TORONTO, June 18 /CNW/ - Whiterock Real Estate Investment Trust (TSX:WRK.UN) announced today that it has completed its previously-announced agreement to purchase Airway Centre 1 and to long-term lease Airway Centre 2-4. These office properties are located at 5915-5955 Airport Road, Mississauga. They are primary market assets consisting of four office towers located adjacent to Toronto Pearson International Airport, have excellent access to the major 400 series highways; and are within minutes of downtown Toronto. These multi-tenant office buildings, consisting of over 670,000 square feet, offer excellent visibility and a diverse tenant base, and have an occupancy rate of 96% and an average remaining lease term of approximately five years.
The in-place AFFO from the properties is expected to add over $0.10 per unit to Whiterock's annualized AFFO, and reduce its overall leverage. The addition of these assets to Whiterock's portfolio will strengthen its owned and/or managed presence in the key GTA market to approximately three million square feet, while maintaining the excellent investment grade profile of Whiterock's tenant roster.
The Airway Centre is comprised of two parcels: (i) 5945-5955 Airport Road, Mississauga ("Airway Centre 1"), a three-storey Class B office building; and (ii) 5915-5935 Airport Road, Mississauga ("Airway Centre 2-4"), which includes one ten-storey and two eleven-storey Class A office towers. These properties total an aggregate of 670,362 square feet with excellent access by public transportation and from Highways 401, 409, 410 and 427. The site has a prestigious tenant roster of national and international organizations led by Air Canada, the largest airline in Canada; Bantrel, a Canadian-based oil & gas project consulting firm; and CA Canada, one of the world's largest IT management software providers. The top five tenants (including the aforementioned) currently occupy 33% of the total available leasing space and have an average remaining lease term of approximately five years.
The Airway Centre Transactions
Airway Centre 1
Whiterock has acquired a 100% freehold interest in Airway Centre 1 for approximately $30 million, before closing costs. The Airway Centre 1 purchase price includes approximately $10.3 million in cash and the assumption of approximately $19.7 million of mortgage debt at an average interest rate of 5.59% maturing on December 9, 2015.
Airway Centre 2-4
Whiterock has also entered into a ground lease of Airway Centre 2-4 for an initial term of 30 years. The Lessor has a put agreement with Whiterock, which may require Whiterock to acquire the freehold interest in Airway Centre 2-4 (the "Put Right"). If exercised concurrently with the closing of Airway Centre 1, the purchase price would be $117 million less the assumption of approximately $78.8 million of mortgage debt. The debt matures on December 9, 2015 and carries an average interest rate of 5.59%. The Put Right is exercisable from the date of closing of Airway Centre 1 to December 1, 2012. Beginning in 2013 Whiterock will receive an annual management fee, and certain capital expenditures will be funded by the Lessor over the remaining term of the lease.
Whiterock has also been granted an option to purchase the freehold interest in Airway Centre 2-4, exercisable between January 1, 2021 and March 31, 2021. The purchase price will be determined by applying a 7.5% capitalization rate on the net operating income for Airway Centre 2-4 for the trailing 12-month period, less the cost of any capital expenditures, tenant inducements and leasing commissions to Airway Centre 2-4 incurred by Whiterock from and after the date of closing of the Airway Centre Transactions. In no event will the purchase price be less than $80 million or greater than $125 million.
On closing, Whiterock's investment in Airway Centre totalled approximately $55 million, including closing costs. This was funded with the assumption of $19.7 million of mortgage debt and cash on hand from its recently closed public equity offering. The closing of the Airway Centre transactions has allowed Whiterock to deleverage its balance sheet; reducing its total debt to gross book value ratio by approximately 240 basis points to approximately 61.7% from 64.1%. In addition, Whiterock's wholly-owned and co-owned aggregate real estate portfolio, including Airway Centre 2-4, totals approximately 6.2 million square feet across 60 properties in seven provinces. Whiterock's interest in the portfolio has a weighted average remaining lease term of approximately 6.5 years and nearly 43.5% of its interest in the portfolio consists of government and investment grade tenants.
This news release contains "forward-looking statements" within the meaning of applicable securities legislation. These forward-looking statements generally can be identified by the use of forward-looking terminology such as "may", "will", "expect", "estimate", "anticipate", "intend", "believe" or "continue", the negative forms thereof and similar expressions suggesting future outcomes or events. Such forward-looking statements reflect management's current beliefs and are based on information currently available to management. These statements are not guarantees of future events or performance and, by their nature, are based on Whiterock's estimates and assumptions, which are subject to known and unknown risks, uncertainties and other factors that may cause the actual events, results or prospects to be materially different from those expressed or implied herein. Readers are cautioned that a number of risks, uncertainties and other factors, including but not limited to the risk that the transactions described herein may not be completed in a timely way or at all, and the risks discussed in Whiterock's various securities filings, including the section entitled "Risk Factors" in Whiterock's Annual Information Form, which can be obtained at www.sedar.com, could cause actual events, results or prospects to differ materially from those stated or implied. These risks, uncertainties and other factors should be considered carefully, and a reader should not place undue reliance on forward-looking statements, as there can be no assurance that actual events, results or prospects will be consistent with such statements. In particular, but without limitation, there can be no assurance that Whiterock will be to able to increase its AFFO. Except as required by law, Whiterock does not undertake, and specifically disclaims, any obligation to update or revise any forward-looking statements, whether as a result of new information, future developments or otherwise.
The Toronto Stock Exchange has not reviewed and does not accept responsibility for the adequacy or accuracy of this release.
SOURCE WHITEROCK REAL ESTATE INVESTMENT TRUST
For further information: For further information: www.whiterockreit.ca, Jason Underwood, 416-907-4861; Frank Bucys, CFO, 416-907-4864