Summit Industrial Income REIT (SMU-UN-T) is making a major acquisition of both properties and development land in a growing industrial area in Guelph, just west of Toronto. In all, the investment comprises up to 1.2 million square feet of existing and future space.
The trust announced this week it has waived conditions and will acquire a new, single-tenant light industrial property and a second recently constructed multi-tenant light industrial property, in the industrial park along The Hanlon Expressway. Summit is paying $57 million in cash for the two properties, which total 431,390 square feet.
Summit is funding the purchases via its most recent equity offering, which raised $149.5 million and closed in June. The transaction represents a going-in capitalization rate of approximately 5.4 per cent.
Both properties are 100 per cent occupied.
Closing is anticipated by the end of September 2019.
JV on development land
In addition, Summit will acquire a 50 per cent interest in 49 acres of development land in the same industrial park for $13.8 million. As part of this acquisition, it is entering a 50/50 joint venture with Cooper Construction Limited, a developer and builder based in nearby Oakville.
Together, they will develop an estimated 774,000 square feet of class-A light industrial space over the next few years.
“We are very pleased to be expanding our presence in the Greater Toronto Area region with these well-located properties,” said Paul Dykeman, Summit’s chief executive officer, in the release.
“We are purchasing new buildings with strong tenants and acquiring a 50 per cent interest in development lands at a cost significantly less than comparable and more central land located in the GTA.”
There are currently two buildings under construction in the park which, when completed, will total 386,929 square feet. Summit will acquire the remaining 50 per cent interest in the two buildings once they are completed and leased.
Summit also has the option to acquire 100 per cent of additional buildings being developed over time under the joint venture.
“We are also pleased to be entering into a joint venture partnership with a proven developer to build-out the remaining space over the next few years,” Dykeman said in the release.
“At Summit, we have significant and proven expertise in developing light industrial properties. These investments can generate much stronger capitalization rates and returns for our unitholders in comparison to acquiring properties.
“However, we will maintain our conservative approach to development and limit these investments to under 10 per cent of our total assets.”
Including two Guelph industrial park developments, Summit has approximately 685,000 square feet under development, primarily within the GTA.
The trust also holds significant future additional growth opportunities, both via development land and expansions of existing assets.
About Summit and Cooper
Summit Industrial Income REIT is focused on growing and managing a portfolio of light industrial properties across Canada. It currently owns interests in about 110 properties in five provinces (Ontario, Quebec, Alberta, British Columbia and New Brunswick).
Founded in 1905, Cooper Construction is a best-practices real estate development and construction company specializing in design/build construction, construction management, turn-key leasing and property management.
Over the last 10 years, Cooper has managed the development and/or construction of over 20 million square feet of industrial and suburban office space.