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Pro REIT to buy 12 assets, internalize property management

Pro Real Estate Investment Trust agreed to buy the assets of property manager Compass Commercial Realty Ltd. as it moves to internalize the management of its portfolio and signed separate deals to acquire 12 commercial properties in Canada for C$45.1 million.

The real estate investment trust expects to save on property management fees with the acquisition of Compass. The Halifax, Nova Scotia-headquartered property manager already manages 25 of Pro REIT's properties and will continue to operate under its brand and be run independently by its current management team. Overall, the firm has 60 properties under management with a total of more than 3.7 million square feet of gross leasable area in Atlantic Canada, Ontario and Alberta.

The properties to be acquired, spread across the provinces of Manitoba, Quebec and New Brunswick, offer a total gross leasable area of 368,854 square feet and are fully leased with roughly 6.7 years of weighted average terms remaining. The assets will be sold by four separate vendors.

In Winnipeg, Manitoba, the company is buying six industrial buildings amounting to gross leasable area of 237,430 square feet for a total C$27.3 million. The properties are 1455 Mountain Ave., 1410 Mountain Ave., 20 Bentall St., 1305 King Edward St., 1313 King Edward St. and 1791 Dublin Ave.

Pro REIT will fund the acquisition with an C$18.9 million first mortgage on the portfolio arranged with a tier 1 Canadian chartered bank. The mortgage has a five-year term and an approximate interest rate of 4%. The remaining amount will be settled from the company's lines of credit.

In Fredericton, New Brunswick, the company agreed to acquire a retail strip mall at 598 Union St. for C$4.5 million. The mall is anchored by a national pharmacy brand and occupied by other national tenants.

Pro REIT is purchasing four fully leased Quebec properties in Montreal, Sherbrooke, Laurier Station and Levis for about C$9 million from sellers that include Vincent Chiara, a trustee of the REIT. The properties, leased to Couche Tard convenience stores, offer a total gross leasable area of 13,606 square feet.

The company said it is buying the remaining 50% interest in an industrial property in Quebec for about C$4.4 million, adding 85,560 square feet of gross leasable area. The single-tenant class A industrial building has a total gross leasable area of about 171,200 square feet.

The REIT expects the deals to have a positive impact on its pro forma net operating income and adjusted funds from operations per unit. Settlement of the acquisitions will involve the issuance of roughly C$6 million of Pro REIT's class B limited partnership units at a minimum price of C$2.30 per unit.

The completion of the deals is subject to customary closing conditions, including approval from the TSX Venture Exchange.