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TORONTO, October 1, 2013 /CNW/ — True North Apartment Real Estate Investment Trust (the “REIT”) (TSX: TN.UN) is pleased to announce that it has acquired properties located in Trenton, Ontario (the “Trenton Acquisition”) and Montreal, Québec (the “Montreal Acquisition”, and together with the Trenton Acquisition, the “Acquisitions”), for purchase prices of approximately $10.7 and $12.3 million, respectively.
The REIT also announced the disposition of two non-core properties located in Hanover, Ontario and Saanich, British Columbia.
“We are very pleased to announce this series of transactions, which in combination, serve to positively refocus our overall property portfolio,” stated Leslie Veiner, the REIT’s Chief Executive Officer. “The two properties we divested were smaller non-core assets and were the only properties the REIT owned in these two markets. The redeployment of the proceeds from these dispositions into acquisitions in Trenton and Montreal are intended to provide the REIT with both a higher return on equity and significant strategic advantages.”
“The property in Trenton, Ontario has been well maintained with extensive recent upgrades, and is located in a strong rental market. The property in Montreal, Quebec will not only increase our presence in the Montreal area, but it will also benefit from considerable operational synergies. We anticipate that these synergies will provide us with opportunities for organic growth, further enhancing the value of this acquisition over time.” Mr. Veiner added, “The acquisition of the Montreal property further demonstrates the significant benefit of our relationship with Starlight Investments Ltd., whereby given their extensive pipeline, we were able to quickly redeploy the proceeds from the property dispositions into a new opportunity in a strong market.”
The Trenton Acquisition
The Trenton property is a 119 unit concrete high-rise building. The property has been well maintained, and recently benefited from capital expenditures of $0.5 million that primarily served to upgrade both the balconies and heating infrastructure. The purchase price of $10.7 million represents a capitalization rate of 5.75% and is expected to be satisfied through a vendor take back of 333,334 of the REIT’s Class B limited partnership units (“Class B LP Units”), which are economically equivalent to and exchangeable for the REIT’s trust units (“Units”), at a price of $9.00 per Class B LP Unit, with the balance being funded by new mortgage financing.
The Montreal Acquisition
In connection with the Montreal Acquisition, the REIT entered into an agreement of purchase and sale with an entity that is wholly-owned by Daniel Drimmer, the Chairman of the Board of the REIT, which contains customary provisions for transactions of a similar nature, including representations, warranties, covenants and indemnities of both parties.
The Montreal Acquisition constitutes a “related party transaction” under Multilateral Instrument 61 – 101 – Protection of Minority Security Holders in Special Transactions (“MI 61 – 101”). Pursuant to Section 5.5(a) and 5.7(1)(a) of MI 61 – 101, the REIT is exempt from obtaining a formal valuation and minority approval of the REIT’s unitholders due to the fair market value of the Montreal Acquisition being below 25% of the REIT’s market capitalization for purposes of MI 61 – 101. The Montreal Acquisition was approved unanimously by the Board of Trustees of the REIT (other than Daniel Drimmer who declared his interest in the Montreal Acquisition and was recused from voting) in accordance with the REIT’s amended and restated declaration of trust dated as of September 28, 2012, and was approved under the rules of the TSX.
The Montreal property is comprised of 148 units in eleven low-rise buildings. The property has been well maintained, and as a result, minimal capital expenditures are expected. The purchase price of approximately $12.3 million, which represents a capitalization rate of 5.75%, was satisfied through the combination of approximately $3.4 million of cash and $8.9 million in new mortgage financing.
On July 30, 2013, and as previously announced by the REIT in connection with the release of its financial results for the period ended June 30, 2013, the REIT completed the disposition of a 57 unit property located in Hanover, Ontario, for a price of approximately $5.7 million, representing a capitalization rate of 5.85%. The purchaser assumed the existing mortgage on the property.
In a separate transaction, the REIT also disposed of a 44 unit property located in Saanich, British Columbia on August 28, 2013. The disposition price of this property was approximately $6.9 million, representing a capitalization rate of 4.43%.
About the REIT
The REIT is an unincorporated, open-ended real estate investment trust established under the laws of the Province of Ontario. The REIT focuses on a long-term strategy to generate stable cash distributions on a tax-efficient basis for unitholders. The REIT intends to actively look for opportunities to expand its asset base and increase its distributable cash flow through acquisitions of additional multi-suite residential rental properties across Canada, the United States, and other jurisdictions where opportunities may arise.
Additional information concerning the REIT is available at www.sedar.com.
Certain statements contained in this press release constitute forward-looking information within the meaning of Canadian securities laws. Forward-looking information is provided for the purposes of presenting information about management’s current expectations and plans relating to the future and readers are cautioned that such information may not be appropriate for other purposes. Forward-looking information relates to the REIT’s future outlook and anticipated events, including statements above regarding the accretion, including to return on equity, resulting from the Acquisitions and the property dispositions, statements regarding the synergies and strategic advantages such as opportunities for organic growth resulting from the Acquisitions and the property dispositions, and statements regarding capital expenditures at the Montreal property, and may also include statements regarding the financial position, business strategy, budgets, litigation, projected costs, capital expenditures, financial results, taxes and plans and objectives of or involving the REIT. Particularly, statements regarding future results, performance, achievements, prospects or opportunities for the REIT or the real estate industry are forward-looking information. In some cases, forward-looking information can be identified by terms such as “may”, “might”, “will”, “could”, “should”, “would”, “occur”, “expect”, “plan”, “anticipate”, “believe”, “intend”, “seek”, “aim”, “estimate”, “target”, “project”, “predict”, “forecast”, “potential”, “continue”, “likely”, “schedule”, or the negative thereof or other similar expressions concerning matters that are not historical facts.
Forward-looking information necessarily involves known and unknown risks and uncertainties, which may be general or specific, and which give rise to the possibility that expectations, forecasts, predictions, projections or conclusions will not prove to be accurate, that assumptions may not be correct and that objectives, strategic goals and priorities will not be achieved. A variety of factors, many of which are beyond the REIT’s control, affect the operations, performance and results of the REIT and its business, and could cause actual results to differ materially from current expectations of estimated or anticipated events or results. These factors include, but are not limited to, the synergies and organic growth resulting from the Acquisitions, and the risks discussed in the REIT’s materials filed with Canadian securities regulatory authorities from time to time on www.sedar.com. The reader is cautioned to consider these and other factors, uncertainties and potential events carefully and not to put undue reliance on forward-looking information as there can be no assurance that actual results will be consistent with such forward-looking information.
Forward-looking information is based upon certain material assumptions that were applied in drawing a conclusion or making a forecast or projection, including management’s perceptions of historical trends, current conditions and expected future developments, as well as other considerations that are believed to be appropriate in the circumstances, including the following: that the Acquisitions will be accretive; that the divestitures and the Acquisitions will result in synergies and organic growth; that the Canadian economy will remain stable over the next 12 months; that inflation will remain relatively low; that interest rates will remain stable; that conditions within the real estate market, including competition for acquisitions, will be consistent with the current climate; that the Canadian capital markets will continue to provide the REIT with access to equity and/or debt at reasonable rates when required; and that Starlight Investments Ltd. will continue its involvement as asset manager of the REIT in accordance with its current asset management agreement. While management considers these assumptions to be reasonable based on currently available information, they may prove to be incorrect.
The forward-looking information in this press release is dated, and relates only to events or information, as of the date of this press release. Except as specifically required by law, the REIT undertakes no obligation to update or revise publicly any forward-looking information, whether as a result of new information, future events or otherwise, after the date on which the statements are made or to reflect the occurrence of unanticipated events.
For further information:
Chief Executive Officer
Chief Financial Officer