Update: Ottawa-based Minto plans IPO of new apartment REIT

Minto One80Five
Minto's One80Five apartment building, located at 185 Lyon St. in Ottawa. (Google Street View image)

One of Ottawa’s largest real estate firms says it plans to spin off part of its residential portfolio into a new publicly traded real estate investment trust.

Minto Properties said late Wednesday that 22 rental properties, consisting of 4,279 suites in Ottawa, Toronto, Calgary and Edmonton, would be acquired by the newly formed Minto Apartment REIT, which will be listed on the Toronto Stock Exchange. That includes 14 local properties, the largest of which are the Minto one80five high-rise at 185 Lyon St. and the 393-unit Parkwood Hills Garden Homes & Townhomes off Meadowlands Drive.

A prospectus filed with regulators does not state how much Minto plans to raise in the IPO, although Bloomberg pegged it at $200 million earlier this month.

In the document, Minto says it plans to maintain a “significant” ownership stake in the REIT over the long term. The new company would be staffed by both former Minto employees and employees who work for both Minto and the new REIT. Minto said the REIT will eventually become the “sole vehicle” for all of its Canadian multi-residential rental properties.

Current Minto Group CEO Michael Waters, who has run the company for the past five years, will also become chief executive of the new entity. In an email to OBJ, Waters said at this point in the process, he “can’t provide any comment” on the company’s IPO plans beyond what was provided in a media release and documents filed to regulators.

Founded in 1955, Minto develops, owns and manages residential and commercial real estate. The company says it’s built more than 85,000 new homes and currently manages 13,000 residential units and 2.5 million square feet of office and retail space.

In the prospectus, Minto says the new entity will be “well-positioned” to capitalize on the growing demand for rental housing across Canada. A Canada Mortgage and Housing Corp. report on Ottawa’s rental market last fall, for example, found that the vacancy rate for rental housing in the city had dropped from three per cent in 2016 to below two per cent last year, while the average rent rose 2.1 per cent to $1,113.

Minto says the average rent of the properties in the new REIT would be about $1,358, which it says would be the highest among all public multi-residential rental REITs focused on the Canadian market.

“There has been limited new supply of purpose-built rental accommodation in the country since 1990,” the document says. “Management believes that growing demand coupled with a supply-constrained market creates a compelling investment opportunity for investors.”

Minto predicts the 22 properties in the REIT will generate $82.2 million in revenue over the 12-month period ending June 30, 2019. Unit-holders will receive about $16.3 million in distributions, leaving a net income of nearly $18 million after expenses.

While Minto plans to use much of the proceeds from the TSX offering to further expand its real estate portfolio, the prospectus also says the IPO will provide Minto’s owners, the Greenberg family, “with an effective means of implementing their own estate-planning arrangements.”

In recent years, Minto has sold more than $600 million worth of its assets in Ottawa alone, led by its divestiture in 2017 of a 50 per cent interest in its downtown Minto Place office building to the Investors Group for $391.2 million.

In 2016, Minto sold a five-property portfolio, consisting of 850 rental units, to CAPREIT Apartments for $180.25 million. In a separate transaction, Minto received $26.1 million for the Emerald Plaza mixed-use development at 1547 Merivale Rd., located just north of Meadowlands Drive.

– With files from Peter Kovessy