Minto Apartment REIT Enhances Portfolio Size and Diversification with Acquisition of Two Calgary Buildings and Provision of Financing for the Redevelopment of an Ottawa Property

November 22, 2018 From Minto Apartment REIT

OTTAWA, Nov. 22, 2018 /CNW/ -

  • Acquisition of two high quality, recently constructed, and strategically located Calgary buildings
  • Financing provided to Minto Properties Inc. for the redevelopment of a property in Ottawa, with an option to acquire upon stabilization at discount to fair market value
  • Consistent with stated strategy of acquiring assets in core urban markets and leveraging the strategic Minto Group relationship
  • Enhances portfolio quality and diversification to drive long term unitholder value

Minto Apartment Real Estate Investment Trust (CNW Group/Minto Apartment Real Estate Investment Trust)

Minto Apartment Real Estate Investment Trust (the "REIT") (TSX: MI.UN) today announced that it has waived its conditions under a definitive agreement to purchase two urban multi-residential rental buildings in Calgary, Alberta (the "Calgary Properties") for total consideration of approximately $63.8 million. In addition, by leveraging the REIT's strategic relationship with the Minto Group, the REIT has agreed to advance to Minto Properties Inc. ("MPI") up to $30.0 million in financing for the redevelopment of a commercial property strategically located at Fifth Avenue and Bank Street ("Fifth and Bank") in Ottawa, Ontario to a mixed use multi-residential and retail property (the "Financing"), with the REIT having an exclusive option to purchase the property upon stabilization for 95% of fair market value at that time.

Benefits of the Acquisition

The acquisition of the Calgary Properties is a testament to the REIT's ability to source deals and continue to grow the REIT portfolio's diversification in key Canadian urban markets. Additionally, the Calgary Properties present a further opportunity to create value for unitholders through operating efficiencies due to their proximity to another of the REIT's properties in Calgary, The Laurier.

The Quarters
The REIT has agreed to acquire The Quarters, a two-building multi-residential rental property comprising a total of 199 suites, located at 370 & 380 Quarry Way SE in Calgary, Alberta and constructed in 2018 and 2017 respectively. Situated in Quarry Park, a true live, work and play community within a 20-minute drive of the downtown core, the property is currently 98% occupied with an average monthly rent of $1,506 per suite. Quarry Park is home to thriving retail amenities and numerous corporate campuses and headquarters, across 1.7 million sq. ft. of office space, including Imperial Oil, Stantec, Jacobs Engineering, AECOM and Lafarge. Surrounded by a 50-acre nature reserve and kilometers of pathways and trails, Quarry Park is serviced by three bus routes, including one Bus Rapid Transit route, and is a short walk from the proposed Quarry Park LRT Station. The Quarters is in close proximity to another REIT property, The Laurier, which will provide the REIT with an opportunity to generate operating efficiencies. With this transaction, the REIT will become the sole purpose-built multi-residential landlord in the Quarry Park corporate campus.

The purchase price for The Quarters is approximately $63.8 million (approximately $321,000 per suite), representing a 4.1% cap rate (based on in-place net operating income) and 6.25% discount to the property's appraised value. The purchase price will be satisfied with a newly arranged term mortgage and from the REIT's existing credit facility. The transaction is currently expected to close in January 2019.

Benefits of the Financing

The Financing demonstrates the REIT's effective leveraging of its strategic relationship with the Minto Group, providing the REIT potential access to a well-located redeveloped property at a discount to fair market value as well as to Minto's development capabilities.

Fifth and Bank
The REIT has agreed to advance up to $30.0 million of financing in support of MPI's planned redevelopment of a commercial property located at 99 Fifth Avenue in Ottawa, Ontario into a mixed-use multi-residential rental and retail property. The property is located in the heart of Glebe, one of Ottawa's most desirable neighbourhoods, with the city's lowest multi-residential vacancy rate of 0.2% according to CMHC. It is surrounded by diverse amenities and a strong retail presence, and features a Walk Score of 96. Zoning for this intensification project has already been secured. Construction of the approximately 160 suite multi-residential rental component is scheduled to start in 2019, with occupancy expected to begin in the first half of 2021.

The REIT intends to fund the Financing through draws on its revolving credit facility. The Financing is expected to be advanced in July 2019 and will be secured by a mortgage on the property in favour of the REIT together with a guarantee from MPI. The Financing will bear interest at 6.00% per annum, will mature in March 2022 and will be subordinate to senior construction financing. In connection with the Financing, the REIT will have an exclusive option to purchase the property upon stabilization at 95% of fair market value at that time.

The terms of the Financing transaction were reviewed, considered and approved by a committee of independent trustees of the REIT. The committee of independent trustees will continue to review and oversee the finalization of the definitive documentation with respect to the transaction on behalf of the REIT.

"The acquisition of the Calgary Properties and the provision of Financing for the Fifth and Bank redevelopment are consistent with our growth strategy as outlined in our IPO prospectus earlier this year," said Michael Waters, Chief Executive Officer of the REIT. "The Calgary transaction will further diversify our holdings by increasing the REIT's presence in Alberta from 8% of the gross book value of our portfolio to 12%. The properties are in close proximity of the REIT's existing Calgary holdings which will allow the REIT to benefit from operating synergies. They will also reduce the average age of the REIT's portfolio, while continuing the REIT's expansion of its exclusively urban portfolio. The redevelopment and potential subsequent acquisition of the Fifth and Bank project in Ottawa are a testament to the benefit of leveraging the relationship between the REIT and the Minto Group. We expect the collective impact of the acquisition and the Financing, once completed, to be accretive to the REIT's FFO and AFFO per unit."

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, 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". 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 completion of the transactions contemplated in this news release in the manner anticipated, and the factors discussed under "Risk Factors" in the REIT's IPO prospectus dated June 22, 2018 and the Interim Management's Discussion and Analysis for the three month period ended September 30, 2018, which is available on SEDAR (www.sedar.com). 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 IFRS and may not be comparable to similar measures presented by other real estate investment trusts or enterprises. FFO and AFFO are key measures of performance used by the REIT's management and other real estate businesses but are not defined by IFRS and do not have a standardized meaning prescribed by IFRS, and therefore should not be construed as an alternatives to net income or cash flow from operating activities calculated in accordance with IFRS. The REIT believes that FFO and AFFO are important measures of earnings performance and are indicative of the REIT's ability to pay distributions. The IFRS measurement most directly comparable to FFO and AFFO is net income. See the REIT's Interim Management's Discussion and Analysis for the three month period ended September 30, 2018, which is available on SEDAR (www.sedar.com), for further discussion of non-IFRS financial measures and for a reconciliation of FFO and AFFO to net income.

SOURCE Minto Apartment Real Estate Investment Trust

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