TORONTO and DALLAS, July 15, 2013 /CNW/ - Milestone Apartments REIT (TSX: MST.UN) ("Milestone" or the "REIT") today announced that it has entered into an agreement to purchase Canyon Chase, a 1986 built 358-unit garden style multifamily apartment community located in the Westminster submarket of Denver, Colorado, for a purchase price of US$40.5 million. The purchase price represents an estimated initial capitalization rate of 6.55% and the transaction is expected to be immediately accretive to the REIT's AFFO per unit. The acquisition will increase the diversification of the REIT's portfolio and expand its market presence. The property is currently owned by an affiliate of The Milestone Group known as Milestone Real Estate Investors II, LP (MREI II).
"Canyon Chase is well located in the dynamic submarket of Westminster Colorado near downtown Denver and Boulder with strong employment and demographic trends. Current demand for well maintained and affordable apartments in this submarket is demonstrated by the high current and historical occupancy at Canyon Chase," said Robert Landin, CEO of Milestone Apartments REIT. "The REIT has access to a pipeline of approximately 19,000 multifamily units that are managed by The Milestone Group, and held mostly in finite-life partnerships. This transaction demonstrates the value generation potential inherent in this pipeline and our commitment to the accretive growth of the REIT."
Canyon Chase features extensive amenities, consistent with the REIT's established portfolio, and is currently 96.6% occupied. The property benefits from its close proximity to several employment centers, including downtown Denver and Boulder, and transportation corridors. In addition, Canyon Chase is located close to several local shopping, dining and entertainment options.
Acquisition Funding and Closing
As part of the purchase consideration, the REIT has negotiated a 7-year fixed-term mortgage of approximately US$22.3 million at an interest rate of 3.66%. The balance of the purchase price will be funded by drawing on the REIT's US$50 million revolving credit facility. The acquisition, which is subject to customary closing conditions, is expected to close by July 31, 2013.
The proposed acquisition constitutes a "related party transaction" under Multilateral Instrument 61- 101 - Protection of Minority Security Holders in Special Transactions ("MI 61-101") and accordingly was reviewed and considered by the independent members of the REIT's investment committee. The chair of the REIT's investment committee, with the assistance of third party advisors, took a lead role in respect of the examination, review and negotiation of the proposed acquisition and related documentation on behalf of the REIT. The proposed acquisition is not subject to the formal valuation and minority approval requirements of MI 61-101 as the fair market value of the transaction is not more than 25% of the REIT's market capitalization.
About Milestone Apartments REIT
Milestone Apartments REIT is an unincorporated, open-ended real estate investment trust that is governed under the laws of Ontario. The REIT's portfolio consists of 53 multifamily garden-style residential properties, comprising 17,290 units that are located in 10 major metropolitan markets throughout the Southeast and Southwest United States. Milestone Apartments REIT is the largest REIT listed on the TSX focused solely on the U.S. multifamily sector. The REIT operates its portfolio through its internal property management company, Milestone Management, with more than 900 employees across the U.S. The Milestone Group, based in Dallas, Texas, is the external asset manager of the REIT. For more information, please visit www.milestonereit.com.
About The Milestone Group
The Milestone Group is a privately-held real estate investment management company with approximately US$2.5 billion of assets under management. The firm has corporate offices in Dallas, TX and New York, NY with regional acquisition and management offices across the United States. Founded in 2004, The Milestone Group has a strong track record of investing in the U.S. multifamily sector, including completion of more than US$4.5 billion in multifamily transactions. For more information, please visit www.milestonegp.com.
Forward-looking information and Non-IFRS Measures
This news release may contain forward-looking statements (within the meaning of applicable securities laws) relating to business of the REIT and the environment in which it operates. Forward-looking statements are identified by words such as "believe", "anticipate", "expect", "intend", "plan", "will", "may", "estimate" and other similar expressions. These statements are based on the REIT's expectations, estimates, forecasts and projections and include, without limitation, statements regarding the anticipated closing date of the proposed acquisition, the initial capitalization rate of the proposed acquisition, the effect of the proposed acquisition on the financial performance of the REIT (including the degree to which the acquisition will be accretive) and the ability to arrange mortgage financing. They are not guarantees of future performance and involve risks and uncertainties that are difficult to control or predict. These risks and uncertainties are discussed in the REIT's prospectus dated February 27, 2013 available at www.sedar.com and include, without limitation, risks relating to general and local economic and business conditions, leasing risks (including the financial condition of tenants and risks associated with the ability to lease vacant space), financing risks and interest and currency rate fluctuations. The forward-looking statements in this news release are based on certain assumptions, including that the economy remains stable, rental rates at Canyon Chase will continue to grow, interest rates remain stable, and the REIT continues to have access to capital. There can be no assurance that forward-looking statements will prove to be accurate as actual outcomes and results may differ materially from those expressed in these forward-looking statements. Readers, therefore, should not place undue reliance on any such forward-looking statements. Further, a forward-looking statement speaks only as of the date on which such statement is made. The REIT undertakes no obligation to publicly update any such statement or to reflect new information or the occurrence of future events or circumstances.
"Initial capitalization rate" is not a measure recognized under IFRS and does not have a standardized meaning prescribed by IFRS. Initial capitalization rate is presented in this press release because management of the REIT believes that this measure is relevant in interpreting the purchase price of the property being acquired. Capitalization rate, as computed by the REIT, may differ from similar computations as reported by other similar organizations and, accordingly, may not be comparable to capitalization rate reported by such organizations.
SOURCE: Milestone Apartments REIT
Robert P. Landin, CEO
Milestone Apartments REIT