DEAL OF THE DAY
CPPIB's big real estate deal
The Canada Pension Plan Investment Board is joining students heading back to school in the new year, with a deal to build and own student housing in the United States.
But these aren't your standard freshman dorms – they are houses and lofty apartments targeting more mature students, at a time when their enrolment at U.S. universities is growing. Some buildings have pools and cabanas, while others boast services such as a pet spa and dog walking.
The $1.4-billion (U.S.) acquisition alongside two partners will give the CPPIB a 47.5-per-cent stake in a student housing portfolio in the United States, some of which is still under development. And the investors plan to look for more opportunities to buy up housing assets through a joint venture – especially in the "Tier 1" university markets in the U.S., meaning larger schools with good reputations.
"This isn't Animal House or anything like that; this is high-quality residences that have a lot of amenities," said Peter Ballon, CPPIB's head of real estate investments Americas. "Our target is more mature students. We're not seeking first-year students that typically live in university-owned residences." Story
FINANCINGS
Canadian Solar announces 'at-the-market' stock offering
On Monday, Canadian Solar Inc. announced an "at-the-market" (ATM) secondary stock offering of up to $100-million (U.S.). The Guelph, Ont.-based solar power company trades on the Nasdaq exchange.
ATM offerings are much more common in the U.S. than in Canada where underwritten bought deals are the norm. In a bought deal, issuers have a commitment from a syndicate of brokers to purchase a certain amount of their shares at an agreed-upon price. In an ATM, newly issued shares are instead sold through an agent at market rates. Typically the agent will sell the stock over an undetermined period of time in block trades. The shares could end up being sold at different prices over a period of months.
"It's essentially a glorified market trade," Ettore Santucci, a partner with Goodwin Procter LLP, said in an interview.
Since bought deals are done in one big shot, they can have a sharp downward effect on the daily share price. ATMs are designed to be the opposite, with new shares being introduced in dribs and drabs – hopefully without a market-moving impact.
"The most successful ATM programs are for companies that have pretty significant daily trading volumes and they can absorb the stock without disruption" Mr. Santucci said.
The major advantage of the Canadian-style bought deal is certainty for the issuer. One a deal is underwritten, issuers get their funds – regardless of whether the broker is able to flip the stock to third parties. In an ATM, issuers have no such assurance. In this particular instance, Canadian Solar may or may not raise the entire $100-million.
One advantage of an ATM is cost. Credit Suisse, the agent for Canadian Solar, is getting paid a 2-per-cent commission. Five per cent is the standard fee for a comparable bought deal of this size in Canada.
"The banks don't really take any risk [with an ATM], Mr. Santucci said. "Whereas in a bought deal they take a lot of risk."
The standard method of raising equity in the U.S. is still a fully marketed offering. But they can take some time as the stock needs to be marketed by brokers to investors on a road show. ATMs are not marketed and so issuers can move quicker initially.
STREET MOVES
Cormark loses long-time equity analyst to buy side
Highly regarded equity analyst Sarah Hughes has left Cormark Securities Inc. to take a buy side position at Norrep Capital Management Ltd.
Ms. Hughes had been with Cormark Securities (formerly Sprott Securities Inc.) since 1997.
"We are sorry to see a great partner go. But she's now going to be a client. So we wish her well," Susan Streeter, head of research at Cormark Securities, said in an interview.
BLG snags competition lawyer
Borden Ladner Gervais LLP has hired well-known competition lawyer Davit Akman away from Gowling Lafleur Henderson LLP.
Mr. Akman has advised companies on a variety of competition matters, including cartel investigations and national and cross-border class actions, and has appeared before the Competition Tribunal and the Supreme Court of Canada. He joined Gowlings in 2012 after leaving Davies Ward Phillips & Vineberg LLP. Story
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Niall McGee