— Proceeds from the repayment of the
$30 million Convertible Development
Loan to be used to repay its revolving credit facility —
OTTAWA,
ON, June 7, 2023 /CNW/ - Minto Apartment Real
Estate Investment Trust (the "REIT") (TSX: MI.UN) today announced
an agreement with Minto Properties Inc. ("MPI", a subsidiary of the
Minto Group), to terminate the REIT's option to purchase Fifth +
Bank ("Option to Purchase") effective immediately. The REIT's cost
of capital in the current high interest rate environment is too
high relative to the anticipated purchase capitalization rate of
the asset. The future prospect that interest rates move materially
lower prior to the expiry of the Option to Purchase is unlikely
and, acting in good faith, the REIT wants to provide MPI with
advanced notice so it may evaluate its alternatives with respect to
the asset.
The $30 million convertible
development loan related to Fifth + Bank (the "CDL") matures on
January 31, 2024, and the REIT will
work to negotiate an option for MPI to prepay earlier, should
circumstances permit. The REIT will use the proceeds from the
repayment of the CDL to repay a portion of its revolving credit
facility. As previously announced, the coupon payable under the CDL
commencing July 1, 2023 will be equal
to the all-in interest rate the REIT pays from time to time on its
revolving credit facility (subject to a collar of between 5% and 7%
per annum), which is approximately 6.75%.
The REIT's rationale for not exercising the Option to Purchase
includes the following:
- The REIT is focused on maximizing FFO per unit, and given the
REIT's current cost of capital, exercising the Option to Purchase
does not represent an attractive allocation of capital, despite the
high-quality and strong expected performance of the property
- Allows the REIT to reduce its variable rate debt exposure by
$30 million, consistent with its
stated strategy
- The REIT is committed to maximizing its unit price by removing
uncertainty related to the prospective purchase of Fifth +
Bank
"Fifth + Bank is a new, attractive urban asset that any
apartment owner would like to have in its portfolio." said
Jonathan Li, the REIT's President
and Chief Executive Officer. "However, current market conditions
plus our cost of capital must be factored into any decision, and as
a result, we believe it's in the best interest of the REIT to
terminate the Option to Purchase. The CDL pipeline is a strategic
program that gives the REIT access to newly-constructed
multi-family assets in major, urban markets, and we remain hopeful
that once market conditions are more favourable, the REIT will be
better positioned to execute on opportunities arising from the CDL
pipeline, which is a strategic advantage for the REIT. The decision
to terminate the Option to Purchase is not related to our capital
recycling program, which continues to be a strategic priority for
the REIT."
Allan Kimberley, lead independent
trustee of the REIT, commented, "The decision to terminate the
Option to Purchase is a clear representation that we will make
decisions that we believe to be in the best interest of the REIT
and its unitholders."
Michael Waters, Chief Executive
Officer of Minto Group added, "Fifth + Bank is an asset that MPI
will retain – brand new assets of this quality in urban locations
are irreplaceable. MPI will evaluate its alternatives and although
not guaranteed, MPI will endeavour to preserve an ability for the
REIT to purchase the property at some point in the future."
Fifth + Bank is a newly constructed, mixed-use multi-residential
rental and retail property located at 99 Fifth Avenue in the Glebe
neighbourhood of Ottawa, Ontario.
Construction of the 163-suite property was completed in Q3 2021.
The property is 100% leased and is not subject to rent control
because it was delivered after November
2018.
About Minto Apartment Real Estate
Investment Trust
Minto Apartment Real Estate Investment Trust is an
unincorporated, open-ended real estate investment trust established
pursuant to a declaration of trust under the laws of the Province
of Ontario to own income-producing multi-residential
properties located in urban markets in Canada. The REIT owns a
portfolio of high-quality income-producing multi-residential rental
properties and developments located in Toronto, Montreal, Ottawa, Vancouver, Victoria, Calgary and Edmonton. For more information on Minto
Apartment REIT, please visit the REIT's website
at https://www.mintoapartmentreit.com.
Forward-Looking
Information
This news release may contain forward-looking information within
the meaning of applicable securities legislation, which reflects
the REIT's current expectations regarding future events and in some
cases can be identified by such terms as "will" and "expects".
Forward-looking information is based on a number of assumptions and
is subject to a number of risks and uncertainties, many of which
are beyond the REIT's control that could cause actual results and
events to differ materially from those that are disclosed in or
implied by such forward-looking information. In this news release,
forward-looking information includes the fact that there is no
certainty that the option to purchase the Fifth + Bank property
will be exercised. Other such risks and uncertainties include, but
are not limited to, the factors discussed under "Risk Factors" in
the REIT's Annual Information Form dated March 8, 2023, which is available on SEDAR
(www.sedar.com). The REIT does not undertake any obligation to
update such forward-looking information, whether as a result of new
information, future events or otherwise, except as expressly
required by applicable law. This forward-looking information speaks
only as of the date of this news release.
Non-IFRS Financial
Measure
This news release contains a financial measure which is not
defined under International Financial Reporting Standards ("IFRS")
and may not be comparable to similar measures presented by other
real estate investment trusts or enterprises. FFO per unit is a
measure of financial position used by the REIT's management and
real estate businesses. This measure is not defined by IFRS and
does not have a standardized meaning prescribed by IFRS. See the
REIT's Management Discussion & Analysis dated May 9, 2023 for further discussion of this and
other non-IFRS financial measures.
SOURCE Minto Apartment Real Estate Investment Trust