Allied Properties REIT continues expansion in downtown Calgary

While some of the big head offices are moving out of downtown Calgary because of high costs, Allied Properties REIT is continuing to buy up properties in the core.
Michael Emory, President and CEO, announced Tuesday that the REIT has purchased a two-building Class I office property known as Vintage I & Vintage II in Calgary's downtown core for $110 million.
Calgary's finest office complexes
“This is one of the finest Class I office complexes in Calgary,” said Michael Emory, President & CEO. “It will continue our consolidation of ownership in the urban core of Calgary in a meaningful way.”
The purchase increases Allied's Calgary portfolio to 15 properties with a total of approximately 777,660 square feet of GLA.
Located at 322-326 – 11th Avenue S.W, between 4th and 1st Streets, the property is comprised of 210,430 square feet of GLA and 210 underground parking spaces. Vintage I was built in 1924 and was renovated and expanded in 1999. Vintage II was added nine years ago on part of the original site.
The two buildings are nearly identical and are connected seamlessly through a two-storey entrance area.

Vintage I & II in downtown Calgary
Calgary market strong and desirable
The REIT has had no trouble finding tenants for their buildings in the core of Canada's hottest real estate market. Currently 98.8 per cent leased, they do expect it to drop slightly in May when part of the Vintage I building will open up about 47,000 square feet of leaseable space over four floors.
The REIT expects to have a new tenant soon “given the desirability of the space and the strength of the Calgary office leasing market.”
The building's $110 million purchase price has a capitalization rate of approximately 6.1% applied to the anticipated year-one net operating income and approximately 7.3% from year two onward, the REIT announcement stated.
There won't be a mortgage on the property as of closing, but the press release said a mortgage is a possibility for the approximate principal amount of $66 million over 10 years.
Follow the numbers with Property Biz Canada
Property Biz Canada recently reported that the Real Property Association of Canada and Investment Property Databank Canada showed that in 2012 Calgary real estate investments had a return of 19.0 per cent with Edmonton second at 17.5 per cent. The Canadian average was 14.1 per cent.
Last week, the business development manager for real estate with Calgary Economic Development said the properties are providing a return on investment and they are gaining in value.
“Our properties are growing in value because they’re quite desirable to investors and income has been rising because our vacancy’s tightening up here in Calgary,” Susan Thompson told the Calgary Herald. “So that means investors are getting a better return on their properties.”
Units available across Canada
Allied Properties has entered into an agreement with underwriters led by Scotiabank to issue to the public, on a bought-deal basis, 3,210,000 units from treasury at a price of $34.30 per unit for gross proceeds of approximately $110 million, the REIT said in a release.
The underwriters have an option to purchase up to an additional 481,500 units on the same terms and conditions,. The issue will be offered in all provinces of Canada, but not in American markets.

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