Adventus Realty Trust (the Trust) is pleased to provide an update to our investors to June, 2103.
Recently, we closed on the Oak Brook Office Center (our second property) and we have now secured our third office property in suburban Chicago. As a result, we are quickly establishing our reputation as a serious player in the office buildings market in suburban Chicago and are seeing a solid flow of properties.
To keep the momentum in acquisitions going, we have commenced the fundraising for our third seed equity round on June 1, 2013 (term sheet attached), which is priced at $14 (large investors $13) per unit.
We have secured a third office property in suburban Chicago for an acquisition cost of $15.5M, with the closing expected in late July, 2013. We have made a deposit of $850,000 with respect to this acquisition and will provide more information in respect of this property closing.
As previously announced (see Apr. 2/2012 Quarterly Report on our website), we successfully closed the acquisition of the Oak Brook Office Center in Oak Brook, Illinois, located in suburban Chicago. On March 7, 2013 we closed the Oak Brook Office Center for an acquisition cost of $33M, with a $24M non-recourse loan from CIBC, with fixed interest at 4.38% on a 10-year term (30-year amortization).
The Oak Brook Office Center is in one of the most high demand suburbs of Chicago, and also has a strong group of tenants. We anticipate that this acquisition will prove to be a very steady, profitable asset for Adventus due to the quality, location, and the tenants in the complex.
Our first property acquisition, the Elgin Chase Campus, has recently passed our first year of self managing the property. It produced net operating income (annualized) of approximately $3.0M, which met our 2013 budget, and was significantly in excess of the net operating income achieved by the previous owner in prior years.
In addition, the Elgin property has been recently appraised for audit purposes and the appraised for audit purposes and the appraised value of the property has risen to $35M from the November 2011 appraisal of $32.5M. Our initial acquisition cost was approximately $27M and Adventus owns a controlling 61.5% interest in the Elgin property.
We are moving ahead on a refinancing of the Elgin Chase Campus property loan and, in this regard, we have agreed to a term sheet with a new, major U.S. debt lender to refinance the loan at a more attractive interest rate, with a longer term and without a cash sweep component. We will provide additional details when the refinancing is completed.
We completed our second seed round equity financing on March 31, 2013, and we were able to raise equity of approximately $15M in this round. Approximately $9M was utilized for the Oak Brook Office Center acquisition and approximately $4M will be used for our third property acquisition described above.
We were partially successful in moving forward the timing of our quarterly distributions for March, 2013, by distributing cheques in the first week of May, 2013. However, we were attempting to accomplish this distribution by the end of April. We will work diligently to expedite our quarterly distributions, to have them out by the end of the following month (after the end of each quarter) commencing with the June, 2013 distribution.
With respect to the June, 2013 and subsequent distributions, all such distributions will be paid based on the 8% of $12.50 per Unit (ie. 2% per quarter). This will result in an increased distribution for investors who acquired their units at a subscription amount below $12.50 per unit. Following the closing of our 3rd Term Sheet, the distribution percentage will be increased to 8% of $14 per Unit.
One of our key goals has always been to provide liquidity to our investors at the appropriate time. While we are still aggressively pursuing a future public listing on the Toronto Stock Exchange, we have to accept that market conditions and our own internal stage of development are significant factors in respect of the timing for a TSX listing. In this regard, we have decided against pursuing a TSX IPO in 2013 and will revisit the topic in 2014 at a time when Adventus has further matured and the capital markets are more receptive to a small cap TSX IPO listing.
We are enclosing the following financial statements, which we trust you will find in order:
- Adventus Realty Trust (2012) – audited
- Adventus Capital Partners Ltd. (2012) – audited
- Adventus Realty Trust (2013 – 1st QTR) – unaudited
Last year was a very good year for Adventus Realty Trust in its initial operating year and we are hopeful that 2013 will exceed our accomplishments of 2012.
ADVENTUS REALTY TRUST
By its Trustee: ADVENTUS REALTY SERVICES INC.
Per: Rodney B. Johnston, FCA