NOT FOR DISTRIBUTION TO UNITED STATES NEWSWIRE SERVICES
OR FOR DISSEMINATION IN THE UNITED STATES
Pure Industrial Real Estate Trust (TSX: AAR.UN) (“PIRET” or the “Trust”) announced today that it has entered into agreements to purchase 11 light industrial properties (the “Portfolio”) from Scannell Properties (the “Acquisition”) for an aggregate purchase price of approximately US$235 million (the “Purchase Price”), representing a capitalization rate of approximately 7.23%. The Portfolio consists of 11 critical-use, ground distribution facilities totaling over 1.9 million square feet leased entirely to a multi-national ground package courier company. The Portfolio comprises 10 properties located in the U.S. in major strategic markets within the tenant’s national distribution network and one property located in Montreal, Canada.
Highlights of the Acquisition
- Critical Mass – Significantly enhances scale and marks PIRET’s strategic entry into the U.S. Following the Acquisition, the U.S. properties will constitute approximately 12% of PIRET’s consolidated portfolio by gross leasable area. PIRET will target to invest up to 20% of its overall portfolio on newer generation distribution assets in key U.S. markets.
- Exposure to E-commerce – Portfolio comprised of new generation ground distribution facilities in major U.S. markets tenanted by a leading e-commerce service provider.
- Strategic Locations – Well located Portfolio in major markets in the U.S. providing access to some of the nation’s top rail hubs and seaports, in addition to being strategically located with excellent connectivity to transportation routes providing direct access to high concentrations of the U.S. population.
- Long-term Leases – Portfolio leased entirely to an investment grade, multi-national ground package courier company with a weighted average lease term of approximately 10.1 years.
- Exceptional Tenant Credit Quality – Tenant is considered investment grade and rated BBB by S&P and Baa1 by Moody’s. The tenant is publicly listed on the New York Stock Exchange with a market capitalization of over US$40 billion.
- Net Lease Structure – All leases are net leases and include escalations, potential and planned expansions, as well as several renewal options with contractual rent increases, providing long-term predictable growth in cash flows.
- Recent Construction – Portfolio comprises six, high quality, recently built income producing properties with a weighted average building age of approximately 6.3 years totaling 1,009,489 square feet, with an average clear height of approximately 27 feet.
- New Development Pipeline – Portfolio comprises five properties under development with scheduled completion between August 2014 and February 2015, totaling 915,010 square feet.
- Attractive Capitalization Rate – Purchase Price of approximately US$235 million represents a capitalization rate of approximately 7.23%.
- Immediately Accretive – Expected to be approximately 4.0% accretive to PIRET’s Adjusted Funds from Operations* (“AFFO”) per trust unit (a “Unit”) of PIRET on a leverage neutral basis after completion of the five properties under development and within the first full year of operations, and approximately 2.5% accretive to PIRET’s AFFO per Unit after the repayment of certain indebtedness of the Trust.
- Future Growth Potential – Transaction is strategic and expected to position PIRET for future acquisition and development opportunities in Canada and the U.S.
Kevan Gorrie, PIRET’s Co-CEO & President, commented, “We are excited to make our entry into the U.S. industrial market and the addition of these new properties will enhance the quality of our overall portfolio. We believe this presents a compelling investment opportunity for PIRET.” Mr. Gorrie added, “The properties represent the leading edge in e-commerce services, and this transaction is consistent with PIRET’s strategy of acquiring newer generation distribution and logistics properties in strong and liquid markets. The properties are fully leased to an investment grade tenant under long-term leases and provide attractive growth opportunities through expansions and multiple renewal options with rent escalations. This acquisition will serve as a strong foundation on which to build a U.S. presence representing up to 20% of our overall portfolio in select U.S. markets.”
The Portfolio
The Portfolio consists of 11 critical-use, ground distribution facilities totaling over 1.9 million square feet leased entirely to the tenant and well-located in major industrial markets within their ground distribution network. The Portfolio has a weighted average remaining lease term of 10.1 years and an average building age of approximately 3.3 years and 6.3 years for the six income producing properties only. The Purchase Price of approximately US$235 million represents a capitalization rate of approximately 7.23%.
All leases are net leases and include potential and planned expansions, as well as several renewal options with contractual rent increases, providing long-term predictable growth in cash flows.
|
City / State or Province
|
GLA (sq. ft.)
|
Year Built
|
Lease Expiration
|
Site Coverage Ratio
|
|
Income Producing Properties
|
|
|
|
City of Industry, CA
|
211,495
|
2007
|
Jun-2022
|
18.0%
|
|
West Palm Beach, FL
|
119,165
|
2007
|
May-2025
|
25.8%
|
|
Newton, NC
|
141,432
|
2010
|
Aug-2023
|
22.9%
|
|
Barrington, NJ
|
259,227
|
2006
|
Jul-2025
|
23.3%
|
|
Dover, NJ
|
171,907
|
2010
|
Jun-2024
|
12.4%
|
|
Montreal, QC
|
106,263
|
2007
|
Aug-2024
|
16.4%
|
|
Total Income Producing
|
1,009,489
|
6.3 Years
|
9.9 Years
|
18.7%
|
|
Properties Under Development
|
|
|
|
Rock Island, IL
|
189,926
|
Nov-2014
|
Oct-2024
|
14.8%
|
|
Wheeling, IL (redevelopment)
|
147,082
|
Aug-2014
|
Jul-2024
|
25.0%
|
|
Baton Rouge, LA
|
175,374
|
Feb-2015
|
Jan-2025
|
22.8%
|
|
Austin, TX
|
199,865
|
Jan-2015
|
Jan-2025
|
13.7%
|
|
San Antonio, TX
|
202,763
|
Feb-2015
|
Jan-2025
|
17.9%
|
|
Total Under Development
|
915,010
|
--
|
10.3 Years
|
17.5%
|
|
Total Portfolio
|
1,924,499
|
3.3 Years
|
10.1 Years
|
18.1%
|
Description of Public Offering of Units
In conjunction with the Acquisition, PIRET also announced today that it has entered into an agreement with a syndicate of underwriters co-led by BMO Capital Markets, Canaccord Genuity Corp. and RBC Capital Markets (collectively, the “Underwriters”), to sell, on a bought deal basis, 33.7 million Units at a price of $4.60 per Unit for gross proceeds of approximately $155 million (the “Offering”). PIRET has also granted the Underwriters an over-allotment option to purchase up to an additional 15% of the Offering on the same terms and conditions, exercisable at any time, in whole or in part, up to 30 days after the closing of the Offering. The Offering is expected to close on or about June 27, 2014 and is subject to customary conditions, including regulatory approval and the approval of the Toronto Stock Exchange. The Offering is not conditional upon closing of the Acquisitions.
PIRET intends to use the net proceeds from the Offering primarily for the funding of a portion of the purchase price of the Acquisition, for repayment of indebtedness and for general trust purposes. In the event PIRET is unable to consummate one or all of the Acquisitions and the Offering is completed, PIRET would use the net proceeds of the Offering to fund future acquisitions and for general trust purposes.
The Offering is being made pursuant to the Trust’s base shelf prospectus dated June 12, 2014. The terms of the Offering will be described in a prospectus supplement to be filed with Canadian securities regulators.
The Units have not been, nor will they be, registered under the United States Securities Act of 1933, as amended, (the "1933 Act") and may not be offered, sold or delivered, directly or indirectly, in the United States, or to, or for the account or benefit of, "U.S. persons" (as defined in Regulation S under the 1933 Act), except pursuant to an exemption from the registration requirements of the 1933 Act. This press release does not constitute an offer to sell or a solicitation of an offer to buy any Units in the United States or to, or for the account or benefit of, U.S. persons.
Bridge Facility and Promissory Note
In addition to a portion of the net proceeds from the Offering, PIRET has received a commitment letter from BMO Capital Markets to provide first mortgage financing for the Acquisition in the amount of up to US$72 million for an open 12 month term. In addition, the vendor will provide PIRET with a promissory note in the amount of US$48.5 million that shall be repaid upon the completion of the five properties under development. PIRET expects to obtain permanent first mortgage financing for the properties comprising the Portfolio within approximately six months after the completion of the Acquisition, on standard mortgage terms and with third party lenders. PIRET expects that such financing will be in an amount equal to approximately 50% of the purchase prices of such properties, bearing an expected interest rate of 4.0%.
Impact of the Acquisition on PIRET’s Portfolio
The Acquisition will increase the scale of PIRET’s property portfolio, while further diversifying its tenant base:
|
|
Current Portfolio*
|
Post-Acquisition**
|
|
Number of Properties
|
164
|
173
|
|
GLA (000s)
|
14,053
|
15,897
|
|
Occupancy – Including Committed
|
97.4%
|
97.7%
|
|
Investment Properties (millions)
|
$1,448.3
|
$1,703.4
|
|
Weighted Average Lease Term (years)
|
6.9
|
7.3
|
|
% of Revenue from Top 10 Tenants
|
30.7%
|
39.0%
|
|
Loan / Gross Book Value
|
52.9%
|
51.9%
|
* As at March 31, 2014
** After taking into effect the Acquisition and events subsequent to March 31, 2014
ABOUT PURE INDUSTRIAL REAL ESTATE TRUST
PIRET is an unincorporated, open-ended investment trust that owns and operates a diversified portfolio of income-producing industrial properties in leading markets. PIRET is an internally managed REIT that focuses exclusively on investing in industrial properties.
Additional information about PIRET is available at www.piret.ca or www.sedar.com.
For more information please contact:
Andrew Greig,
Director of Investor Relations
Pure Industrial Real Estate Trust
Suite 910, 925 West Georgia Street
Vancouver, BC V6C 3L2
Phone: (604) 398-2836 or (888) 681-5959
*Non-GAAP Measures
PIRET prepares and releases unaudited quarterly and audited consolidated annual financial statements prepared in accordance with IFRS (GAAP). In this release, PIRET discloses and discusses certain non-GAAP financial measures, including AFFO. The non-GAAP measures are further defined and discussed in the MD&A filed on May 14, 2014 on SEDAR, which should be read in conjunction with this press release. Since AFFO is not determined by IFRS, it may not be comparable to similar measures reported by other issuers. PIRET has presented such non-GAAP measures as management believes the measure is a relevant measure of the ability of PIRET to earn and distribute cash returns to Unitholders and to evaluate PIRET’s performance. These non-GAAP measures should not be construed as alternatives to net income (loss) or cash flow from operating activities determined in accordance with GAAP as an indicator of PIRET’s performance.
Forward-Looking Information
Certain statements contained in this news release may constitute forward-looking statements. Forward-looking statements are often, but not always, identified by the use of words such as "anticipate", "plan", "expect", "may", "will", "intend", "should", and similar expressions. These statements involve known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in such forward-looking statements. Forward looking statements in this news release include the following: (i) portfolio comprises five properties under development, with scheduled completion between August 2014 and February 2015, totaling 915,010 square feet; (ii) expected to be immediately accretive to PIRET’s Adjusted Funds from Operations (“AFFO”) per trust unit (a “Unit”) and after completion of the five properties under development by February 2015, AFFO per Unit is estimated to be approximately 4.0% accretive to AFFO per trust Unit of PIRET on a leverage neutral basis and within the first full year of operations, and approximately 2.5% accretive to PIRET’s AFFO per Unit after the repayment of certain indebtedness of the Trust; (iii) transaction is strategic and expected to position PIRET for future acquisition and development opportunities in Canada and the U.S., (iv) the Offering is expected to close on or about June 27, 2014 and is subject to customary conditions, including regulatory approval and the approval of the Toronto Stock Exchange, (v) PIRET intends to use the net proceeds from the Offering primarily for the funding of a portion of the purchase price of the Acquisition, for repayment of indebtedness and for general trust purposes, (vi) PIRET expects to obtain permanent first mortgage financing for the properties comprising the Portfolio within approximately six months after the completion of the Acquisition, on standard mortgage terms and with third party lenders and (vii) PIRET expects that such financing will be in an amount equal to approximately 50% of the purchase prices of such properties, bearing an expected interest rate of 4.0%.
The forward-looking statements contained in this news release are based on certain key expectations and assumptions made by PIRET, including: expectations and assumptions concerning receipt of required regulatory approvals and the satisfaction of other conditions to the completion of and use of proceeds from the Offering, and PIRET ability to obtain permanent first mortgage financing for the properties.
Although PIRET believes that the expectations and assumptions on which the forward-looking statements are based are reasonable, undue reliance should not be placed on the forward-looking statements because PIRET can give no assurance that they will prove to be correct. Since forward-looking statements address future events and conditions, by their very nature they involve inherent risks and uncertainties. Actual results could differ materially from those currently anticipated due to a number of factors and risks. These include, but are not limited to, the failure to obtain necessary regulatory approvals or satisfy the conditions to closing the Offering or mortgage financings, competitive factors in the industries in which PIRET operates, prevailing economic conditions, and other factors, many of which are beyond the control of the PIRET.
The forward-looking statements contained in this news release represent PIRET’s expectations as of the date hereof, and are subject to change after such date. PIRET disclaims any intention or obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise, except as required under applicable securities regulations.
THE TORONTO STOCK EXCHANGE HAS NOT REVIEWED AND DOES NOT ACCEPT RESPONSIBILITY FOR THE ADEQUACY OR THE ACCURACY OF THIS RELEASE.