Artis REIT announced earlier in June that it is selling its 28-property, 2.5-million-square-foot Greater Toronto Area industrial portfolio for $750M. The sale is part of Artis’ business transformation efforts to reduce debt and top up its war chest to pursue new deals. Pure Industrial, a subsidiary of Blackstone Group, was identified as the purchaser.

Artis’ Desirable Golden Horseshoe Portfolio

While Artis did not disclose the addresses of the properties in the sale, Pelion’s database shows that the REIT has 29 industrial properties in Ontario, as shown below. All of the properties are located in the highly desirable Golden Horseshoe area, the most industrial and densely populated region in Canada. The buildings in this portfolio are mainly warehouses/distribution centers followed by flex and general industrial. They are 89,000 square feet on average.

Source: Pelion Intelligence, Artis REIT Industrial GTA Portfolio – Warehouse/Distribution Center (orange), Industrial (green)

According to Artis’ CEO, Samir Manji, the deal works out to a sub-three percent cap rate based on 2021 expected NOI. While this is lower than the market cap rate reported by CBRE of 3.25% – 3.75% shown below, the upside for the buyer is expected to come from marking rent to market. Overall, the transaction represents a purchase price of $297 per square foot.

Source: CBRE
Source: Pelion Intelligence, Example property sold – 2425 Weyercroft Road, Oakville, ON (54,394 sq. ft.)
Source: Pelion Intelligence, Example property sold – 760 Pacific Road, Oakville, ON (56,863 sq. ft.)

Synergistic Deal for Pure Industrial

According to Pelion’s data, Pure Industrial was already the biggest industrial landlord in Ontario with 11.9 million square feet and 90 properties that extend from Barrie to London. With the transaction, Pure’s footprint in the province is now over 14.5 million square feet, a 21% increase.

It is worth highlighting that the transaction provides significant clustering benefits to Pure Industrial’s existing Mississauga-Brampton properties since the majority of Artis’ portfolio is in this area. Brampton and Mississauga are two of the most highly sought-after industrial markets, given their proximity to Toronto. As such, the region has one of the highest average asking sale prices in the GTA at $321-$346 per square foot. At $297 per square foot, the Artis transaction appears well-priced.

Source: CBRE, Mississauga and Brampton are two of the sub-markets with the highest average asking sale price
Source: Pelion Intelligence, Artis REIT (purple) & Pure Industrial (green) Property Map: The transaction adds significant clustering benefits to Pure Industrial’s Brampton-Mississauga region
Source: Pelion Intelligence, Top Owners of Industrial Property in Ontario (Pre-transaction): Pure Industrial takes the top spot

About Artis REIT

Artis is a diversified Canadian real estate investment trust with a portfolio of industrial, office and retail properties in Canada and the United States. Artis’ vision is to build best-in-class asset management and investment platform focused on growing net asset value per unit and distributions for investors through debt repayment, return of capital and value investing in real estate.

About Pure Industrial

Pure Industrial is a Blackstone and Ivanhoe Cambridge portfolio company headquartered in Toronto, Canada. Pure Industrial is focused on acquiring, leasing, operating and managing a portfolio of high-quality, well-located industrial assets with a portfolio of over 20 million square feet throughout Canada.

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