Allied Properties Reit has entered into an agreement to purchase Class I office property in Calgary for CAD110m.
Vintage I & II is located at 322-326, 11th Avenue SW, Calgary.
Allied has also entered into an agreement with a syndicate of underwriters led by Scotiabank to issue to the public, on a bought-deal basis, 3,210,000 units from treasury at a price of CAD34.30 per unit for gross proceeds of approximately CAD110m. Allied has granted the underwriters an option to purchase up to an additional 481,500 units on the same terms and conditions, exercisable at any time, in whole or in part, for a period of 30 days following the closing of the offering.
The issue will be offered in all provinces of Canada. The units being offered have not been, and will not be, registered under the US Securities Act of 1933 and state securities laws. Closing of the offering is expected to occur on or about 7 March 2013 and is subject to regulatory approvals. Allied intends to use the net proceeds of the offering to fund the acquisition of Vintage I & II, with the balance, if any, to be used for general trust purposes.
"This is one of the finest Class I office complexes in Calgary," says Michael Emory (pictured), president and chief executive. "In addition to being immediately accretive on acquisition, it will continue our consolidation of ownership in the urban core of Calgary in a meaningful way."
Located on the north side of 11th Avenue S.W., between 4th and 1st Streets, the property is comprised of 210,430 square feet of GLA and 210 underground parking spaces. Vintage I was built in 1924 and was renovated and expanded in 1999. Vintage II was built in 2004 on the eastern portion of the original site. The two buildings are nearly identical in appearance and are integrated through a two storey entrance area. With this property, Allied's Calgary portfolio will increase to 15 properties with a total of approximately 777,660 square feet of GLA.
Although 98.8 per cent leased to tenants consistent in character and quality with Allied's tenant base, the occupancy of the property will decline to 76.6 per cent on May 1. Most of the space to be vacated is in Vintage I and is divided among four floors of 11,700 square feet each, which Allied considers very leasable, given the desirability of the space and the strength of the Calgary office leasing market.
The acquisition is scheduled to close in March of 2013, subject to customary conditions. The purchase price for the property represents a capitalisation rate of approximately 6.1 per cent applied to the anticipated year-one net operating income (NOI) and approximately 7.3 per cent applied to the stabilised NOI from year two onward. The property will be free and clear of mortgage financing at closing. Allied is evaluating the possibility of placing a first mortgage on the property after closing in the approximate principal amount of CAD66m for a term of 10 years.