Mainstreet Equity Corporation (MEQ) continued expanding its apartment portfolio with the acquisition of 641 units in Regina, Saskatchewan for $71.65 million from Boardwalk Real Estate Investment Trust (BEI.UN-T).
The portfolio consists of 49 properties known as Boardwalk Estates, and includes two acres of residual land as well as a warehouse. The buildings contain as many as 35 apartments, but most range from four to 24 units. They were built during the 1950s and 1960, and are clustered into four geographic groupings, the largest by far being Boardwalk Estates South with 547 of the apartments — including both walkups and townhouses.
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The transaction fits into the announced strategic plans of both companies.
“Our strategic partnership with Boardwalk began nearly two decades ago with transactions in Edmonton, Calgary and the Lower Mainland of British Columbia, and continues with the acquisition of this 641-apartment unit portfolio in Regina, Saskatchewan, which represents an opportunity for Mainstreet to expand into the Regina market,” said Mainstreet president Bob Dhillon in a release Wednesday morning.
“This portfolio is ideal for Mainstreet to position itself to further create value by providing its strong and consistent brand of mid-market, renovated suites coupled with a high level of customer service.”
‘Non-core’ assets for Boardwalk
Boardwalk is divesting assets in non-core markets as it ramps up plans to acquire or develop up to 15,000 apartments over the next few years (see Boardwalk plans to add up to 15,000 apartments).
“The Trust had identified these assets as non-core given the size of each asset and the varying locations within the portfolio,” said Boardwalk REIT chairman and CEO Sam Kolias in a release Wednesday morning, “and is consistent with the Trust’s strategy of high-grading its portfolio by investing in new construction such as our Pines Edge Communities in Regina.
“The continuation of our strategic partnership with Mainstreet has provided a win-win relationship where Mainstreet is able to further enhance value in providing high-quality mid-market apartments, while also providing Boardwalk strategic divestment opportunities.”
The sale price represents a price per door of approximately $112,000.
Mainstreet will assume the existing first mortgage of approximately $24.37 million at an interest rate of 2.19 per cent. In addition, Boardwalk will provide a $38.76 million vendor-takeback mortgage, also at 2.19 per cent, for two years.
About the Boardwalk Estates
The Boardwalk Estates South portfolio includes 43 of the properties in the Albert Park , stretching along Retallack, Rae, Robinson streets and Parliament Avenue.
The Central portfolio comprises two, 23-unit buildings at Smith and Rose streets, while the West grouping consists of three buildings containing 48 units along the 1500 block of Alexandra Street. The North portfolio is one, 12-unit building at 801 Grey Street.
The acquisitions and unit prices are directly in line with both Mainstreet’s overall strategy of purchasing what it considers to be “underperforming properties” and its other most recent acquisitions.
In its just-released annual report, Mainstreet lauds “the effectiveness of our 100 per cent organic growth model.
“During the year, Mainstreet acquired 601 units of residential apartments for $65 million ($109,000 per unit). Subsequent to the year-to-date, we acquired an additional 706 units in Alberta and Saskatchewan for $78 million ($109,900 per unit),” the report states.
For its part, Boardwalk REIT president Rob Geremia said the sale price “is inline with our fair value for the asset despite the current vacancy and incentive opportunity which is currently in place.
“The VTB provides the Trust with additional income, while balancing the near-term capital needs within the Boardwalk Estates portfolio. The Trust anticipates that it will be able to retain all of the net proceeds from this sale to utilize towards Boardwalk’s strategic plan.”
The transaction is scheduled to close on December 14, 2017.
About Mainstreet, Boardwalk
Since 2000, Mainstreet has grown from 272 units with a market value of approximately $17 million to 11,185 units and approximately $1.7 billion market value. Mainstreet positions itself as a value creator by purchasing under-performing properties, renovating them to a branded standard, improving operating efficiencies and repositioning them in the market for greater returns.
In addition to the Regina portfolio, Mainstreet owns and operates properties in Surrey, New Westminster and Abbotsford, B.C.; Calgary, Cochrane, Edmonton, Lethbridge, and Fort Saskatchewan, Alta.; and in Saskatoon, Sask.
Boardwalk REIT owns and operates more than 200 communities with over 33,000 residential units. Its principal objectives are to provide residents with quality communities and superior customer service, while providing unitholders with sustainable monthly cash distributions; and increase share value through selective acquisitions, dispositions, development and effective management.
Boardwalk is Canada’s leading owner/operator of multi-family communities, with 1,800 associates overseeing properties in Alberta, Saskatchewan, Ontario, and Quebec.