Agellan Commercial Real Estate Investment Trust (the REIT) (TSX: ACR.UN) announced today that it has entered into agreements to purchase a light industrial property located in Northcentral Austin, Texas and a 50% interest in an industrial distribution center in the I-85 South submarket of Atlanta, Georgia (together, the Acquisitions).
The Newnan Distribution Center comprises approximately 1.9 million square feet of gross leasable area and will be acquired for an aggregate purchase price of approximately US$53 million (before closing costs), representing a going-in capitalization rate of approximately 5.5%, and a stabilized capitalization rate of approximately 7.25%.
The REIT, together with a private Canadian-based investor, intend to acquire the property through a strategic partnership, of which the REIT will have a 50% interest. The REIT will also provide asset management services to this new partnership. The REITs portion of the purchase price for this property is expected to be satisfied with cash on hand and/or proceeds from debt financing.
- This property comprises modern warehouse and distribution features, is currently 87% leased to two tenants, and has a remaining weighted average lease term of approximately 16.4 years;
- The purchase price is below replacement cost and this acquisition is expected to be accretive to the REITs adjusted funds from operations (AFFO) per unit;
- This property is strategically located along the rapidly growing I-85 South corridor, which provides seamless access to a network of major transportation thoroughfares, including I-65, I-285 and I-75;
- This property is expected to provide long-term stable cash flow as well as expected growth through contractual rent increases, and lease-up of the remaining vacant space; and
- The Atlanta industrial market has established itself as one of the premier industrial markets in the U.S., offering excellent regional accessibility, a skilled work force and a low cost of operation.
The acquisition of Corridor Park D comprises approximately 56,000 square feet of gross leasable area and will be acquired for an aggregate purchase price of approximately US$8.35 million (before closing costs), representing a going-in capitalization rate of approximately 7.59%.
This property is comprised of 4 suites that are all currently leased to a single tenant, with just over three years of the lease term remaining. This acquisition will be undertaken solely by the REIT and is expected to be purchased with cash on hand.
- This acquisition is expected to be immediately accretive to the REITs AFFO per unit;
- This property is well-located in the North Central Austin Submarket, which has recently seen strong occupancy and net absorption trends; and
- This property is expected to provide a stable cash flow and will require limited capital expenditures due to recent improvements to HVAC, landscaping, painting and significant tenant investment.
The Acquisitions are both expected to close by the end of the third quarter of 2018. Closing of the Acquisitions are each subject to certain closing conditions typical for transactions of this type. There can be no assurance that all conditions to closing will be satisfied or waived.
The REIT is excited to expand its presence in both the Atlanta and Austin markets in which the REIT has strong knowledge and has had historical success said Frank Camenzuli, Chief Executive Officer of the REIT. Although both properties currently have strong tenancies, they provide the REIT with the future flexibility to re-configure the spaces for multiple tenancies.
About Agellan Commercial Real Estate Investment Trust
The REIT is an unincorporated, open-ended real estate investment trust established pursuant to a declaration of trust under the laws of the Province of Ontario. The REIT has been created for the purpose of acquiring and owning industrial, office and retail properties in select target markets in the United States and Canada.
The REITs 44 properties contain 6.3 million square feet of gross leasable area, with the REITs ownership interest at 6.0 million square feet. The properties are primarily located in major urban markets in the United States.
Non-IFRS supplemental measures:
Certain terms used in this press release are not recognized under International Financial Reporting Standards (IFRS) and therefore these terms should not be construed as alternatives to IFRS measures, such as net income or cash flow from operating activities, nor are these terms necessarily comparable to similar measures presented by other reporting issuers. These terms are used by management to measure, compare and explain the operating results and financial performance of the REIT. Management believes that these terms are relevant measures in comparing the REITs performance to industry data and the REITs ability to earn and distribute cash to holders of the REITs units. These non-IFRS measures are defined, and AFFO is reconciled to net income, in managements discussion and analysis for the three and six month periods ended June 30, 2018, which should be read in conjunction with this press release.
This press release contains forward-looking information within the meaning of applicable securities legislation, which reflects the REITs current expectations regarding future events. Forward-looking information is based on a number of assumptions and is subject to a number of risks and uncertainties, many of which are beyond the REITs control that could cause actual results and events to differ materially from those that are disclosed in or implied by such forward-looking information. These forward-looking statements are made as of the date of this press release and, except as expressly required by applicable law, the REIT assumes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.