Northern Property REIT is acquiring True North Apartment REIT and an apartment portfolio from Starlight Investments, forging Canada's third-largest publicly traded multifamily REIT. Here are four things to know about the deal.
1. It’s Now One of a Big 3
The new entity—dubbed Northview Apartment REIT, with Todd Cook staying on as CEO—will have a market cap of $1.2B. Only Canadian Apartment Properties ($3.3B) and Boardwalk REIT ($2.97B) are bigger. With a portfolio across eight provinces and two territories of 24,742 residential suites (including at 68 Hillside Dr in Toronto), 419 execusuites and hotel rooms, and 1.2M SF of commercial space, the combined enterprise is worth $3B. The occupancy level of its multifamily portfolio is 93.4%. True North CEO Leslie Veiner, now Northview’s COO, said the deal “accelerates our goal of creating scale.”
2. Starlight Investments is a Partner
The transaction will see Northview acquire a 4,650-suite multifamily portfolio from Starlight Investments, and from a JV between the Public Sector Pension Investment Board (PSP Investments) and Starlight, for $535M. This includes 33 properties in Ontario (like 19 Rosemount Dr in Toronto, above), New Brunswick and Nova Scotia. Starlight will enter into a service agreement with Northview to provide support services to the newly acquired properties (the fee in the first year is expected to be $1.6M). PSP Investments will hold a 9.8% interest in Northview.
3. Daniel Drimmer’s Contribution is Key
True North chairman and Starlight CEO Daniel Drimmer will be Northview's largest unit holder, with a 14.5% stake. His board nomination rights and the service agreement through Starlight mean he will play a key part in Northview’s success. “These transactions enable True North unit holders to invest in a REIT with a size and scale that would have taken significantly longer to achieve organically," said Daniel (pictured opening the TSX). Thanks to Starlight's broad market presence and investment activities, Northview can access acquisition opportunities “not generally available,” like the portfolio it just bought.
4. It’s About Diversification
Northview's portfolio will be diversified across more than 60 Canadian centres, including the GTA. While Northview says it will continue to have a “significant” presence in some of Northern Property REIT’s traditional northern Canadian markets, including Iqaluit and Yellowknife (where it owns Ridgeview, above), the trust expects its new national platform will provide greater access to additional acquisition and development opportunities. An estimated 50% of its net operating income is expected to be generated in central and eastern Canada, regions where Northern Property REIT previously didn’t have a foothold.
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