Mr. Milton Lamb reports
AUTOMOTIVE PROPERTIES REIT ANNOUNCES ACQUISITION OF TWO DEALERSHIP PROPERTIES FROM AUTOCANADA AND $55 MILLION EQUITY OFFERING
Automotive Properties Real Estate Investment Trust has entered into an agreement to purchase two automotive dealership properties from AutoCanada Inc. for a total purchase price of approximately $55.5-million.
Automotive Properties has entered into an agreement to sell 5.1 million units of the REIT on a bought deal basis at a price of $10.80 per unit to a syndicate of underwriters bookrun by TD Securities Inc. and Scotiabank, and co-led by BMO Capital Markets, for gross proceeds of approximately $55.1-million.
In addition, Automotive Properties has granted the syndicate of underwriters an overallotment option, exercisable in whole or in part at any one time up to 30 days following closing of the offering, to purchase up to an additional 765,000 units at the offering price, which, if exercised in full, would increase the gross proceeds of the offering to approximately $63.3-million. 893353 Alberta Inc. (Dilawri) has waived its pre-emptive right in connection with the offering.
The two dealership properties included in the transaction are the BMW Laval automotive dealership property located in Laval, Que., part of the Montreal metropolitan area, and the Sherwood Park Volkswagen automotive dealership property located in Sherwood Park, Alta., part of the Edmonton metropolitan area. The additions of the BMW Laval property and the Sherwood Park Volkswagen property are expected to be moderately accretive to the REIT's run-rate adjusted funds from operations (AFFO) per unit on a leverage-neutral basis.
"We are pleased to enter into our first acquisition agreement with AutoCanada, one of Canada's largest automotive retailers. This transaction highlights our focus on partnering with leading automotive dealership operators that are active in consolidating the industry," commented Milton Lamb, president and chief executive officer of Automotive Properties. "The addition of these two best-in-class dealership properties to our portfolio will further build our presence in both the Greater Montreal Area, Canada's second-largest urban market, and the Greater Edmonton Area, providing more exposure to the rebounding Alberta economy."
The BMW Laval property was built in 2000 and substantially renovated in 2011/2012. It includes a 111,187-square-foot, full-service BMW dealership facility and a 16,428-square-foot MINI dealership. The BMW Laval property is located on approximately 8.4 acres of land located at 2440 and 2450 Chomedey Blvd., with convenient access to the Trans-Canada Highway in an area of substantial commercial development. Upon closing of the transaction, an affiliate of AutoCanada will be the operating tenant of the property and will enter into an 18-year, triple-net lease with Automotive Properties. The lease will include a contractual annual rent increase after the third year of the lease term that will be based on the Consumer Price Index. AutoCanada Holdings Inc. will provide an indemnity to the REIT in respect of the lease obligations.
The Sherwood Park Volkswagen property includes a 48,921-square-foot, full-service Volkswagen dealership facility built in 2015. The Sherwood Park Volkswagen property is located on approximately 4.5 acres of land located at 2365 Broadmoor Blvd., with convenient access from the Yellowhead Highway in an area of substantial commercial development. Upon closing of the transaction, an affiliate of AutoCanada will be the operating tenant of the property and will enter into an 18-year, triple-net lease with Automotive Properties. The lease will include a contractual annual rent increase after the third year of the lease term that will be based on the Consumer Price Index. AutoCanada Holdings will provide an indemnity to the REIT in respect of the lease obligations.
Automotive Properties expects to finance the transaction initially through draws on one of its existing revolving credit facilities and draws on an expanded revolving credit facility to be put in place in conjunction with the transaction. The transaction is expected to close later this month, subject to customary closing conditions.
Automotive Properties intends to use the net proceeds from the offering to repay the debt incurred to finance the transaction and for general trust purposes. Closing of the offering is expected to occur on or about Oct. 16, 2018, and is subject to customary conditions, including approval of the Toronto Stock Exchange. The offering is not conditional on closing of the transaction.
Pro forma the transaction, the offering and the intended use of proceeds, Automotive Properties' leverage will decline to approximately 45 per cent of gross book value as at June 30, 2018. "The offering is expected to further strengthen the REIT's balance sheet and allow the REIT to create greater capacity to pursue new acquisition opportunities," added Mr. Lamb.
The units will be offered by way of a short form prospectus to be filed on or about Oct. 1, 2018, with the securities commissions and other similar regulatory authorities in each of the provinces of Canada.
About Automotive Properties Real Estate Investment Trust
Automotive Properties is an unincorporated, open-ended real estate investment trust focused on owning and acquiring primarily income-producing automotive dealership properties located in Canada. Currently, the REIT's portfolio consists of 40 income-producing commercial properties representing approximately 1.5 million square feet of gross leasable area in metropolitan markets across Ontario, Saskatchewan, Alberta, British Columbia and Quebec. Automotive Properties is the only public vehicle in Canada focused on consolidating automotive dealership real estate properties.
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