True North Apartment Real Estate Investment Trust
TSX VENTURE : TN.UN

June 27, 2012 15:44 ET

True North Apartment REIT Announces Accretive Acquisition of 1,528 Suites and Public Offering of $42 Million of Trust Units

Highlights

- the REIT agrees to acquire a portfolio of residential properties comprising of 1,528 suites for a total purchase price of approximately $121 million

- purchase price for the properties implies a capitalization rate of approximately 7%

- the REIT will sell, on a bought-deal basis, $42 million of trust units of the REIT at a price of $3.92 per trust unit to finance the cash component of the purchase price and the costs in connection with the acquisition and the offering

- the first cash distribution for the period ending July 31, 2012 will be paid to unitholders on August 15, 2012 in the amount of $0.0428 per trust unit

- the REIT initially intends to make subsequent monthly cash distributions of $0.0233 per trust unit, implying an annual distribution yield of approximately 7.1%

- the REIT is operated by a management team and board of trustees with a proven track record of growth and value creation

TORONTO, ONTARIO--(Marketwire - June 27, 2012) -

NOT FOR DISTRIBUTION IN THE U.S. OR OVER U.S. NEWSWIRES

True North Apartment Real Estate Investment Trust (the "REIT") (TSX VENTURE:TN.UN) announced today that it has agreed to acquire a portfolio of residential properties (the "Acquisition Properties") comprising 127 buildings that contain 1,528 residential suites and are located in the borough of Saint-Laurent, Montreal, Quebec (the "Acquisition").

The purchase price for the Acquisition Properties of approximately $121 million implies a capitalization rate of approximately 7% and will be satisfied by a combination of approximately $37 million in cash and the assumption of approximately $58 million aggregate principal amount of CMHC insured mortgage debt and approximately $26 million aggregate principal amount of vendor take-back mortgage debt. The assumed mortgages have an effective interest rate of 2.75% and an expected weighted average term to maturity of approximately 3 years. The Acquisition Properties have had an average occupancy rate of approximately 97% over the last 10 years.

The Acquisition is expected to close on July 16, 2012 and is subject to customary closing conditions. The number of issued and outstanding trust units of the REIT as of the date hereof and on a pro forma basis after giving effect to the Offering (as defined below) is 7,125,000 and 17,839,286 (assuming that the over-allotment option has not been exercised), respectively.

Financing of the Acquisition

In order to finance the cash component of the purchase price of the Acquisition and the costs in connection with the acquisition and the offering, the REIT has agreed to sell, on a bought-deal basis by way of a short-form prospectus (the "Offering"), 10,714,286 trust units of the REIT (the "Units") at a price of $3.92 per Unit for aggregate gross proceeds of $42,000,001 to a syndicate of underwriters led by Raymond James Ltd. The REIT has also granted the underwriters an over-allotment option to purchase up to an additional 1,607,143 Units at the same offering price, exercisable no later than 30 days after the closing of the Offering. If the over-allotment option is fully exercised, the total gross proceeds of the Offering will be $48,300,002.

The REIT expects to file a preliminary short form prospectus relating to the issuance of the Units with the securities commissions or other similar regulatory authorities in each of the provinces and territories of Canada, on or before June 29, 2012. Closing of the Offering is expected to occur on or about July 16, 2012, subject to TSX Venture Exchange ("TSXV") and other necessary regulatory approvals.

Management of the REIT

The REIT's management team has demonstrated a proven track record for growth:

Daniel Drimmer
President, Chief Executive Officer & Trustee
Founded TransGlobe Investment Management Ltd., TransGlobe Property Management Services Ltd. and TransGlobe Apartment Real Estate Investment Trust. Expanded TransGlobe Investment Management Ltd.'s original portfolio of seven properties to a portfolio exceeding 25,000 residential suites (including those owned by TransGlobe Apartment Real Estate Investment Trust, as at September 1, 2011). Chairman of TransGlobe Apartment Real Estate Investment Trust between May 2010 and August 2011. Founded Starlight Investments Ltd in September 2011. Daniel has completed over $6 billion of real estate transactions in last 5 years.
Martin Liddell
Chief Financial Officer & Secretary
Executive Vice-President and CFO of Leisureworld Senior Care Corporation from 2006 until 2011. Significant senior management experience in finance, strategic planning, mergers and acquisitions and corporate governance and played a critical role in Leisureworld's initial public offering in March 2010. Chief Financial Officer of NBS Technologies Inc. (at the time a TSX-listed company and since privatized). Between 2000 and 2005, served in a variety of increasingly senior corporate development and financial management roles at Tyco International Ltd., and prior to that from 1995 to 2000, provided strategic corporate finance and mergers and acquisitions advice to clients at KPMG LLP.

Starlight Investments Ltd. ("Starlight") provides advisory, asset management and administrative services to the REIT and its subsidiaries through an asset management agreement. Starlight is an asset manager focused on acquisition, ownership and management of multi-tenant residential apartment properties across Canada. The REIT is administered and operated by Daniel Drimmer, the REIT's Chief Executive Officer and Martin Liddell, the REIT's Chief Financial Officer, together with an experienced team of real estate professionals from Starlight who have diverse backgrounds in the acquisition, divestiture, financing and operation of real estate.

The REIT anticipates that its continuing relationship with Starlight will provide opportunities to acquire additional multi-suite residential rental properties as Starlight has advised the REIT that its current intention is to offer to sell to the REIT additional rental properties it has ownership interest in, over the next few years. Starlight has developed a strong position in key geographic markets with deep relationships with local property managers. Starlight will focus on enhancing the value of the REIT's assets to maximize long-term Unit value through active management strategies.

Description of the Acquisition Properties

The Acquisition Properties consist of two low-rise complexes on nearly 30 acres located in the borough of Saint-Laurent, Montreal, Quebec. The 127 three-storey detached multi-family apartment buildings were constructed circa 1948-1952 and have been well maintained and managed with approximately $5 million spent over the last three years on building fundamentals, such as balconies, roofs and electrical upgrades. The Acquisition Properties comprise 1,528 suites, including three bachelor, 306 one-bedroom, 653 two-bedroom, 551 three-bedroom and 15 five-bedroom apartments. The Acquisition Properties are well suited to serve couples and young families with 80% of the suites offering between two and five bedrooms at affordable rates and within close proximity to downtown Montreal. Management believes the currently in place rental rates are below market. The Acquisition Properties also include six commercial units leased by businesses that cater to tenants of the complex and neighbouring community. The property is within walking distance to the Metro, with access to the subway and regional bus hubs, schools (French and English) and amenities such as grocery stores, boutiques, community centres and parks. The site also contains a variety of tenant amenities including a swimming pool, laundry facilities and nine surface parking lots. Aggregate capital expenditures of approximately $526,000 are required over the next 5 years based on building condition reports completed in connection with the Acquisition.

The following table highlights information about the Acquisition Properties as at June 19, 2012:

Property Year Built
(approx.)
Asset
Type
Net Rentable
Area
(Square Feet)
Occupancy Level
(%)
Average Monthly Rent/Suite
($)
Norgate Apartments:
1200-1600 Rue Decarie and 1205-1595 Rue Ouimet, Saint-Laurent, Montreal, Quebec 1948-1952, one building in 1999 74
3-storey Buildings
751,535 96.7% $707
Renaissance Apartments:
1415 -1800 Rue Crevier, 1655-1675 Rue Tassé, 1650 - 1670 Rue Deguire, 1676 - 1694 Rue Poirier, Saint-Laurent, Montreal, Quebec 1950-1951; Renovated between 1995 - 1998 53
3-storey Buildings
360,820 98.8% $697
Total................... 1,112,355 97.3% $705(1)
(1) Consolidated weighed average monthly rent per suite.

The REIT and its Strategy

The REIT is an unincorporated, open-ended real estate investment trust established under the laws of the Province of Ontario. Additional information concerning the REIT may be obtained from the management information circular dated May 4, 2012 of Wand Capital Corporation and is available at www.sedar.com.

The REIT focuses on a long-term strategy to generate stable cash distributions on a tax efficient basis for unitholders. The REIT intends to actively look for opportunities to expand its asset base and increase its distributable cash flow through acquisitions of additional multi-suite residential rental properties across Canada, the United States and other jurisdictions where opportunities may arise.

Declared distributions will be paid to unitholders of record at the close of business on the last business day of a month on or about the 15th day of the following month. The first distribution for the period ending July 31, 2012 will be paid on August 15, 2012 in the amount of $0.0428 per Unit. The REIT initially intends to make subsequent monthly cash distributions in the estimated amount of $0.0233 per Unit commencing September 15, 2012, subject to the discretion of the Board of Trustees, implying an annual distribution yield of approximately 7.1%. The Units issued under the Offering will be entitled to receive the first distribution of $0.0428 per Unit notwithstanding that such Units will be outstanding for a shorter period than those Units already outstanding.

Forward-looking Statements

Certain statements contained in this press release constitute forward-looking information within the meaning of Canadian securities laws. Forward-looking statements are provided for the purposes of assisting the reader in understanding the REIT's financial position and results of operations as at and for the periods ended on certain dates and to present information about management's current expectations and plans relating to the future and readers are cautioned that such statements may not be appropriate for other purposes. Forward-looking information may relate to the REIT's future outlook and anticipated events, including completion of the Acquisition and the Offering, respectively, or results and may include statements regarding the financial position, business strategy, budgets, litigation, projected costs, capital expenditures, financial results, taxes, plans and objectives of or involving the REIT. Particularly, statements regarding future results, performance, achievements, prospects or opportunities for the REIT or the real estate industry are forward-looking statements. In some cases, forward-looking information can be identified by such terms such as "may", "might", "will", "could", "should", "would", "occur", "expect", "plan", "anticipate", "believe", "intend", "seek", "aim", "estimate", "target", "project", "predict", "forecast", "potential", "continue", "likely", "schedule", or the negative thereof or other similar expressions concerning matters that are not historical facts.

Forward-looking statements necessarily involve known and unknown risks and uncertainties, that may be general or specific and which give rise to the possibility that expectations, forecasts, predictions, projections or conclusions will not prove to be accurate, that assumptions may not be correct and that objectives, strategic goals and priorities will not be achieved. A variety of factors, many of which are beyond the REIT's control, affect the operations, performance and results of the REIT and its business, and could cause actual results to differ materially from current expectations of estimated or anticipated events or results. These factors include, but are not limited to, the risks discussed in the REIT's materials filed with Canadian securities regulatory authorities from time to time. The reader is cautioned to consider these and other factors, uncertainties and potential events carefully and not to put undue reliance on forward-looking statements as there can be no assurance that actual results will be consistent with such forward-looking statements.

Information contained in forward-looking statements is based upon certain material assumptions that were applied in drawing a conclusion or making a forecast or projection, including management's perceptions of historical trends, current conditions and expected future developments, including the closing of the Acquisition, as well as other considerations that are believed to be appropriate in the circumstances, including the following: the Canadian economy will remain stable over the next 12 months; inflation will remain relatively low; interest rates will remain stable; conditions within the real estate market, including competition for acquisitions, will be consistent with the current climate; the Canadian capital markets will provide the REIT with access to equity and/or debt at reasonable rates when required; Starlight will continue its involvement with the REIT; and the risks identified or referenced above, collectively, will not have a material impact on the REIT. While management considers these assumptions to be reasonable based on currently available information, they may prove to be incorrect.

The forward-looking statements made in this press release are dated, and relate only to events or information, as of the date of this press release. Except as specifically required by law, the REIT undertakes no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise, after the date on which the statements are made or to reflect the occurrence of unanticipated events.

The Units have not been, and will not be, registered under the United States Securities Act of 1933, as amended, and may not be offered or sold in the United States without registration or an applicable exemption from the registration requirements of that Act. This new release does not constitute an offer to sell the Units in the United States.

The TSXV has neither approved nor disapproved the contents of this press release. Neither the TSXV nor its Regulation Services Provider (as that term is defined in policies of the TSXV) accepts responsibility for the adequacy or accuracy of this release.

Contact Information

  • True North Apartment Real Estate Investment Trust
    Daniel Drimmer
    President and Chief Executive Officer
    (416) 234-8444

    True North Apartment Real Estate Investment Trust
    Martin Liddell
    Chief Financial Officer and Secretary
    (416) 234-8444