True North Apartment Real Estate Investment Trust is to acquire four multi-family properties in Ontario for an aggregate purchase price of CAD25.7m (inclusive of an instalment note to be provided at closing).
The properties consist of four mid-rise buildings and a townhouse complex, and are located in Kitchener, Guelph and Brantford.
The properties were originally constructed between 1968 and 1972, and comprise a total of 265 suites, the majority of which are two bedroom units. These suites are currently 97 per cent occupied at an average in-place rent of CAD833 per suite. In keeping with the Reit's stated strategy, the properties are well maintained, and near-term capital expenditures are expected to be minimal.
The purchase price of CAD25.7m implies a capitalisation rate of approximately 5.7 per cent or CAD96,900/unit. The purchase price will be financed through a combination of cash and the assumption of CAD12.7m in existing mortgage debt, representing a transaction debt-to-gross-book-value of 49.4 per cent. On closing of the acquisition, the assumed mortgage debt is expected to have an effective weighted average term to maturity of 7.8 years and an effective 2.5 per cent interest rate after giving effect to an instalment note to be provided in connection with the acquisition. The impact on the Reit's overall capital structure is expected to be minimal.
Completion of the acquisition is expected to occur on or about 28 February, 2013.
"The Reit is very pleased to be able to further strengthen both our overall property portfolio, as well as our position in Kitchener and Guelph, two communities where we have witnessed strong performance to date," says Leslie Veiner, the Reit's chief executive officer. "While the transaction is immediately accretive, we look forward to increasing its value by pursuing opportunities for further organic growth."