/NOT FOR DISTRIBUTION IN THE UNITED STATES OR OVER UNITED STATES WIRE SERVICES/
TORONTO, Nov. 18, 2019 /CNW/ - (TSX:CAR.UN) – Canadian
Apartment Properties Real Estate Investment Trust ("CAPREIT" or the
"REIT") announced today that it has agreed to sell, subject to
regulatory approval 6,530,000, units at a price of $53.60
per unit for aggregate gross proceeds of $350,008,000 (the
"Offering") to a syndicate of underwriters led by RBC Capital
Markets on a bought-deal basis. CAPREIT has granted the
underwriters an over-allotment option (the "Over-Allotment
Option"), exercisable in whole or in part up to 30 days after
closing of the Offering, to purchase up to an additional
979,500 units to cover over-allotments, if any. CAPREIT also
announced its intention to acquire six Canadian multi-residential
properties, comprising 604 suites for an aggregate purchase price
of $194 million.
The Offering
CAPREIT will, within the next few days, file with the securities
commissions and other similar regulatory authorities in each of the
provinces and territories of Canada, a preliminary short form prospectus
relating to the issuance of the units. Closing of the Offering is
expected to occur on or about December 6,
2019.
CAPREIT intends to use the net proceeds of the
Offering:
i. to finance the REIT's acquisition of approximately
$194 million of unencumbered
multi-residential properties (the "Q4 Acquisitions");
ii. to repay approximately $127
million of the REIT's acquisition and operating facility,
which was used to fund $88 million of
recently closed unencumbered acquisitions (the "Closed
Acquisitions") and the acquisition of $39
million of Irish Residential REIT ("IRES") shares;
iii. to finance approximately $14
million to exercise existing operating lease buyouts
("Operating Lease Buyouts"), converting two Toronto properties to traditional fee simple
property interests; and
iv. the remainder, if any, to finance future acquisitions
in CAPREIT's robust pipeline, to fund intensification opportunities
within CAPREIT's existing portfolio, for revenue-enhancing capital
expenditures, and for general trust purposes.
Q4 Acquisitions
CAPREIT intends to acquire six unencumbered Canadian
multi-residential properties totalling 604 suites for approximately
$194 million. The Q4
Acquisitions are located in the Greater Montréal Area, Greater
Vancouver Region, Calgary and
Halifax, and are being acquired at
a weighted average capitalization rate of approximately 4.2%.
Four of the six properties are newly constructed properties, and
two represent value-add opportunities.
The Q4 Acquisitions include 288 suites being acquired for
approximately $75 million that are
expected to close in the fourth quarter of 2019 and the first
quarter of 2020. The Q4 Acquisitions also include 316 suites
expected to be acquired for approximately $119 million that are currently either subject to
non-binding letters of intent or to customary conditions, including
due diligence. There can be no assurance that these Q4 Acquisitions
will be completed on their currently proposed terms, or at all.
Closed Acquisitions
The Closed Acquisitions consist of three Canadian
multi-residential properties totalling 659 suites, which were
recently announced and acquired for approximately $88 million, and were initially funded by drawing
on CAPREIT's acquisition and operating facility. The Closed
Acquisitions are located in Southwestern
Ontario and Prince Edward
Island, and were acquired at a weighted average
capitalization rate of approximately 5.0%. The Closed
Acquisitions are 98.9% occupied.
Operating Lease Buyouts
CAPREIT's portfolio currently includes 15 properties located in
Toronto that are subject to
operating leases. The operating lease payments were fully
prepaid upon signing of the operating leases. Each operating
lease has fixed price purchase options that can be paid any time
between the 25th year and the 35th year (the
"Operating Lease Buyouts"), which, if exercised, would allow
CAPREIT to become the fee simple owner of the property.
CAPREIT has agreed to accelerate the Operating Lease Buyouts on
two of the properties for approximately $14
million, which is less than the price specified in the
respective operating leases. Accelerating the Operating Lease
Buyouts and converting CAPREIT's operating leasehold interest in
these properties to traditional fee simple interests is estimated
to result in an $18 million fair
market value gain to CAPREIT, net of the $14
million Option Lease Buyouts. Additionally, exercising
the Operating Lease Buyouts is expected to provide additional
liquidity to execute on its acquisition pipeline and the
intensification opportunities within its portfolio.
Impact of the Offering and the Acquisitions
After giving effect to the Q4 Acquisitions, the Closed
Acquisitions, the Operating Lease Buyouts (collectively, the
"Acquisitions"), and the Offering, the REIT's Debt to Gross Book
Value ratio is expected to decrease from approximately 37.4%
currently to approximately 35.7%. After the Acquisitions and
the Offering, CAPREIT expects to have approximately $375 million of capacity on its acquisition and
operating facility. Prior to any other acquisitions closing from
CAPREIT's robust acquisition pipeline, the impact on NFFO accretion
will be approximately flat.
Mark Kenney, President and CEO of
CAPREIT, said "In addition to making some fine acquisitions, this
equity offering will de-lever CAPREIT's balance sheet and reload
our credit facility, providing productive financing capacity to
allow us to capitalize on exciting future acquisition and
intensification opportunities, which are expected to be accretive
to CAPREIT's NFFO on a leverage-neutral basis. Over its 22
years, CAPREIT has become highly experienced and successful in
integrating acquisitions to maximize NOI, NFFO and NAV growth, such
that its compounded annual total return since its 1997 initial
public offering is approximately 15%. With CAPREIT's proven
internal management platform, deep market knowledge and
demonstrated economies of scale, CAPREIT is eager to continue to
accretively expand its portfolio, but also to continue to improve
margins and narrow the significant gap between in-place and market
rents, which we estimate to be approximately 20% in our existing
portfolio, including approximately 30% in the Greater Toronto Area."
CAPREIT intends to make monthly cash distributions to
unitholders of record on each record date, on or about the
15th day of the month following the record date.
CAPREIT's current monthly cash distribution is $0.1150 per unit ($1.38 annually). The first cash distribution to
which purchasers of the units under this Offering will be entitled
to participate will be for the month of December, with a record
date of December 31, 2019 and a
payment date of January 15, 2020.
This press release shall not constitute an offer to sell, or the
solicitation of an offer to buy, any securities in any jurisdiction
in which such offer, solicitation or sale would be unlawful. The
securities being offered have not been and will not be registered
under the U.S. Securities Act of 1933 as amended and may not be
offered or sold in the United
States absent registration or pursuant to applicable
exemption from registration.
ABOUT CAPREIT
CAPREIT is a growth-oriented investment
trust managing 63,907 suites and sites across Canada, the
Netherlands, and Ireland.
It owns interests, directly in Canada, and indirectly in the Netherlands through its investment in
ERES, a total of 60,241 residential units, comprising 48,566
residential suites and 72 manufactured home communities comprising
11,675 sites, all located in and near major urban centres.
CAPREIT is a 2019 AON-Hewitt Best Employer in Canada. For more information about
CAPREIT, its business and its investment highlights, please refer
to our website at www.caprent.com or www.capreit.net, and our
public disclosure which can be found under our profile at
www.sedar.com.
CAUTIONARY STATEMENTS REGARDING FORWARD-LOOKING
STATEMENTS
All statements in this press release that do not
relate to historical facts constitute forward-looking statements.
These statements represent CAPREIT's intentions, plans,
expectations and beliefs and are subject to certain risks and
uncertainties, including that the Q4 Acquisitions do not close, the
projected net operating income for the Closed Acquisitions and for
the Q4 Acquisitions on which the cap rates cited are based on is
not achieved, that could result in actual results differing
materially from these forward-looking statements. These risks and
uncertainties are more fully described in regulatory filings that
can be obtained on SEDAR at www.sedar.com.
SOURCE Canadian Apartment Properties Real Estate Investment
Trust (CAPREIT)