Allied Properties Real Estate Investment Trust
(“Allied”)(TSX:AP.UN) announced today that it has entered into an
agreement with Choice Properties Real Estate Investment Trust
(“Choice Properties”)(TSX:CHP.UN) to acquire the following six
urban office properties for $794 million:
Property |
GLA @ Share |
Occupancy |
Underground Parking Stalls |
Certification |
Principal Tenant |
1010 Sherbrooke Street West, Montréal (100% Freehold) |
328,354 |
94.9% |
276 |
BOMA Best Silver |
McGill University |
110 Yonge Street, Toronto (Managing 50% Freehold) |
80,384 |
89.7% |
72 |
BOMA Best Silver |
S.I. Systems |
525 University Avenue, Toronto (100% Freehold) |
202,111 |
99.0% |
178 |
BOMA Best Gold |
Hospital for Sick Children |
175 Bloor Street East, Toronto (Managing 50% Freehold) |
304,731 |
80.9% |
264 |
LEED O+M Gold |
Klick Inc. |
1508 West Broadway, Vancouver (100% Leasehold) |
147,376 |
95.1% |
265 |
BOMA Best Gold |
Nicola Wealth |
1185 West Georgia Street, Vancouver (100% Freehold) |
165,855 |
91.2% |
157 |
BOMA Best Gold |
Fluor Canada |
Total |
1,228,811 |
91.3% |
1,212 |
|
|
“This is an extraordinary win-win transaction
for Choice and Allied,” said Michael Emory, Allied’s President and
CEO. “It represents an important and compelling strategic
refinement for Choice and a significant expansion of operating
capability for Allied. By using Allied’s units as currency for 75%
of the purchase price and a promissory note for the balance, each
of Choice and Allied will achieve important capital-allocation
objectives.”
Allied will pay $594 million of the purchase
price by issuing to Choice Properties 11,809,145 Class B LP Units
of a subsidiary limited partnership (the “Class B Units”) at $50.30
per unit. The Class B Units will be exchangeable for Allied Units
on a one-to-one basis and will be subject to certain lock-up and
standstill provisions, including a lock-up for a period of 24
months with 25% of the Class B Units or Allied Units, as the case
may be, being released from lock-up every three months following
the first anniversary of closing. Each Class B Unit will be
accompanied by one non-participating special voting unit of Allied
(“Special Voting Unit”). Allied’s Declaration of Trust was amended
and restated to provide for the creation and issuance of the
Special Voting Units. Allied will pay the balance of the purchase
price by granting to Choice Properties a $200 million promissory
note for a term expiring on December 31, 2023, and bearing interest
at 1% per year in 2022 and 2% per year in 2023, payable quarterly
in arrears.
FFO and AFFO per unit accretion from the
transaction is expected to be modest at the outset and to increase
over time as Allied integrates the properties into its urban office
portfolios in Montréal, Toronto and Vancouver. The transaction will
improve Allied’s total indebtedness ratio and net debt as a
multiple of Adjusted EBITDA.
The transaction is expected to close before the
end of the second quarter of 2022, subject to the approval of the
Toronto Stock Exchange and Competition Act clearance. Goldman Sachs
Canada, Scotiabank and Aird & Berlis advised Allied in
connection with the transaction. RBC Capital Markets and Torys
advised Choice Properties in connection with the transaction.
Operating Capability
“Our overriding objective in making this
acquisition is to expand our operating capability in Montréal,
Toronto and Vancouver,” said Tom Burns, Allied’s Executive Vice
President and COO. “In particular, the acquisition will expand our
ability to serve the biotech and life-sciences, education and TAMI
sectors. It will also further our objective of becoming a leading
provider of distinctive urban workspace in Vancouver.”
Allied will integrate 1010 Sherbrooke into its
Montréal portfolio, increasing the portfolio to 32 properties with
over 7 million square feet of GLA. Allied will integrate 110 Yonge,
525 University and 175 Bloor East into its Toronto portfolio,
increasing the portfolio to 108 properties with 5.4 million square
feet of GLA. Allied will integrate 1508 West Broadway and 1185 West
Georgia into its Vancouver portfolio, increasing the portfolio to
15 properties with just over 1 million square feet of GLA.
Biotech and Life Sciences
Allied signaled its intention to serve biotech
and life-sciences users in August of 2021 as part of its
acquisition of the office component of Place Gare Viger in
Montréal. 525 University and 175 Bloor East will enable Allied to
begin serving biotech and life-sciences users in Toronto, just as
the acquisition of Place Gare Viger did in Montréal. Hospital for
Sick Children occupies 60% of 525 University, while Klick occupies
25% of 175 Bloor East. Among other things, Klick is the world’s
largest independent commercialization partner for life sciences,
focusing on developing, launching and supporting life-sciences
brands to maximize their full market potential. Looking forward,
Allied intends to operate both properties with a view to serving
biotech and life-sciences users more fully.
Education
Educational users represent a significant
element of ongoing demand for Allied’s distinctive urban workspace.
George Brown College has occupied 73,542 square feet of space at
Allied’s 230 Richmond Street East in Toronto since 2007. Farleigh
Dickenson University has occupied 37,075 square feet of GLA in
Allied’s 840 Cambie Street in Vancouver since 2007. A leading
American university has pre-leased all of the leasable area at QRC
West, Phase II, in Toronto (estimated to be 93,134 square feet).
McGill University occupies 22% of 1010 Sherbrooke West in Montréal.
Looking forward, Allied intends to operate this property, along
with 1001 Robert Bourassa, with a view to serving educational
users, TAMI users and related business accelerators and incubators
more fully.
TAMI (Technology, Advertising, Media and
Information)
Allied has served TAMI users since going public
in 2003. According to Cushman & Wakefield, Allied completed 29%
of all leasing transactions (by area) with tech users in Toronto’s
downtown market between March 1 of 2020 and January 31 of 2022,
even though Allied owned 5% of Toronto’s downtown office inventory
during that timeframe. The Montréal and Toronto properties to be
acquired from Choice Properties currently serve a wide range of
TAMI users. Looking forward, Allied intends to operate these
properties with a view to serving knowledge-based organizations
more fully. With column-free floor plates and direct access to
Toronto’s PATH network, 110 Yonge is particularly well suited to
ongoing transformation for TAMI users.
Vancouver
In 2017, as Downtown Vancouver was transforming
into a primary Canadian office market, Allied made it part of its
mission to become a leading provider of distinctive urban workspace
in that city. Allied’s portfolio has grown from five properties
comprising 285,476 square feet of GLA at the end of 2016 to 13
properties comprising 714,113 square feet of GLA at the end of
2021. With the acquisition of 1508 West Broadway and 1185 West
Georgia, Allied’s portfolio will grow to 15 properties comprising
1,027,344 square feet of GLA. These properties serve a combination
of knowledge-based organizations, including TAMI, engineering and
financial-services users. Looking forward, Allied intends to
operate these properties with a view to serving knowledge-based
organizations more fully.
About Choice Properties
Choice Properties is a leading Real Estate
Investment Trust that creates enduring value through the ownership,
operation and development of high-quality commercial and
residential properties. Choice Properties believes that value comes
from creating spaces that improve how its tenants and communities
come together to live, work, and connect. Choice Properties strives
to understand the needs of its tenants and manage its properties to
the highest standard. Choice Properties aspires to develop healthy,
resilient communities through its dedication to social, economic,
and environmental sustainability.
About Allied
Allied is a leading operator of distinctive
urban workspace in Canada’s major cities and network-dense UDC
space in Toronto. Allied’s mission is to provide knowledge-based
organizations with workspace and UDC space that is sustainable and
conducive to human wellness, creativity, connectivity and
diversity. Allied’s vision is to make a continuous contribution to
cities and culture that elevates and inspires the humanity in all
people.
Cautionary Statements
This press release may contain forward-looking
statements with respect to (i) Allied, (ii) its operations,
strategy, financial performance and condition and (iii) the closing
and expected impact of the transactions contemplated in this press
release. These statements generally can be identified by use of
forward looking words such as “may”, “will”, “expect”, “estimate”,
“anticipate”, “intends”, “believe” or “continue” or the negative
thereof or similar variations. The actual results and performance
of Allied discussed herein could differ materially from those
expressed or implied by such statements. Such statements are
qualified in their entirety by the inherent risks and uncertainties
surrounding future expectations, including that the transactions
contemplated herein are completed and have the expected impact on
funding and earnings. Important factors that could cause actual
results to differ materially from expectations include, among other
things, general economic and market conditions, competition,
changes in government regulations and the factors described under
“Risk Factors” in Allied’s Annual Information Form, which is
available at www.sedar.com. These cautionary statements qualify all
forward-looking statements attributable to Allied and persons
acting on Allied’s behalf. Unless otherwise stated, all
forward-looking statements speak only as of the date of this press
release and the parties have no obligation to update such
statements.
For more information, please
contact:
Michael Emory, President & CEO (416)
977-0643 memory@alliedreit.com
Tom Burns, Executive Vice President &
COO(416) 977-9002tburns@alliedreit.com
Cecilia Williams, Executive Vice President &
CFO(416) 977-9002cwilliams@alliedreit.com
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