Ottawa real estate giant Minto turns to investors with REIT listing on TSX
Minto Group appears set to raise an estimated $200 million through a listing on the TSX.
The company, one of Ottawa’s largest real estate firms, this week filed to issue investment units to the public through a new entity called Minto Apartment Real Estate Investment Trust. The price for each REIT unit will be set in coming days, thus determining the final value of the offering. (REITs are more like a mutual fund than a public corporation, which issues shares.)
Creating the REIT is part of a wider Minto strategy of raising money through partnerships and outside investors, rather than inhouse. Minto nevertheless made clear in its filing that it “intends to maintain a significant ownership in the REIT over the long term.” Indeed, the REIT will be run by former Minto employees and will serve as the sole vehicle for all of Minto’s multi-residential rental properties in Canada over time.
Part of the proceeds from the TSX offering will go toward further diversifying Minto’s real estate business. But Minto’s owners — the Greenberg family, led by Roger — will also be using some of the money raised for personal reasons. The filing notes that the establishment of the REIT will provide the Greenbergs “with an effective means of implementing their own estateplanning arrangements.”
Minto Group has been run for the past five years by Michael Waters, the first person outside the family to serve as CEO.
Demand for the REIT units is expected to be high because the investment vehicle will control 4,279 rental suites in Ottawa, Toronto, Calgary and Edmonton, representing a significant chunk of Minto’s 13,000 rental suites.
Rental properties are generally in short supply because developers have concentrated instead on building condominiums and single-family homes during the past decade. Just three per cent of rental suites were vacant in Ottawa last year according to the Canada Mortgage and Housing Corp., and a mere one per cent were vacant in Toronto.
Documents filed by Minto in support of a share listing reveal that 72 per cent of the REIT’s rental properties are in Ottawa. The buildings are relatively old. Of the 14 multi-residential units in Ottawa, seven were built in the 1970s and four in the 1960s. The rental properties have been kept up to date, however. Minto said it has invested $55 million in upgrades for the entire REIT portfolio in the past three years alone.
Among the Ottawa properties are: Minto one80five at 185 Lyon St. N. (the former Minto Suites Hotel, built in 1988), Seneca at 1343 Meadowlands Dr. E. ( built in 1972), and Castle Hill at 1000 Castle Hill Crescent ( built in 1971).
Three of the four Toronto properties were constructed after 2003 and are highly valued. Minto estimated its Toronto suites will make up 34 per cent of the REIT’s appraised value, even though they account for just 19 per cent of the total units.
The reason for this can be seen in the rents that can be charged in the two cities. The average rent for a two-bedroom apartment in Toronto is approaching $1,400 per month while in Ottawa it’s about $1,225 per month.
The difference is greater for the particular rental suites included in the Minto REIT. The Minto filing suggests the average monthly rent per suite is $1,632 for the 669 Toronto apartments and $1,317 per month for the 2,878 Ottawa apartments.
Minto estimates the apartments in the REIT will generate $82.2 million in revenue during the 12 months ending June 30, 2019. Unit holders will receive about $16.3 million per year in distributions, leaving $18 million in net income.