True North Commercial REIT (TNT-UN-T) says it is in due diligence to purchase three office properties in the Greater Toronto Area and in Calgary, and is issuing a $70-million share offering to help fund the potential acquisitions. 

True North does not identify any of the properties it is attempting to purchase, but says two of the sites are in the Toronto area and the third in Calgary. All three are owned by what it calls “arm’s length vendors.”

The total purchase price is $222.5 million, and the three properties in total comprise 624,000 square feet of leasable space.

One of the GTA properties comprises 315,000 square feet, while the other is 100,000 square feet. The Calgary property is 209,000 square feet and leased to a government-related tenant. All are fully occupied.

They have a weighted average remaining lease term of 7.6 years and 97 per cent of revenue is generated from government and credit-rated tenants, True North says. True North officials were not immediately available for further comment.

Earlier this year, True North completed its transition from a diversified commercial REIT to what CFO Tracy Sherrer called “pure-play office” investor in an interview with RENX.

“We’re really good at office so we thought we’d stick with just that one office sector,” Sherrer said, noting True North feels there is considerable opportunity to grow its portfolio in the sector.

True North share offering

The offering is being led by CIBC Capital Markets and Raymond James Ltd. and will include 10,610,000 shares at a price of $6.60 per unit. Gross proceeds to the REIT will be about $70 million.

There is also provision for an additional 1,591,500 units to be offered to cover over-allotments, if required, raising an additional $10.5 million.

The funds will be used in part to help finance the acquisitions, as well as other purposes. The offering, True North says, is not contingent on the acquisitions.

Daniel Drimmer, the REIT’s president and chief executive officer, will be purchasing approximately $1 million worth of units, True North says in a release.

In addition to the offering, the institutional vendor of one of the office properties will accept approximately $15 million in shares as part of the purchase price of the property. These shares would be subject to a contractual hold of 12 months from the closing.

If all three properties are successfully acquired, True North’s portfolio will have 4.3 million leasable square feet. It will be 97 per cent occupied, have a weighted average lease term of 4.7 years and have 82 per cent of its revenue generated by government and/or credit-rated tenants.

The REIT also already holds 27 Ontario properties and four in Alberta.

About the REIT

True North Commercial REIT is an unincorporated, open-ended real estate investment trust based in Toronto.

The REIT currently owns and operates a portfolio of 45 commercial properties consisting of approximately 3.7 million square feet in urban and select secondary markets across Canada.

The REIT is focused on growing its portfolio, principally through acquisitions across Canada.