Summit Industrial Income REIT Announces Acquisition of Alberta Light Industrial Portfolio for $588 Million and C$200 Million Offering of Subscription Receipts
NOT FOR DISTRIBUTION TO UNITED STATES NEWSWIRE SERVICES OR FOR DISSEMINATION IN THE UNITED STATES
Summit Industrial Income REIT ("Summit" or the "REIT") (TSX:SMU-UN.TO) announced today that it has entered into a binding Purchase and Sale Agreement to acquire 100% of an institutional quality portfolio of 37 light industrial properties in Alberta totaling over 3.3 million square feet of quality space (the "Acquisitions"). Of the total, 22 of the properties (1.8 million square feet) are in Edmonton, 14 properties (1.4 million square feet) are in Calgary, and one property is in Grand Prairie. The purchase also includes one parcel of land (which is leased) in Edmonton. Details of the portfolio being acquired are described in the table below.
-- Significantly increases the size and scale of Summit's portfolio, aggregate pro forma portfolio of approximately 16.9 million square feet and $2.5 billion of asset value
-- Expands Summit's presence and operating platform in core industrial markets in Western Canada
-- Diversified and stable tenant roster with a weighted average lease term of 5 years
-- Attractive transaction metrics result in net asset value ("NAV") and cash flow accretion on a per unit basis
- Transaction expected to be accretive to Funds From Operations ("FFO") per unit in the first year
-- Opportunity to enhance yield through future lease up, development and expansion
Summit will pay approximately $588 million for the portfolio, generating a year 1 capitalization rate of approximately 5.5%. The Acquisitions will be financed by a combination of approximately $200 million of gross proceeds raised from a subscription receipt offering, $382 million from a new bridge credit facility established in connection with the Acquisitions and the balance from proceeds generated by the recent sale of its data centre properties. Details regarding the subscription receipt offering are described below. Closing of the Acquisitions is expected on or about November 1, 2019.
The portfolio contains a mix of single tenant and multi-tenant properties. Approximately 67% of the portfolio consists of modern Class A space, significantly enhancing the quality of Summit's overall portfolio, with almost 60% of the total space consisting of logistics buildings. Occupancy currently stands at approximately 91.7%, providing the opportunity to enhance the yield on the acquisition through the lease up of the vacancies. The tenant base consists primarily of transportation, warehouse and light manufacturing firms, with only 17% exposure to the oil and gas industry. Site coverage is approximately 22% of total land being acquired, providing the opportunity for development, re-development and tenant expansions over time.
Additional property information regarding the portfolio is set out below:
Area Avg. Avg. Year Site City SF % Year Built Last Expanded Acres Avg. Cov. Avg. Occ. WALT Edmonton 1,834,741 55.2 % 1994 2001 158.7 26 % 91 % 4.3 Calgary 1,447,690 43.6 % 2000 2001 117.8 28 % 93 % 5.2 Grand Prairie 26,180 0.8 % 2006 2006 20.1 3 % 100 % 12.9 Bldg Subtotal 3,308,611 99.6 % 1997 2001 296.6 26 % 92 % 4.7 Land 12,649 0.4 % 52.5 0.5 % 100 % 11.7 TOTAL 3,321,260 100.0 % 349.1 22 % 92 % 4.8
BMO Capital Markets Real Estate Inc. is acting as an exclusive advisor on this Transaction.
"This important acquisition significantly increases the size and scale of our total portfolio to 145 properties aggregating 16.9 million square feet with an asset value of approximately $2.5 billion," commented Paul Dykeman, Chief Executive Officer. "We are also pleased to have quickly and accretively recycled the funds generated from the sale of our non-core data centre properties into our core light industrial business where we have a proven track record of creating value for our Unitholders."
In conjunction with the Acquisitions, Summit has entered into an agreement with a syndicate of underwriters led by BMO Capital Markets (collectively, the "Underwriters") to sell, on a bought deal basis, 15,510,000 subscription receipts (the "Subscription Receipts") at a price of $12.90 per Subscription Receipt for gross proceeds to Summit of approximately $200 million (the "Offering"). In addition, Summit has granted the Underwriters an over-allotment option to purchase up to an additional 2,326,500 Subscription Receipts on the same terms and conditions, exercisable at any time, in whole or in part, up to the earlier of (i) 30 days after the closing of the Offering, and (ii) the date of a Termination Event (as defined below).
On satisfaction of the Escrow Release Conditions (as defined below): (i) one unit of the REIT (each, a "Unit") will be automatically issued in exchange for each Subscription Receipt (subject to customary anti-dilution protection), without payment of additional consideration or further action by the holder thereof, (ii) an amount per Subscription Receipt equal to the amount per Unit of any cash distributions made by the REIT for which record dates have occurred during the period that the Subscription Receipts are outstanding, net of any applicable withholding taxes, will become payable in respect of each Subscription Receipt, and (iii) the net proceeds from the sale of the Subscription Receipts will be released from escrow to the REIT.
The net proceeds from the sale of the Subscription Receipts will be held by an escrow agent pending the satisfaction or waiver of all conditions precedent to the Acquisitions in accordance with the terms of the material agreements relating to the Acquisitions, without amendment or waiver in a manner that would be materially adverse to the terms and conditions upon which the REIT is effecting the Acquisitions, unless the consent of the lead underwriter is given to such amendment or waiver, other than (i) the payment of the consideration to be paid for the Acquisitions for which the escrowed funds are required, and (ii) such conditions precedent that by their nature are to be satisfied at the time of the closing of the Acquisitions (the "Escrow Release Conditions"). There can be no assurance that the requisite approvals will be obtained, closing conditions will be met or that the Acquisitions will be consummated on the terms described herein, if at all.
If the Escrow Release Conditions are not satisfied or deemed to be satisfied by December 31, 2019, or the Acquisitions are terminated at an earlier time, or the REIT announces by press release that it will not proceed with the Acquisitions (each, a "Termination Event"), the gross proceeds of the Offering and pro rata entitlement to interest earned or deemed to be earned on the Subscription Receipts, net of any applicable withholding taxes, will be paid to holders of the Subscription Receipts and the Subscription Receipts will be cancelled.
The Subscription Receipts will be offered by way of a prospectus supplement to the REIT's short form base shelf prospectus dated May 28, 2019, which prospectus supplement is expected to be filed with the securities commissions and other similar regulatory authorities in each of the provinces and territories of Canada on or about October 9, 2019. Further information regarding the Offering and the Acquisitions, including related risk factors, will be set out in the prospectus supplement. The Offering is subject to the receipt of all necessary approvals, including the approval of the Toronto Stock Exchange. Closing of the Offering is expected to take place on or about October 17, 2019.
The Subscription Receipts have not been, nor will they be, registered under the United States Securities Act of 1933, as amended, (the "1933 Act") and may not be offered, sold or delivered, directly or indirectly, in the United States, or to, or for the account or benefit of, "U.S. persons" (as defined in Regulation S under the 1933 Act), except pursuant to an exemption from the registration requirements of the 1933 Act. This press release does not constitute an offer to sell or a solicitation of an offer to buy any Subscription Receipts in the United States or to, or for the account or benefit of, U.S. persons.
Summit Industrial Income REIT is an unincorporated open-end trust focused on growing and managing a portfolio of light industrial properties across Canada. Summit's units are listed on the TSX and trade under the symbol SMU.UN. For more information, please visit our web site at www.summitIIreit.com.
Caution Regarding Forward Looking Information
This news release contains forward-looking statements and forward-looking information within the meaning of applicable securities laws. The use of any of the words "expect", "anticipate", "continue", "estimate", "objective", "ongoing", "may", "will", "project", "should", "believe", "plans", "intends", "goal" and similar expressions are intended to identify forward-looking information or statements. Forward-looking information may relate to future results, performance, achievements, events, prospects or opportunities for the REIT or the real estate industry, outlook and anticipated events or results. Some of the specific forward-looking statements contained herein include statements with respect to the following: the expected benefits and results of the Acquisitions to the REIT; the intention of the REIT to complete the Acquisitions and the Offering, and on the terms and conditions described herein; the date on which the closings of the Acquisitions and the Offering are expected to occur; the timing for the filing of the prospectus supplement; and the use of proceeds of the Offering.
Forward-looking statements necessarily involve known and unknown risks and uncertainties, and there can be no assurance that actual results will be consistent with such forward-looking statements.
Readers are cautioned not to place undue reliance on this forward-looking information, which is given as of the date hereof, and to not use such forward looking information for anything other than its intended purpose. Summit undertakes no obligation to update publicly or revise any forward-looking information, whether as a result of new information, future events or otherwise, except as required by law.
This news release contains certain non-IFRS measures including NAV and FFO, which are not generally accepted accounting principles as defined under International Financial Reporting Standards ("IFRS"). Management believes that in addition to conventional measures prepared in accordance with IFRS, investors in the real estate industry use these nonâ?IFRS financial measures to evaluate the REIT's performance and ability to generate cash flows. Accordingly, these nonâ?IFRS financial measures are intended to provide additional information and should not be considered in isolation or as a substitute for performance measures prepared in accordance with IFRS. In addition, they do not have standardized meanings and may not be comparable to measures used by other issuers in the real estate industry or other industries. For more information see the REIT's most recent MD&A available at www.sedar.com.
For More Information, please contact:
Paul Dykeman, CEO at
(902) 405-8813 email@example.com