FAM Real Estate Investment Trust (REIT) has announced an agreement to acquire a 170,000-square-foot urban office building in Toronto.
“The acquisition of 4211 Yonge St. completes our two-stage capital redeployment initiative that commenced with the previously announced agreement to sell our 50 per cent non-managing interest in 220 Portage Ave.,” says Shant Poladian, CEO of FAM REIT. “We estimate these transactions will immediately generate three per cent accretion to our annualized adjusted funds from operations per diluted unit on a leverage neutral basis. It is also important to note these transactions did not require the issuance of any new equity, with FAM REIT’s improved risk-reward profile fully accruing to the benefit of our existing unit holders.”
The acquisition is expected to close May 2. The purchase price is $43 million (exclusive of closing costs), subject to certain adjustments, representing an attractive going-in capitalization rate of approximately 6.7 per cent.
4211 Yonge St. is currently 92 per cent leased, with a 5.4 year weighted average remaining lease term. The property is well-located in a prime transit-oriented office node just south of Highway 401, along the Yonge-University-Spadina TTC subway line. The property includes a 320-stall indoor parking lot representing 1.9 stalls per 1,000 square feet, providing a healthy mix of parking and transit options for tenants.
Management believes net rental rates are approximately 25 per cent below estimated current market net rents, providing an opportunity to increase cash flow. Existing zoning allows for additional retail uses at 4211 Yonge St., an attractive asset given the large number of recently completed residential condominiums within walking distance that currently lack the benefit of ground-level retail amenities.
