Business Context and Reporting Period
Company: InvenTrust Properties Corp.
Filing Type: Form 8-K (Current Report)
Date of Report: January 3, 2016
Event: Entry into a Material Definitive Agreement to sell the Company's student housing business.
Key Financial Metrics and Transaction Details
This filing details a strategic divestiture rather than standard operating financial results. Key transaction metrics include:
- Asset Sold: University House Communities Group, Inc. (wholly owned subsidiary holding the student housing business).
- Buyer: UHC Acquisition Sub LLC, a subsidiary of Scion Student Communities LP (a joint venture of CPPIB, GIC, and Scion Communities Investors LLC).
- Initial Purchase Price: $1,410,000,000.
- Adjusted Consideration: $1,235,923,790 (after pre-determined reductions for development costs and transaction costs).
- Expected Closing: Mid-2016 (deferrable to July 5, 2016).
- Reverse Break-up Fee: $85,000,000 (payable by the Joint Venture Partners upon certain termination events).
Material Changes and Adjustments
The Adjusted Consideration of $1,235,923,790 is subject to further variable adjustments at closing, including:
- Debt Assumption: Decrease by the outstanding principal and accrued interest on University House loans assumed by the Acquiror.
- Working Capital & Cash: Adjustments based on customary working capital and cash balances.
- Leasing Adjustment: Downward adjustment if signed lease revenue for the 2016-2017 year falls below the forecast.
- Removal Adjustment: Downward adjustment if specific properties are removed from the transaction.
- Diligence Adjustment: Downward adjustment for remediation costs exceeding $3,440,000 (capped at $10,000,000).
- Closing Costs & Concessions: Decreases for Acquiror's closing costs and specific 2015-2016 leasing concessions.
- Development Funding: Increase by the amount of cash equity and debt draws actually funded for development properties.
Guidance, Outlook, and Risks
Management Commentary: The Company intends to use the proceeds from this transaction to support its retail strategy. The transaction is expected to close in mid-2016, subject to customary conditions and third-party consents.
Risks and Contingencies:
- Closing Conditions: Failure to satisfy closing conditions could delay or terminate the deal.
- Development Escrow: If substantial completion is not achieved for a certain development property by closing, the Company must deposit $8,000,000 into escrow.
- Indemnification: Claims against the Company are subject to a $50,000 de minimis threshold, a $3,250,000 deductible, and a cap of 10% of the final purchase price.
- Forward-Looking Statements: Actual results may differ due to risks associated with executing the strategy and satisfying transaction conditions.
Investor Verification Checklist
- Verify the final purchase price after all closing adjustments (working capital, debt, leasing, and remediation).
- Confirm the exact closing date and whether the July 5, 2016 deferral option is utilized.
- Review the specific properties potentially subject to the "Removal Adjustment."
- Assess the impact of the $8,000,000 development escrow requirement on liquidity.
- Monitor the Company's stated use of proceeds for its retail strategy post-closing.