Information on the Target

Kimco Holdings, LLC ("Kimco") is a private company that has undergone significant restructuring and rehabilitation over recent years. After facing a series of challenges, it has emerged as a noteworthy entity within its industry, ultimately leading to a successful sale to a third party. Alaris Equity Partners Income Trust ("Alaris") held a significant investment in Kimco, which was redeemed in connection with this sale.

The sale was finalized on April 1, 2022, and yielded gross proceeds of approximately US$68.2 million (CA$85.9 million) for Alaris. This total consisted of the redemption of preferred equity, previously deferred distributions, and the repayment of promissory notes, evidencing a strong return on investment and an effective exit strategy for Alaris.

Industry Overview in Canada

The Canadian financing and investment landscape has seen a steady evolution over the years, particularly for private companies seeking alternative sources of capital. Alaris Equity Partners has been at the forefront of providing alternative financing solutions through its unique partnership model, which involves sharing revenue with the companies it invests in.

This alternative investment approach stands in contrast to traditional debt financing options commonly available in the market. With increased economic uncertainties, many private firms look for stability through these arrangements, which can yield better financial performance while reducing overall risk.

Furthermore, Canada’s economy has been gradually recovering from the impacts of the COVID-19 pandemic, fostering optimism across industries. This recovery has opened avenues for private companies to engage in growth-focused strategies, thereby presenting opportunities for investors like Alaris to capitalize on future growth.

As private enterprises navigate competitive markets, the demand for flexible financing solutions has intensified, ensuring that services offered by firms such as Alaris remain relevant and vital for sustained business operations.

The Rationale Behind the Deal

The redemption of Alaris’ interest in Kimco not only marks a successful exit but also signifies the realization of a strong return from a long-term investment strategy. Over the eight-year partnership with Kimco, Alaris achieved a total return of US$52.1 million, representing an impressive unlevered internal rate of return (IRR) exceeding 13%.

By exiting the investment with considerable returns, Alaris demonstrates its adeptness at managing partnerships, as evidenced by the ability to salvage and grow Kimco despite its earlier challenges. This transaction aligns with Alaris’ objective of generating stable cash flows and a consistent payout to its unitholders.

Information About the Investor

Alaris Equity Partners Income Trust is a leading entity in the alternative financing space, providing innovative funding solutions to private companies across various sectors. Through its subsidiaries, Alaris focuses on acquiring preferred equity interests in its partner companies, allowing it to generate distributions that contribute to the stability of its income stream.

The Trust adopts a strategy that prioritizes strong financial performance from its partners, making adjustments based on revenue-related measures, which enhances its ability to manage risks while ensuring solid returns for its investors. This strategic focus underpins Alaris' growth and retention of capital across economic cycles.

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This deal serves as an exemplary case of effective investment management and strategic exit planning. Alaris’ decision to redeem its interest in Kimco at a significant profit showcases the firm’s capacity to navigate complex economic conditions and rehabilitate struggling businesses successfully. The deal aligns perfectly with Alaris’ objective of providing reliable financial solutions while enhancing shareholder value.

The unlevered IRR of over 13% achieved through this transaction indicates not only the success of the investment but also underscores the importance of Alaris' thorough evaluation processes in selecting suitable partners. Such returns can be highly appealing to investors considering alternative financing options.

Moreover, the commitment to allocate funds into an escrow for potential indemnifications illustrates Alaris' prudent approach to risk management. This careful consideration positions Alaris favorably, demonstrating that it is prepared to handle uncertainties while maintaining shareholder interest.

Overall, the Kimco deal is perceived as a strong investment, providing a model for other private companies considering partnerships with Alaris. It highlights the potential for significant returns and the benefits of alternative financing paths in a rapidly evolving economic environment.

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