Summit Industrial Income REIT (SMU.UN-T) is expanding its GTA portfolio with the pending acquisition of a 342,830 square foot, single-tenant warehouse and logistics facility in Ajax, just east of Toronto.
In the announcement, Summit says the $68-million price tag is below replacement cost. It has waived conditions, and will finance the purchase with cash from its recent $200-million offering of unsecured debentures which closed just prior to Christmas.
The price reflects a going-in capitalization rate of approximately 4.3 per cent. The property also includes excess land for future expansion or fleet parking. When this is factored in, Summit says the going-in capitalization rate is approximately 3.9 per cent.
Closing is anticipated by the end of January 2021.
“We are very pleased to be acquiring this quality property with an excellent GTA location and a strong investment grade tenant,” said Paul Dykeman, Summit’s chief executive officer, in the announcement. “Looking ahead, with current rents below market, and expansion potential utilizing the excess land, we anticipate this accretive purchase will generate solid returns for years to come.”
In response to queries from RENX, a Summit spokesperson said they are not able to comment further until the acquisition closes.
About the Ajax property
The 34-acre property currently has just 23 per cent site coverage, and includes seven acres of excess land.
It includes a distribution warehouse of 299,313 square feet and a 43,517 square foot office building.
The property offers a clear warehouse ceiling height of 26 feet, shipping and receiving doors, vehicle parking and storage. Summit says the site has been well maintained.
The property is well-located on a corner location near major highway and railway transportation links.
The tenant, a major global automotive company, utilizes the facility as its Canadian head office and national parts distribution centre. The tenant recently signed a five-year extension to its original 15-year lease with annual rent escalations to 2025.
Management believes current in-place rents are below market.
Busy 2020 for Summit Industrial
The announcement caps a very active year of growth for Summit.
In 2020 it acquired 10 GTA properties comprising almost a million square feet of space, for $227.6 million. It also acquired the remaining 50 per cent interest in a portfolio of 11 light industrial properties in Montreal from its previous joint venture partner for $88 million; and the remaining 50 per cent interest in two recently constructed Guelph properties from its partner for $33.9 million.
The REIT divested a mid-sized office property, a non-core industrial asset in Edmonton and its share of the DC2 data project in the GTA for about $29 million in total.
The moves also mean Summit now internally manages 100 per cent of its portfolio.
In other news, Summit has appointed the Honourable A. Anne McLellan to its board of trustees.
McLellan is a senior advisor at the law firm Bennett Jones LLP and recently served as the Chancellor of Dalhousie University. She is a former deputy prime minister of Canada and has held several senior cabinet positions. She is also an Officer of the Order of Canada.
Prior to entering politics, McLellan was a professor of law at the University of Alberta, where she served at various times as associate dean and acting dean.
About Summit Industrial
Summit Industrial Income REIT owns and manages a portfolio of light industrial properties across Canada.
The Brampton, Ont.-based REIT currently operates properties in Ontario, Alberta, Quebec, British Columbia and New Brunswick, with half of its portfolio concentrated in Ontario.
At September 30, 2020, the portfolio totalled 153 properties aggregating 18.2 million square feet with a net book value of approximately $2.7 billion.