announced today that it has entered into an agreement to purchase a $214 million portfolio of office properties including West Metro Corporate Centre, 2810 Matheson Boulevard and Valhalla Executive Centre, three primary market assets consisting of seven office buildings, located along the 427 corridor in the geographic centre of the Greater Toronto Area. These multi-tenant office buildings, consisting of 1.1 million square feet, offer excellent visibility and a diverse tenant base, with an occupancy rate of approximately 98% and an average remaining lease term of six years. These properties have been well-maintained to institutional standards, with extensive improvements completed within the past four years including lobby upgrades, washroom modernizations, and a new parking structure.In keeping with its accretive acquisition program, Whiterock will acquire a 49.9% equity interest in this portfolio and will assume the exclusive property management of this portfolio. The in-place AFFO from the properties is expected to add approximately
.12 per unit to Whiterock’s annualized AFFO. The addition of these assets to Whiterock’s portfolio will strengthen its owned and/or managed presence in the key Toronto market to 1.9 million square feet and will bring the total value of assets in which Whiterock has an interest to over $800 million, while maintaining the excellent investment grade profile of Whiterock’s tenant roster.
Whiterock’s equity investment partner in this portfolio acquisition is Return on Innovation Capital Inc. ("ROI Capital"), an investment firm based in Toronto that specializes in private placement investments, including a focus on high quality properties with visible growing cash flow streams backed by solid covenants and longer term leases. With over $600 million in assets under management, ROI Capital is one of the fastest growing investment firms in Canada.
Whiterock also announced today that it has entered into an agreement with a syndicate of underwriters led by TD Securities Inc. pursuant to which the syndicate has agreed to purchase, on a bought deal basis, 3,015,000 trust units at $14.95 per unit for total proceeds of $45.1 million. Whiterock has granted the underwriters an over-allotment option to purchase up to an additional 452,500 trust units at the same offering price, exercisable in whole or in part at any time for a period of up to 30 days following the closing of the offering to cover over-allotments, if any. If the over-allotment option is exercised in full, the gross proceeds of the offering will total $51.84 million. Whiterock intends to use the net proceeds of the offering to fund the aforementioned acquisitions and for general trust purposes. The closing of the offering, which is scheduled to occur on or about February 11, 2010, is not conditional on the completion of these acquisitions.
Whiterock will file with the securities commissions and other similar regulatory authorities in each of the provinces of Canada, a preliminary short form prospectus relating to the issuance of the units on or about January 28, 2010.
The units being offered pursuant to the public equity offering have not been and will not be registered under the United States Securities Act of 1933 and, accordingly, will not be offered,
sold or delivered, directly or indirectly within the United States, its possessions and other areas subject to its jurisdiction or to, or for the account or benefit of a U.S. person, except in limited circumstances.
In connection with the transaction, Whiterock intends to issue to an affiliate of the vendor 375,000 trust unit purchase warrants. Each warrant will entitle the holder, for a period of 24 months from the date of issuance, to subscribe for one trust unit at a 10% premium to the closing price of Whiterock units on the TSX on January 25, 2010. These warrants do not form part of the public equity offering.
Whiterock’s 49.9% equity investment in this portfolio, net of debt, totals approximately $41.2 million including closing costs, with an in-place AFFO return of approximately 13%. Pro forma for the closing of this portfolio acquisition and this public equity offering, Whiterock will have deleveraged its balance sheet through a reduction in the total debt to gross book value ratio of approximately 6%, to less than 69% from 75%, and a reduction in the mortgage debt to gross book value ratio of approximately 7%, to 54% from 61%. Of Whiterock’s $267 million of mortgage debt, only $11.4 million is scheduled to mature in 2010 and none is scheduled to mature in 2011. Of Whiterock’s $75 million of outstanding convertible debentures, $9 million are scheduled to mature in 2010.
With the completion of this portfolio acquisition, Whiterock’s aggregate real estate portfolio will total approximately four million square feet across 54 properties in seven provinces, with a weighted average lease term of more than seven years and 54% of the portfolio will consist of government and investment grade tenants.
Although Whiterock has completed its due diligence on this portfolio acquisition, the closing of the transactions described herein are subject to regulatory approval (including Toronto Stock Exchange and Competition Act) and other standard closing conditions and are expected to occur in the first quarter of 2010.