
economic, financial markets and economic conditions in Canada and the
United States will not, in the long term, be adversely
impacted by COVID-19, disruptions resulting from the temporary
restrictions that governments imposed on businesses to address
COVID-19 will not be long term.
Artis is subject to significant risks and uncertainties which
may cause the actual results, performance or achievements of the
REIT to be materially different from any future results,
performance or achievements expressed or implied in these
forward-looking statements. Such risk factors include, but are
not limited to, risks associated with the COVID-19 pandemic, real
property ownership, geographic concentration, current economic
conditions, strategic initiatives, debt financing, interest rate
fluctuations, foreign currency, tenants, SIFT rules, other
tax-related factors, illiquidity, competition, reliance on key
personnel, future property transactions, general uninsured losses,
dependence on information technology, cyber security, environmental
matters and climate change, land and air rights leases, public
markets, market price of common units, changes in legislation and
investment eligibility, availability of cash flow, fluctuations in
cash distributions, nature of units, legal rights attaching to
units, preferred units, debentures, dilution, unitholder liability,
failure to obtain additional financing, potential conflicts of
interest, developments and trustees. Further, the Business
Transformation Plan has additional risk factors including, but not
limited to: failure to obtain requisite unitholder or other
approvals for the Business Transformation Plan, failure to execute
the Business Transformation Plan in part or at all, the ability to
achieve certain efficiencies to generate savings in G&A, pace
of completing investments and divestitures, inability to engage
Sandpiper on terms satisfactory to Artis, Sandpiper's ability to
provide the contemplated services to Artis, risk of not obtaining
control or significant influence in portfolio companies, risks
associated with minority investments, reliance on the performance
of underlying assets, operating and financial risks of investments,
ranking of Artis' investments and structural subordination,
follow-on investments, investments in private issuers, valuation
methodologies involve subjective judgments, risks associated with
owning illiquid assets, competitive market for investment
opportunities, risks upon disposition of investments, reputation of
Artis and Sandpiper, unknown merits and risks of future
investments; resources could be wasted in researching investment
opportunities that are not ultimately completed, credit risk, tax
risk, regulatory changes, foreign security risk, foreign exchange
risk, potential conflicts of interest with Sandpiper and market
discount. Artis cannot assure investors that actual results
will be consistent with any forward-looking statements and Artis
assumes no obligation to update or revise such forward-looking
statements to reflect actual events or new circumstances. All
forward-looking statements contained in this press release are
qualified by this cautionary statement.
NON-GAAP MEASURES
In addition to reported IFRS measures, non-GAAP measures are
commonly used by Canadian real estate investment trusts as an
indicator of financial performance. "GAAP" means the generally
accepted accounting principles described by the CPA Canada Handbook
- Accounting, which are applicable as at the date on which any
calculation using GAAP is to be made. Artis applies IFRS, which is
the section of GAAP applicable to publicly accountable enterprises.
These non-GAAP measures are not defined under IFRS and are not
intended to represent operating profits for the period, or from a
property, nor should any of these measures be viewed as an
alternative to net income, cash flow from operations or other
measures of financial performance calculated in accordance with
IFRS. Readers should be further cautioned that non-GAAP measures as
calculated by Artis may not be comparable to similar measures
presented by other issuers. These non-GAAP financial measures are
more fully defined and discussed in Artis' Management's Discussion
and Analysis as at and for the three and twelve months ended
December 31, 2020, available at
www.artisreit.com and on www.sedar.com.
Artis is a diversified Canadian real estate investment trust
investing primarily in industrial and office properties in select
markets in Canada and the United States. Since 2004, Artis has
executed an aggressive but disciplined growth strategy, building a
portfolio of commercial properties which, as of December 31,
2020, comprised approximately 22.9 million square feet of leasable
area.
SOURCE Artis Real Estate Investment Trust