Pair of Canadian REITs Ink $80M Deal

Toronto-based Whiterock REIT and Leben REIT of Calgary have agreed that Leben will sell to Whiterock a portfolio consisting of eight of Leben’s nine properties for approximately $80 million. The properties, in Calgary and Edmonton, total about 341,000 square feet, of which about half is office, nearly a third is

Toronto-based Whiterock REIT and Leben REIT of Calgary have agreed that Leben will sell to Whiterock a portfolio consisting of eight of Leben’s nine properties for approximately $80 million. The properties, in Calgary and Edmonton, total about 341,000 square feet, of which about half is office, nearly a third is industrial and one-sixth is retail. The properties are currently 99 percent leased with a 5.7-year average remaining lease term, and the current leases average 20 percent below market rates. Excluding closing and transaction costs, the purchase price represents a going-in cap rate of about 7.0 percent, according to a prepared statement. Closing is expected by the end of the month. Once that occurs, about one-third of Whiterock’s portfolio, as measured by net operating income, will be in the Saskatchewan and Alberta markets. Of the $80 million purchase price, $11.4 million will be paid by Whiterock’s issuance of new units to Leben and $11.4 million by the issuance to Leben of an $11.4 million, four-year, 6 percent convertible debenture. The remainder will be covered by cash and by new and assumed mortgages. Leben CEO Shariff Chandran told CPN that his company’s original plan had been to go public next September, but that the crisis in the capital markets forced them to rethink their strategy. “This transaction is good,” he said, “because it gets us into the public market.” Going forward, Chandran told CPN, Leben will both acquire properties to rebuild its own portfolio and facilitate deal flow for Whiterock, specifically in Alberta. “We see a lot of real estate that doesn’t come on the market” there, he said. Leben’s entire portfolio had included two additional properties, but one was sold recently and the other is under contract, Chandran said. Both transactions involve private companies in Calgary. Once this transaction has closed, Whiterock’s portfolio will total 3.1 million square feet in 41 properties in 13 primary and secondary markets across Canada.