— Sale price is in line with IFRS values and
the Transaction is aligned with the REIT's capital recycling
strategy —
OTTAWA,
ON, Jan. 9, 2024 /CNW/ - Minto Apartment Real
Estate Investment Trust (the "REIT") (TSX: MI.UN) is pleased to
announce the sale of two properties comprising 311 suites located
in Ottawa, Ontario, to Ottawa
Community Housing Corporation ("OCH") (the "Transaction"). The
total sale price of $86 million for
the Tanglewood and Chesterton/Bowhill properties is in line
with the REIT's IFRS values for the assets. Upon closing, the
proceeds of approximately $69
million, net of mortgages and commissions, will be used to
repay a portion of the REIT's variable-rate revolving credit
facility.
Transaction Highlights
- The agreement between OCH and the REIT marks a significant
milestone in increasing and protecting Ottawa's affordable housing supply as the
demand for housing solutions for low- to moderate-income levels has
never been more pressing.
- ARRIV Properties, the banner for OCH's affordable housing
rentals, will oversee the management of both properties following
the Transaction and ensure a seamless transition, minimizing any
disruptions to current tenants.
- The Transaction results in a reduction in the average age of
the REIT's portfolio, and will also reduce future capital
requirements.
- The sale price of $86 million is
in line with the REIT's IFRS values for the assets and is
supported by an appraisal commissioned by OCH.
- The Transaction strengthens the REIT's balance sheet,
providing increased flexibility with respect to its refinancing,
operating and investment strategies. As a result of the
Transaction, pro forma net debt/GBV as at September 30, 2023, is reduced by 187 bps to
40.9%.
- The Transaction is immediately accretive to FFO and AFFO
per unit on an annualized basis.
- Geographic exposure to Ottawa
is reduced to approximately 37% from 39% based on IFRS value
as at September 30, 2023.
"We are pleased to be playing a role in addressing the
affordable housing issue in Canada
by conveying these assets to OCH, who can maintain their
affordability indefinitely," said Jonathan
Li, President and Chief Executive Officer of the REIT. "We
are also very pleased to generate cash from internal sources to
reduce leverage in a transaction that is accretive to FFO and
AFFO per unit. This is truly a win-win Transaction that helps
alleviate some of the housing affordability challenges facing our
country."
"OCH's acquisition of these 311 homes signifies a strategic
milestone in preserving affordable housing solutions for low and
moderate-income families" said Stéphane Giguère, Chief Executive
Officer of OCH. "This transaction is a demonstration of our
commitment to addressing the critical issue of housing
affordability in Ottawa and also
stands as a testament to our dedication to innovation and
community-focused development partnerships."
Eddie Fu, Chief Financial Officer
of the REIT, added, "Since the beginning of 2023, we will have
reduced our expensive variable-rate debt exposure by approximately
$215 million from its peak of
approximately $290 million in early
2023. Our improved pro forma balance sheet will help us deliver
cash flow per unit growth. It also provides us with increased
financial flexibility and a strong foundation to optimize the
REIT's refinancing strategies, operating strategies and investment
strategies for 2024 and beyond."
Transaction Details
The two properties, Tanglewood and Chesterton/Bowhill, are
located in close proximity to each other in the Nepean area of Ottawa, just southwest of the inner core. The
Minto Group developed both properties approximately 50 years ago
and it owned and operated them continuously until the IPO of the
REIT in 2018. The Tanglewood property was built in 1975 and
comprises 122 low-rise, wood-framed single-family rental homes on
approximately eight acres of land. The Chesterton/Bowhill property
was built in 1969 and comprises 189 low-rise, wood-framed
single-family rental homes on approximately twelve acres of
land.
The sale price for the Tanglewood property is $32.2 million and all conditions were waived by
OCH on December 14, 2023. The sale
price for the Chesterton/Bowhill property is $53.8 million and all conditions were waived by
OCH on January 8, 2024. Closing of
the Transaction is expected to occur in February 2024. Any impact on the REIT's
taxable income and potential payment of a special distribution
resulting from asset sales will be assessed and communicated later
in fiscal 2024.
Strengthening the Balance Sheet
Under its capital recycling strategy, upon closing of the
Transaction, the REIT will have completed the sale of five non-core
properties (three in Edmonton,
Alberta and two in Ottawa,
Ontario) generating a total of $128
million of gross proceeds and approximately $78 million of net proceeds. In addition, as
previously disclosed, the REIT is currently evaluating upward
refinancing opportunities that may generate incremental net
financing proceeds of $55 to
$65 million. Lastly, on January 31, 2024, the REIT expects to receive
$30 million for the repayment of the
convertible development loan related to the Fifth + Bank property
located in Ottawa, Ontario. All
the net proceeds generated from the above transactions will be used
to repay portions of the REIT's revolving credit facility,
following which it is estimated that the REIT's variable-rate debt
outstanding as a percentage of total debt outstanding will be in
the low-single digits, furthering the REIT's ability to take
advantage of future investment opportunities, subject to
appropriate market conditions and cost of capital.
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 Canada. The REIT owns a portfolio of
high-quality multi-residential rental properties
located primarily in urban centers in Canada's major markets of Toronto, Montreal, Ottawa and Calgary. For more information on Minto
Apartment REIT, please visit the REIT's website
at https://www.mintoapartmentreit.com.
About Ottawa Community Housing
Corporation
OCH provides approximately 15,000 homes to more than 32,000
tenants, including seniors, parents, children, couples, singles,
and persons with special needs, within many communities across the
City of Ottawa. OCH houses a
diverse population of varying languages, ethnicities, and cultures.
OCH is Ottawa's largest social,
community and affordable housing provider and the fourth largest in
Canada. For more information on
OCH, please visit OCH's website at www.och-lco.ca.
About ARRIV Properties
ARRIV Properties represents a new concept to fill the
Ottawa affordable rental market
gap. ARRIV Properties is a new banner for OCH's affordable housing
rentals. It offers homes at average or below-average market prices,
setting the standard for modern living and lifestyle at an
affordable price. It is an exciting milestone because it signals
another offering in the housing continuum by providing apartments
and townhomes at affordable prices for low- to moderate-income
households. For more information, please visit www.arriv.ca.
Ottawa Community Housing operates as ARRIV Properties.
SOURCE Minto Apartment Real Estate Investment Trust