Canadian Apartment Properties REIT
(CAR.UN-T) C$58.73
Corporate Update Following Acquisition/Disposition Announcements
Event
Since reporting Q2/21 results, CAPREIT has been active on the acquisition/ disposition front, completing four separate acquisitions aggregating 988 suites for $405.1mm (~$410,230/suite), including 535 suites in the GTA. The REIT has also sold two GTA assets for $142.9mm (~$561,100/suite).
Impact: SLIGHTLY POSITIVE
Despite the competitive acquisition market, CAPREIT continues to find assets that fit its buy box. We are also encouraged to see the REIT recycle capital through the disposition of assets that are no longer a strategic fit or that can be sold to developers for very low in-place cap rates. The net ~$263mm of acquisitions is slightly higher than the $200mm in our forecast for H2/21.
GTA Portfolio (50% Interest): On August 31, the REIT acquired the remaining 50% interest in a portfolio eight properties (apartments and townhouses) aggregating 787 suites for $159.0mm (~$404,100/suite). CAPREIT acquired the initial 50% interest in 2008 for $45.0mm, or just ~$115,000/suite.
Tower Hill East: On September 22, acquired the 141-suite Tower Hill East property in Toronto for $110.0mm ($780,100/suite). The elevated price per suite is due to its Forest Hill-area location and large average suite size (1,143sf). The asset offers potential synergies given its close proximity to CAPREIT's 'The Thomas' property (same original developer). Management estimates rents are ~30% below market. CAPREIT assumed a $34.0mm mortgage and issued $76mm of exchangeable LP units to the vendor at $56.00/unit (~IFRS NAV).
West Kelowna and Quebec City Portfolios: Acquired four newly-built low rise apartments in West Kelowna, BC for $63.3mm ($328,000/suite) and three recently- built apartments in Quebec City for $72.8mm (~$280,000/suite). We estimate a low-3% cap rate for Kelowna and a low-4% cap rate for Quebec City.
Dispositions: Sold 124 Broadway Avenue (Toronto) for $52.0mm ($604,700/suite) to the adjacent property owner (plans are submitted, but not currently approved, for a high-rise redevelopment of the combined property). We believe this helps to underscore the value of excess density within CAPREIT's Toronto assets. Also sold its 1/3 managing interest in King's Club (co-owned by FCR.un) for $90.9mm to Woodbourne. Both dispositions include VTB loans to the purchasers and both prices exceeded Q2/21 IFRS values.