US REIT managers who think their shares are the Rodney Dangerfields of the equities market may want to commiserate with TrizecHahn counterparts on being a Canadian real estate company, especially one with a growing presence in top US Central Business District markets. TrizecHahn's 48.9 million sf is concentrated heavily in New York; Chicago; Washington, DC; Houston, Atlanta, Los Angeles and Dallas.
"The status quo, the way things have been, really did not allow us to get the full benefits of our performance or for the quality of our assets into the hands of our shareholders," says Chairman Peter Munk. "It was very frustrating to go through a period of two years and deliver the values we were able to deliver in a corporate environment."
TrizecHahn already deals with tax complexities involved in doing business in the US and Canada. While the $2.5-billion Toronto-based firm is divesting itself of its Canadian, European and US retail and entertainment properties, cross-border issues will be involved in the REIT.
US shareholders in TrizecHahn, traded on the New York Stock Exchange, will receive one share in the newly-created REIT. Canadian shareholders will receive one share in Canco, a newly-created public Canadian company, which will own 40% of the REIT. The 60-40 percentages represent the current distribution of US and Canadian shareholders. In addition to owning a piece of the new REIT, Canco will be in charge of disposing of Canadian and European assets, including landmark CN Tower in Toronto.
The conversion was under consideration for two years. The structure was created to reduce tax exposure, as well as put TrizecHahn on the same playing field with companies it considers its peers, which are mostly REITs.
Dividends will remain at $0.35 per share, but are expected to jump to $1.75 per share in 2003, says President and CEO Christopher Mackenzie. At its most recent price of $16.45 per share, the current yield is 2.13%. "Despite the tough economic climate and slowdown in absorption, the REIT should deliver double-digit (funds from operations) growth," he adds.
By 2003, TrizecHahn projects FFO to rise to $2.90 per share, up from $2.35 this year.
The REITs management team will include Munk as chairman, Mackenzie as president and CEO, Antonio Bismonte heading leasing and operations, Greg Hanson as chief financial officer and Casey Wold in charge of capital transactions.
Under a June reoganization, accounting, payroll and information systems were shifted from Toronto to Sears Tower under the direction of Hanson, who was hired away from GE Capital Real Estate.
TrizecHahn's retail and entertainment properties are the 425,000-sf Hollywood & Highland mixed-use development Los Angeles, the 475,000-sf Desert Passage in Las Vegas and 565,000-sf Paseo Colorado in Pasadena, CA.
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