Whiterock Real Estate Investment Trust

Whiterock Real Estate Investment Trust

December 15, 2011 07:00 ET

Whiterock REIT Announces Put Agreement Exercise on $110 Million Accretive Office Property in Greater Toronto Area

TORONTO, ONTARIO--(Marketwire - Dec. 15, 2011) - Whiterock Real Estate Investment Trust ("Whiterock" or the "REIT") (TSX:WRK.UN) announced today that it has entered into an agreement to acquire a 100% freehold interest in Airway Centre 2-4 in Mississauga, Ontario, a property in which Whiterock currently has a 100% leasehold interest and exclusively manages, for a purchase price of approximately $110 million (before closing costs). Airway Centre 2-4 is comprised of 3 adjacent Class A office buildings located directly across from Toronto Pearson International Airport, with a total gross leasable area of 492,743 square feet, an occupancy rate of approximately 96%, and an average remaining lease term of approximately 4 years.

By way of background, the REIT had entered into a 30-year ground lease on June 18, 2010 with respect to the lands and buildings comprising Airway Centre 2-4. The REIT and the lessor under the ground lease (the "Lessor") had also entered into a put agreement, exercisable by the Lessor on or before December 31, 2011, for the sale of Airway Centre 2-4 to the REIT at a pre-determined purchase price. The Lessor has exercised its right under the put agreement and management anticipates that the acquisition will close in the first quarter of 2012, subject to standard closing conditions.

Management expects the impact from the acquisition to add approximately $0.02 to annualized adjusted funds from operations ("AFFO") per unit. The first full quarter impact of this increase to AFFO per unit is expected to be realized commencing in the second quarter of 2012.

"We are delighted to acquire outright Airway Centre 2-4, a property we already manage and adjacent to Airway Centre 1, our existing wholly-owned property. The purchase price had been determined 18 months ago, as part of the put agreement, and over this period the property's value has appreciated considerably, to the REIT's direct benefit," said Jason Underwood, Chief Executive Officer. "We continue to successfully execute on our disciplined and accretive growth strategy, building long-term value for our unitholders."

On closing of the acquisition, the purchase price of approximately $110 million (before closing costs) will be satisfied by the assumption of existing mortgages of approximately $76 million at an interest rate of approximately 2.5% and a remaining term of approximately 4 years, the retention by the Lessor of prepaid rent under the ground lease of approximately $15 million, with the remaining balance of approximately $19 million paid with cash on hand. On closing of the acquisition, the ground lease will be terminated and the REIT will cease to pay annual rent of $6 million to the Lessor. Going forward, at the end of each reporting period, Airway Centre 2-4 will be measured and recorded at its fair value, which was estimated by management to be approximately $132 million as at September 30, 2011.

Airway Centre - Mississauga, Ontario

The Airway Centre in Mississauga, Ontario is comprised of two parcels: (i) 5945 - 5955 Airport Road ("Airway Centre 1"), a 3-storey Class B office building and (ii) 5915 - 5935 Airport Road ("Airway Centre 2-4"), which includes one 10-storey and two 11-storey Class A office towers. These properties in aggregate consist of a total gross leasable area of 670,362 square feet with excellent access by public transportation and from Toronto's major 400 series of highways. The site has a prestigious tenant roster of national and international organizations led by Molson Coors Canada, Air Canada, CA Canada, and ConAgra Foods. The top 5 tenants (including the aforementioned) currently occupy 23% of the total gross leasable area and have an average remaining lease term of approximately 3 years.

About Whiterock REIT

Whiterock REIT is a growth-oriented diversified commercial REIT with a wholly-owned and co-owned aggregate real estate portfolio that, subsequent to this acquisition and the recently announced Edmonton portfolio acquisition, will total approximately 10.8 million square feet of gross leasable area across 88 properties, geographically diversified across 8 Canadian provinces and 2 U.S. states.

Forward-Looking Statements

This news release contains "forward-looking statements" within the meaning of applicable securities legislation. These forward-looking statements generally can be identified by the use of forward-looking terminology such as "may", "will", "expect" "estimate", "anticipate", "intend", "believe" or "continue", the negative forms thereof and similar expressions suggesting future outcomes or events. Such forward-looking statements reflect management's current beliefs and are based on information currently available to management. These statements are not guarantees of future events or performance and, by their nature, are based on Whiterock's estimates and assumptions, which are subject to known and unknown risks, uncertainties and other factors that may cause the actual events, results or prospects to be materially different from those expressed or implied herein. Readers are cautioned that a number of factors, including those discussed in the section entitled "Risk Factors" in Whiterock's Annual Information Form (available at www.sedar.com), could cause actual events, results or prospects to differ materially from those stated or implied. These factors should be considered carefully, and a reader should not place undue reliance on forward-looking statements, as there can be no assurance that actual events, results or prospects will be consistent with such statements. In particular, but without limitation, there can be no assurance that Whiterock will be able to increase its AFFO or achieve the expected capitalization rate on the assets to be acquired or the expected average interest rate on the new first mortgages. Material factors or assumptions that were applied in drawing a conclusion or making an estimate set out in the forward-looking information may include, but are not limited to: a relatively stable leasing environment, the maintenance of current occupancy levels, stable interest costs, limited dilution from conversion of convertible debentures; stable acquisition capitalization rates and available access to equity and debt capital markets to fund, at acceptable costs, Whiterock's future growth plans, and to enable Whiterock to refinance its debt as it matures. In addition, historic performance is not necessarily indicative of future results. Except as required by law, Whiterock specifically disclaims any obligation to update or revise any forward-looking statements, whether as a result of new information, future developments or otherwise.

The Toronto Stock Exchange has not reviewed and does not accept responsibility for the adequacy or accuracy of this release.

Contact Information

  • Whiterock Real Estate Investment Trust
    Jason Underwood
    (416) 907-4861

    Whiterock Real Estate Investment Trust
    Kursat Kacira
    (416) 572-0427