Toronto, Ontario, March 7, 2022 - Choice Properties Real Estate Investment Trust (“Choice Properties” or the “Trust”) (TSX: CHP.UN) announced today that it has entered into an agreement to sell six high-quality office properties in Toronto, Vancouver, and Montreal (the “Portfolio”) to Allied Properties Real Estate Investment Trust (“Allied”) for an aggregate purchase price of $794 million, excluding transaction costs (the “Transaction”). The purchase price will be satisfied through the issuance of approximately 11.8 million exchangeable Class B limited partnership units (“Class B Units”) of Allied Properties Exchangeable Limited Partnership, an affiliated entity of Allied, and a promissory note in the amount of $200 million. The Class B Units were valued at $50.30 per unit and are exchangeable into, and economically equivalent to, publicly traded trust units of Allied (“Allied Units”).
“We have made the strategic decision to focus our time and capital on the opportunities available in our core business of essential retail and industrial, our growing residential platform and our robust development pipeline,” said Rael Diamond, President and Chief Executive Officer of Choice Properties. “The transaction allows us to exchange our interest in the portfolio for equity in Canada’s leading office operator, and gives us greater flexibility to manage capital allocation in future years.”
Choice Properties currently holds an interest in 16 office properties representing 8% of the Trust’s total portfolio. After the completion of the Transaction, Choice Properties will continue to hold an interest in 10 office properties representing approximately 4% of the Trust’s total portfolio. Approximately 70% of the value of the remaining 10 office properties is comprised of properties in the Greater Toronto Area that are primarily leased to other affiliated entities in the Weston Group and are strategic assets for Choice Properties.
Choice Properties has significant opportunities in the medium-term to deploy capital to its core asset classes of essential retail, industrial and residential. These opportunities include a robust development pipeline representing over 10.5 million square feet of gross leasable area.
The Portfolio includes office properties at 110 Yonge Street, 525 University Avenue, and 175 Bloor Street East in Toronto, 1508 West Broadway and 1185 West Georgia Street in Vancouver, and 1010 Sherbrooke Street West in Montreal.
The Portfolio is being sold in a tax-efficient manner. The Class B Units are exchangeable into, and economically equivalent to, Allied Units, and will be accompanied by a corresponding number of special voting units of Allied. There will be no restriction on the exchange of Class B Units into Allied Units, but the Allied Units (if exchanged) will be subject to a lock-up on the closing of the Transaction, such that 25% of the Class B Units or Allied Units, as applicable, will be released from lock up every three months following the first anniversary of closing of the Transaction.
The promissory note will mature on December 31, 2023 and bear interest at a 1% annual coupon in 2022 and a 2% annual coupon in 2023, payable quarterly in arrears.
The Transaction is subject to compliance with the Competition Act (Canada), approval of the Toronto Stock Exchange for the issuance of Class B Units, and other closing conditions customary in transactions of this nature. Subject to the receipt of all regulatory approvals and satisfaction of customary closing conditions, Choice Properties expects to close the Transaction before the end of the second quarter of 2022. RBC Capital Markets is acting as financial advisor to Choice Properties and Torys LLP is acting as legal advisor. Goldman Sachs Canada, Scotiabank and Aird & Berlis advised Allied in connection with the Transaction.
About Allied Real Estate Investment Trust
Allied is a leading operator of distinctive urban workspace in Canada’s major cities and network-dense urban data center (“UDC”) space in Toronto. Allied’s mission is to provide knowledge-based organizations with workspace and UDC space that is sustainable and conducive to human wellness, creativity, connectivity and diversity. Allied’s vision is to make a continuous contribution to cities and culture that elevates and inspires the humanity in all people.
About Choice Properties Real Estate Investment Trust
Choice Properties is a leading Real Estate Investment Trust that creates enduring value through the ownership, operation and development of high-quality commercial and residential properties.
We believe that value comes from creating spaces that improve how our tenants and communities come together to live, work, and connect. We strive to understand the needs of our tenants and manage our properties to the highest standard. We aspire to develop healthy, resilient communities through our dedication to social, economic, and environmental sustainability. In everything we do, we are guided by a shared set of values grounded in Care, Ownership, Respect and Excellence.
This press release may contain forward-looking information within the meaning of applicable securities legislation, which reflects Choice Properties' current expectations regarding future events, including the expected closing of the Transaction. Forward-looking information is based on a number of assumptions and is subject to a number of risks and uncertainties, many of which are beyond Choice Properties' control that could cause actual results and events to differ materially from those that are disclosed in or implied by such forward-looking information. Such risks and uncertainties include, but are not limited to, the factors discussed in Choice Properties' current Annual Information Form and 2021 Annual Report to Unitholders. Choice Properties does not undertake any obligation to update such forward-looking information, whether as a result of new information, future events or otherwise, except as expressly required by applicable law. All forward-looking statements contained in this press release are made as of the date hereof and are qualified by these cautionary statements.
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Chief Financial Officer
t: (416) 628-7872 e: Mario.Barrafato@choicereit.ca