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Summit Industrial Income REIT (SMU.UN-T) continued to snap up Toronto-area industrial properties with the announcement of a 255,000-square-foot acquisition near the Toronto airport.
The 22-foot clear, light industrial property is in the Etobicoke industrial sub-market which rings Pearson International Airport. As such, it has easy access to major GTA highways.
The property is 83 per cent leased to two tenants, each with more than nine years of remaining lease term and annual contractual rent escalation of approximately 1.4 per cent.
Plans to redevelop vacant space
Summit plans to redevelop the remaining vacant space. The property also includes three acres of surplus land which is leased for outside storage to the tenants.
“This acquisition is another example of our ability to acquire properties at prices well below replacement cost with a value add component that will enhance our return on investment over time,” said Summit CEO Paul Dykeman in a release.
“In addition, we believe the GTA offers Canada’s most compelling fundamentals to create long-term value for our unitholders, and we will continueto focus the majority of our growth in this vibrant region.”
Summit could spend $250M in 2017
Dykeman told RENX in a July interview the REIT could spend up to $250 million on acquisitions this year as it moves toward the $1-billion plateau in assets. He also said Summit has narrowed its focus to the Greater Toronto and Montreal areas, as well as some Alberta sites.
The trust will pay $23.9 million for the Etobicoke property ($80 per square foot excluding the surplus land), well below replacement cost. The acquisition will be financed initially from the REIT’s credit lines and, after closing, by a $15.7-million, five-year mortgage with an expected interest rate of 3.35 per cent.
The capitalization rate on closing will be approximately 5.5 per cent, but once the vacant space is redeveloped and leased, management expects the capitalization rate will increase to approximately 6.5 per cent.
Closing is expected by the end of September.
Summit has now acquired more than a half-dozen properties in 2017, and Dykeman said in his July interview the trust is exploring several other opportunities.
Also Wednesday, Summit also said it has placed a new $29-million seven-year mortgage (at 3.76 per cent) on its recently acquired logistics property at 5500 Trans-Canada Highway in Montreal.
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