OTTAWA,
ON, Dec. 16, 2024 /CNW/ - Minto Apartment
Real Estate Investment Trust (the "REIT") (TSX: MI.UN) announced
today it has entered into a definitive agreement (the
"Transaction") under which the REIT has agreed to purchase a 50%
managing interest in Lonsdale Square. A national Canadian life
insurance company (the "Partner") has agreed to purchase the
remaining 50% non-managing interest. Completed in Q1
2024, Lonsdale Square is a purpose-built rental building
located in central Lonsdale in North
Vancouver consisting of 113 suites and ground floor retail
highlighted by an upscale brewpub and a pharmacy.
The undiscounted purchase price for 100% of the asset of
$111.5 million compares favourably
with the $114.3 million average from
two independent appraisals. The REIT has agreed to purchase 50% of
the asset for $52.96 million,
representing a 5.0% discount on its share of the undiscounted
purchase price (consistent with the discount in the REIT's original
purchase option for the asset), and a 7.3% discount to the average
appraisal value. The REIT will fund its portion of the purchase
price by entirely assuming and being solely responsible for a
$52.96 million mortgage which is
equal to 100% of the REIT's discounted share of the purchase price.
The mortgage is CMHC-insured, bears an annual interest rate of
3.9% and has a maturity date of December 1,
2034. Upon completion of the Transaction, the REIT will also
receive full repayment of the $14.0
million convertible development loan ("CDL") associated with
the asset, which will be used to repay a portion of its revolving
credit facility. The REIT will receive customary asset management
and property management fees to manage and operate Lonsdale Square. Based on the REIT's purchase
price for the asset, the implied stabilized capitalization rate is
in the low 4% range.
Transaction Highlights
- The REIT makes its first property acquisition in the Metro
Vancouver market at a discount to market value
- Purchase price validation from an arm's length institutional
investor
- Advances the high grading of the portfolio
- Newly-constructed asset in highly desirable Lonsdale
neighbourhood
- Reduces overall portfolio age
- Minimal future capital expenditure requirements relative to
older assets
- ESG benefits of owning a new building that is energy efficient
and has a smaller carbon footprint than older buildings
- Creative transaction structure allows the purchase of a new
asset without diluting cash flow per unit
- Cash flow is augmented from asset management and property
management fees
- No requirement for equity capital by the REIT
- Transaction fully funded without accessing the REIT's
revolving credit facility, which is currently approximately 150
basis points higher than the CMHC-insured mortgage to be assumed by
the REIT at closing
- Net proceeds from the repayment of the CDL will be used to
repay a portion of the REIT's revolving credit facility
- The Transaction is expected to be accretive to FFO and AFFO per
unit
Pro Forma Leverage Adjusted for Subsequent Events
As at September 30, 2024, debt to
GBV was 42.0% and variable-rate debt as a percentage of total debt
was 12%. At the end of January 2025,
pro forma for: (i) the Transaction, including the repayment of
the CDL associated with Lonsdale
Square; (ii) the previously announced upward debt
refinancings; (iii) the previously announced sale of the Castleview
property; and (iv) ongoing cash flow requirements, pro forma debt
to GBV is anticipated to remain approximately 42% and no
variable-rate debt is expected to be outstanding.
"Our team worked hard to design and implement a transaction that
is beneficial to unitholders. The Transaction adds a newly-built
asset in the attractive Metro Vancouver market to our portfolio in
a manner that is accretive to FFO per unit. We did not have to
access expensive and dilutive new equity capital to fund any
portion of the Transaction because we implemented a financing
structure that fully funds it with CMHC financing, at a
significantly lower interest rate compared to our revolving credit
facility. Moreover, the REIT will reduce its variable-rate
debt exposure by using the proceeds from the repayment of the CDL
to repay a portion of the outstanding revolver balance," said
Jonathan Li, President and CEO of
the REIT. "We believe the REIT has demonstrated prudence and
discipline over time and we will continue to be disciplined when
considering future acquisition opportunities, which will be
evaluated in the context of cost of capital, pro forma leverage and
prevailing market conditions."
"This transaction underlines the benefit of the REIT's
relationship with the Minto Group and we would like to thank them
for their flexibility and patience regarding this asset," added
Allan Kimberley, lead independent
trustee of the REIT. "The Minto Group agreed to extend the maturity
date of the purchase option, accept a purchase price discount
greater than 5.0% of appraisal value and implement long-term
financing which is beneficial to the REIT."
The Transaction was reviewed and unanimously approved by an
independent committee of the Board of Trustees and is expected to
close in January 2025. The
transaction constitutes a "related party transaction" for purposes
of Multilateral Instrument 61-101 - Protection of Minority Security
Holders in Special Transactions ("MI 61-101"), but is exempt from
the valuation and minority approval requirements.
Description of Lonsdale Square
Lonsdale Square is located in the
highly desirable city of North
Vancouver just south of the Upper Levels Highway, adjacent
to the new Harry Jerome Community Recreation Centre (HJCRC) and
directly on major public transit routes providing excellent access
to key destinations, including downtown Vancouver. The asset is a six-storey,
purpose-built rental building offering premium amenities including
a rooftop terrace, penthouse social lounge, and 108 parking stalls
and is surrounded by diverse retail, restaurants, outdoor parks and
trails. The building has a state-of-the-art smart building
operating system including a package and food delivery system, a
resident app, remote video intercom, keyless access control and
security cameras. Current residential occupancy is 93% and the
building's approximately 8,000 square feet of ground floor retail
space is 100% leased to an upscale brewpub, a pharmacy and a
vitamin/nutrition retailer.
The HJCRC is scheduled to be completed in 2025 and is expected
to bring additional vibrancy, foot traffic and sense of community
to the immediate neighborhood. Once completed, it will be a 200,000
square foot, state-of-the-art community facility that will offer a
500-person capacity hockey arena, a modern aquatic centre,
indoor/outdoor fitness facilities, a skate park, preschool and
youth spaces and a seniors activity centre.
About Minto Apartment Real Estate Investment Trust
Minto Apartment Real Estate Investment Trust is an
unincorporated, open-ended real estate investment trust established
pursuant to a declaration of trust under the laws of the Province
of Ontario to own income-producing
multi-residential properties located in Canada. The REIT owns a portfolio of
high-quality multi-residential rental properties
located primarily in urban centers in Canada's major markets of Toronto, Montreal, Ottawa and Calgary. For more information on Minto
Apartment REIT, please visit the REIT's website
at https://www.mintoapartmentreit.com.
Forward-Looking Information
This news release may contain forward-looking information within
the meaning of applicable securities legislation, which reflects
the REIT's current expectations regarding future events and in some
cases can be identified by such terms as "expected", "will" and
"may". Forward-looking information is based on a number of
assumptions and is subject to a number of risks and uncertainties,
many of which are beyond the REIT's control that could cause actual
results and events to differ materially from those that are
disclosed in or implied by such forward-looking information. Such
risks and uncertainties include, but are not limited to, the
factors discussed under "Risk Factors" in the REIT's Annual
Information Form dated March 6, 2024,
which is available on SEDAR+ (www.sedarplus.ca). The REIT does not
undertake any obligation to update such forward-looking
information, whether as a result of new information, future events
or otherwise, except as expressly required by applicable law. This
forward-looking information speaks only as of the date of this news
release.
Non-IFRS Financial Measures
This news release contains financial measures that are not
defined under International Financial Reporting Standards ("IFRS")
and may not be comparable to similar measures presented by other
real estate investment trusts or enterprises. FFO per unit and AFFO
per unit are measures of financial performance used by the REIT's
management and other real estate businesses. These measures are not
defined by IFRS and do not have standardized meanings prescribed by
IFRS. See the REIT's Management Discussion & Analysis dated
November 12, 2024 for further
discussion of these and other non-IFRS financial measures.
SOURCE Minto Apartment Real Estate Investment Trust
