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Allied Properties Real Estate Investment Trus
Symbol C : AP.UN
Shares Issued 92,969,270
Close 2018-06-13 C$ 42.21
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Allied Properties arranges $260-million financing

2018-06-13 16:29 ET - News Release

Mr. Michael Emory reports

ALLIED ANNOUNCES $260 MILLION EQUITY OFFERING TO FORTIFY BALANCE SHEET FOR A GROWING AND SUCCESSFUL URBAN DEVELOPMENT PIPELINE

Allied Properties Real Estate Investment Trust has entered into an agreement with a syndicate of underwriters led by Scotiabank, RBC Capital Markets and Goldman Sachs Canada Inc., as joint bookrunners, to issue to the public, on a bought deal basis, 6,342,000 units from treasury at a price of $41 per unit for gross proceeds of approximately $260-million. Allied has granted the underwriters an option to purchase up to an additional 951,300 units on the same terms and conditions, exercisable at any time, in whole or in part, for a period of 30 days following the closing of the offering.

Allied makes this offering pursuant to its base shelf prospectus dated Dec. 15, 2016. The terms of the offering will be described in a prospectus supplement to be filed with Canadian securities regulators.

Allied will use the net proceeds of the offering to retire existing debt obligations on or shortly after closing. Approximately $132-million of the net proceeds will be used to prepay (including a one-time, yield-maintenance cost of approximately $7.7-million) the first mortgage on 151 Front St. West in Toronto, which bears interest at 6.54 per cent and is scheduled to expire on Nov. 1, 2019. The remainder of the net proceeds will be used to reduce amounts drawn on Allied's operating and acquisition line of credit, which Allied used to finance acquisitions, mortgage repayments, revenue-enhancing capital expenditures and development costs thus far in 2018.

The offering reflects Allied's unwavering commitment to its balance sheet and key debt metrics. After giving effect to the offering and the consequent debt retirement, Allied expects that its total indebtedness ratio will be 30 per cent, its net debt as a multiple of annualized adjusted earnings before interest, taxes, depreciation and amortization will be 6.9:1 and its interest coverage ratio will be 3.3:1. Allied also expects that its pool of unencumbered investment properties will reach $3.7-billion at that point in time. Management considers this enhanced commitment particularly appropriate in the context of Allied's growing and successful urban development pipeline.

Allied expects to allocate $1.2-billion to its urban development program in the five-year period from Jan. 1, 2018, to Dec. 31, 2022, with approximately $300-million being allocated in each of 2018, 2019 and 2020, and a much smaller amount in each of 2021 and 2022. Allied now expects to complete eight urban development projects within that time frame with aggregate gross leasable area (at Allied's share) of approximately 2.3 million square feet, 175,000 feet of which will be in Vancouver, 316,000 of which will be in Calgary, 300,000 of which will be in Montreal and the balance of which (approximately 1.5 million) will be in Toronto. A significant portion of Allied's urban development program in the next five years will be financed with conventional construction financing.

"By using equity to retire a large amount of debt, we'll reduce our interest expense and strengthen our debt metrics, while maintaining expected levels of FFO and AFFO per unit, excluding the one-time yield-maintenance payment we'll make late in the second quarter on prepaying the 151 Front mortgage," said Michael Emory, president and chief executive officer. "The strengthening of our debt metrics will enable us to execute our development program over the next five years with added financial flexibility and discipline. We expect our development program to contribute meaningfully to our AFFO and NAV per unit growth over that time frame."

About Allied Properties Real Estate Investment Trust

Allied Properties is a leading owner, manager and developer of distinctive urban workspace in Canada's major cities. Its objectives are to provide stable and growing cash distributions to unitholders and to maximize unitholder value through effective management and accretive portfolio growth.

We seek Safe Harbor.

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