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Investing.com - Scotiabank downgraded Artis REIT (TSX:AX-U) (OTC:ARESF) from Sector Perform to Sector Underperform with a price target of C$7.50 following the announcement of a merger agreement with RFA Capital.
Artis REIT and RFA Capital, a private company led by Artis Chairperson Mr. Rodney, have agreed to merge and form RFA Financial through a share exchange. Under the agreement, Artis unitholders will own 68% of the combined entity upon closing, which is expected in the first quarter of 2026.
The newly formed RFA Financial, a private licensed bank, plans to offer a $0.44 per share dividend, approximately 25% lower than Artis REIT’s current $0.60 dividend. According to RFA’s presentation, this represents a 5.8% yield compared to the peer average of 3.6%, but falls below Artis REIT’s current yield of approximately 8%.
Scotiabank noted that the proposed transaction comes after a Strategic Review that began in August 2023, suggesting limited conventional options were available to Artis REIT at this stage.
The bank recommended that Artis unitholders seeking diversified REIT exposure consider H&R REIT instead, while highlighting other opportunities within their coverage including Allied Properties, Brookfield Asset Management, Brookfield Corporation, Crombie REIT, and Killam Apartment REIT.
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