Dream Industrial REIT has entered agreements with KingSett Capital and Dream Office REIT to acquire two separate portfolios totalling 1.35 million square feet of industrial properties for approximately USD128 million.
The acquisitions will be funded by issuing approximately 2.7 million units of equity to an affiliate of KingSett and approximately 2.3 million units of equity to Dream Office, in each case at a price of USD9.40 per unit, with the balance funded by new and assumed mortgage debt.
Closing of both acquisitions is expected to occur in September and is subject to customary closing conditions and consents.
The KingSett portfolio consists of 1.1 million square feet of single and multi-tenant light industrial properties in Calgary, the Greater Toronto Area (GTA) and Montreal, with a total purchase price of USD94.7 million.
The portfolio is 97.7 per cent occupied with a weighted average lease term of 7.0 years.
The REIT will issue 2.7 million units to KingSett with a total value of USD25 million (based on a price of USD9.40 per unit) and fund the remaining purchase price with cash on hand and debt, including USD67 million of new mortgage debt. Arrangement of mortgage financing with a major Canadian bank is in progress, and management expects to finance with a term of seven years at an interest rate of approximately 3.6 per cent based on prevailing bond pricing.
The Dream Office portfolio consists of 248,000 square feet of multi-tenant flex industrial properties located in Edmonton with a purchase price of USD33 million. These properties were intended to be transferred to Dream Industrial REIT at the time of its IPO. The properties are 95.1 per cent occupied with a weighted average lease term of 3.1 years.
The REIT will issue 2.3 million LP B units to Dream Office having a total value of USD22 million (based on a price of USD9.40 per unit), with the remainder funded by the assumption of existing mortgages totalling USD11 million with a weighted average interest rate of 4.0 per cent. The issuance of LP B units to Dream Office is subject to the approval of the Toronto Stock Exchange.