REIT To Provide $51.7 Million Convertible Development Loan To Fund Minto Properties’ Interest In Redevelopment Joint Venture
VICTORIA – Minto Apartment Real Estate Investment Trust announced an agreement to provide a convertible development loan of $51.7 million to Minto Properties Inc. to finance 80 per cent of MPI’s 45 per cent equity interest in a joint venture with subsidiaries of Greystar Real Estate Partners and one of Canada’s largest institutional investment managers.
The JV acquired the University Heights shopping mall located in Saanich, BC in the Greater Victoria Area with the intention of redeveloping a portion of the 11.5-acre site. MPI and the institutional investment manager each hold 45 per cent interests in the JV, while Greystar holds a 10 per cent interest and will act as the development manager. The Financing consists of a $40.5 million direct facility and a $11.2 million interest reserve.
The Property is currently occupied by a 119,000 square foot shopping centre and a 76,000 square foot Home Depot store. The JV will redevelop the shopping centre into a mixed-use multi-residential and retail property, with five six-storey wood-frame buildings comprising 593 rental suites atop 113,485 square feet of grocery-anchored retail. The Property is subject to a long-term lease with the Home Depot, who will be expanding their store by approximately 9,200 square feet and adding a new garden centre and seasonal outdoor area of approximately 20,000 square feet.
University Heights is situated in an attractive location in Saanich’s Shelbourne Valley neighbourhood within 1.4 kilometres of the University of Victoria (22,000 students enrolled and 5,350 staff), and within 2.8 kilometres of Camosun College‘s downtown campus (20,400 students enrolled and 1,200 staff located across two campuses in the Greater Victoria Area).
There is good access to public transit, and the Property is surrounded by attractive amenities including parks, beaches and a library. University Heights has a Walk Score of 77 and a Bike Score of 88. There is significant demand for student rental housing in the area, with little purpose-built rental supply and a historically low vacancy rate. Two of the five buildings on the Property will specifically target students with smaller furnished suites and student-focused amenities.
“Our first investment in the Greater Victoria Area represents an important strategic milestone for the REIT,” said Michael Waters, Chief Executive Officer of the REIT. “It provides geographical diversification and exposure to a strong rental market. The Victoria rental market is characterized by low vacancy rates and is supported by strong population and employment growth. University Heights is located proximate to two post-secondary institutions. We see this attractive investment as a building block for continued growth in the region.”
The Financing will bear interest at 7 per cent per annum, which will accrue and be payable in full on the maturity of the loan. The REIT intends to fund the Financing through existing cash-on-hand and draws on its revolving credit facility. The Financing has full financial recourse to MPI and is secured by, among other things, a mortgage on the property. The Financing will be subordinate to senior construction and land financing.
Development permit approval is expected in the spring of 2022 and construction is expected to commence in late 2022 or early 2023 with stabilization anticipated in 2026. Upon stabilization, the REIT will have the option to purchase MPI’s 45 per cent interest in University Heights at a 5 per cent discount to its then-appraised fair market value.
MPI is a related party to the REIT. Accordingly, the terms of the Financing were reviewed, considered and approved by a committee of the REIT’s independent trustees.
