A Mississauga apartment building and 12 mobile home communities changed hands in an early June deal between Killam Properties Inc. and Canadian Apartment Properties Real Estate Investment Trust (CAPREIT).
The deals, involving more than $100-million worth of property, were sparked by CAPREIT, which approached Halifax-based Killam about acquiring some of its mobile home community holdings, said Killam Vice-President Dale Noseworthy.
“We swapped some assets basically,” she said. “It was a good opportunity for us to get rid of some MHCs to trade.” She hastened to add that Killiam is “very happy with our portfolio” in mobile homes, but that a chance to acquire CAPREIT’s building in the GTA market was too good to pass up. “Had it not been for the opportunity to get an asset in Toronto we may not have done that part of the deal.”
Under the deal, Toronto-based CAP REIT agreed to sell a 199-unit apartment building for $33.5 million to Killam while the Halifax real estate company sold 12 manufactured home communities in Western Canada and Ontario for a total price of $72.3 million.
Killam will only have to lay out $8.375 million for the 14-story apartment building because it is taking just a 25% ownership position. The remainder of the building will be owned by Killam’s joint venture partner, Kuwait Finance House.
Killam has sold 2,032 sites in those twelve manufactured home communities (trailer parks to those outside thebusiness) to CAPREIT for a total pricetag of $72.3 million. The REIT acquired five parks in Saskatchewan, Alberta and British Columbia and another seven in Ontario. Under the deal, CAPREIT assumed existing mortgages of $38.4 million and Killam will receive net proceeds of $33.9 million, which it said will be earmarked for future acquisitions and developments.
“We end up with some cash to put towards acquisitions,” said Killam’s Noseworthy.
One of the largest operators of manufactured homes properties in Canada, Killam is also an owner of multi-residential properties. Most of its apartment building assets are in Atlantic Canada, where it is a significant player, however the company has stated that it wants to acquire more multi-res holdings, with Ontario at the top of its wish list.
“We have certainly talked a lot about wanting to expand more in Ontario,” said Noseworthy. “It could be elsewhere too but Ontario is pretty likely. We have talked about Ottawa, GTA, Kitchener-Waterloo-Cambridge and London (Ont.)”
Joint Property Book With Kuwait House Continues to Swell
The Mississauga apartment building purchase marks the third joint venture asset purchase Killam has made with Kuwait Finance House. In December, Killam-KFH announced the acquisition of a $33.3 million luxury apartment in London, Ont., which was their first joint venture purchase. Last month, the partners announced their second joint (25%-75%) acquisition, the 10-storey, 146-unit Kanata Lakes Apartments in Ottawa for $42.5 million.
Over a year ago, Killam reached a $100-million equity partnership agreement with Kuwait Finance House, one of the world’s leading Islamic banks in the world with total assets in excess of US$46 billion. The deal makes sense, Killam says, because KFH is keen to invest in the Ontario market while its Canadian partner wants to expand it apartment holdings beyond its east coast base.
Killam-KFH took a shine to the centrally located building at 1355 Silver Spear Road in Mississauga because of what it is and what it can be in the future. It boasts average monthly rent of $1,087 per unit for its 199 units, a pool, gym, outdoor terrace and underground parking and is sited on a 3.6-acre plot of land. That parcel is big enough, Killam figures, to host an adjacent apartment building of 110 units.
For CAPREIT, the acquisition of the 12 trailer parks marks just the latest expansion into a market that it first entered in 2007 and continues to prize for its “secure and stable long-term cash flows, high occupancies, steady increases in average monthly rents, and significantly lower capital and maintenance costs,” in the words of Thomas Schwartz, the REIT’s President and CEO.
With the deal, CAPREIT bumps its mobile home property holdings to more than 10% of its total asset portfolio.
The CAPREIT CEO predicts that 2012 will produce “a record year of portfolio growth” and it is on the hunt for “additional accretive growth opportunities that add to our significant presence from coast to coast.”
CAPREIT owns interests in 32,711 residential units, 29,346 of which are apartment and townhome suites with the remainder made up of 3,365 land lease sites on fourteen manufactured home communities.