Minto Apartment REIT (MI.UN-T) has sold its 241-unit Castleview apartments tower in Ottawa for $69 million as the trust continues to divest older assets and use the proceeds to reduce debt.
Minto did not identify the buyer in the announcement, noting only it is a “private real estate investor.”
“In total, upon closing of the transaction, we will have completed approximately $200 million of older non-core asset sales located in the Edmonton and Ottawa markets,” during 2024, Minto Apartment REIT’s president and CEO Jonathan Li said in the announcement. “These sales have increased the overall quality of our portfolio, reduced our future major capital expenditure requirements, strengthened our balance sheet and increased our financial flexibility.”
The transaction is anticipated to close in January 2025.
Minto states the sale price is a premium to the 51-year-old building’s current IFRS value.
Castleview was built in 1973 and is located on Frobisher Lane southeast of downtown Ottawa, with views of the Rideau River and the downtown.
The proceeds of approximately $33.8 million are to be used to repay a portion of the REIT’s variable-rate revolving credit facility.
Minto’s efforts to reduce its debt
The REIT has already made significant inroads in lowering debt this year.
It kicked off 2024 by closing on the sale of its two apartment properties in Edmonton, and exiting that market. The York House and The Lancaster House properties comprised a total of 190 apartments, and netted Minto $32.3 million for the sale.
It then sold its Tanglewood and Chesterton/Bowhill properties in Ottawa to Ottawa Community Housing for $86 million.
Proceeds of those sales allowed Minto to pay down an additional $75 million of debt.
Minto also paid down $30 million on its revolving credit facility in January with proceeds from the repayment of a convertible development loan for its newly constructed Fifth + Bank property in downtown Ottawa.
Finally, it has been working to upward finance three of its assets in Ottawa and a fourth in Toronto. This is almost complete, is expected to close in December, and deliver an additional $91 million which will also be applied to the variable-rate revolving credit facility.
Minto’s Q3 2024 financial results
Minto reported a $41.9-million loss in its Q3 financials last week, compared to net income of $27.8 million in Q3 2023. That was mainly due to the impact of a non-cash fair value loss of $54.3 million on Class B LP Units (which rose in value), compared to a gain of $35.8 million in Q3 2023.
Its other metrics were positive, reflected in a three per cent increase in annual distributions to unitholders. This is the sixth consecutive year Minto Apartment REIT has increased its distributions.
The REIT also reported a 5.9 per cent increase in same property portfolio (SPP) rents, while its SPP NOI margin expanded to a record 66.2 per cent.
Its normalized funds from operations and adjusted funds from operations, per unit, rose 8.3 per cent and 9.6 per cent respectively. Overall portfolio revenues of $39.8 million were flat compared to Q3 2023, but that is due to the property divestments resulting in a smaller portfolio.
On the debt front, Minto Apartment REIT lowered its interest expenses by 10.8 per cent year-over-year and reduced its debt-to-book-vale from 42.8 per cent to 42 per cent.
Occupancy rose from 96.9 to 97.1 per cent year-over-year.
Minto’s portfolio at the end of Q3 comprised interests in 28 properties in Ottawa, Toronto, Montreal and Calgary. The properties comprised 7,726 apartments – 6,211 at Minto’s ownership share.
The portfolio was valued at approximately $1.47 billion.