Soneil Investments has acquired Millcreek Business Centre, comprised of seven industrial buildings in Mississauga and totalling 324,362 square feet on 20 acres of land, for more than $100 million from GWL Realty Advisors (GWLRA).

The 2020 annual report for GWLRA’s Canadian Real Estate Investment Fund No. 1 showed it purchased a 50 per cent stake in the buildings at 6665-6725 Millcreek Rd. in June 2003. That ownership had increased to 100 per cent in subsequent annual reports.

“This was our single largest industrial acquisition to date, so we were happy to be able to complete a deal like this in the current market,” Soneil president and chief executive officer Neil Jain said  in an exclusive interview with RENX.

Colliers brokered the transaction. 

"From what I heard, it was quite a competitive process," Jain said, “and based on my experience, these bids tend to involve institutional buyers.”

Millcreek Business Centre’s components

Millcreek Business Centre’s buildings, which range in size from 34,950 to 63,401 square feet, were constructed from 1987 to 1989. Each of the buildings offers truck-level doors.

All of the buildings except one are full, giving the portfolio a 92 per cent occupancy rate, according to Colliers’ marketing brochure. They’re occupied by 31 tenants with a weighted average lease term of 3.54 years at weighted average rents approximately 18 per cent below market.

“Average rents in place are roughly $15-and-a-half, which is great because it really optimizes the amount of stability and in-place rent that's there, but it's not fully at market, which also allows us to have a lot of upside in the future,” Jain observed. 

There are a variety of different types of businesses and national, regional and local tenants in the buildings.

Jain said the portfolio “represents our bread and butter, which is small bay industrial tenants with minimal concentration risk and opportunity to grow the rent over time. They're well-maintained, institutionally managed assets with clear heights throughout the buildings well over 20 feet, and for shipping it can accommodate 53-foot trailers throughout the complex. 

“The main part of the asset that we really liked was that there wasn't too much concentration risk with a single tenant. The average tenant size is under 10,000 square feet, so that allows us to not be so heavily dependent on any one given tenant.” 

Prime industrial location

Millcreek Business Centre is easily accessible via commuter roads, 400-series highways and public transit. The location is also in reasonably close proximity to Toronto Pearson International Airport and rail intermodal terminals.

“I think this specific node of Mississauga is probably one of the strongest performing nodes for industrial in the GTA (Greater Toronto Area) and probably throughout Canada,” Jain said.

While industrial rents have stopped climbing at the rapid rates of earlier this decade, Jain said small bay spaces have been resilient, continue to perform well and remain in demand.

“By having a combination of larger and national tenants, there are always tenants who are looking to expand their premises,” Jain said. “So as vacancies come up in the units beside them, they're always our first call to be able to see if they're interested. And many times they are.”

More acquisitions expected in 2025

Soneil is a private real estate corporation with a portfolio of more than five million square feet of industrial, office and retail space across the GTA.

The company will be seeking assets similar to Millcreek Business Centre in 2025, when Jain feels more acquisition opportunities will crop up due to lower interest rates and narrowing bid-ask spreads.

While the focus will remain on industrial properties, Soneil is willing to look at other asset classes if it likes their long-term prospects and lending partners are supportive.

“Over the last three or four years we've been buying somewhere between $200 and $300 million,” Jain explained. “This year, after this transaction we’ll be at around $150 million, but we're optimistic that next year we’ll be somewhere in the $300- to $400-million range.”

Soneil is rezoning elements of its portfolio for potential future development, but it’s a long process and properties are already providing strong cash flow so he said there’s no urgency to aggressively move into that area.