PRV.UN Pro Real Estate Investment Trust

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• Acquisition of 12 institutional-quality industrial assets comprising 572,000 square feet of GLA
• Transaction to increase PROREIT portfolio to 5.0 million square feet of GLA and approximately $700 million Gross Book Value¹ on pro forma basis
• Increased exposure to industrial segment, representing 70% of GLA and 54% of base rent on pro forma basis
• Increased exposure to Ontario, representing 31% of GLA and 33% of base rent on pro forma basis
• Aggregate new mortgage financing of $53.7 million
• $50 million private placement with Collingwood Investments Incorporated, member of the Bragg Group of Companies
• Strong acquisition pipeline, including non-binding letters of intent to acquire $47 million in additional industrial assets

MONTRÉAL, March 15, 2021 /CNW/ - PRO Real Estate Investment Trust (TSX: PRV.UN) ("PROREIT" or the "REIT") today announced its proposed acquisition of a 100% interest in 12 industrial properties, including three properties in Ottawa, Ontario, representing 283,000 square feet of gross leasable area ("GLA") and nine properties in Winnipeg, Manitoba, representing 288,000 square feet of GLA (collectively, the "Acquisitions"), for an aggregate purchase price of approximately $86.8 million (excluding closing costs).

"With these acquisitions and new financing providing transformational opportunities for PROREIT, we are returning to a growth trajectory in a re-opening and expanding economy with a robust portfolio of institutional caliber industrial assets. These acquisitions align with PROREIT's commitment to expand its footprint in attractive markets and to increase its exposure to the industrial asset class. We are extremely pleased to return to the market with an accretive transaction, while at the same time enhancing the REIT's liquidity for future growth opportunities," said James Beckerleg, CEO of PROREIT.

"We are also very proud to welcome an institutional investor of the caliber of the Bragg Group of Companies at this pivotal stage of our growth. Given the momentum we are experiencing and the opportunities ahead, we look forward to capturing these with a strong partner at our side," added James Beckerleg. 

"Given PROREIT's proven track record and solid reputation, we are pleased with the completion of this long-term investment, supporting PROREIT's growth strategy in which we have full confidence. We have followed PROREIT closely for the last couple of years and are very impressed by its growth strategy, properties, reputation and management team. We are excited to be accepted as an investor in PROREIT through this private placement," said David Hoffman, Vice Chairman of the Bragg Group.

Private Placement

PROREIT also announced today that it has entered into a binding subscription agreement to issue 8,264,463 trust units of PROREIT from treasury on a non-brokered private placement basis at a price of $6.05 per unit to Collingwood Investments Incorporated, a member of the Bragg Group of Companies, from Nova Scotia, for aggregate gross proceeds to the REIT of approximately $50 million (the "Private Placement"). Upon closing of the Private Placement, Collingwood Investments Incorporated, together with one of its related parties, will have a voting and economic interest of approximately 19.8% in PROREIT.

The Private Placement is expected to close in April 2021 and is subject to customary conditions, including receipt of the approval of the Toronto Stock Exchange following the clearance of any required personal information forms. Collingwood Investments Incorporated will be entitled at closing of the Private Placement to a capital commitment fee equal to 3% of the gross proceeds of the Private Placement.

PROREIT intends to use the net proceeds from the Private Placement to partially fund the Acquisitions, to repay certain indebtedness which may be subsequently redrawn, and the balance if any to fund future acquisitions and for general business and working capital purposes.

The Acquisitions

Ottawa Acquisitions
PROREIT has entered into an agreement to acquire three industrial buildings in Ottawa, Ontario. The assets represent a complementary expansion of PROREIT's existing portfolio and include three small bay industrial assets strategically located within core industrial submarkets in the City of Ottawa with easy access to Highway 417 and major arterial roads. The assets, which total 283,000 square feet of GLA, feature clear heights of 14 to 18 feet, efficient bay sizes, ample loading doors and practical layouts. Currently the properties are 96% leased to a diverse mix of tenants with a weighted average lease term of 3.5 years. A majority of the leases include contracted rent steps.

Ottawa's industrial market benefits from the strength and stability of local economy along with its connectivity to major cities in both Canada and the US which positions the City well as a prime e-commerce hub. The market boasts a vacancy rate of 2.7%², among the lowest in the last decade, as a result of strong market fundamentals driven by e-commerce growth and limited availability of new supply and industrial development land.

Winnipeg Acquisitions
In addition, PROREIT has entered into letters of intent with two vendors to acquire a total of nine industrial buildings in Winnipeg, Manitoba, totaling 288,000 square feet of GLA, further expanding PROREIT's footprint in the city (the "Winnipeg Acquisitions"). Strategically located in industrial parks within close proximity to downtown and Trans-Canada highway, the assets feature clear heights of 14 to 21 feet and are currently 97% occupied by a diverse mix of local and national tenants with a weighted average lease term of 3.0 years. Many of the leases include contractual rent steps.

Winnipeg's proximity to the Canada-US border along with its central location positions the city well as a distribution hub within North America. The market has a vacancy rate of 3.9% and has shown remarkable stability with vacancy staying within 3.0% to 5.0% over the past decade³. Strong tenant demand and leasing activity in the city are supported by continued robust immigration and employment along with its growing popularity as an e-commerce logistic centre, as evidenced by Amazon's new delivery centre in the city which is slated to open this year.

Attractive Financing Transaction

The aggregate purchase price (excluding closing costs) for the Acquisitions is anticipated to be approximately $86.8 million and is expected to be satisfied by a combination of the following funding sources: (i) approximately $33.1 million in cash from the Private Placement, and (ii) approximately $53.7 million aggregate principal amount of new 5-year mortgage financings. Pending the closing of the Acquisitions, PROREIT intends to use a portion of the net proceeds of the Private Placement to temporarily repay certain amounts outstanding under its operating facilities, which will be subsequently redrawn to partially fund the Acquisitions.

Impact of the Acquisitions on PROREIT's Overall Portfolio

Upon completion of the Acquisitions, PROREIT's portfolio will be comprised of 102 income producing commercial properties representing approximately 5.0 million square feet of GLA and approximately $700 million of Gross Book Value with a weighted average lease term of 5.1 years. The addition of the industrial properties will further improve portfolio diversification by increasing exposure to the industrial and mixed-use segments to 70% by GLA and 54% by base rent. Additionally, the Acquisitions further increase the Ontario footprint to approximately 1.6 million square feet, representing 31% of GLA and 33% of base rent.

The Acquisitions are all with arm's length vendors and are subject to customary due diligence and closing conditions, including with respect to financing and regulatory approvals, and are expected to close in the second quarter of 2021. The Winnipeg Acquisitions are also subject to PROREIT entering into binding agreements with the vendors. The negotiation of the binding agreements is at an advanced stage and PROREIT currently expects the Winnipeg Acquisitions to proceed.

Pro Forma Portfolio

Deleveraging and Funding of Future Acquisitions

In addition to the Acquisitions, PROREIT intends to use some of the net proceeds of the Private Placement to repay certain indebtedness, including certain amounts outstanding under PROREIT's credit facilities and a full repayment of a high coupon debt, and for general trust purposes. Deleveraging enhances PROREIT's liquidity to fund future investments and acquisitions. Closing of the Private Placement, the Acquisitions, and the repayment of certain indebtedness will lead to an improvement of PROREIT's Debt to Gross Book Value⁴.

Consistent with its growth strategy and in the normal course, PROREIT is engaged in discussions with respect to possible acquisitions, and currently has a strong future acquisition pipeline, including non-binding letters of intent to acquire six institutional-quality industrial assets in Atlantic Canada comprising approximately 500,000 square feet for approximately $47 million.

About PRO Real Estate Investment Trust

PROREIT is an unincorporated open-ended real estate investment trust established pursuant to a declaration of trust under the laws of the Province of Ontario. PROREIT was established in March 2013 to own a portfolio of diversified commercial real estate properties in Canada, with a focus on primary and secondary markets in Québec, Atlantic Canada and Ontario with selective expansion into Western Canada. PROREIT's portfolio is diversified by property type and geography.

For more information on PROREIT, please visit the website at: https://proreit.com.

Non-IFRS and Operational Key Performance Indicators

PROREIT's condensed consolidated financial statements are prepared in accordance with International Financial Reporting Standards ("IFRS"). In this press release, as a complement to results provided in accordance with IFRS, PROREIT discloses and discusses certain non-IFRS financial measures, including Gross Book Value and Debt to Gross Book Value as well as other measures discussed elsewhere in this release. These non-IFRS measures are not defined by IFRS, do not have a standardized meaning and may not be comparable with similar measures presented by other issuers. PROREIT has presented such non-IFRS measures as management believes they are relevant measures of PROREIT's underlying operating performance and debt management. Non-IFRS measures should not be considered as alternatives to net income, cash generated from (utilized in) operating activities or comparable metrics determined in accordance with IFRS as indicators of PROREIT's performance, liquidity, cash flow, and profitability. For a full description of these measures and, where applicable, a reconciliation to the most directly comparable measure calculated in accordance with IFRS, please refer to the "Non-IFRS and Operational Key Performance Indicators" section in PROREIT's Management's Discussion and Analysis for the three months ended September 30, 2020, available on SEDAR at www.sedar.com.

Forward-Looking Information

This news release contains forward-looking statements within the meaning of applicable securities legislation. Forward-looking statements are based on a number of assumptions and is subject to a number of risks and uncertainties, many of which are beyond PROREIT's control, that could cause actual results and events to differ materially from those that are disclosed in or implied by such forward-looking statements.

Forward-looking statements contained in this press release include, without limitation, statements pertaining to the closing of the Private Placement and each of the Acquisitions, the entering into of binding agreements in respect of the Winnipeg Acquisitions, the use of the net proceeds of the Private Placement, the impact of the Acquisitions on PROREIT's future financial performance, the Gross Book Value of the REIT following the closing of the Acquisitions, the Debt to Gross Book Value of the REIT following the closing of the transaction, the impact of the transaction on the REIT's financial performance, the acquisition pipeline of the REIT and the ability of PROREIT to execute its growth strategies. PROREIT's objectives and forward-looking statements are based on certain assumptions, including that (i) PROREIT will receive financing on favorable terms; (ii) the future level of indebtedness of PROREIT and its future growth potential will remain consistent with REIT's current expectations; (iii) there will be no changes to tax laws adversely affecting PROREIT's financing capacity or operations; (iv) the impact of the current economic climate and the current global financial conditions on PROREIT's operations, including its financing capacity and asset value, will remain consistent with PROREIT's current expectations; (v) the performance of PROREIT's investments in Canada will proceed on a basis consistent with PROREIT's current expectations; and (vi) capital markets will provide PROREIT with readily available access to equity and/or debt. Without limitation, there can be no assurance that any discussions PROREIT may have concerning future acquisitions, or that the proposed acquisitions for which PROREIT has entered into letters of intent, will result in definitive agreements and, if they do, what the terms or timing of any such acquisitions would be.

The forward-looking statements contained in this news release are expressly qualified in their entirety by this cautionary statement. All forward-looking statements in this press release are made as of the date of this press release. PROREIT does not undertake to update any such forward-looking information whether as a result of new information, future events or otherwise, except as required by law.

Additional information about these assumptions and risks and uncertainties is contained under "Risk Factors" in PROREIT's latest annual information form, which is available on SEDAR at www.sedar.com.

Neither the TSX nor its Regulation Services Provider (as that term is defined in the policies of the TSX) accepts responsibility for the adequacy or accuracy of this release.

SOURCE PROREIT