Mr. Michael Stein reports
CAPREIT COMPLETES BUYOUT OF EIGHT PROPERTIES UNDER OPERATING LEASES
Canadian Apartment Properties REIT has completed the previously announced buyout of eight operating leases for properties in Toronto. The aggregate purchase price for the eight operating lease buyouts was approximately $123-million.
The operating lease buyouts were financed, in part, by a draw on CAP REIT's acquisition and operating facility. CAP REIT expects to replace the draw in the near term with mortgage financing insured by Canada Mortgage and Housing Corporation (CMHC). In addition, certain vendors of the operating lease buyouts completed today elected to receive, in aggregate, approximately 633,000 in CAP REIT limited partnership Class B units (Class B LP units) at an agreed-upon price of $48, with an aggregate value of $30.4-million. The Class B LP units are exchangeable into CAP REIT trust units on a one-for-one basis.
CAP REIT previously closed the early buyout of three other operating leases in Toronto for approximately $31-million and has now successfully converted 11 of its 15 operating lease properties to fee simple ownership. The total 11 operating lease buyouts are expected to result in a net fair value gain of over $150-million, after deducting the cost of prepaying the operating lease buyouts, of which $130-million has been previously recognized. The operating lease buyouts are expected to provide CAP REIT with significant additional financing capacity due to the increase in fair market value of these properties, the current low leverage on these properties, as well as the elimination of lending restrictions applicable to the operating lease structure. CAP REIT expects that the fee simple ownership of the 11 properties could have incremental CMHC-insured mortgage capacity of over $500-million over the amount of mortgages currently outstanding on the properties.
CAP REIT will continue to evaluate prepaying the buyouts on its remaining four operating leases which have contractual buyout periods commencing between 2024 and 2028.
"We are very pleased to complete these further eight operating lease buyouts, adding material incremental financial capacity, a meaningful increase in our net asset value and unlocking the potential for future accretive development opportunities," commented Mark Kenney, president and chief executive officer.
Canadian Apartment Properties REIT
CAP REIT is one of Canada's largest real estate investment trusts. CAP REIT owns approximately 56,800 suites and sites, including townhomes and manufactured housing sites, in Canada, and, indirectly through its investment in ERES, approximately 5,600 suites in the Netherlands.
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