Summit Industrial Income REIT says it has sold its interests in two data centres in Montreal and the Greater Toronto Area for $178 million and will make a special distribution of a portion of the profits to its shareholders.
In a release late Wednesday, Summit (SMU-UN-T) said the sale creates a “significant realized gain of approximately $42 million or $0.35 per unit.” As a result of its internal policy to distribute a portion of such gains to shareholders, the special distribution of seven cents per unit will be made on Oct. 2.
Summit had been a joint venture partner in the data centres with Urbacon while the two facilities were completed and stabilized.
“We remain opportunistic in our capital deployment and recycling strategies,” said Summit CEO Paul Dykeman, in the release, “and determined that realizing the significant gain available on the monetization of our investments in these data centres, and reducing our mezzanine loans, will provide approximately $140 million in new capital to direct towards our current and future development projects and our strong pipeline of future acquisition opportunities, both in our core light industrial business.
“We are also pleased to announce the new special distribution, a reflection of our commitment to generate enhanced value for our unitholders.”
Summit said the sale also allows it to repay working capital loans and mezzanine loans of approximately $62 million. Additional funds will be used for future industrial investments.
The sale closed on Wednesday.
Summit loans for new data centres
The REIT remains involved in the development of one of the data centres in the Greater Toronto Areas and the data centre in downtown Montreal, by extending new mezzanine loans to new joint ventures with Urbacon.
The new joint ventures will partner with a major Canadian Institutional investor to complete the two developments.
Summit announced its data centres partnership with Urbacon in December 2017, taking its 50 per cent stake in the DC1 data centre at the Barker Business Park Digital Campus in suburban Richmond Hill.
The purpose-built, state-of-the-art facility was already 50 per cent leased to a global cloud provider.
Toronto-based Urbacon is already developing a second facility at the site, known as DC2. The ultimate plan is to construct five data centres at that property.
In Montreal, Summit was a partner in Urbacon’s stand-alone, purpose-built data centre in the city’s downtown at 544 rue de l’Inspecteur. The nine-storey facility offers 16 megawatts of capacity and has additional capacity to be upgraded.
When Summit made the original investments, Dykeman told RENX there was potential for significant returns.
“The attraction with data centres is we get new, state-of-the-art facilities in a very quickly growing area of storage and e-commerce,” Dykeman said during a January 2018 interview. “Because of the specialized design and operation, there are significant barriers to entry. As a result, development returns will exceed what you can achieve from industrial development.”
Summit Industrial Income REIT is an unincorporated open-end trust focused on growing and managing a portfolio of light industrial properties across Canada.