CAPREIT to sell Canadian manufactured homes to TPG for $740M

CAPREIT (CAR-UN-T) has an agreement to sell its Canadian portfolio of 75 manufactured homes communities (MHC) to TPG Real Estate for $740 million, the Toronto-based trust announced Monday morning.

The communities comprise a total of 12,138 residential lots.

TPG intends to pay for the acquisition via $600 million in cash and a $140 million vendor takeback loan. The properties are all unencumbered assets.  

“We look forward to a smooth and successful transition with TPG Real Estate. TPG Real Estate has advised CAPREIT that, as a longstanding investor in the Canadian real estate sector, it intends to partner with the existing team to manage and grow the MHC portfolio going forward,” Mark Kenney, the president and chief executive officer of CAPREIT, said in the announcement.

The communities are in Ontario, British Columbia, Alberta, Saskatchewan, Quebec and Atlantic Canada.

CAPREIT intends to utilize the net sale proceeds for:

• Repaying the $187-million balance on its Canadian revolving credit facility; 
• future acquisitions of “on-strategy rental properties” in Canada; and
• general business purposes, which it said may include capital expenditures, debt repayment and/or share buybacks under its normal course issuer bid.

“We intend to use the net proceeds from this strategic sale to strengthen our balance sheet, enhance our liquidity and further fuel our high-grading capital allocation strategy,” Julian Schonfeldt, chief investment officer of CAPREIT, said in the announcement. “This pivotal transaction is not only providing CAPREIT with a significant amount of capital, but it also increases management’s focus as a pure-play apartment REIT. 

“We’re excited to be simplifying our story and dedicating our resources to our core business, where our competitive advantages are strongest.”

CAPREIT reported in its Q1 financials total debt of $7.168 billion, or a 41.8 per cent debt-to-gross-book-value ratio (up 1.7 per cent from the year-earlier Q1 2023 period, and slightly up from 41.6 per cent at year-end 2023). It reported total Q1 gross book value of $17.158 billion for its assets

Its debt service coverage ratio at the end of Q1 was 1.8 times. 

The transaction is subject to closing conditions including compliance with the Competition Act (Canada). Subject to all approvals, closing is anticipated in the fourth quarter of 2024.

About CAPREIT and TPG

CAPREIT is Canada’s largest publicly traded provider of rental housing. 

As of March 31 CAPREIT owned approximately 64,200 residential apartment suites, townhomes and manufactured home community sites well-located across Canada and the Netherlands, with approximately $16.7 billion of investment properties in Canada and Europe.

Formed in 1992, TPG is an investment firm based in San Francisco with international holdings across several real estate sectors. Its real estate platform consists of an $18-billion portfolio of assets under management.