Why Northview Apartment REIT (TSX:NVU.U) Shot Up 12.25% Today

Northview Apartment REIT (TSX:NVU.U) is being acquired. Investors should track other stocks that are seemingly undervalued and attractive buyout targets.

Paper airplanes flying on blue sky with form of growing graph

Image source: Getty Images

Investors in Northview Apartment REIT (TSX:NVU.U) woke up to a pleasant surprise this morning. The real estate investment trust jumped 12.25% in value after an announced that private equity investors were set to acquire the trust and its assets for a significant premium. 

Starlight Group Property Holdings Inc. and Kingsett Capital Inc. have bid $36.25 per unit for the trust, an 11.5% premium to its market value at the close of trading yesterday. Northview’s management team says the deal was offered in October last year and places the company’s value at $2.5 billion ($4.8 billion with debt included). 

Here’s a look at why Northview was an ideal acquisition target and which other companies are well positioned for a similar takeover. 

The deal

Calgary-based Northview is focused on multifamily residential properties spread across the country. According to the company’s latest investor presentation, it manages 27,000 residential units, 344 executive suites, and 1.2 million square feet of commercial space that are collectively worth $4 billion. 

At the end of the third quarter of 2019, the trust’s net asset value (NAV) per unit was $30.87. Through acquisitions and renovations, the value of Northview’s underlying assets have expanded by 36% over the past three years. 

The offer price of $36.25 is significantly higher than the company’s reported NAV, which makes this a fair deal for retail investors. Starlight Group Property Holdings was already a major stakeholder in the company, making this a strategic purchase for the investment firm. 

At the time of writing, Northview has accepted the offer and it seems likely that the deal will close later this year. If you own the stock, congratulations!

Future targets

Buyouts are my favourite type of corporate actions because they quickly unlock value in underappreciated stocks. Private investors need to offer a significant premium to persuade shareholders to vote for a deal and take a public company private, which is why I keep an eye out for potential acquisition targets. 

I believe Indigo Books could be an ideal acquisition target given that its stock price is less than the value of its underlying assets and properties. Badger Daylighting could also be a potential target as it appears that the company received an offer in 2018 and is now trading at the same value. 

My Fool colleague Ryan Vanzo believes he’s found an asset on Just Energy’s books that could be worth three and a half times the entire company’s market capitalization. If he’s right, the energy company could be the next multi-billion dollar buyout deal.

Investors could add these potentially undervalued stocks to their watch list in hopes of a major deal that unlocks their value soon. 

Bottom line

Northview Apartment REIT is being acquired by private equity investors for a price that’s significantly higher than its market value but closely aligned to its net asset value.

Investors should keep an eye out for other stocks trading at less than book value per share or with hidden underlying assets for potential windfalls triggered by similar buyouts.

Deep value stocks tend to have lower downside risks, so adding some exposure isn’t such a bad idea.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Vishesh Raisinghani has no position in any of the stocks mentioned.

More on Dividend Stocks

Two seniors float in a pool.
Dividend Stocks

TFSA: How to Earn $1,890 in Annual Tax-Free Income

Plunk these investments into your TFSA to earn passive income and avoid the taxman.

Read more »

Engineers walk through a facility.
Dividend Stocks

1 TSX Stock I Wouldn’t Touch With a 10-Foot Pole

AtkinsRéalis (TSX:ATRL) is one TSX stock I'd never invest in.

Read more »

edit Woman in skates works on laptop
Dividend Stocks

3 No-Brainer Stocks to Buy Under $30

These three stocks all offer a huge deal for investors looking for dividends, as well as growth that will last.

Read more »

You Should Know This
Dividend Stocks

How to Convert a $300 Monthly Investment Into $338 in Monthly Income

If you want a certain amount in monthly passive income, invest a similar amount today and leave the rest to…

Read more »

Increasing yield
Dividend Stocks

3 Income Stocks With Big Yields to Consider in April 2024

If you haven’t yet made your March investments, here are three income stocks to buy the dip and lock in…

Read more »

Senior Man Sitting On Sofa At Home With Pet Labrador Dog
Dividend Stocks

RRSP Investors: Don’t Miss Out on This Contribution Hack!

This hack has so many benefits for you -- not just when you put it in your RRSP but for…

Read more »

A red umbrella stands higher than a crowd of black umbrellas.
Dividend Stocks

Passive Income: 2 Safe Dividend Stocks to Own for the Next 10 Years

Dividend stocks such as Manulife and Fortis can help you generate a stable and recurring passive-income stream.

Read more »

Young woman sat at laptop by a window
Dividend Stocks

3 Dividend Stocks Everyone Should Own for the Long Haul

For investors looking for top-tier dividend stocks to buy and hold for the long term, here are three of my…

Read more »