PRO Real Estate Investment Trust (PRV-UN-X) will acquire 12 commercial properties in three provinces for $45.1 million, in addition to purchasing a Halifax-based property management firm to internalize those functions.
The properties are six industrial buildings and development land in Winnipeg, five retail buildings in Quebec and New Brunswick, and the 50 per cent remaining interest in an industrial building in Drummondville, Que. The acquisitions represent a capitalization rate of approximately 6.8 per cent.
In addition, PROREIT has a binding agreement to purchase Compass Commercial Realty Limited, a property manager headquartered in the Nova Scotia capital.
Compass has 60 properties under management, totalling 3.7 million square feet in Atlantic Canada, Ontario and Alberta. The company has offices in Halifax, Moncton and Oakville. Compass manages 25 PROREIT properties in the Maritimes.
“The acquisition of Compass is an important strategic initiative,” said James W. Beckerleg, president and CEO of PROREIT, in a release. “We see it as a major part of the eventual internalization of our full management function, once total asset targets have been achieved and the REIT elects to take this step.
“In addition to the properties currently under management at Compass, including our own, this new subsidiary has the talent, expertise and platform to grow its business. We look forward to it adding significant value to PROREIT in the future.”
Compass will continue to be headquartered in Halifax under the current management team.
The 12 commercial properties comprise 368,854 square feet, and are 100 per cent occupied with an average remaining lease term of 6.7 years. The properties are to be acquired from four vendors.
“With these acquisitions, we continue to build our national footprint while further strengthening our presence in the Maritimes and Quebec,” said Beckerleg in the release. “The acquisitions will increase our total assets by approximately 12.3 per cent to $412 million and allow us to complete the redeployment of the proceeds of our January 2018 equity issue.
“With the Winnipeg acquisitions, we are now in nine of 10 Canadian provinces.”
All the commercial transactions are subject to standard closing conditions and approvals.
PROREIT’s Winnipeg acquisitions
PROREIT is acquiring six industrial buildings and a 2.1-acre parcel of land in Winnipeg. Total GLA of the six buildings is 237,430 square feet.
The $27.3-million acquisition will be financed by a $18.9 million first mortgage with a five-year term and four per cent interest rate. The balance will be settled from PROREIT’s lines of credit.
The buildings, which have been institutionally owned and managed for 10 years, are fully occupied.
They’re located in the Inkster Industrial Park and the St. James industrial area near the Winnipeg airport. The industrial areas contain approximately 35 per cent of the roughly 78 million-square-foot industrial real estate market in Manitoba.
Manitoba’s historically stable industrial sector has maintained a vacancy rate of less than four per cent during the past 10 years.
“Vacancy rates in the Winnipeg industrial real estate market are declining and rents are rising,” Beckerleg said. “Winnipeg is exactly the type of market we want to be in and we look forward to expanding our assets there over the longer term.”
The properties include:
* 1455 Mountain Ave.: The largest of the properties is a 94,541-square-foot building with 20-foot ceilings. Built in 1981, it was substantially upgraded in 2014. The building has three loading docks and occupies only 18 per cent of 11.9 acres of land, providing significant development possibilities. It is leased to Canada Goose through 2025 with two additional five-year options. The lease includes a significant rent step in 2019;
* 1410 Mountain Ave.: Built in 1989-1990, the 47,521-square-foot, mixed-use, light industrial building has two tenants on medium- to long-term leases, including rent steps and options to renew;
* 20 Bentall St.: Sitting on the same land as 1410 Mountain Avenue, this is a 34,181-square-foot, light industrial building with 21-foot ceiling height. The tenant is a distribution and logistics firm, with a remaining lease of nine years, rent steps and options to renew. The building includes eight truck-level and three grade-level doors. The property also includes a prime, 2.1-acre undeveloped parcel of land;
* 1305 King Edward St.: The single-tenant property contains 9,464 square feet of GLA with 20-foot ceilings. Built in 1991, the two-acre property is shared with 1313 King Edward St.;
* 1313 King Edward St.: The 20,900-square-foot, single-tenant building has a remaining lease term of four years and includes rent steps and renewal options;
* 1791 Dublin Ave.: The 30,823-square-foot, multi-tenant building is fully occupied by seven tenants. Built in 1988, it has 21-foot ceilings and seven truck level doors on a 1.6-acre lot.
* 598 Union St.: This strip mall is anchored by a pharmacy and New Brunswick Liquor Commission (ANBL) store and is fully leased. Built in 1964 and renovated in 2017, the building is adjacent to the Fredericton business core.
It sits on 3.71 acres of land with 100 parking stalls.
Couche Tard/Tim Hortons Quebec portfolio
They contain 13,606 square feet of GLA. The portfolio cost $8.95 million.
50 per cent Interest in 1750 Jean-Berchmans-Michaud, Drummondville
The property is a single-tenant, class-A industrial building of 171,200 square feet.
It was built in 1997 on 10.75 acres of land and offers future expansion opportunities. It is fully occupied under a long-term lease of 12 years with annual rent steps.
The warehouse has a clear ceiling of 24 feet. The interest is being acquired for $4.39 million.