Minto Apartment REIT is using a Class B exchangeable and Class C preferred unit structure

On July 3, Minto Apartment REIT completed an initial public offering in which unitholders are investing in a portfolio of rental properties formerly held by Minto Properties. This is being accomplished first by Minto Properties transferring the portfolio (appraised at $1.179 billion) to a newly-formed wholly-owned LP in consideration for cash, the assumption of a portion of the related secured debt, the issuance of two promissory notes and a partnership interest that then will be converted into “common” Class A units, exchangeable Class B units and “preferred” Class C units, with Minto Properties then selling its Class A units to the REIT for a note that is repaid out of the IPO proceeds.

The Class C units (valued at $233 million) are intended to service the secured debt that was retained by Minto Properties. This approach to deal with excess boot issues was also used in the Melcor and CT REIT IPOs.

Neal Armstrong. Summary of Minto Apartment REIT prospectus under Offerings – REIT and LP Offerings – Domestic REITs.