Industrial REIT Adding 2M SF for $91M

TORONTO-Locally based Summit REIT, which is in the process of exiting the US property market, says it has agreed to purchase 2 million sf in 25 light industrial buildings situated primarily in the Greater Toronto Area. The purchase price will be $91.2 million (120.1 million Canadian), which translates to a capitalization rate of approximately 8.2%. About 77% of the portfolio is concentrated in Scarborough and North York. Another 8% of the portfolio is in Mississauga. The remaining 15% is located in other southern Ontario markets. The acquisition will take Summit’s Scarborough portfolio to more than 2.2 million sf, which the company says will make it the dominant industrial property owner in the region. All told, the acquisition will raise Summit’s total portfolio to 29.6 million sf, of which 25.8 million sf (representing 83% of Summit’s annualized net operating income) will be in the light industrial sector.Summit president/CEO Lou Maroun says the portfolio offers a significant opportunity for income growth over time. “The embedded rents have contractual rent escalations that provide Summit’s unitholders with solid organic growth,” he says. “In addition, the in-place rents are well below market rents, allowing Summit to considerably increase our NOI on turnover and renewals.”Financing for the acquisition will come from cash raised in Summit’s recently-completed equity and debt offerings as well as its available acquisition credit facilities. As part of the transaction, Summit will be assuming mortgages totaling approximately $27 million and has negotiated a $50 million non-revolving term credit facility with a Canadian chartered bank, using the 25 acquired properties as security. On completion of the transaction, Summit’s debt leverage will be 57%.Earlier this month, after selling a warehouse and manufacturing plant in Lakeland, FL, for $15.5 million, Maroun said the transaction was part of our strategy to exit the U.S. market over the next two years. “We will be utilizing the funds from this and other US dispositions to continue growing our Canadian portfolio of light industrial properties as we continue to build our presence and our brand as Canada’s industrial landlord,” he said.