Alaris Equity Partners has redeemed its interest in Kimco, an Atlanta-based provider of commercial cleaning programs, facility maintenance and associated services. The redemption resulted from Kimco’s sale to Kellermeyer Bergensons Services, a portfolio company of Cerberus Capital Management. Alaris, a Canadian alternative equity firm, said it realized gross proceeds of $68.2 million (C$85.9 million).
CALGARY, Alberta, April 01, 2022 (GLOBE NEWSWIRE) — Alaris Equity Partners Income Trust (the “Trust” and collectively with its subsidiaries “Alaris”) (TSX: AD.UN) is pleased to announce the redemption of Alaris’ interest in Kimco Holdings, LLC (“Kimco”) in connection with a sale (the “Kimco Sale”) of Kimco to a third party. The Kimco Sale closed on April 1, 2022 and resulted in gross proceeds to Alaris of US$68.2 million (CA$85.9 million) (the “Kimco Proceeds”), consisting of (i) US$44.7 million for the redemption of all of Alaris’ preferred equity, (ii) the payment of US$13.7 million (the “Previously Deferred Distributions”) owed to Alaris and (iii) the repayment of US$9.8 million of promissory notes. In connection with the Kimco Sale, Alaris agreed to fund US$1.1 million of the Kimco Proceeds into an escrow account to cover potential indemnification obligations. Alaris further agreed to fund a portion of any additional indemnification obligations in connection with the Kimco Sale, up to a maximum amount of US$9.0 million, if such obligations arise in the future.
Alaris’ total return on its Kimco investment was US$52.1 million or 109% (“Kimco Return”) which represents an unlevered IRR(3) of over 13% during the eight-year partnership, excluding the escrowed proceeds. The Kimco Return was generated by collecting US$37.4 million of distributions (including the Previously Deferred Distributions) and US$5.3 million in interest payments, as well as a premium of US$9.4 million on the redemption of the preferred equity, which had a cost basis of US$34.2 million. The US$13.7 million of Previously Deferred Distributions as well as US$7.9 million of the premium have not yet been recognized.
“This is a very gratifying end result on our investment in Kimco. Our team did an outstanding job in rehabilitating this company after a very difficult series of events hit the company several years ago. To be able to crystalize significant positive returns after all of that is a tremendous achievement and bodes well for the future should any of our partners encounter any significant issues,” said Steve King, President & CEO, Alaris.
After today’s announcements, Alaris will have approximately CA$263 million drawn on its senior credit facility and CA$137 million available for investment purposes while the total senior debt to EBITDA(2) on a proforma basis is approximately 1.9x. Alaris estimates its Run Rate Payout Ratio(1) to be between 60% and 65% following the Kimco Redemption.
Alaris, through its subsidiaries, provides alternative financing to private companies (“Partners”) in exchange for distributions, dividends and interest (“Distributions”) with the principal objective of generating stable and predictable cash flows for dividend payments to its unitholders. Distributions from the Partners are adjusted each year based on the percentage change of a “top line” financial performance measure such as gross margin and same-store sales and rank in priority to the owners’ common equity position.