Allied Properties Real Estate Investment Trust has entered into an agreement with a syndicate of underwriters led by Scotiabank, RBC Capital Markets and Goldman Sachs Canada Inc., as joint bookrunners, to issue to the public, on a bought-deal basis, 3,086,000 units from treasury at a price of $43.75 per unit for gross proceeds of approximately $135 million.
Allied has granted the underwriters an option to purchase up to an additional 462,900 units on the same terms and conditions, exercisable at any time, in whole or in part, for a period of 30 days following the closing of the offering. The issue will be offered in all provinces of Canada.
According to a prepared release, the units being offered have not been, and will not be, registered under the U.S. Securities Act of 1933 and state securities laws. Closing of the offering is expected to occur on or about September 26, 2018, and is subject to regulatory approvals.
Allied makes this offering pursuant to its base shelf prospectus dated December 15, 2016. The terms of the offering will be described in a prospectus supplement to be filed with Canadian securities regulators.
Allied will use the net proceeds of the offering to repay all amounts drawn on its operating and acquisition line of credit. These amounts were drawn in recent months to fund mortgage repayments, revenue-enhancing capital expenditures and development costs.
The offering reflects Allied’s unwavering commitment to its balance sheet and key debt-metrics. After giving effect to the offering (assuming exercise of the Over-Allotment Option) and the consequent debt retirement, Allied expects that its total indebtedness ratio will be 28.4%, its net debt as a multiple of annualized adjusted EBITDA will be 6.6:1 and its interest coverage ratio will be 3.5:1. Allied’s pool of unencumbered investment properties reached $4 billion on September 1, 2018, with the repayment of the first mortgage on The Chambers in Ottawa. Management considers this commitment particularly appropriate in the context of Allied’s growing and successful urban development pipeline.
Allied expects to allocate $1.2 billion to its urban development program in the five-year period from January 1, 2018, to December 31, 2022, with approximately $300 million being allocated in each of 2018, 2019 and 2020 and a much smaller amount in each of 2021 and 2022. Allied expects to complete eight urban development projects within that timeframe with aggregate GLA (at Allied’s share) of approximately 2.3 million square feet, 175,000 of which will be in Vancouver, 316,000 of which will be in Calgary, 300,000 of which will be in Montréal and the balance of which (approximately 1.5 million) will be in Toronto.
“Allied deploys large amounts of capital on an annual basis to support its acquisition and development activities and strives to fix the cost of that capital regularly,” said Michael Emory, President and CEO. “In this instance, utilizing equity rather than fixed-rate term debt represents optimal capital allocation, as it will reduce our interest expense and strengthen our debt-metrics with only minimal dilution to our FFO and AFFO per unit in the fourth quarter.”