Homburg Canada REIT to acquire portfolio of 29 shopping centres anchored by Jean Coutu Group stores for $114.9 million

Non-strategic residential properties to be sold by the REIT in separate transaction for $64.85 million

MONTREAL, Sept. 16, 2011 /CNW Telbec/ - Homburg Canada Real Estate Investment Trust (TSX: HCR.UN) (the "REIT") announced today that it has entered into a binding agreement to acquire a 100 percent interest in a portfolio of 29 neighbourhood shopping centres, of which 24 are leased and anchored by the Jean Coutu Group. The gross purchase price for the portfolio is $114.9 million, excluding closing and transaction costs, representing a going-in capitalization rate of approximately 8.00%. The portfolio, which will be acquired from a group led by Delek Global Real Estate (DGRE), will add 728,000 square feet of retail space to the REIT's portfolio. The transaction is expected to close in late September, 2011.

"With this acquisition, the REIT continues to grow its retail footprint in Quebec and particularly in Montreal," said Jim Beckerleg, President and Chief Executive Officer.  "This broad portfolio provides us with additional access to Jean Coutu Group and other high quality tenants, enabling us to further leverage our existing retail platforms in the Greater Montreal Area."

The portfolio is anchored by the Jean Coutu Group, which currently leases and anchors 24 of the portfolio's 29 properties, with their stores representing approximately 50 percent of the total portfolio's net income. The portfolio is further characterized by long-term leases and strong covenants with brand-name tenants such as IGA, METRO, a Canadian Schedule I Chartered Bank, Shoppers Drug Mart and Dollarama, which together represent 12% of the total square footage. The average remaining lease term for the Jean Coutu Group leases is 10.1 years, while the average remaining lease term for entire portfolio is 7.2 years. Twenty-six of the properties are in the province of Quebec, predominantly in the Montreal region; three properties are located in Ontario.

The $114.9 million purchase price of the portfolio will be settled by the assumption of $74.6 million in existing mortgages and by net equity of $40.3 million, which will be funded through cash on hand from the proceeds of the September 13, 2011 bought deal transaction and the REIT's existing line of credit.

The acquisition of the portfolio is subject to receipt of the formal consent of certain rating agencies under the existing mortgages registered on certain of the properties.

Sale of Non-Strategic Residential Atlantic-Provinces-based Portfolio

The REIT also announced today that it has entered into a binding agreement to sell its non-strategic multi-residential Atlantic-Provinces-based portfolio for approximately $65 million.  After repayment of mortgages and mortgage-related costs, net proceeds from the transaction will total approximately $37 million. The transaction is expected to close in October, 2011 and is subject to standard closing conditions. The Atlantic-Provinces-based portfolio consists of 1,261 residential units in 42 buildings on 23 separate properties.

"The residential portfolio is no longer a part of our long-term strategic plans," noted Jim Beckerleg.  "The REIT will continue to focus its activities on the retail and office sectors of the commercial real estate market."

About the REIT

The REIT is an unincorporated open-ended real estate investment trust established pursuant to a declaration of trust under the laws of the Province of Quebec. Managed internally, the REIT owns a portfolio of Canadian income-producing commercial properties, consisting mainly of retail and office properties with certain industrial properties, as well as certain income-producing multi-family residential properties. The properties comprise approximately 8.0 million square feet of commercial gross leasable area and 1,725 multi-family residential units located in Quebec, Atlantic Canada, Western Canada and Ontario.

Forward-looking Statements

This news release may contain forward-looking information within the meaning of applicable securities legislation. Forward-looking information is based on a number of assumptions and is subject to a number of risks and uncertainties, many of which are beyond the REIT's control that could cause actual results and events to differ materially from those that are disclosed in or implied by such forward-looking information. Such risks and uncertainties include, but are not limited to, the factors discussed under "Risk Factors" in the REIT's latest annual information form.

The REIT's objectives and forward-looking statements are based on certain assumptions, including that (i) the REIT will receive financing on favourable terms; (ii) the future level of indebtedness of the REIT and its future growth potential will remain consistent with the REIT's current expectations; (iii) there will be no changes to tax laws adversely affecting the REIT's financing capacity or operations; (iv) the impact of the current economic climate and the current global financial conditions on the REIT's operations, including its financing capacity and asset value, will remain consistent with the REIT's current expectations; (v) the performance of the REIT's investments in Canada will proceed on a basis consistent with the REIT's current expectations; and (vi) capital markets will provide the REIT with readily available access to equity and/or debt.

The forward-looking statements contained in this news release are expressly qualified in their entirety by this cautionary statement. All forward-looking statements in this press release are made as of the date of this press release. The REIT, except as required by applicable securities legislation, does not undertake to update any such forward-looking information whether as a result of new information, future events or otherwise. Additional information about these assumptions and risks and uncertainties is contained in the REIT's filings with securities regulatory authorities, including its latest annual information form, which are available on SEDAR at www.sedar.com.

SOURCE Homburg Canada Real Estate Investment Trust

For further information:

Investors:
 
James W. Beckerleg
President and Chief Executive Officer
Homburg Canada REIT
514-931-2591, ext. 358
 
Gordon G. Lawlor, CA
Executive Vice President, Chief Financial Officer
and Secretary
Homburg Canada REIT
514-931-2591, ext. 313
 
Media:
 
Mélanie Tardif
NATIONAL Public Relations
514-843-2060

 

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Homburg Canada Real Estate Investment Trust

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