Minto Apartment REIT (MI-UN-T) will acquire a 20-storey Montreal apartment building for $80 million and is moving ahead with construction of a nine-storey development which will contain 229 apartment units in Ottawa.
The trust also announced a share offering which could raise up to $86 million in new equity, in part to fund these activities.
The acquisition is Le Hill-Park, a 261-suite tower at 4530 Chemin de la Côte-des-Neiges in downtown Montréal. The centrally located property is near the Université de Montréal, McGill University, three major hospitals and the Côte-des-Neiges metro station.
Average in-place rents at Le Hill-Park are approximately 20 per cent below current market rents, offering the potential for revenue growth as tenants turn over. Minto also sees “significant repositioning opportunity” as only 72 of the 261 suites have undergone a modernization program.
Le Hill-Park is also close to the REIT’s existing Rockhill, Haddon Hall and Le 4300 properties, offering the potential for operating synergies.
Following the acquisition of Le Hill-Park, Minto will hold interests in 1,793 suites in the Montréal market, about 22 per cent of the overall value of its portfolio.
Its debt-to-gross-book-value ratio will be approximately 37.3 per cent, assuming the unit offering is exercised in full.
Minto plans to finance the purchase via $40 million from the offering and the remaining $40 million via a mortgage. The acquisition is expected to close on or about Dec. 7.
Developments in Ottawa, North Vancouver
Minto also offered updates on two of its developments.
In Ottawa, it has completed the zoning process for its Beechwood project, a nine-storey building which will include the 229 apartments as well as up to three retail tenants. The building comprises about 153,000 square feet of residential and 6,000 square feet of retail.
Minto Properties Inc. is the developer and construction is slated to begin early in 2022.
The REIT has committed up to $51.4 million in financing for Beechwood through a convertible development loan. Upon stabilization, expected in Q4 2023, Minto Apartment REIT has the option to purchase the project at a five per cent discount to its appraised value.
In North Vancouver, construction is progressing at Phase I of Lonsdale Square, a 50-50 joint venture between Minto Properties Inc. and a subsidiary of Darwin Properties Ltd. It comprises 113 residential suites and 7,800 square feet of retail space.
The REIT has committed up to $14 million in construction financing through a convertible development loan and has the option to acquire the property upon stabilization at a five per cent discount to its appraised value.
$86M Minto unit offering
The offering involves the issuance of 3,300,000 units on a bought-deal basis at $22.85 per unit to a syndicate of underwriters led by TD Securities Inc. and BMO Capital Markets, for gross proceeds of approximately $75 million.
An over allotment of up to 15 per cent of additional units, if fully exercised under the same terms, would bring the total proceeds to $86 million.
The funds are to be used for the Le Hill Park acquisition, the two loans for Beechwood and Lonsdale Square, and to pay down a portion of the REIT’s credit facilities.
About Minto Apartment REIT
The trust is an unincorporated, open-ended real estate investment trust established under the laws of Ontario to own income-producing multresidential properties in urban markets in Canada.
The REIT owns a portfolio of income-producing multiresidential rental properties in Toronto, Montreal, Ottawa, Calgary and Edmonton.