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TORONTO and DALLAS, Feb. 2, 2015 /CNW/ – Milestone Apartments Real Estate Investment Trust (TSX: MST.UN) (“Milestone” or the “REIT”) today announced that it has entered into an agreement to purchase Heritage on Millenia (“Heritage” or the “Property”), a 303-unit, Class A multifamily apartment community located in South Orlando, Florida, for a purchase price of US$40.0 million, representing an estimated year one capitalization rate of 6.4% (the “Acquisition”). The Acquisition is expected to be accretive to the REIT.
“Orlando is one of the leading employment markets in the United States, having added the fourth most jobs in the nation since 2009,” said Robert Landin, CEO of Milestone. “This is another off-market acquisition for Milestone, representative of our reputation and strong presence in the marketplace. We have an opportunity to drive additional value creation through a unit upgrade program at Heritage further enhancing the property’s value.”
Heritage was built in 2006 and is currently approximately 96.0% occupied, with average monthly rents of approximately US$1,100. The Property’s average in-place rent per square foot is consistent with the REIT’s portfolio and Milestone’s middle market strategy. The Property’s average in-place rents are higher than the REIT’s portfolio average in part due to a higher proportion of two and three-bedroom apartment suites. The Property, which has convenient access to several major transportation corridors, is located within close proximity to large employment centers including downtown Orlando, Walt Disney World and the Southpark Center office park, which has over 2.9 million square feet of Class A office space and more than 5,000 employees. Heritage features extensive amenities consistent with the REIT’s established portfolio, including a resort style pool and outdoor children’s playground, and residents have a wide variety of shopping, dining and entertainment options nearby. Directly adjacent to the Property is the Mall at Millenia, a 1.1 million square foot shopping center that is one of the top ten malls globally in sales per square foot. Additionally, International Drive, with over 150 restaurants, 100 hotels, and 490 stores and retail destinations is less than one mile away from the Property.
Acquisition Funding and Closing
As part of the purchase consideration for Heritage, the REIT is negotiating a new, interest only, fixed-rate mortgage of approximately US$22.0 million, with the balance of the purchase price expected to be funded using the REIT’s available cash and revolving line of credit. The Acquisition, which is subject to customary closing conditions, is expected to close by March 31, 2015. The REIT will disclose the final details of the purchase, including financing terms, following closing of the Acquisition.
Milestone also announced the recent sales of two properties located in Atlanta, Georgia, for combined gross proceeds of US$21.6 million. Shannon Chase Apartments, a 156-unit multifamily apartment community that was built in 1987, was sold for US$7.3 million. Villas at Indian Trail, a 236-unit multifamily apartment community that was built in 1986, was sold for US$14.3 million. The weighted average cap rate for these dispositions was 6.7%. The variable rate debt associated with these assets was $12.4 million and part of the Walker Dunlop Master Credit Facility. These dispositions are a part of the REIT’s overall business strategy to optimize cash flow performance and continue to build long term unitholder value through its strategic acquisition and disposition strategies. The proceeds from the sales will be used towards the recently announced acquisitions of Heritage and The Manor Homes of Arborwalk.
Milestone is an unincorporated, open-ended real estate investment trust that is governed by the laws of Ontario. The REIT’s portfolio consists of 57 multifamily garden-style residential properties, comprising 19,161 units that are located in 12 major metropolitan markets throughout the Southeast and Southwest United States. Milestone is the largest real estate investment trust listed on the TSX focused solely on the United States multifamily sector. The REIT operates its portfolio through its internal property management company, Milestone Management, LLC, which has more than 900 employees across the United States. Based in Dallas, TX, TMG Partners, L.P., an affiliate of The Milestone Group, LLC, is the external asset manager of the REIT. For more information, please visit www.milestonereit.com.
About The Milestone Group, LLC
The Milestone Group is a privately-held real estate investment management company with expertise and presence in major metropolitan markets throughout the United States. The firm has corporate offices in Dallas, Texas and New York, New York with regional acquisition and management offices across the United States. Founded in 2004, The Milestone Group has a strong track record of investing in the U.S. multifamily sector, including completion of more than US$4.5 billion in multifamily transactions. For more information, please visit www.milestonegp.com.
Forward-looking information and non-IFRS measures
This news release may contain forward-looking statements (within the meaning of applicable securities laws) relating to the business of the REIT and the environment in which it operates. Forward-looking statements are identified by words such as “believe”, “anticipate”, “expect”, “intend”, “plan”, “will”, “may”, “estimate” and other similar expressions. These statements are based on the REIT’s expectations, estimates, forecasts and projections and include, without limitation, statements regarding the anticipated closing date of the proposed acquisition, the initial capitalization rate of the proposed acquisition, the effect of the proposed acquisition on the financial performance of the REIT (including the degree to which the acquisition will be accretive), the ability to enhance the value of Heritage through the implementation of Milestone’s operating efficiencies and the financial impact of the recent asset dispositions. They are not guarantees of future performance and involve risks and uncertainties that are difficult to control or predict. A number of factors could cause actual results to differ materially from the results discussed in the forward-looking statements, including, but not limited to, the factors discussed under the heading “Risk Factors” in the REIT’s annual information form available at www.sedar.com. The forward-looking statements in this news release are based on certain assumptions, including that the economy remains stable, rental rates at Heritage will continue to grow, interest rates remain stable, and the REIT will continue to have access to capital. There can be no assurance that forward-looking statements will prove to be accurate as actual outcomes and results may differ materially from those expressed in these forward-looking statements. Readers, therefore, should not place undue reliance on any such forward-looking statements. Further, these forward-looking statements are made as of the date of this news release and, except as expressly required by applicable law, the REIT assumes no obligation to publicly update any such statement, whether as a result of new information, future events or otherwise.
“Year one capitalization rate” is not a measure recognized under IFRS and does not have a standardized meaning prescribed by IFRS. Year 1 capitalization rate is presented in this news release because management of the REIT believes that this measure is relevant in interpreting the purchase price of the Property. Capitalization rate, as computed by the REIT, may differ from similar computations as reported by other similar organizations and, accordingly, may not be comparable to capitalization rate reported by such other organizations.
SOURCE Milestone Apartments REIT