PROREIT will act as sole property manager for the portfolio
MONTREAL, June 21, 2022 /CNW Telbec/ – PRO Real Estate Investment Trust (“PROREIT” or the “REIT”) (TSX: PRV.UN) is pleased to announce that it has entered into a strategically important joint venture agreement with Crestpoint Real Estate Investments Ltd. (“Crestpoint”) to jointly own an industrial-oriented portfolio of 42 properties, including 41 properties in Halifax, Nova Scotiaand a property Moncton, New Brunswick. The portfolio comprises nearly 3.1 million square feet of gross leasable area (“GLA”).
Under the joint venture transaction, PROREIT and Crestpoint will each acquire a 50% interest in 21 primarily industrial properties currently owned by a third party, for an aggregate purchase price of $228 million (before closing costs).
Concurrent with this acquisition, PROREIT will sell to Crestpoint a 50% interest in 21 of its currently owned properties, with a total value of $227 millionfor a total consideration to PROREIT of approximately $113.5 million (before closing costs).
“This joint venture is a unique opportunity for PROREIT to increase its presence in Halifax Burnside Industrial Park, one of from Canada most powerful industrial nodes. By joining forces with Crestpoint, a leading institutional real estate investor, we will collectively have the opportunity to realize significant operational and tenant synergies in addition to diversifying our strong industrial tenant base,” said James W. BeckerlegPresident and CEO of PROREIT.
“We are excited to manage and operate this highly desirable portfolio. Given Halifax a strong economy and a tight industrial real estate market, we look forward to unlocking the significant rental market advantage built into these properties and further benefiting from the accretive effect expected to result from the scale of this joint venture,” added Ms. Beckerleg.
“Crestpoint is delighted to have a significant presence in the Halifax industrial market with an ideal partner, PROREIT. The City of Halifax has been such a big beneficiary of population and economic growth over the past few years and we believe that in the future it will continue to demonstrate these growth patterns as a dominant commercial center for Eastern Canada. The combination of Crestpoint’s national industrial expertise and PROREIT’s local industrial knowledge will result in a leading industrial platform on the East Coast. Crestpoint, with this acquisition, will have a significant coast-to-coast presence, which will contribute to Crestpoint’s leadership position as one of from Canada top investment managers,” said Kevin LeonPresident and CEO of Crestpoint.
The combined transaction, which will immediately increase earnings, will see PROREIT and Crestpoint each have a 50% stake in the 42-property portfolio. PROREIT, through its wholly owned property management business Compass Commercial Realty, will act as sole property manager for the entire portfolio and will collect industry standard fees.
The acquisition by PROREIT of the 50% interest in the 21 properties, totaling 1.6 million square feet, at a cost to PROREIT of approximately $114 million (excluding closing costs), will be financed by the proceeds of a 50% interest in approximately $148 million new fixed rate mortgages and the balance of approximately $40 million will be satisfied with cash on hand, including cash from the sale proceeds of a 50% interest in existing properties to Crestpoint.
PROREIT’s sale of a 50% interest in 21 of its currently owned properties, totaling 1.5 million square feet, will result in considerations of approximately $49 million cash receivable from Crestpoint (before closing costs), which will also assume a 50% interest in approximately $129 million fixed rate mortgages currently held by PROREIT.
The balance of the proceeds to PROREIT, net of the acquisition payment, will be used to reduce the REIT’s credit facility. The transaction is expected to close in the coming weeks and is subject to customary closing conditions.
The 21 properties acquired are located in the Halifax Burnside Industrial Park, bringing PROREIT’s presence in the region to 42 properties. Halifax Highly sought after, Burnside Industrial Park is one of Canada’s strongest industrial hubs and the largest industrial hub east of Montreal and north of Boston. Burnside is currently benefiting from strong underlying fundamentals surrounding its industrial markets with vacancy rates at historic lows (2.5%) and steady growth in net rental rates1.
The 42-asset portfolio totals 3,059,635 square feet of GLA with efficient bay sizes and large loading doors, and includes warehouse, light industrial and flexible office space. The buildings are approximately 95% leased to a diverse mix of tenants with a weighted average lease term of three years. Many leases in place benefit from the inclusion of contractual rent increases and/or are below current market rents, which presents a substantial increase in future rents based on turnover.
PROREIT (TSX: PRV.UN) is an unincorporated open-ended real estate investment trust established pursuant to a Declaration of Trust under the laws of the Province of Ontario. Founded in 2013, PROREIT holds a portfolio of high quality commercial real estate properties in Canadawith a high industrial concentration in robust secondary markets.
About Crest Point
Crestpoint Real Estate Investments Ltd. is a commercial real estate and mortgage investment manager dedicated to providing investors with direct access to a diversified portfolio of commercial real estate assets. Crestpoint’s current wallet has a market value greater than $8.5 billion and includes over 31 million square feet of commercial properties. Crestpoint is part of the Connor, Clark & Lunn Financial Group, a multi-boutique asset management firm that provides investment management products and services to institutional and high net worth clients. With offices across Canada and in Chicago, Londonand Gurugram, IndiaConnor, Clark & Lunn Financial Group and its affiliates are collectively responsible for managing approximately $104 billion in assets. For more information, please visit: www.crestpoint.ca.
This press release contains forward-looking statements and forward-looking information (collectively, “forward-looking statements”) within the meaning of applicable securities laws, including statements regarding certain expectations, projections, growth plans and other related information. to the REIT’s business strategy and future plans. Forward-looking statements are based on a number of assumptions and are subject to a number of risks and uncertainties, many of which are beyond PROREIT’s control, which could cause actual results and events to differ materially from those disclosed or implied by such forward-looking statements.
Forward-looking statements in this press release include, but are not limited to, statements regarding the formation of the joint venture, the acquisition with Crestpoint of 21 primarily industrial properties, the sale to Crestpoint of a 50% interest in 21 properties currently held by PROREIT, the expected terms, financing and closing date of such transactions, as well as the expected performance of the portfolio and its future impact on PROREIT’s results. PROREIT’s objectives and forward-looking statements are based on certain assumptions, including that (i) PROREIT will receive financing on favorable terms; (ii) PROREIT’s future indebtedness level and future growth potential will remain consistent with the REIT’s current expectations; (iii) there will be no changes to tax laws adversely affecting the financing capacity or operations of PROREIT; (iv) the impact of the current economic climate and current global financial conditions on PROREIT’s operations, including its funding capacity and the value of its assets, will remain consistent with PROREIT’s current expectations; (v) the performance of PROREIT’s investments in Canada will proceed on a basis consistent with PROREIT’s current expectations; and (vi) the capital markets will provide PROREIT with readily available access to equity and/or debt.
The forward-looking statements contained in this press release are expressly qualified in their entirety by this cautionary statement. All forward-looking statements contained in this press release are made as of the date of this press release. PROREIT does not undertake to update this forward-looking information, whether as a result of new information, future events or otherwise, except as required by law.
Additional information on these assumptions and risks and uncertainties is contained under “Risk Factors” in PROREIT’s latest Annual Information Form and “Risk and Uncertainties” in PROREIT’s Management Report for the year ended December 31, 2021which are available under the PROREIT’s profile on SEDAR at www.sedar.com.
1 Clamps Q1 2022 Halifax Industrial Report
For further information: For PROREIT: James W. Beckerleg, President and Chief Executive Officer, 514-933-9552; PRO Real Estate Investment Trust, Gordon G. Lawlor, CPA, CA, Executive Vice President, Chief Financial Officer and Secretary, 514-933-9552; For Crestpoint: Elizabeth Steele, Director, Customer Relations, 416-304-8743