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Opportunity Knocks for Two More True North Deals

REIT Invests $41.1 Million to Acquire Pair of Office Bldgs. in Greater Toronto Area and Victoria, BC
November 7, 2017
True North Commercial Real Estate Investment Trust (TSX: TNT.UN) has closed on two key acquisitions in the Greater Toronto Area and Victoria markets, moves one Bay St. analyst says solidifies its push into opportunistic Canadian markets.

In the GTA, True North paid $29.8 million for a seven-story building with 120,200 rentable square feet that is 99% occupied and anchored by what the REIT calls a "credit-rated" tenant.

The REIT also paid $11.3 million for a four-story, 34,400-square-foot building in Victoria's central business district that is 100% occupied by the provincial government in British Columbia.

Johann Rodrigues, an analyst at Raymond James Ltd., said in an interview the two latest moves fit in with the REIT's long-term goals that are described as focusing on growing its portfolio through acquisitions across Canada and such other jurisdictions where opportunities exist.

"It's right within their wheelhouse. You are adding stable, government tenanted buildings into diversified cities that really have very low occupancy volatility," said Rodrigues.

In the GTA, True North's purchase of 1595 16th Ave. in Richmond Hill, Ontario includes 472 parking stalls and about $2 million in improvements that have been invested in the building over the last five years to help it achieve BOMA BEST Level II certification.

The average remaining lease term at the Richmond Hill property is 3.6 years. The $29.8 million purchase price was satisfied by mortgage financing of approximately $19.5 million with an annual interest rate of 3.46% for a five-year term, and cash on hand.

The Victoria property, located at 810 Blanshard St., is a BOMA Best Level II certified building with an average remaining lease term of 2.3 years. The $11.3 million purchase price was satisfied by mortgage financing of approximately $7.9 million at an annual interest rate of 3.68% for a five-year term, as well as cash on hand.

"We are very pleased to continue to add quality properties anchored with government and credit-rated tenants to our growing portfolio, and to strategically deploy the proceeds from our recent public unit offering," said Daniel Drimmer, president and CEO of True North. "With the current robust pipeline of available properties, we intend to continue to execute on our core strategies."

True North said that its previously announced purchase of a 129,200-square-foot office property at 36 and 38 Solutions Dr. in Halifax, Nova Scotia is expected to close on November 15, 2017. In early October, the REIT also completed its $18 million purchase of a 148,500-square-foot office complex located at 301 and 303 Moodie Dr. in Ottawa.

Rodrigues noted True North is getting some "juicy" yields on its acquisitions in the opportunistic markets it is now looking at.

"They've got a pretty identifiable strategy that they've carved out when they (had their initial public offering)," he said. "The idea was to buy government-tenanted office buildings in primary markets but really outside the cores of those markets. They are buying between 7% to 8% cap rates and that supports their sector-leading distribution."

Founded by Drimmer in 2012, the REIT owns and operates a portfolio of 37 commercial properties consisting of approximately 2.5 million square feet.

For more information on this transaction, please see CoStar Comp #4051503.

Garry Marr, Toronto Market Reporter  CoStar Group   
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