Partners Real Estate Investment Trust

TSX : PAR.UN


Partners Real Estate Investment Trust

February 11, 2014 14:15 ET

Partners Real Estate Investment Trust Announces Senior Management Changes and Update on Ontario Property Acquisition

VICTORIA, BRITISH COLUMBIA--(Marketwired - Feb. 11, 2014) - Partners Real Estate Investment Trust (TSX:PAR.UN) (the "REIT") is pleased to announce the appointments of Ron McCowan as interim-Chief Executive Officer and President and Derrick W. West as Chief Financial Officer effective immediately. Both appointments have been made pursuant to the REIT's management agreement which will be terminated on February 15, 2014 in connection with the previously announced proposed internalization of the REIT's management. Mr. McCowan and Mr. West will continue in these capacities on completion of the internalization process and more details regarding the REIT's internalization are expected to be announced on or about February 14, 2014.

Mr. McCowan is the owner of McCowan and Associates Ltd. and an entrepreneur who possesses more than 40 years of extensive experience in real estate development, construction, ownership, and management. The REIT's Board of Trustees is currently engaged in a comprehensive executive search for a permanent Chief Executive Officer.

Mr. West most recently served as the Chief Financial Officer of an international mining services corporation with operations in Canada, Russia, Mongolia, and Mexico. Mr. West has amassed over 15 years of experience in financial reporting, tax planning and compliance, treasury management, business development, and internal control compliance. Mr. West has additional experience in the commercial real estate sector and previously served as the Vice-President of Accounting and Administration for Plazacorp Retail Properties Limited. Mr. West is a Chartered Accountant and holds a Bachelor of Commerce degree from Mount Allison University.

The REIT would like to thank Patrick Miniutti for his contribution and commitment to the REIT and its unitholders during his tenure as Chief Executive Officer. Mr. Miniutti has indicated that he will remain a Trustee of the REIT.

Ontario Property Acquisition

The REIT is pleased to announce that it has agreed to amend its purchase and sale agreement (the "Agreement"), originally announced on December 18, 2013, to acquire four retail centres in Ontario (collectively, the "Properties"). The Properties are located in Hamilton, London, Kemptville, and North Bay, and total approximately 650,000 square feet of gross leasable area.

Pursuant to such amendments, the vendor, Holyrood Holdings Limited (the "Vendor"), has guaranteed $7,240,000 of the Properties' annualized net operating income ("NOI") until such time as this amount has been achieved for a full calendar quarter of operations. Additionally, the Vendor has agreed to fund certain non-recoverable capital improvement projects that are expected to materially reduce the REIT's anticipated capital expenditures on the Properties in the future. These capital improvement projects include a substantial redevelopment of the Crossroads Centre in London. This redevelopment will considerably improve that property's layout and overall aesthetic appeal.

Based on the $7,240,000 of annualized NOI outlined above, management currently expects the newly acquired properties to generate an annual adjusted funds from operation ("AFFO") contribution of approximately $4,600,000. As a result, the transaction will be immediately accretive to the REIT's AFFO per unit.

The REIT will pay approximately $109,100,000 for the Properties, net of an interest rate adjustment credit of $600,000. This purchase price will be satisfied by (i) the assumption of certain debt secured by the Properties, and (ii) the issuance of units of a limited partnership to be formed by the REIT for the purposes of completing the acquisition as purchaser (the "New LP"), with such units including 6,450,000 class B units of the New LP (the "Class B Units"). The Class B Units will be exchangeable for units of the REIT on a one-for-one basis and will be the economic equivalent of units of the REIT and carry the right to vote at the REIT level. The Class B Units will be issued at an effective price of $7.61 per Class B Unit. After giving effect to the issuance of the Class B Units, the Vendor is expected to hold approximately 19.9% of the outstanding units of the REIT, calculated on a fully-diluted basis.

For the purpose of IFRS accounting for the transaction (i) the interest rate adjustment credit will be added back to the purchase price, and (ii) the transaction will be based on the then current market value of the units being issued. As of Monday, February 10, 2014, the REIT's units had a market value of $5.74, which would result in a transaction value of approximately $97.4 million under IFRS accounting.

The Properties include:

  • Hamilton City Centre, a multi-tenant retail centre located at the heart of Hamilton's business district in Hamilton, Ontario. Originally built in 1990, Hamilton City Centre comprises approximately 423,900 square feet of gross leasable area. The property has been well maintained, and its more than 50 tenants include Hart Stores, a branch of Sun Life Financial, Worlds Gym, Thunder Alley Entertainment and the City of Hamilton.
  • Crossroads Centre, a multi-building, multi-tenant retail centre located just north of Highway 401 in London, Ontario. Originally built in 1990, Crossroads Centre comprises approximately 159,800 square feet of gross leasable area. The property will be aesthetically enhanced with new facades and its tenants include Winners, Designer Depot, Living Lighting, and OK Tire. The centre's gross leasable area now reflects the removal of a building, which will allow for the construction of four additional out-parcels. The removal of the building and aesthetic enhancements are included in the major capital project noted above, which is to be funded by the Vendor.
  • Two single tenant retail buildings adjacent to the North Bay Mall at the centre of the commercial district in North Bay, Ontario. Originally built in 2006 and substantially improved in 2013, the property comprises approximately 39,000 square feet of gross leasable area. Its tenants include Shoppers Drug Mart and Giant Tiger.
  • A multi-tenant retail property in Kemptville, Ontario, which is approximately 55km south of Ottawa and the largest community in North Grenville. Built in 1998, the property comprises approximately 26,500 square feet of gross leasable area, and its tenants include Dollar Tree and Giant Tiger.

"We are very excited at the opportunity to add all four of these properties to the REIT's dynamic portfolio," stated Mr. Joseph Feldman, the Chairman of the REIT's Board of Trustees. "The REIT's portfolio will grow significantly as a result of this transaction, which increases our total gross leasable area by more than 25% and reinforces our position within the healthy Ontario marketplace. We have clearly articulated our desire to utilize accretive acquisitions to both enhance and protect unitholder value. This transaction is a clear achievement of that objective. With the NOI guarantee now in place, we are increasingly confident that this transaction will be accretive to the REIT's AFFO per unit. Additionally, the financial structuring of this acquisition will contribute to lowering the portfolio's overall debt to gross book value and further decreasing our payout ratio. The REIT is preparing for a transformational 2014, and this transaction marks the first step towards that goal."

The closing of the transaction is expected to occur by the end of February, 2014. While the REIT has completed all necessary due diligence, the completion of the transaction remains subject to regulatory approval and the fulfillment of certain conditions, including the consent of the applicable lenders to the REIT's assumption of mortgage debt on the Properties.

About Partners REIT

Partners REIT is a growth-oriented real estate investment trust, which currently owns (directly or indirectly) 39 retail properties, well-located in British Columbia, Alberta, Manitoba, Ontario and Quebec, aggregating approximately 2.7 million square feet of leasable space. Partners REIT focuses on expanding and managing a portfolio of retail and mixed-use community and neighbourhood shopping centres located in both primary and secondary markets across Canada.

Disclaimer

Certain statements included in this press release constitute forward-looking statements, including, but not limited to, those identified by the expressions "expect," "will" and similar expressions to the extent they relate to Partners REIT. The forward-looking statements are not historical facts but reflect Partners REIT's current expectations regarding future results or events. These forward looking statements are subject to a number of risks and uncertainties that could cause actual results or events to differ materially from current expectations, including access to capital, regulatory approvals, intended acquisitions and general economic and industry conditions. Although Partners REIT believes that the assumptions inherent in the forward-looking statements are reasonable, forward-looking statements are not guarantees of future performance and, accordingly, readers are cautioned not to place undue reliance on such statements due to the inherent uncertainty therein.

Contact Information

  • Partners Real Estate Investment Trust
    Derrick W. West
    Chief Financial Officer
    (506) 874-1176