MINTO APARTMENT REIT ANNOUNCES AGREEMENTS TO ACQUIRE TWO PREMIUM DOWNTOWN PROPERTIES FOR AN AGGREGATE OF $201 MILLION

April 11, 2022 From Minto Apartment REIT

— Niagara West in Toronto and The International in Calgary add a total of 753 suites to the REIT's portfolio

Highlights

  • Agreement to acquire a 28.35% managing interest in 39 Niagara Street ("Niagara West") located in downtown Toronto at the intersection of Front Street West and Bathurst Street. Niagara West is a high-rise building completed in 2020 comprising 501 suites and approximately 52,600 square feet of at-grade retail. The purchase price of $114.5 million will be satisfied by cash payment, assumption of mortgage and an issuance of securities;
  • Agreement to acquire a 100% interest in 220 4th Avenue SW ("The International") in downtown Calgary, a 34-storey building containing 252 suites and approximately 2,700 square feet of commercial space for $86.5 million, to be satisfied by cash payment and assumption of mortgage;
  • Both properties are institutional quality and located in core urban locations, offering above-average net operating income growth potential;

  • The REIT's suite count increases by 10% with the acquisition of these properties; and
  • Satisfaction of the purchase prices for the two transactions will result in the assumption by the REIT of an aggregate of $108.4 million in existing mortgages, a $26.9 million draw on the REIT's revolving credit facility and the issuance of 2,985,956 exchangeable Class B limited partner units of Minto Apartment Limited Partnership ("MALP") at a price of $22.00 per Class B limited partner unit, which represents a premium of 9% to the last closing price of the REIT's publicly traded units into which the Class B limited partner units are exchangeable.

OTTAWA, ON, April 11, 2022 /CNW/ - Minto Apartment Real Estate Investment Trust (TSX: MI.UN) (the "REIT") today announced that it has entered into two separate agreements to acquire a 28.35% managing interest in Niagara West in downtown Toronto (the "Niagara West Acquisition") and a 100% interest in The International in downtown Calgary (the "International Acquisition" and, together with the Niagara West Acquisition, the "Acquisitions"), two institutional quality multi-residential properties.

The purchase price for the Niagara West Acquisition is $114.5 million, which will be satisfied by a cash payment of $2.6 million, the assumption of $46.2 million in existing mortgage financing and the issuance to the vendor of 2,985,956 Class B limited partner units of MALP, which are exchangeable for units of the REIT on a one-for-one basis. The purchase price for The International Acquisition is $86.5 million, which will be satisfied by a cash payment of $24.3 million and the assumption of $62.2 million in existing mortgage financing.

Upon closing of each of the Acquisitions, the REIT will have ownership interests in a total of 8,277 suites with a geographic mix, based on fair value, of 38% in Ottawa, 33% in Toronto, 20% in Montreal, 7% in Calgary and 2% in Edmonton.

"This is a unique opportunity to acquire institutional-quality assets in highly desirable downtown markets," said Michael Waters, Chief Executive Officer. "These Acquisitions increase our scale to 8,277 suites, reduce the average age of the portfolio by 2.6 years, increase our exposure to Toronto to 33% and improve operating efficiencies in the management of our Calgary portfolio. The Acquisitions also underline the value of our relationship with the Minto Group, through which we were able to acquire these premier assets in off-market transactions."

The Acquisitions are from two separate limited partnerships, in which a subsidiary of Minto Properties Inc. ("MPI") holds a minority ownership interest. Because MPI is a related party to the REIT, the terms of each Acquisition were reviewed, considered and approved by a committee of the REIT's independent trustees. The purchase price for each Acquisition was determined by calculating the average of two appraisals obtained in respect of each property. In respect of each Acquisition, the independent committee reviewed and considered the commercial and legal aspects of each transaction, including price and financing, as well as the transaction documentation. The Acquisitions constitute a "related party transaction" for purposes of Multilateral Instrument 61-101 – Protection of Minority Security Holders in Special Transactions ("MI 61-101"), but are exempt from the valuation and minority approval requirements of MI 61-101.

Property Profiles

Niagara West, Toronto

Niagara West comprises a 14-storey tower and a 19-storey tower containing a total of 501 residential suites, 52,594 square feet of retail at grade anchored by a Farm Boy grocery store, and 379 parking stalls. The development of the towers was completed in 2020 and they are located in a mixed-use urban neighbourhood with world class public transportation and access to walking paths and green space (Walk Score of 91 and Bike Score of 95).

With suite sizes ranging from bachelors to large three-bedroom townhomes, the buildings contain a variety of suites to accommodate the area's broad demographic diversity. Amenities dedicated to residential rental tenant use include a 24/7 concierge, fitness centre, sauna, steam room, outdoor rooftop pool and urban garden, rooftop off-leash dog run, games room and a party room. The average rental rate for suites in Niagara West is $2,573 per month and the building is currently 95% occupied. 

The 28.35% interest of Niagara West being acquired by the REIT corresponds to the 28.35% direct and indirect interest currently held by MPI's subsidiary and certain current and former MPI executives in the limited partnership that owns Niagara West. The remaining 71.65% in Niagara West will be acquired by the third party Canadian institutional investment manager that is currently the majority owner of the vendor. Upon closing of the Niagara West Acquisition, the REIT will earn property and asset management fees to manage its co-owner's interest in the property.

The International, Calgary

Originally constructed in 1970 as an apartment building and later operated as a suite hotel, the property was acquired in 2015 and converted to luxury apartments with substantial infrastructure upgrades, extensive common area and amenity improvements and additions, the full renovation of all 247 suites and the addition of five penthouse units in former amenity space. The building also has a commercial component comprising approximately 2,700 square feet. It is well located with direct access to the Plus 15 Skywalk, which enables pedestrian mobility throughout the central business district in an 18-kilometre, weather-protected, above-ground walkway.

The International offers spacious, open concept suites with quartz countertops, stainless steel appliances, in-suite laundry, air conditioning and balconies. Amenities include a 24/7 concierge, full fitness centre with spin studio, indoor swimming pool, hot tub, sauna, gaming area, movie theatre, private lounge and a dog washing station.

Market conditions continue to improve in the downtown Calgary submarket. The average rental rate for suites in The International is $1,699 per month and the building is currently 99% occupied. 

Acquisition Funding

The purchase price of $114.5 million for the Niagara West Acquisition will be satisfied by a $2.6 million cash payment (funded by a draw on the REIT's revolving credit facility), the assumption of $46.2 million of existing mortgage financing and the issuance of 2,985,956 Class B limited partnership units of MALP at a price of $22.00 per Class B limited partner unit. The issuance of the Class B limited partner units, which are anticipated to be held by MPI's subsidiary following closing, is subject to the approval of the TSX and will be subject to a four month hold period. 

The purchase price of $86.5 million for The International Acquisition will be satisfied by a $24.3 million cash payment (funded by a draw on the REIT's revolving credit facility) and the assumption of $62.2 million of existing mortgage financing.

The REIT plans to refinance both properties with CMHC-insured financing.

Assuming completion of each of the Acquisitions and the Class B limited partner unit issuance on the Niagara West Acquisition, the REIT's Debt to Gross Book Value ("GBV") ratio will be approximately 38.9% and the ownership in the REIT by MPI and related entities will increase from 37.66% to 40.49%.

Closing

Subject to approval by the TSX and satisfaction of all customary closing conditions, the REIT expects to close the Niagara West Acquisition on or about April 22, 2022.

Subject to satisfaction of customary closing conditions, the REIT expects to close The International Acquisition on or about May 6, 2022.

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 urban markets in Canada. The REIT owns a portfolio of high-quality income-producing multi-residential rental properties located in Toronto, Montreal, Ottawa, Calgary and Edmonton. For more information on Minto Apartment REIT, please visit the REIT's website at: https://www.mintoapartments.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 "will" and "expected". In particular, this news release contains forward-looking information in relation to: the proposed Acquisitions; the properties that are the subject of each of the proposed Acquisitions; the timing for completion of each of the proposed Acquisitions; the satisfaction of the conditions for completion of each of the proposed Acquisitions; and the potential impact of each of the proposed Acquisitions. Forward-looking information reflects management's current beliefs and is based on a number of assumptions that the REIT believes are reasonable 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 "Risks and Uncertainties" in the REIT's Management Discussion & Analysis dated March 8, 2022, which is available on SEDAR (www.sedar.com), as well as the ability of the REIT to complete each of the proposed Acquisitions, including the mortgage assumptions contemplated therein and the Class B limited partner unit issuance on terms as contemplated. Certain information in this press release may be considered as "financial outlook" within the meaning of applicable securities legislation. The purpose of this financial outlook is to provide readers with disclosure regarding the REIT's reasonable expectations with respect to each of the proposed Acquisitions. Readers are cautioned that the financial outlook may not be appropriate for other purposes. 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 certain financial measures which 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. Gross Book Value ("GBV") is defined as the total assets of the REIT as at the balance sheet date. Debt-to-GBV is calculated by dividing total interest-bearing debt consisting of mortgages, credit facility and Class C LP Units of MALP by Gross Book Value and is used as the REIT's primary measure of its leverage. This measure is not defined by IFRS and does not have a standardized meaning prescribed by IFRS. See the REIT's Management Discussion & Analysis dated March 8, 2022 for further discussion of this and other non-IFRS financial measures.

SOURCE Minto Apartment Real Estate Income Trust

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