Key Takeaways
- • Activist hedge fund Anson Funds, holding a 9% stake (~$130 million) in Ottawa-based InterRent REIT, has launched a campaign pressuring management to halt acquisitions and sell properties to reduce debt, potentially positioning the company for sale to private equity buyers.
- • InterRent's unit price has declined 28% over the past 12 months while trading at a 30% discount to asset value, significantly underperforming the S&P/TSX capped REIT index, which fell 5.3% over the same period—a valuation gap that has attracted activist attention.
- • The REIT owns 13,000 apartment units across British Columbia, Ontario, and Quebec with a $1.45 billion market capitalization; debt reached $1.6 billion at end-2024 following four years of aggressive acquisition activity.
- • InterRent CEO Brad Cutsey announced in late February plans to sell up to $250 million in properties over 12 months, generating up to $140 million in proceeds for debt reduction and unit buybacks—a strategic shift that Bank of Nova Scotia analyst Mario Saric noted should support unit price recovery.
- • The activist campaign reflects broader market dynamics where private equity buyers place higher valuations on rental properties than public capital markets, creating arbitrage opportunities for activists targeting undervalued REITs.
Summary
Toronto-based activist hedge fund Anson Funds has initiated a shareholder campaign at InterRent Real Estate Investment Trust, Canada's largest apartment owner by activist investment, holding approximately 9% of the Ottawa-based REIT. According to sources familiar with the matter, Anson has pressed InterRent's board and management to reverse the company's acquisition strategy, instead prioritizing asset sales to reduce leverage. The campaign carries significant implications: if successful in forcing strategic changes, it could position InterRent for acquisition by private equity buyers who currently value rental properties at a substantial premium to public market valuations.
The activist push comes against a backdrop of significant unit price deterioration. InterRent's units have fallen 28% over the past 12 months, a sharp decline relative to the S&P/TSX capped REIT index, which decreased 5.3% over the same period. More notably, the REIT now trades at a 30% discount to net asset value—a substantial gap that Anson and other investors view as unsustainable. InterRent operates 13,000 apartment units across British Columbia, Ontario, and Quebec and carries a $1.45 billion market capitalization, with debt levels that grew to $1.6 billion by year-end 2024 following an aggressive four-year acquisition campaign that fueled the unit price decline.
Management has already taken steps toward the activist's prescribed strategy. In late February, InterRent CEO Brad Cutsey announced plans to sell between $200 million and $250 million in properties over the next 12 months, with proceeds of up to $140 million earmarked for debt reduction and unit repurchases. This strategic pivot has garnered analyst support: Mario Saric at Bank of Nova Scotia stated in a recent report that "concretely killing the idea of InterRent as a net buyer of assets should help" the REIT's unit price recovery. InterRent sold 10 buildings in 2024 for $143 million, demonstrating management's willingness to reduce the portfolio in response to market pressures.
The activist push comes against a backdrop of significant unit price deterioration. InterRent's units have fallen 28% over the past 12 months, a sharp decline relative to the S&P/TSX capped REIT index, which decreased 5.3% over the same period. More notably, the REIT now trades at a 30% discount to net asset value—a substantial gap that Anson and other investors view as unsustainable. InterRent operates 13,000 apartment units across British Columbia, Ontario, and Quebec and carries a $1.45 billion market capitalization, with debt levels that grew to $1.6 billion by year-end 2024 following an aggressive four-year acquisition campaign that fueled the unit price decline.
Management has already taken steps toward the activist's prescribed strategy. In late February, InterRent CEO Brad Cutsey announced plans to sell between $200 million and $250 million in properties over the next 12 months, with proceeds of up to $140 million earmarked for debt reduction and unit repurchases. This strategic pivot has garnered analyst support: Mario Saric at Bank of Nova Scotia stated in a recent report that "concretely killing the idea of InterRent as a net buyer of assets should help" the REIT's unit price recovery. InterRent sold 10 buildings in 2024 for $143 million, demonstrating management's willingness to reduce the portfolio in response to market pressures.
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