Canada's recovering commercial real estate market has planted another signpost along its road to redemption.
Allied Properties REIT closed its $192-million acquisition of a data centre at 151 Front Street West in Toronto on Monday. The sale of the class A office property was the second largest in Canada this year behind German institutional investor Deka Bank's unsolicited $297-million purchase of the Bentall V office building in the spring.
According to a Wall Street Journal article published last week, the deal says more about the strength of data centres than the market itself. Data-centre property values have displayed resilience during the downturn, due to the rapidly-increasing popularity of streaming video and other Internet-based services that require considerable bandwidth.
But the deal also continues REITs' recent trend of raising money on the capital markets for acquisitions.
Allied partially funded the purchase of the 325,000-square-foot property from Northam Realty Advisors Ltd., by issuing about C$125 million in new units. Allied will use about $96 million from that offering to finance part of the deal, while the British Columbia Investment Management Corp., an institutional investment manager whose clients include public pension funds, provides $96 million on a 10-year mortgage at 7.5%.
"Happily, and to my surprise, the equity capital markets came roaring back faster than we thought they would," Michael Emory, Allied's CEO, was quoted in the Wall Street Journal story. "It was a big change in the Canadian environment."
After struggling to find credit through most of 2008, other REIT CEOs and investors have been making similar comments lately. The question now is how long it will take them to close more large deals.
Subscribe to:
Post Comments (Atom)
No comments:
Post a Comment