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First Capital REIT sells stake in King High Line multires for $149M

First Capital REIT (FCR.UN-T) says it has a firm agreement to sell its remaining 50 per cent non-...

IMAGE: 1100 King Street West in Toronto, the King High Line property. (Google Maps)

1100 King Street West in Toronto, the King High Line property. (Google Maps)

First Capital REIT (FCR.UN-T) says it has a firm agreement to sell its remaining 50 per cent non-managing interest in the residential component of the three-tower King High Line property at 1100 King Street West in Toronto for $149 million.

The transaction does not include the 160,000-square-foot retail portion of the property, nor does it include the commercial parking component. First Capital will continue to own 100 per cent of those portions of the site.

The sale price values the residential component of King High Line at $298 million and represents a per-door price of almost $589,000.

First Capital REIT did not identify the buyer in its Wednesday morning announcement.

“This transaction represents the immediate execution of our recently announced enhanced capital allocation and portfolio optimization plan and is indicative of the type of value-surfacing transactions that we have identified,” Adam Paul, president and CEO of First Capital, said in the announcement. “Consistent with our plan, we have realized FCR’s short- to medium-term objectives for this asset and will reallocate the proceeds to more productive uses, including our NCIB.

“The sale of our interest in King High Line residential at a premium to IFRS value is accretive to both NAV and FFO per unit while at the same time positively impacts our key debt metrics.”

The King High Line property

King High Line is a mixed-use property beside the Liberty Village neighbourhood in downtown Toronto. First Capital developed the almost three-acre site, which includes three residential towers containing 506 residential suites.

The site also has a multi-level underground parking facility.

The first tenant took possession in 2019 and occupancy of the residential component is at 96 per cent, First Capital says. The sale price equates to a capitalization rate of less than three per cent on in-place net operating income.

The retail portion of the property is fully leased to a variety of necessity and service-based retailers including Longo’s (a Toronto-based food retail chain), Canadian Tire, Shoppers Drug Mart, Winners, WeWork, Kids & Co, McDonald’s and Petsmart. It features about 650 feet of frontage along the coveted King Street corridor.

The property was recently financed with an interest-only, 10-year, $160-million first mortgage ($80 million at FCR’s share) at a 4.8 per cent fixed interest rate.

The purchaser will assume the mortgage on closing, which is scheduled during Q4 of 2022.

“We have an exceptional portfolio and remain confident in our ability to unlock value for our unitholders through the ongoing monetization of low-yielding and non-core properties while progressing our necessity-based retail properties and maintaining a significant density pipeline for future development,” Paul said in the announcement.

History of the King High Line development

First Capital acted as the developer of the property, with an unnamed partner identified only as a developer with experience in Toronto’s King West neighbourhood.

Canadian apartment real estate investment trust CAPREIT acquired the right to a one-third interest in the residential portion of the project in 2015, and closed on the transaction in 2019 upon substantial completion of construction. It had also acted as the manager of the property during the lease-up period.

CAPREIT paid $60.3 million for its share of the site, and then sold that one-third interest to Woodbourne about a year later for $90.9 million. As part of that transaction, CAPREIT provided a vendor-takeback mortgage to Woodbourne to finance 75 per cent of the purchase price at an interest rate of three per cent.

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