Canadian REIT Buys $633M of U.S. M-F Assets
- Jan 11, 2013
By Gail Kalinoski, Contributing Editor
Morguard North American Residential Real Estate Trust, a Canadian-based REIT, is making inroads in the U.S. multi-family housing market in a big way by starting off the year with plans to buy $633 million in assets in seven states.
“These investments afford the REIT the opportunity to acquire a portfolio of institutional quality assets with a known operational history, solid yield and high quality physical plant,” said REIT CEO Rai Sahi. “This acquisition will contribute to the REIT on an accretive basis and is indicative of our U.S. strategy.”
The planned acquisitions, featuring 24 multi-family complexes, are to be done through subsidiaries and split into two purchases. They are both expected to close by the end of the first quarter. The purchases are to be financed through the assumption of mortgages of approximately $400 million with a weighted average interest rate of 4.5 percent and weighted average maturity rate of 4.5 years, and other available sources of funding that weren’t specified.
The first is for 12 multi-family apartment and townhome communities with a total of 3,752 units in Dallas; Denver; Atlanta; Tampa, Fla., and Raleigh, N.C. The properties are described as best-in-class, low-rise garden-style walkups that are an average age of 11 years from construction. Of those units, 2,200 were build after 2002, the REIT said. The seller was not identified.
The second group of purchases is also for 12 multi-family apartment and townhome communities in Pensacola, Fla.; Mobile, Ala., and southwest Louisiana that are to be acquired from Morguard Corp., an Ontario, Canada,-based real estate investor that owns the controlling interest in the Morguard North American Residential REIT. The properties, with an average age of more than 15 years, are three-story garden-style walkups with upgraded units.
After the transactions close, the REIT will own interests in 12,850 units in Canada and the United States worth approximately $.1.5 billion. It currently owns, through a limited partnership, interests in a portfolio of 14 Canadian residential apartment buildings and six apartment communities in the U.S. states of Louisiana and Florida with a total of 6,376 residential units.
The REIT was launched in April 2012 with a $75 million initial public offering in Canada and purchases it made from parent company Morguard Corp., including three Louisiana multi-family properties. A statement from the REIT at the time noted it was formed to own multi-unit residential properties in Canada and the U.S. An April 23, 2012, report in The Globe and Mail explained that the Louisiana properties, located near jobs in the oil and gas industry, fit Morguard’s focus on acquiring assets in urban centers and major suburban areas. The newspaper noted that the REIT has right of first refusal on any North American multi-family properties that Morguard Corp. plans to sell.
Morguard Corp., which also owns and manages retail, office and industrial properties, recently agreed to buy an 848-unit multi-family complex in Chicago’s West Loop. Located at 555 West Kinzie St., Alta at K Station, has two towers – a 37-story and 41-story – that were built in 2010 and are LEED Gold certified. Morguard will take over management on March 1. Shai, also CEO of Morguard Corp., said the Chicago acquisition was part of the firm’s U.S. growth strategy of acquiring high-quality core assets.
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