Summit Industrial Income REIT (SMU.UN-T) will pay $183.3 million to acquire a modern 765,145-square-foot logistics and office complex on a 35-acre property in Saint-Laurent, Que., a suburb of Greater Montreal.
“This highly accretive acquisition, occupied by institutional-grade tenants under long-term leases, significantly enhances our presence in Canada’s second-largest industrial market,” said Summit COO Dayna Gibbs in the announcement Monday morning.
The property contains 534,111 square feet of “next-generation” logistics space and 231,034 square feet of class-A office space. Buildings on the property have a modest 37 per cent site coverage, providing the opportunity for potential future expansion in an increasingly hot market where premium industrial space has been at an increasing premium in recent months.
It is 100 per cent occupied by two institutional-grade global tenants with a 10.5-year average remaining lease term including 10 per cent rent increases every five years.
“Looking ahead, the 10 per cent contractual rent increases every five years will enhance returns generated by the property, making a significant contribution to our cash flow going forward,” Gibbs said in the release.
Summit’s Saint-Laurent acquisition
Summit says it will pay cash for the property and that the purchase price is below replacement cost. The going-in capitalization rate is approximately 4.5 per cent.
Closing is expected in April.
Located in the Saint-Laurent Industrial Park, the property is just minutes from Montreal-Trudeau International Airport and has ready access to highway and railway links.
The logistics space features 37-foot clear ceiling heights, 52 truck-level doors, one drive-in door, 30 trailer parking stalls, electric vehicle charging and sophisticated moveable mezzanine space designed for e-commerce logistics.
The space is occupied by a single tenant, a global e-commerce luxury goods platform operating in more than 150 countries. It has nine years remaining on its lease.
The three-storey class-A office building provides a modern environment including ample green space, a sky-lit three-level atrium, gourmet kitchen and underground parking. The office tenant, the world’s largest privately owned security services company, has 14 years remaining on its lease.
Gibbs comments on Montreal market
Gibbs told RENX in an email exchange this morning there are a number of factors in the not-so-sudden emergence of Montreal’s industrial sector as a real estate hot spot.
“Montreal has been impacted by overall heat in (the) industrial sector in Canada and people are shying away from West – Alberta,” Gibbs wrote. “Specific to Montreal, in no particular order, would be: attractive energy pricing there, particularly more green energy; cap rate spread versus (the) GTA, improved relative returns; less spec development activity happening there, which impacts new supply.”
Summit Industrial Income REIT also announced Monday it has agreed to sell a non-core 30,411-square-foot industrial property in Edmonton, for $5 million, above the REIT’s IFRS book value for the property.
Closing of this sale is expected by the end of the month.
Burst of industrial sales in Montreal
Montreal has seen several significant industrial property acquisitions in recent weeks during a major spike in activity.
Concert’s CREC Commercial Fund LP also acquired a class-A distribution centre, fully leased by L’Oréal Canada in Saint-Laurent in February. Acquired from Vista Properties for $90 million, the acquisition was Concert’s first in Quebec.
The 1.2-million-square-foot property at 3500 Douglas-B.-Floreani St. has a 424,422-square-foot distribution centre and office. It includes 95,120 square feet of expansion space under construction by Vista which is expected to be completed in March.
Dream Industrial REIT also acquired a prime logistics property with expansion potential in Vaudreuil-Dorion from Vista Properties and Groupe Quint for $114 million.
401 Marie-Curie St., is a class-A 525,922-square-foot distribution centre built in 2005 with 48 truck-level doors; 300 trailer parking stalls; and the ability to expand by approximately 222,000 square feet on the east and west sides. The vendor had already started the development process on an expansion of 132,226 square feet.
Summit Industrial Income REIT is an unincorporated open-end trust focused on growing and managing a portfolio of light industrial properties across Canada.