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Minto Apartment REIT sells two Ottawa properties for $86M

West-end assets include 311 rental units; proceeds used to reduce variable-rate debt

Minto Apartment REIT has sold its Tanglewood (pictured here) and Chesterton/Bowhill properties to Ottawa Community Housing for $86 million. (Courtesy Minto)
Minto Apartment REIT has sold its Tanglewood (pictured here) and Chesterton/Bowhill properties to Ottawa Community Housing for $86 million. (Courtesy Minto)

Minto Apartment REIT has sold two rental housing properties to Ottawa Community Housing (OCH) for $86 million in a transaction designed to lower its variable-rate debt and which also reduces the average age of its remaining portfolio.

The properties are known as Tanglewood and Chesterton/Bowhill and are located close to each other in the city’s west-end Nepean neighbourhood.

Both were developed by Ottawa-based Minto about 50 years ago and had been owned by the parent company and then the REIT (MI-UN-T) after it was founded six years ago.

Together, they comprise 311 apartments of low-rise housing.

"We are pleased to be playing a role in addressing the affordable housing issue in Canada by conveying these assets to OCH, who can maintain their affordability indefinitely," Jonathan Li, president and chief executive officer of the REIT, said in the announcement Tuesday morning.

"We are also very pleased to generate cash from internal sources to reduce leverage in a transaction that is accretive to FFO and AFFO per unit.” 

The sale price is in line with Minto’s IFRS values for the properties and is expected to generate approximately $69 million of proceeds for the REIT after payments of mortgages and commissions.

OCH’s management arm ARRIV Properties will manage the properties following the closing of the sale.

"OCH's acquisition of these 311 homes signifies a strategic milestone in preserving affordable housing solutions for low- and moderate-income families" OCH chief executive officer Stéphane Giguère said in the announcement.

"This transaction is a demonstration of our commitment to addressing the critical issue of housing affordability in Ottawa and also stands as a testament to our dedication to innovation and community-focused development partnerships."

The Tanglewood and Chesterton/Bowhill properties

The Tanglewood property was built in 1975 and comprises 122 low-rise, wood-framed single-family rental homes on approximately eight acres of land.

The Chesterton/Bowhill property was built in 1969. It comprises 189 low-rise, wood-framed single-family rental homes on approximately 12 acres of land.

The sale price for the Tanglewood property is $32.2 million and all conditions were waived by OCH on Dec. 14. The sale price for Chesterton/Bowhill is $53.8 million and all conditions were waived by OCH on Jan. 8.

The transaction is expected to close in February. 

Minto noted the transaction reduces the REIT’s future capital expenditure requirements. 

Sale significantly reduces variable-rate debt

On the debt front, its pro forma net debt to gross book value (as at Sept. 30, 2023) will be reduced 187 basis points to 40.9 per cent and its variable rate debt will be lowered into “the low-single digits” it reports.

It also reduces Minto’s exposure to Ottawa from 39 per cent to 37 per cent of its portfolio (measured by IFRS value).

Minto has been steadily expanding its holdings across Canada over the past several years to improve its geographic diversity after being focused on Ottawa for most of its early history.

"Since the beginning of 2023, we will have reduced our expensive variable-rate debt exposure by approximately $215 million from its peak of approximately $290 million in early 2023,” Eddie Fu, chief financial officer of the REIT, explained in the announcement.

“Our improved pro forma balance sheet will help us deliver cash flow per unit growth. 

“It also provides us with increased financial flexibility and a strong foundation to optimize the REIT's refinancing strategies, operating strategies and investment strategies for 2024 and beyond."

When the transaction closes, Minto Apartment REIT will have completed the sale of five non-core properties (the other three are in Edmonton) in recent months, generating $128 million of gross proceeds and approximately $78 million of net proceeds.

Four of these have been sold in the past month.

In December, the REIT announced it had sold its two remaining Edmonton assets, The York House and The Lancaster House, for $32 million. The properties offer a total of 190 units. 

Proceeds of approximately $7 million from that transaction were also used to repay a portion of the REIT’s variable-rate revolving credit facility. 

About Minto, OCH and ARRIV

Minto Apartment REIT is an unincorporated, open-ended real estate investment trust which owns income-producing multiresidential properties in Canada.

The REIT owns a portfolio of multiresidential rental properties located primarily in urban centres in Toronto, Montreal, Ottawa and Calgary.

OCH provides approximately 15,000 homes to more than 32,000 tenants, including seniors, parents, children, couples, singles and persons with special needs, within many communities across the City of Ottawa. 

It is Ottawa's largest social, community and affordable housing provider and the fourth-largest in Canada.

ARRIV Properties is a new banner for OCH's affordable housing rentals.

It offers homes at average or below-average market prices, providing apartments and townhomes at affordable prices for low- to moderate-income households.

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