Minto Apartment REIT will expand into the Metro Vancouver market through the acquisition of a 50% managing interest in Lonsdale Square for about $53 million.

Lonsdale Square is a newly built multi-family rental property in located in North Vancouver, B.C.

The REIT has agreed to purchase the stake from its parent, the Ottawa-based Minto Group.

The pending acquisition represents a significant strategic move for the REIT as it adds a high-quality asset in one of Canada’s most desirable rental markets, said Minto..

The remaining 50% of Lonsdale Square will be owned by a national Canadian life insurance company, which has acquired a non-managing interest.

Lonsdale Square, completed in early 2024, is a six-storey purpose-built rental building featuring 113 suites and approximately 8,000 square feet of retail space. Current retail tenants include an upscale brewpub, a pharmacy, and a health supplement store.

The building’s amenities include a rooftop terrace, a penthouse social lounge, and smart building systems. Residential occupancy stands at 93%.

Minto plans to fund its share of the acquisition by assuming a $52.96 million CMHC-insured mortgage at an annual interest rate of 3.9%, maturing in December 2034. In addition, the REIT will receive a full repayment of its $14- million convertible development loan associated with the project, which will be used to reduce its variable-rate debt.

“Our team worked hard to design and implement a transaction that is beneficial to unitholders,” said Jonathan Li, president and CEO of Minto. “The transaction adds a newly built asset in the attractive Metro Vancouver market to our portfolio in a manner that is accretive to [funds from operations] per unit. We did not have to access expensive and dilutive new equity capital because we implemented a financing structure that fully funds it with CMHC financing at a significantly lower interest rate compared to our revolving credit facility.”

Li also highlighted the REIT’s approach to managing its debt exposure and maintaining discipline in evaluating future acquisitions.

The undiscounted purchase price of the entire property was $111.5 million, below the $114.3 million average appraised value, said Minto. The REIT’s 50% stake, purchased for $52.96 million, reflects a 5% discount on its share of the undiscounted price and a 7.3% discount to the appraised value.

“This transaction underlines the benefit of the REIT’s relationship with the Minto Group,” said Allan Kimberley, lead independent trustee of the REIT. “The Minto Group agreed to extend the maturity date of the purchase option, accept a purchase price discount greater than 5% of appraisal value, and implement long-term financing which is beneficial to the REIT.”

Lonsdale Square’s location is a key selling point. Situated in the central Lonsdale area, the property is adjacent to the Harry Jerome Community Recreation Centre, which is undergoing a redevelopment scheduled for completion in 2025. The new centre is expected to further enhance the neighbourhood’s vibrancy and attract additional foot traffic.

The acquisition is expected to close in January 2025, following unanimous approval from an independent committee of the REIT’s board. The deal was classified as a related-party transaction under Canadian securities regulations but was exempt from certain valuation and minority-unitholder-approval requirements.

Minto Apartment REIT owns and manages multi-residential rental properties across major Canadian urban centres, including Toronto, Montreal, Ottawa, and Calgary.

Photo: CNW Group/.Minto Apartment REIT