Minto Apartment REIT has entered into an agreement to acquire Le 4300 and Haddon Hall, two premium institutionally owned and maintained multiresidential properties in Montreal.

Minto Apartment Real Estate Investment Trust (MI-UN-T) has entered into an agreement to acquire Le 4300 and Haddon Hall, two “premium” institutionally owned and maintained multiresidential properties in Montreal.

The properties have a combined 528 suites and are located in the highly attractive neighbourhoods of Westmount and Ville-Marie.

They’re also near the REIT’s existing Rockhill property which Minto purchased earlier this year, enhancing economies of scale.

The purchase price is $281.1 million, representing a cap rate of 3.7 per cent on forecast year-one NOI. Following closing of these acquisitions, the REIT will have ownership interests in 7,243 suites in Toronto, Montreal, Ottawa, Calgary and Edmonton.

Share offering to raise $225M

The REIT also announced plans to issue 9,850,000 shares at $22.85 per unit in an offering to be led by TD Securities Inc. and BMO Capital Markets. This is expected to raise approximately $225 million.

An over-allotment option for an additional 985,000 units would increase the proceeds by $247.5 million if fully exercised. Minto intends to use the proceeds to finance a portion of the acquisition.

“When we launched Minto Apartment REIT last year, one of our objectives was to build a strong presence in the Montreal market. This acquisition, combined with our purchase of the Rockhill property in May, clearly achieves this goal,” said Michael Waters, chief executive officer, in a release Thursday afternoon.

“Upon closing of this transaction, our Montreal properties will make up more than 20 per cent of the total suites of the REIT.

“Moreover, we believe that the REIT will own one of the best portfolios of multiresidential properties in Montreal. Both Le 4300 and Haddon Hall are premium properties in desirable locations, and provide substantial opportunities for us to build value.

“They are outstanding additions to our portfolio.”

About the properties

Le 4300 is a 12-storey premium building originally built in two phases in 1957 and 1962, located on 3.1 acres at 4300 de Maisonneuve Blvd. W. in Montreal’s affluent Westmount.

It contains 318 large suites with an average size of approximately 1,260 square feet and average monthly rent of $2,667 per suite. Over 70 per cent of the suites have at least two bedrooms.

Amenities include valet service, a fitness facility and a large landscaped courtyard.

Le 4300 has easy access to transit, parks, restaurants, retail amenities, schools and universities, resulting in a 95 Walk Score. Current tenants are primarily retirees or high-earning professionals.

Constructed in 1928, Haddon Hall consists of 10 six- and seven-storey buildings on 3.2 acres at 2150-2174 Sherbrooke St. W., 2211-2255 Lambert Closse Street, 2151-2177 Lincoln Ave., and 2260 Chomedey St.

The site sits between the Westmount and Golden Square Mile neighbourhoods. The buildings have an aggregate of 210 large units, with an average suite size of approximately 1,200 square feet and average monthly rent of $1,882 per suite.

Nearly 70 per cent of the suites have either two or three bedrooms.

Current amenities include storage lockers, laundry rooms and a fitness facility. This property is also located close to transit, parks, restaurants, retail amenities, schools and universities, resulting in a high Walk Score of 98.

Both properties have been under the management of Realstar Group.

Minto to continue repositioning

Minto plans to reposition suites at both Le 4300 and Haddon Hall following tenant turnover. Only 76 suites at the two properties have been renovated to date, leaving 452 with potential for repositioning.

The REIT believes in-place rents are significantly below renovated market rents for both properties. The repositioning program is expected to generate an annual ROI in line with the REIT’s eight to 15 per cent target.

To drive further rent growth, the REIT intends to upgrade common areas at both properties, create additional suites and amenity areas from underutilized space at Le 4300, and upgrade the fitness facility at Haddon Hall.

The purchase price of $281.1 million will be funded by a $45-million mortgage on Haddon Hall, with the balance from proceeds of the share offering.

Following completion of the acquisition and the unit offering, the REIT’s debt-to-gross book value ratio will be approximately 42 per cent, but is expected to increase over time to align with management’s leverage target of 45 to 55 per cent.

The share offering is expected to close on Oct. 22. Minto expects the acquisition to close on or about Nov. 20.

About Minto Apartment REIT

The REIT owns a portfolio of high-quality income-producing multi-residential rental properties located in Toronto, Montreal, Ottawa, Calgary and Edmonton.