/NOT FOR DISSEMINATION IN THE
UNITED STATES OR DISTRIBUTION THROUGH UNITED
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- 7 institutional quality assets comprising total GLA of 696,000
square feet
- Represents PROREIT's continued growth as a high quality
diversified REIT increasing the portfolio to 4.4 million square
feet of GLA and $625 million of Gross
Book Value1 pro forma the Transaction
- Increases PROREIT's portfolio concentration in Ontario, specifically in the attractive
Ottawa market
- Meaningfully increases industrial exposure and provides entry
into the strong Halifax industrial
market that has witnessed significant interest from institutional
investors
- Transaction expected to be accretive to AFFO/unit1
and to reduce the REIT's AFFO payout ratio1
- Transaction reduces the REIT's Debt-to-Gross Book
Value1
- Increases liquidity through partial pay down of credit
facilities
MONTRÉAL, Aug. 7, 2019 /CNW/
- Pro Real Estate Investment Trust (TSX: PRV.UN) ("PROREIT" or
the "REIT") today announced that it has entered into three separate
agreements to acquire a 100% interest in 7 properties including 2
properties in Ottawa, Ontario
representing 338,000 square feet of gross leasable area ("GLA") and
a light industrial portfolio in Halifax,
Nova Scotia representing 358,000 square feet of GLA
(collectively, the "Acquisitions") for an aggregate purchase price
of $97.8 million, representing an
implied weighted average capitalization rate of 6.7% (approximately
$140 per square foot).
Specifically, the REIT has entered into agreements to acquire 1)
a 100% freehold interest in a boutique office tower in the central
business district in Ottawa,
Ontario, 2) a 100% interest in a Class A mixed-use
industrial property in Ottawa,
Ontario, and 3) a 100% interest in a 5-property light
industrial portfolio in the Burnside Industrial Park in
Halifax, Nova Scotia.
The REIT also announced today that it has entered into an
agreement to issue 7,150,000 trust units of the REIT ("Units")
from treasury on a bought deal basis at a price of $7.00 per Unit (the "Offering Price") to a
syndicate of underwriters with TD Securities Inc. and Scotiabank
acting as bookrunners and co-led by Canaccord Genuity Corp.
(collectively, the "Underwriters") for gross proceeds of
approximately $50 million (the
"Offering"). The REIT has granted the Underwriters an
over-allotment option to purchase up to an
additional 1,072,500 Units on the same terms and conditions,
exercisable at any time, in whole or in part, up to 30 days after
the closing of the Offering (the "Over-Allotment Option"). The
Offering is expected to close on or about August 16, 2019 and is subject to customary
conditions, including regulatory approval. The Units will be
offered by way of a prospectus supplement to the REIT's base shelf
prospectus dated July 5, 2019, to be
filed with the securities commissions and other similar regulatory
authorities in each of the provinces and territories of
Canada, pursuant to National
Instrument 44-102 - Shelf Distributions (the "Prospectus
Supplement").
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1
Non-IFRS measure. See "Non-IFRS and Operational Key Performance
Indicators".
|
The REIT intends to use the net proceeds from the Offering to
partially fund the Acquisitions, to repay certain indebtedness
which may be subsequently redrawn, and the balance if any to fund
future acquisitions and for general business and working capital
purposes (collectively, with the Acquisitions and the Offering, the
"Transaction").
"These acquisitions are all institutional quality assets and
align with PROREIT's commitment to expanding the REIT's footprint
in attractive markets and increasing the REIT's exposure both in
Ontario and to the industrial
asset class. We are extremely pleased to be in a position to
finance these acquisitions on an accretive basis to our AFFO per
unit, while at the same time reducing the REIT's leverage," said
James Beckerleg, CEO.
The Acquisitions
Ottawa Properties
The Ottawa properties represent
a complementary expansion of PROREIT's existing Ottawa portfolio, and include a fully occupied
downtown office building in the heart of Ottawa's central business district and a
mixed-use industrial property in Kanata,
Ontario.
The downtown Ottawa asset is
located in the commercial and economic center of Ottawa. Located in the financial core and
surrounded by popular tourist sites and retail amenities, the area
is well-serviced by multiple restaurants and retail offerings.
Ottawa's office vacancy rate is at
its lowest in the last decade2 as a consequence of
increasing demand, limited new supply, and continued expansion from
Ottawa's diverse industries
particularly technology and government sectors. Given the high
concentration of technology talent, some of the most innovative
companies in North America –
including Amazon, Bell, IBM, and Shopify are present in downtown
Ottawa.
The REIT has also entered into an agreement to acquire a 100%
interest in a state-of-the-art, multi-tenant flex industrial
building featuring a prestigious office, research and lab facility
with exceptional power, air handling and cooling specifications
located within the high technology Kanata neighborhood of Ottawa. The property houses an outstanding
group of tenants who operate in the fields of material sciences,
defense, communications and medical technology.
The property is located in a high technology growth node. The
Kanata region is undergoing major
economic growth with numerous new tenants, together with dynamic
growth of existing uses. Strong fundamentals have led to
significant decline in the vacancy rate in the Kanata industrial market in recent
years3. Technology employers in the neighborhood include
Cisco, Ericsson, HP, Lockheed Martin, Honeywell, Microsoft, and
Apple. The property is located favorably adjacent to a major retail
node offering countless amenities, shops, restaurants, a movie
theatre, and the Terry Fox transit terminal.
_____________________
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2 Cushman
& Wakefield MarketBeat Office Q2 2019
|
3 Avison
Young 2019 Forecast
|
The two properties are 100% leased to a diverse roster of
exceptional private sector tenants with a weighted average lease
term of 6.6 years. Many of the leases include contracted rent
steps.
Halifax Light Industrial Properties
In addition to the two Ottawa
acquisitions, PROREIT has entered into a contract to acquire five
light industrial buildings located in Halifax, Nova Scotia. The buildings are 93.0%
occupied with a weighted average lease term of 4.1 years, and offer
clear heights of between 18 and 24 feet. Many of the leases include
contractual rent steps.
This acquisition provides PROREIT a significant entry to the
strong Halifax industrial market
that has received increased interest from institutional investors
recently. Halifax has experienced
a longer-term trend of declining vacancy rate supported by
continued robust immigration, strong employment growth and
expansion in the manufacturing sector in the city4.
PROREIT's management team has significant prior experience of
owning and managing properties in this location.
Financing of the Acquisitions
The aggregate purchase price (excluding closing costs) for the
Acquisitions is anticipated to be approximately $97.8 million. The purchase price of the
Acquisitions is expected to be satisfied by a combination of the
following funding sources: (i) approximately $30.8 million in cash from the Offering, and (ii)
approximately $67.0 million aggregate
principal amount of new mortgage financings at a weighted average
interest rate of 3.4%.
Impact of the Acquisitions on the REIT's Overall
Portfolio
Upon completion of the Acquisitions, the REIT's portfolio will
be comprised of 91 income producing commercial properties
representing approximately 4.4 million square feet of GLA and
$625 million of Gross Book Value with
a weighted average lease term of 5.7 years. The addition of the
Ottawa properties will improve
portfolio balance by increasing PROREIT's portfolio exposure to the
Ontario market to 29.1% by GLA and
29.3% by base rent, making Ontario
the REIT's largest provincial market and further increases the
REIT's Ottawa portfolio to
approximately 620,000 square feet of its total 4.4 million square
feet of GLA. The Acquisitions will also increase the REIT's
industrial and mixed-use exposure by another 636,726 square feet to
more than 2.8 million square feet representing 64% of total GLA and
46% of total base rent upon closing of the Acquisitions.
The Acquisitions are subject to customary due diligence and
closing conditions, including with respect to financing and
regulatory approvals, and are expected to close in the third
quarter of 2019.
__________________
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4 CBRE
2019 Canada Market Outlook
|
Pro Forma Portfolio
Proforma
Portfolio
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Province
|
Base Rent
%
|
GLA
%
|
|
Asset
Class
|
Base Rent
%
|
GLA
%
|
Maritime
Provinces
|
40.8%
|
39.2%
|
|
Retail
|
38.1%
|
24.6%
|
Quebec
|
15.0%
|
20.4%
|
|
Commercial Mixed
Use
|
18.1%
|
16.4%
|
Western
Cananda
|
14.9%
|
11.3%
|
|
Office
|
16.2%
|
11.1%
|
Ontario
|
29.3%
|
29.1%
|
|
Industrial
|
27.6%
|
47.8%
|
Total
|
100.0%
|
100.0%
|
|
Total
|
100.0%
|
100.0%
|
Deleveraging and Funding of Future Acquisitions
In addition to the Acquisitions, PROREIT intends to use
$13.0 million of the net proceeds of
the Offering to repay certain indebtedness, including certain
amounts outstanding under the REIT's credit facilities, which may
be subsequently redrawn and applied as needed to fund future
acquisitions and for general trust purposes. Following the closing
of the Offering, the Acquisitions, and the repayment of certain
indebtedness, PROREIT estimates that its ratio of Debt-to-Gross
Book Value will decline to approximately 57.5%.
Additional information related to the Transaction will be
included in the Prospectus Supplement.
About PRO Real Estate Investment Trust
PROREIT is an unincorporated open-ended real estate investment
trust established pursuant to a declaration of trust under the laws
of the Province of Ontario.
PROREIT was established in March 2013
to own a portfolio of diversified commercial real estate properties
in Canada, with a focus on primary
and secondary markets in Québec, Atlantic
Canada and Ontario with
selective expansion into Western
Canada. PROREIT's portfolio is diversified by property type
and geography.
The securities offered have not and will not be registered under
the United States Securities Act of 1933, as amended (the "U.S.
Securities Act"), or any U.S. State securities laws and may not be
offered or sold, directly or indirectly, within the United States or its territories or
possessions or to or for the account of any U.S. person (as defined
in Regulation S under the U.S. Securities Act) other than pursuant
to an available exemption from the registration requirements of the
U.S. Securities Act. This press release does not constitute an
offer to sell or a solicitation of an offer to buy any such
securities within the United
States, or its territories or possessions, or to or for the
account of any U.S. person.
For more information on PROREIT, please visit the REIT's website
at: https://proreit.com.
Non-IFRS and Operational Key Performance Indicators
PROREIT's condensed consolidated financial statements are
prepared in accordance with International Financial Reporting
Standards ("IFRS"). In this press release, as a complement to
results provided in accordance with IFRS, PROREIT discloses and
discusses certain non-IFRS financial measures, including gross book
value ("Gross Book Value"), adjusted funds from operations
("AFFO"), AFFO payout ratio and Debt to Gross Book Value
("Debt-to-Gross Book Value") as well as other measures discussed
elsewhere in this release. These non-IFRS measures are not defined
by IFRS, do not have a standardized meaning and may not be
comparable with similar measures presented by other issuers.
PROREIT has presented such non-IFRS measures as management believes
they are relevant measures of PROREIT's underlying operating
performance and debt management. Non-IFRS measures should not be
considered as alternatives to net income, cash generated from
(utilized in) operating activities or comparable metrics determined
in accordance with IFRS as indicators of PROREIT's performance,
liquidity, cash flow, and profitability. For a full description of
these measures and, where applicable, a reconciliation to the most
directly comparable measure calculated in accordance with IFRS,
please refer to the "Non-IFRS and Operational Key Performance
Indicators" section in PROREIT's Management's Discussion and
Analysis for the three months ended March
31, 2019, available on SEDAR at www.sedar.com.
Forward-Looking Information
This news release contains forward-looking statements within the
meaning of applicable securities legislation. Forward-looking
statements are based on a number of assumptions and is subject to a
number of risks and uncertainties, many of which are beyond
PROREIT's control, that could cause actual results and events to
differ materially from those that are disclosed in or implied by
such forward-looking statements.
Forward-looking statements contained in this press release
include, without limitation, statements pertaining to the closing
of the Offering and each of the Acquisitions, the use of the net
proceeds of the Offering, the impact of the Acquisitions on
PROREIT's future financial performance, the Gross Book Value of the
REIT following the closing of the Acquisitions, the Debt-to-Gross
Book Value of the REIT following the closing of the Transaction,
the impact of the Transaction on the REIT's AFFO per unit and AFFO
Payout Ratio, and the ability of PROREIT to execute its growth
strategies. PROREIT's objectives and forward-looking statements are
based on certain assumptions, including that (i) PROREIT will
receive financing on favorable terms; (ii) the future level of
indebtedness of PROREIT and its future growth potential will remain
consistent with REIT's current expectations; (iii) there will be no
changes to tax laws adversely affecting PROREIT's financing
capacity or operations; (iv) the impact of the current economic
climate and the current global financial conditions on PROREIT's
operations, including its financing capacity and asset value, will
remain consistent with PROREIT's current expectations; (v) the
performance of PROREIT's investments in Canada will proceed on a basis consistent with
PROREIT's current expectations; and (vi) capital markets will
provide PROREIT with readily available access to equity and/or
debt.
The forward-looking statements contained in this news release
are expressly qualified in their entirety by this cautionary
statement. All forward-looking statements in this press release are
made as of the date of this press release. PROREIT does not
undertake to update any such forward-looking information whether as
a result of new information, future events or otherwise, except as
required by law.
Additional information about these assumptions and risks and
uncertainties is contained under "Risk Factors" in PROREIT's latest
annual information form, which is available on SEDAR at
www.sedar.com.
Neither the TSX nor its Regulation Services Provider (as that
term is defined in the policies of the TSX) accepts responsibility
for the adequacy or accuracy of this release.
SOURCE Pro Real Estate Investment Trust