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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-focused portfolio of 42 properties, including 41 properties in Halifax, Nova Scotia, and one property in Moncton, New Brunswick. The portfolio is comprised of nearly 3.1 million square feet of gross leasable area ("GLA").
As part of 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 a total purchase price of $228 million (before closing costs).
In conjunction with such acquisition, PROREIT will sell a 50% interest in 21 of its currently owned properties to Crestpoint, having a total value of $227 million, for 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 footprint in Halifax's Burnside Industrial Park, one of Canada's strongest industrial nodes. By joining forces with Crestpoint, a high profile institutional real estate investor, collectively we will have an opportunity to achieve meaningful operational and leasing synergies in addition to diversifying our robust industrial tenant base," said James W. Beckerleg, President and Chief Executive Officer of PROREIT.
"We are pleased to manage and operate this highly desirable portfolio. Given Halifax's solid economy and tight industrial real estate market, we look forward to unlocking the significant market leasing upside embedded in these properties and to further benefit from the accretive effect that should result from the scale of this joint venture," added Mr. Beckerleg.
"Crestpoint is excited to take a significant presence in the Halifax industrial market with an ideal partner, PROREIT. The City of Halifax has been such a strong beneficiary of population and economic growth in the last several years and we believe going forward it will continue to demonstrate these growth patterns as the dominant commercial centre for Eastern Canada. Combining Crestpoint's national industrial expertise alongside PROREIT's local industrial knowledge will result in a leading East coast industrial platform. Crestpoint, with this acquisition, will have a significant presence from coast to coast which will contribute to Crestpoint's leading position as one of Canada's top investment managers," said Kevin Leon, President and CEO of Crestpoint.
The combined transaction, which will be immediately accretive to earnings, will result in PROREIT and Crestpoint to each have a 50% ownership interest in the 42-property portfolio. PROREIT, through its wholly-owned property management business Compass Commercial Realty, will act as the sole property manager for the entire portfolio and will collect industry standard fees.
PROREIT's acquisition of the 50% interest in the 21 properties, totaling 1.6 million square feet, for a cost to PROREIT of approximately $114 million (excluding closing costs), will be financed from the proceeds of a 50% interest in approximately $148 million of new fixed-rate mortgages and the balance of approximately $40 million will be satisfied with cash on hand, including cash from the proceeds of the sale 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 in cash to be received from Crestpoint (before closing costs), who will also assume a 50% interest in approximately $129 million of 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 acquisition properties are located in Halifax Burnside Industrial Park, increasing PROREIT's presence in the area to 42 properties. Halifax's highly sought-after Burnside Industrial Park is one of Canada's strongest industrial hubs and is the largest industrial node east of Montréal and north of Boston. Burnside currently benefits from strong underlying fundamentals surrounding its industrial markets with vacancy rates at all-time lows (2.5%) and consistent growth in net rental rates1.
The 42 asset portfolio totals 3,059,635 square feet of GLA with efficient bay sizes and ample loading doors, and is comprised of warehouse, light industrial, and flex office spaces. The properties are approximately 95% leased to a diverse mix of tenants with a weighted average lease term of three years. Many of the in-place leases benefit from the inclusion of contracted rent step escalations and/or are at below current market rents, presenting substantial future rental upside upon 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 owns a portfolio of high-quality commercial real estate properties in Canada, with a strong industrial focus in robust secondary markets.
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 portfolio has a market value in excess of $8.5 billion and is comprised of over 31 million square feet of commercial properties. Crestpoint is part of the Connor, Clark & Lunn Financial Group, a multi-boutique asset management company that provides investment management products and services to institutional and high net-worth clients. With offices across Canada and in Chicago, London, and Gurugram, India, Connor, Clark & Lunn Financial Group and its affiliates are collectively responsible for the management of 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 legislation, including statements relating to certain expectations, projections, growth plans and other information related to 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, that could cause actual results and events to differ materially from those that are disclosed in or implied by such forward-looking statements.
Forward-looking statements contained in this press release include, without limitation, statements pertaining to the creation of the joint venture, the acquisition with Crestpoint of 21 primarily industrial properties, the sale to Crestpoint of a 50% interest in 21 of PROREIT's currently owned properties, the anticipated terms, financing and closing date of such transactions, and 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 favourable terms; (ii) the future level of indebtedness of PROREIT and its future growth potential will remain consistent with the REIT's current expectations; (iii) there will be no changes to tax laws adversely affecting PROREIT's financing capacity or operations; (iv) the impact of the current economic climate and the current global financial conditions on PROREIT's operations, including its financing capacity and asset value, 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) capital markets will provide PROREIT with readily available access to equity and/or debt.
The forward-looking statements contained in this news release are expressly qualified in their entirety by this cautionary statement. All forward-looking statements in this press release are made as of the date of this press release. PROREIT does not undertake to update any such forward-looking information whether as a result of new information, future events or otherwise, except as required by law.
Additional information about 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's discussion and analysis for the year ended December 31, 2021, which are available under PROREIT's profile on SEDAR at www.sedar.com.
1 Colliers Q1 2022 Halifax Industrial Report
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