Killam Apartment REIT (KMT-UN-T) has an agreement to acquire an 11-building portfolio on four properties in Kitchener and Waterloo, west of Toronto, for $190.5 million.

In an announcement late Tuesday, the Halifax-based REIT said the 785-unit acquisition will increase its Ontario portfolio by about 25 per cent, to 3,342 units. It also has 485 units under development in Canada’s largest province.

“We are pleased to expand our portfolio in the Kitchener and Waterloo market,” said Philip Fraser, Killam’s president and CEO, in the announcement. “This investment will be a valuable addition to our portfolio based on its attractive locations, alignment with our existing asset base and an opportunity for net operating income growth through unit repositionings and energy saving investments.”

The purchase price represents a per-unit price of approximately $243,000.

Killam does not identify the vendor in the announcement.

Killam issues $110M offering of units

Killam also announced a bought-deal offering of 5,135,200 trust units, at $18.50 per unit, via a syndicate of underwriters led by RBC Capital Markets. Including the provision for a 15 per cent overallotment at the same price (an additional 770,820 units), the offering would raise almost $110 million.

Proceeds will finance a portion of the purchase price for the KW portfolio. Proceeds will also be used to repay a portion of Killam’s credit facility (with a current balance of $51 million) and any remaining funds would support future acquisitions, developments and general trust purposes.

The offering is slated to close by May 31.

The remainder of the K-W portfolio will be financed through a first-mortgage financing of approximately 60-65 per cent loan-to-value, the REIT says.

Upon completion of the offering and the use of proceeds, Killam expects to have access to approximately $110 million of available capital through its credit facilities.

About the Kitchener-Waterloo portfolio

The K-W portfolio is 98 per cent occupied and comprises bachelor (nine units), one-bedroom (130 units), two-bedroom (631 units) and three-bedroom (15 units) units with an average size of approximately 853 square feet. The average in-place rent is about $1,200 ($1.41 per square foot).

The transaction is expected to close on June 30.

“Including the K-W portfolio, Killam will have completed $256 million of acquisitions year-to-date, with 94 per cent of these outside of Atlantic Canada,” Fraser said in the release.

Earlier this year, Killam acquired the remaining 90 per cent interest in the Nolan Hill development in Calgary for $49.5 million, adding 233 apartments to its portfolio. The building opened to tenants in January and was 75 per cent leased at the end of Q1 2021.

Killam also acquired $10.2 million in land for future development, all adjacent to properties Killam already owns. About $6.8 million of the development sites acquired are currently generating income from existing properties, which are to remain operational until redevelopment begins.

Among its current Ontario developments is Phase II of Frontier in Ottawa in partnership with RioCan REIT. The 20-storey, 208-unit tower will be the second at the site, located adjacent to a major shopping, retail and entertainment centre and at the current eastern terminus of Ottawa’s light-rail transit line.

About Killam Apartment REIT

Killam Apartment REIT is one of Canada’s largest residential landlords, owning, operating and developing a $3.9 billion portfolio of apartments and manufactured home communities.

Killam’s strategy to enhance value and profitability focuses on three priorities: 1) increasing earnings from existing operations, 2) expanding the portfolio and diversifying geographically through accretive acquisitions, with an emphasis on newer properties, and 3) developing high-quality properties in its core markets.