TORONTO - A battle over a private financing that effectively changes control of apartment owner InterRent Real Estate Investment Trust (TSX:IIP.UN) is moving to the courts after securities regulators effectively gave a thumbs up to the deal Wednesday.
"It's not unexpected but it's a bit disappointing," Paul Dalla Lana, president of Northwest Value Partner's Venture Inc., said of the decision by the Ontario Securities Commission backing an earlier TSX ruling on the financing and related governance matters.
Dalla Lana said he and other unitholders, whom he describes as being the majority, are now pinning their hopes on "injunctive relief" by the Superior Court of Ontario, which he said could come as early as Thursday.
The OSC did not immediately provide a complete explanation of its decision Wednesday, saying the ruling was made on an "expedited basis" because it was "a matter of some urgency."
The companies have been battling each other for several weeks after InterRent announced private placements in July with Ottawa-based CLV Group Inc. that rivalled NorthWest's own planned financing for InterRent, which would have given NorthWest control of the trust.
NorthWest argued that the financing effectively gives CLV control of InterRent and was done without seeking unitholder approval.
The OSC noted the $12 million CLV paid for eight million InterRent units were being held in trust by lawyers for CLV and that the private placement could not be completed until the commission had issued its ruling.
"We will issue full reasons in due course," the OSC said on its website.
Dalla Lana described the OSC ruling as based a narrow mandate dealing largely with how the TSX "came to their decision."
"The way forward for us continues to be through a parallel track, which involves the Superior Court of Ontario," a track he said is much more involved in the "merits of the case."
"We think we have a much stronger opportunity there," Dalla Lana said, adding that the case is much more about how InterRent is run, "which is what this is all about - a majority of the shareholders wanting to have a vote on what we see as a transformative transaction."
Dalla Lana said that in addition to Northwest, there are nine other major institutions and unitholders who have more than 50 per cent of the outstanding units who are "very concerned."
"We are just hopeful that we get to have a meeting and we get to voice out opinion. It's really what this is all about and fundamentally being able to have a vote on what are very significant business issues for this trust."
Nobody at InterRent was available Wednesday. However, the trust said in a statement that it sees the decision by the provincial regulator as "unequivocally confirming" the earlier TSX decision to approve the proposed financing.
"Other motions brought by NorthWest in the proceeding, relating to disclosure of the names of the private placees and reviewing the TSX decision to allow a postponement of the unitholder meeting date, were also dismissed," it noted.
The commission granted full intervenor status to Ottawa-based CLV at the hearing but not to its CEO, Mike McGahan, whom the commission described as the company's sole director and shareholder.
It said it dismissed NorthWest's appeal of the TSX decision agreeing to postponement of the unitholders meeting because Northwest's request for a review was not made until more than 30 days after it learned of the decision.
In June, InterRent announced a non-brokered private placement of 9.3 million trust units at $1.50 each to raise up to $14 million.
InterRent says the financing has been subscribed by 41 institutional and individual investors, with CLV acquiring about eight million units, effectively giving the privately owned property manager control.
InterRent currently has 19 million units issued and outstanding.
InterRent said its board of trustees chose the CLV financing proposal over a rival $6 million financing plan by NorthWest at $1.275 a unit after it "thoroughly examined a number of options."
NorthWest, which owns 34 per cent of InterRent, is a private real estate investment firm that founded and owns NorthWest Healthcare Properties, Canada's largest private owner and manager of medical office buildings and health-care centres.
The dispute has dragged on in the boardroom, the courts and stocks regulator. NorthWest and other investors it says backs its moves, are trying to remove InterRent's trustees at a proposed meeting next month.
NorthWest says it believes moves by InterRent's trustees to approve the private placements and inter-related transactions without unitholder approval are self-dealing and hurt the apartment property owner, change control of the company and entrench management.
InterRent units were up 12 cents or 7.2 per cent at $1.78 Wednesday on the Toronto Stock Exchange.