Montreal rental properties

Milestone Apartments REIT acquires U.S. portfolio

Thursday, October 20, 2016

Milestone Apartments REIT announced that it has entered into a definitive agreement to acquire a portfolio containing six garden-style rental properties, comprising 1,460 units, in attractive U.S. Sunbelt markets (for approximately US $242.2 million. The acquisition, which is subject to customary closing conditions, is expected to close no later than December 1, 2016.

“The portfolio acquisition reflects our ongoing strategic acquisition approach to growing the REIT’s portfolio and improving its operating margins and cash flow,” said Robert Landin, CEO of Milestone. “This acquisition will also increase our scale as we continue to diversify our portfolio in high growth U.S. Sunbelt markets, which benefit from strong underlying demographic trends and higher than national average employment and population growth.”

To partially fund the acquisition, the REIT also announced that it has reached an agreement with a syndicate of underwriters co-led by BMO Capital Markets and CIBC Capital Markets to issue 9,490,000 trust units of the REIT at a price of C $18.45 per unit, on a bought deal basis, for gross proceeds of approximately C $175 million (the “Offering”).

The REIT also announced today that its Board of Trustees has approved a 10.0% increase to its unitholder monthly cash distributions. The increase to cash distributions is expected to be effective for the January 2017 distribution, payable on February 15, 2017, to unitholders of record on January 31, 2017.

Acquisition highlights:

• Milestone will acquire a portfolio of six high quality garden-style multifamily properties comprising 1,460 units for a gross purchase price of approximately US$242.2 million;
• The properties have a weighted average year built of 2005 and upon acquisition will further decrease the average age of the REIT’s portfolio;
• The acquisition is in line with the REIT’s growth strategy to continue to high-grade its portfolio and improve its operating margins and cash flow position;
• As part of the acquisition, the REIT will further geographically diversify its U.S. Sunbelt property portfolio, which benefits from strong underlying demographic trends and higher than national average employment and population growth, by increasing scale in four existing markets and entering two new markets, establishing greater critical mass to drive operating efficiencies and growth;
• Following completion of the acquisition and the REIT’s proposed property disposition described below (the “Proposed Disposition”), the REIT is expected to have eight unencumbered assets, further enhancing the REIT’s liquidity and balance sheet flexibility;
• Following the completion of the acquisition, the REIT’s investment properties’ value is expected to increase by more than 10 per cent to approximately US$2.72 billion, from US$2.42 billion at the end of the second quarter of 2016; and
• As of September 30, 2016, the properties had average monthly rents of approximately US $1,175 and average occupancy of 95.5 per cent.

Other key facts:

As part of the acquisition, the REIT will further geographically diversify its U.S. Sunbelt property portfolio, which benefits from strong economic fundamentals, favorable underlying demographic trends and higher than national average employment and population growth, by increasing scale in Charlotte, NC, Denver, CO, Orlando, FL and San Antonio, TX, while entering two new markets, Colorado Springs, CO and Oklahoma City, OK, establishing greater critical mass to drive operating efficiencies and growth.

The properties located in Colorado Springs and Oklahoma City will be managed from the REIT’s closest regional offices, allowing Milestone to efficiently manage the properties while providing a foothold to drive potential growth opportunities in these desirable new markets.

The properties are located in major metropolitan markets in the U.S. Sunbelt and represent a good fit within Milestone’s existing geographical footprint. The Properties are similar to the REIT’s established portfolio, featuring extensive amenities and located in close proximity to shopping, dining, and entertainment options, as well as major transportation corridors and employment centers. The properties are being acquired at an average year one capitalization rate of approximately 5.8 per cent. As of September 30, 2016, the properties had average monthly rents of approximately US $1,175 and average occupancy of 95.5 per cent.

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