Middlefield Group has announced:
Middlefield Group, on behalf of Real Estate & E-Commerce Split Corp. (the “Company”), is pleased to announce the Company has completed its initial public offering of 1,613,887 class A shares and 1,613,887 preferred shares for total gross proceeds of $40 million. The class A and preferred shares are listed on the Toronto Stock Exchange under the symbols RS and RS.PR.A, respectively.
The Company will invest in a diversified, actively managed portfolio of dividend-paying securities of issuers operating in the real estate or related sectors, including real estate investment trusts, that the Advisor (as defined below) believes are well-positioned to benefit from low interest rates, the rapid adoption of e-commerce, the growth of data infrastructure as well as attractive valuations in various areas of the real estate sector.
The Company’s investment objectives for the:
- Class A shares are to provide holders with:
- non-cumulative monthly cash distributions; and
- the opportunity for capital appreciation through exposure to the portfolio
- Preferred shares are to:
- provide holders with fixed cumulative preferential quarterly cash distributions; and
- return the original issue price of $10.00 to holders upon maturity
The initial target distribution yield for the class A shares is 8% per annum based on the original subscription price (or $0.10 per month or $1.20 per annum).
The initial target distribution yield for the preferred shares is 5.25% per annum based on the original subscription price (or $0.13125 per quarter or $0.525 per annum).
Middlefield Capital Corporation (the “Advisor”) will provide investment management advice to the Company.
The syndicate of agents was co-led by CIBC Capital Markets and RBC Capital Markets, and includes BMO Capital Markets, Scotiabank, TD Securities Inc., Canaccord Genuity Corp., National Bank Financial Inc., Industrial Alliance Securities, Manulife Securities Incorporated, Raymond James Ltd., Richardson GMP, Middlefield Capital Corporation, Echelon Wealth Partners Inc. and Mackie Research Capital Corporation.
For further information, please visit our website at www.middlefield.com or contact Nancy Tham or Michael Bury in our Sales and Marketing Department at 1.888.890.1868.
Highlights from the prospectus are:
Real Estate & E-Commerce Split Corp. (the “Company”) is a mutual fund established as a corporation under the laws of the Province of Ontario. The Company proposes to offer preferred shares (“Preferred Shares”) and class A shares (“Class A Shares”) at a price of $10.00 per Preferred Share and $15.00 per Class A Share (the “Offering”). Preferred Shares and Class A Shares are issued only on the basis that an equal number of Preferred Shares and Class A Shares will be outstanding at all material times.
The Company will invest in a diversified, actively managed portfolio (the “Portfolio”) of dividend-paying securities of issuers operating in the real estate or related sectors, including real estate investment trusts, that the Advisor (as defined below) believes are well-positioned to benefit from low interest rates, the rapid adoption of e-commerce, the growth of data infrastructure as well as attractive valuations in various areas of the real estate sector (“Real Estate & E-Commerce Issuers”). See “Investment Strategy.”
The investment objectives for the Preferred Shares are to provide holders with fixed cumulative preferential quarterly cash distributions and to return the original issue price of $10.00 to holders on December 31, 2025 (the “Maturity Date”), subject to extension for successive terms of up to five years as determined by the Company’s board of directors. See “Investment Objectives”. The quarterly cash distribution will be $0.13125 per Preferred Share ($0.525 per annum), representing a yield of 5.25% per annum on the issue price of $10.00 per Preferred Share until December 31, 2025. See “Distribution Policy”
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The first distribution will be pro-rated to reflect the period from the Closing Date to December 31, 2020.
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No distributions will be paid on the Class A Shares if (i) the distributions payable on the Preferred Shares are in arrears, or (ii) in respect of a cash distribution by the Company, the net asset value (“NAV” or “Net Asset Value”) per “Unit”, comprised of one Preferred Share and one Class A Share, would be less than $15.00 following the payment of such distributions.
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The Preferred Shares have been provisionally rated Pfd-2 (low) by DBRS Limited.
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The Preferred Shares will be redeemed by the Company on the Maturity Date, subject to extension for successive terms of up to five years as determined by the Board of Directors. The redemption price payable by the Company for a Preferred Share on that date will be equal to the lesser of (i) $10.00 plus any accrued and unpaid distributions thereon and (ii) the NAV of the Company on that date divided by the total number of Preferred Shares then outstanding.
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Monthly: Preferred Shares may be surrendered at any time for retraction to Middlefield Capital Corporation (in such capacity, the “Registrar and Transfer Agent”), the Company’s registrar and transfer agent, but will be retracted only on the second last business day of a month (the “Retraction Date”). Preferred Shares surrendered for retraction by 5:00 p.m. (Toronto time) on or before the twentieth business day prior to the Retraction Date will be retracted on such Retraction Date and the holder will be paid on or before the last business day of the following month (the “Retraction Payment Date”).Holders of Preferred Shares whose Preferred Shares are surrendered for retraction will be entitled to receive a retraction price per Preferred Share equal to 96% of the lesser of (i) the NAV per Unit determined as of such Retraction Date, less the cost to the Company of the purchase of a Class A Share for cancellation; and (ii) $10.00. For this purpose, the cost of the purchase of a Class A Share will include the purchase price of the Class A Share, and commission and such other costs, if any, related to the liquidation of any portion of the Portfolio to fund the purchase of the Class A Share.
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On the Maturity Date and upon any subsequent maturity date as determined by the Board of Directors, a holder of Preferred Shares may retract such Preferred Shares. The Company will provide at least 60 days’ notice to holders of Preferred Shares of such right. The retraction price payable by the Company for a Preferred Share pursuant to the non-concurrent retraction right will be equal to the lesser of (i) $10.00 plus any accrued and unpaid distributions thereon and (ii) the NAV of the Company on that date divided by the total number of Preferred Shares then outstanding.
DBRS rates the shares Pfd-2(low):
DBRS Limited (DBRS Morningstar) finalized its provisional rating of Pfd-2 (low) assigned to the Preferred Shares issued by Real Estate & E-Commerce Split Corp. (the Company), managed by Middlefield Limited (the Manager). Middlefield Capital Corporation (the Investment Advisor) will provide investment advice to the Company.
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The initial downside protection available to holders of the Preferred Shares is approximately 58% (after offering expenses). Downside protection available to the Preferred Shares consists of the net asset value (NAV) of the Class A Shares. The fixed distributions of dividends on the Preferred Shares will be funded from the dividends received on the securities in the Portfolio, which are expected to cover approximately 1.8 times the annual Preferred Shares distributions.
It’s very nice to see another issue qualifying for the SplitShares index! Vital statistics are:
| RS.PR.A | SplitShare | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-12-31 Maturity Price : 10.00 Evaluated at bid price : 10.10 Bid-YTW : 5.03 % |
