The next time an executive from the Dundee group of companies meets with an executive from TD Securities for lunch, both should insist that the banker pays.
The reason: through its seemingly never ending flow of equity financings the three realty companies within the Dundee group ? Dundee REIT, Dundee International REIT and Dundee Industrial ? have made significant contributions to the profit pool at the dealer and to its retail brokerage network given that TD Securities was the lead manager/book runner on all the financings. Now the issuer may demand a little quid pro quo.
According to calculations done by Financial Post Data, the three issuers have completed six equity financings this year raising about $1.034-billion (with another $200-million of deals announced but not closed.) Dundee REIT has done two deals for ($580.80-million); Dundee International three ($275.4-million) and Dundee Industrial one ($178.3-million.)
All those deals were treasury offerings except for the $155-million initial public offering of Dundee Industrial REIT. That issuer, which was created because of the perceived void for real estate based on industrial properties, was back in the markets Wednesday with a two part deal: $125-million of equity and $75-million of convertible debentures.
The completed treasury financings come with a 4% fee which was moved up to 5.25% in the case of the IPO. Overall, the Dundee group (after making some assumptions about the two current deals) has paid $52.31-million in agents fees this year. Given that TD has around a 30% liability for each of the deals, the bank has been paid $14.47-million for its underwriting services. Scotia Capital received $10.64-million in fees from Dundee. Of course that $14.47-million doesn?t flow to the investment banking group: the firm?s retail brokers also receive a fee for placing the new issue stock
A similar story prevailed in 2011: Dundee REIT raised $629-million equity on four deals while Dundee International completed its initial public offering with $310.5-million of equity and $161-million of convertibles. In all the group raised $1.1-billion. TD was lead on those five deals. In 2010, Dundee REIT completed or announced five deals that raised $577.6-million.
Andrew Phillips, head of the real estate group at TD Securities, said his firm ?has a broad and deep relationship? with Dundee having led all their deals since Dundee converted to a REIT in 2003,?
But his relationship with Micheal Cooper, chief executive at Dundee REIT goes back to the mid-1990s. ?We have done lots of business over the years. They are a great client,? said Phillips noting that about 20% of all equity capital raised this year have been in the form of real estate financings. In total more than $6-billion has been raised for real estate issuers.
But Phillips doesn?t take anything for granted. ?We are fortunate that they are a TD client. A number of the banks also have great clients as well.?
Indeed, if TD can continue its close relationship with the Dundee Group, big paydays will continue. This week, Dundee REIT filed a short form prospectus allowing it to borrow $2-billion in either equity (units) or debt including convertibles, over the next 25 months.
Dundee couldn?t be reached for comment but it?s known that it also values the relationship, which it views as a partnership, because it has worked well for many years.
Given the benefits to both sides of the TD/Dundee relationship, one debate among underwriters is the merits of having a stable of clients that are frequent issuers even if the average deal size is relatively small compared with having a few clients which are irregular but large issuers. It used to be said that the foreign firms used to target the latter, the so-called Big Elephants, because of their ability to access the U.S. and international markets. While that may be true for the large corporate debt deals, over time it has become less true for equity financings.
Here are two other valuable clients:
? Crescent Point Energy Corp. The Calgary-based company has completed two major deals this year: in March it raised $604-million and followed up with a $750-million financing earlier this month. On deals, the fee was meaning 4% meaning that the syndicate split $54.16-million.
? Brookfield Asset Management. This year companies within the group have been to the market on six occasions and raised $1.366-billion, the bulk of which ($1.25-billion) has been in preferred shares. Those deals have generated $42.245-million in fees. That issuer has a different arrangement with its underwriters: it has been three joint lead managers ? Scotia, RBC and CIBC ? which each received $7.25-million.
Source: http://business.financialpost.com/2012/11/29/dundee-deals-keep-td-rolling-in-the-green/
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