Minto Apartment REIT and an investment partner have a definitive agreement to acquire the newly constructed Lonsdale Square apartment building in Vancouver, along with its ground-floor retail component.
The acquisition will mark Ottawa-based Minto’s entry into apartment ownership in the Metro Vancouver market.
Minto will acquire a 50 per cent managing interest and its “national Canadian life insurance company” partner will acquire the non-managing 50 per cent stake.
Appraised at $114.3 million, according to Minto, the purchase is being based on a price of $111.5 million. Minto said it is receiving a five per cent discount on that price due to an existing option to purchase the property, thus paying $52.96 million for its share.
North Vancouver-based Darwin Construction and Minto developed the building, part of Phase 1 of the Harry Jerome lands redevelopment in the city’s central Lonsdale neighbourhood. Lonsdale Square was completed in Q1 of this year.
The Lonsdale Square development
Lonsdale Square is located just south of the Upper Levels Highway, adjacent to the new Harry Jerome Community Recreation Centre (expected to be completed in 2025) and directly on public transit routes which offer access to downtown Vancouver.
The six-storey, purpose-built rental building offers “premium amenities” including a rooftop terrace, penthouse social lounge, and 108 parking stalls. It is surrounded by retail, restaurants, outdoor parks and trails. The building has a state-of-the-art smart building operating system including a package and food delivery system, a resident app, remote video intercom, keyless access control and security cameras.
The apartments are 93 per cent occupied and the building’s approximately 8,000 square feet of ground floor retail space is 100 per cent leased to a brewpub, a pharmacy and a vitamin/nutrition retailer.
“The transaction adds a newly-built asset in the attractive Metro Vancouver market to our portfolio in a manner that is accretive to FFO per unit,” Minto Apartment REIT president and CEO Jonathan Li said in the announcement Monday morning.
The transaction, and financing
“We did not have to access expensive and dilutive new equity capital to fund any portion of the transaction because we implemented a financing structure that fully funds it with CMHC financing, at a significantly lower interest rate compared to our revolving credit facility.”
The REIT is funding its portion of the purchase price by assuming a $52.96-million, CMHC-insured mortgage at 3.9 per cent through its 2034 maturity.
Upon closing of the sale, expected in January 2025, the REIT will also receive repayment of the $14-million convertible development loan associated with the property.
“Moreover, the REIT will reduce its variable-rate debt exposure by using the proceeds from the repayment of the (convertible development loan) to repay a portion of the outstanding revolver balance,” Li said.
The transaction leveraged the relationship between Minto Group entities.
“This transaction underlines the benefit of the REIT’s relationship with the Minto Group and we would like to thank them for their flexibility and patience regarding this asset,” Allan Kimberley, lead independent trustee of the REIT, added. “The Minto Group agreed to extend the maturity date of the purchase option, accept a purchase price discount greater than five per cent of appraisal value and implement long-term financing which is beneficial to the REIT.”
Based on the REIT’s purchase price for the asset, the implied stabilized capitalization rate is in the low four per cent range, the announcement states.
About Minto Apartment Real Estate Investment Trust
Minto Apartment Real Estate Investment Trust is an Ontario-based, unincorporated, open-ended real estate investment trust established to own income-producing multiresidential properties in Canada. The REIT owns a portfolio of such properties located primarily in urban centres in major markets of Toronto, Montreal, Ottawa and Calgary.
