Dundee Industrial REIT to Acquire Industrial Portfolio for $151.5 Million

DUNDEE INDUSTRIAL REIT announced that it has entered into an agreement with CanFirst Industrial Realty Fund III LP and CanFirst Industrial Realty Fund IV LP (CanFirst) to acquire a portfolio of 22 industrial properties (the Portfolio) for approximately $151.5 million.

The CanFirst Portfolio comprises 1.6 million square feet of gross leaseable area wholly located across the Greater Toronto Area (GTA) in key industrial markets and along major transportation corridors providing direct highway access.

Highlights:

Further solidifies Dundee Industrial as market leader - Upon completion of the acquisition of the Portfolio and the recently announced acquisition of C2C Industrial Properties Inc. (C2C), Dundee Industrial will own a nationally diversified portfolio totalling 15.6 million square feet of gross leasable area, reinforcing its position as Canada's largest industrial REIT.

Broadens Dundee Industrial's exposure in the GTA - The Portfolio comprises 1.6 million square feet of gross leaseable area located entirely within the GTA. The Portfolio will provide additional scale in the GTA and further enhances the REIT's geographic and tenant diversification.

Immediately accretive - The transaction is immediately accretive to the REIT. The Portfolio has a year-one capitalization rate of 6.5%. Including property management fee income, the capitalization rate increases to 6.7%.

The CanFirst Portfolio complements the REIT's existing assets in terms of asset type and quality, as well as other key portfolio metrics. The Portfolio has a current in-place occupancy rate of 96%, a weighted average lease term of approximately 3.7 years and an average in-place rent of $5.83 per square foot.

  Gross leasable area (sq. ft.) Geographic distribution of NOI
 

 

Current
Portfolio

 

 

C2C
Portfolio

 

 

CanFirst
Portfolio

 

Pro
forma

 

Current
Portfolio

 

 

Pro forma
C2C &
CanFirst

 

Atlantic Canada 2,191,503 619,876 - 2,811,379 18% 19%
Quebec 3,204,516 528,508 - 3,733,024 24% 20%
Ontario 1,917,401 1,211,822 1,625,814 4,755,037 15% 27%
Saskatchewan 829,815 - - 829,815 7% 5%
Alberta 3,277,555 168,251 - 3,445,806 35% 28%

British Columbia 

17,405 - - 17,405 1% 1%
Total 11,438,195 2,528,457 1,625,814 15,592,466 100% 100%

 

The pro forma impact of the acquisition on Dundee Industrial REIT's key portfolio metrics is detailed below:

Portfolio Current
portfolio

Pro forma
C2C Portfolio

Pro forma
C2C & CanFirst

Gross leasable area (sq. ft.) 11.4 million 14.0 million 15.6 million
Number of properties 158 183 205
Avg remaining lease term (years) 5.4 5.1 5.0
Average in-place rent (per sq. ft.) $7.12 $6.86 $6.75
Average market rent (per sq. ft.) $7.57 $7.29 $7.15
Average tenant size (sq. ft.) 11,850 11,987 12,077
Number of tenants 910 1,120 1,240
NOI by Multi-tenant / Single-tenant 62 % / 38 % 67 % / 33 % 66 % / 34 %
Occupancy rate (%)  96 % 96 % 96 %

Dundee Industrial will acquire the Portfolio for a purchase price of approximately $151.5 million, equating to a value of approximately $93/square foot. Year 1 NOI is expected to be $9.9 million, resulting in a capitalization rate of 6.5%. Including property management income, the capitalization rate increases to 6.7%.

The acquisition will be financed with:

  • $93.5 million in cash from the Equity Issue that closed last March 6;
  • The assumption of $61.7 million existing mortgage debt, with an average term of 1.9 years. The effective interest rate on the assumed debt is 3.1% after giving effect to the vendor's buy down of existing rates.

Subsequent to both the CanFirst and C2C acquisition, the REIT will have approximately $15 million of cash on hand, an undrawn operating facility of $50 million and operate at a debt level of 54% (45% excluding convertible debentures).

The acquisition is subject to certain closing conditions typical for transactions of this type, including lender consents. The acquisition is scheduled to close by the end of April.

on April 11, 2013