Summit announced the acquisitions in Markham and Burlington, Ont., and in Calgary, on Wednesday. Together, the buildings total 798,673 square feet of gross leasable area and also offer the potential for expansion or development. The total purchase price is approximately $127 million.
“We continue to expand our presence in our key target markets in what remains one of the strongest and most stable sectors of the North American real estate business,” said Paul Dykeman, Summit’s chief executive officer, in a release.
“We are also pleased to be adding further development potential to the portfolio, increasing our ability to generate lower-risk and more accretive long-term returns . . .”
The acquisitions will be funded by cash from the REIT’s credit lines, an assumed $8.5 million mortgage, and proceeds of a $100-million bought-deal equity offering which was also announced Tuesday.
All the purchases remain subject to standard closing conditions, and are expected to be completed by mid-July.
The first two properties are single-tenant class-A sites in Markham totalling 321,028 square feet of GLA. They’re fully occupied by two large multi-national companies with long-term leases with average two per cent contractual annual rent increases, and a weighted average lease term of approximately 11 years.
The properties have been maintained to an institutional-quality standard and are close to major transportation networks. The “new generation” facilities are critical operating hubs for the tenants.
Summit will pay $70 million for the two properties, including an assumed $8.5 million 14.8-year mortgage bearing an interest rate of 4.34 per cent, generating a capitalization rate of approximately 4.63 per cent.
The Burlington property is a single-tenant industrial facility at the juncture of the Queen Elizabeth Way and Appleby Line. The 250,000-square-foot building is leased to a single tenant with 7.5 years remaining on the lease.
It includes 7.5 acres of excess land that can accommodate the development of a new 140,000- to 160,000-square-foot building.
Summit will pay $28.1 million, generating a capitalization rate of approximately 5.78 per cent.
The Calgary purchase expands Summit’s presence in what it feels is a strengthening market.
The site is a new two-building, class-A, multi-tenant logistics centre on land leased from the Calgary Airport Authority. Built in 2015, the buildings contain total GLA of 227,645 square feet with a current occupancy of 89 per cent.
One bay is vacant.
Summit will pay approximately $29.6 million in cash for the two buildings, generating a capitalization rate of approximately 5.86 per cent.
$100-million equity offering
BMO Capital Markets will lead a syndicate of underwriters to sell, on a bought-deal basis, 11,565,000 Summit shares at a price of $8.65 per share for gross proceeds of approximately $100 million.
In addition, Summit has granted the underwriters an over-allotment option to purchase up to an additional 1,734,750 units on the same terms and conditions. The offering is expected to close on or about June 15.
The REIT intends to use a portion of the net proceeds and cash from the REIT’s credit lines along with the assumed mortgage noted above primarily for the funding of the acquisitions. The balance will be used for debt repayment.
The offering is not conditional on the closing of the five most current acquisitions.
Summit continues to grow
Summit has been continually expanding its portfolio during the past 18 months – more than doubling its holdings during 2017 alone.
Most recently, in May it purchased a 187,245-square-foot cold storage facility, with expansion capability, in Mississauga for about $37 million. A few weeks earlier, it bought a 141,034-square-foot warehouse in Stratford, Ont., for $14.9 million.
Summit also disposed of five properties in early 2018.
These moves came after a flurry of activity late in 2017, when it bought about 20 properties and entered into a joint venture with data centre specialist Urbacon to share ownership of an existing facility in Markham. That partnership also allows Summit the opportunity to partner on future Urbacon developments.
In an interview with RENX late in 2017, Dykeman said Summit was pushing toward the $1-billion level in holdings. Its portfolio has been weighted toward the GTA, with more than 60 per cent of total holdings in that region.
Summit now owns about 90 properties.
It’s head office is in Brampton, Ont., with another office in Halifax.