Weekly Real Estate News
Summary
Morguard and Morguard North American Residential REIT said November 2 that their proposed C$1.1 billion investment in a Canadian apartment portfolio has become a firm agreement after due diligence and the waiver of purchaser conditions. The purchase covers an approximately 26% undivided interest in 91 properties with 12,302 apartments. The transaction has not closed and still requires CMHC and lender approvals.
A previously announced billion-dollar apartment investment by Morguard and Morguard North American Residential REIT has advanced to a firm agreement, marking a major step toward the Canadian real estate companies’ acquisition of a minority interest in a large institutional rental-housing portfolio.
In a November 2 announcement issued at 5:15 p.m. Eastern, the companies said due diligence was complete, purchaser conditions had been waived and the allocation of individual property interests between the two buyers had been finalized.
The proposed purchase represents approximately a 26% undivided interest in 91 Canadian apartment properties containing 12,302 suites. The gross purchase price is approximately C$1.1 billion before closing costs. All dollar amounts in this article are Canadian unless otherwise stated.
The deal is not yet closed. Morguard expects a single-tranche closing subject to approval from Canada Mortgage and Housing Corporation (CMHC) and lenders. No closing date or exact legal completion time has been confirmed.
From February proposal to November firm agreement
Morguard and its residential REIT originally announced a strategic relationship with TD Asset Management on February 25. At that stage, the companies described an approximately C$1 billion investment representing about 20% of a 106-property portfolio with more than 15,500 suites. The November announcement supersedes those preliminary transaction parameters.
The updated deal involves 91 properties and 12,302 suites. Morguard Corporation is expected to acquire interests in 31 properties comprising 4,728 suites for C$621 million, while Morguard Residential REIT is expected to acquire interests in 60 properties comprising 7,574 suites for C$478 million.
The properties are in Ontario, Alberta, Quebec and Nova Scotia. The portfolio includes established rental buildings and selected recently delivered rental developments. The acquisition gives the companies minority ownership interests in the underlying assets; the announcement does not say they are buying 91 entire buildings outright.
Financing includes insured mortgages and vendor credit
The companies expect to fund the transaction through cash on hand, assumed mortgages, approximately C$225 million in vendor financing and short-term borrowings. The assumed mortgages are insured by CMHC and have an approximate loan-to-value ratio of 46%, according to the announcement.
Morguard had paid a C$20 million nonrefundable deposit as of September 30. Management expects the investment to be immediately accretive to both buyers, but that is a projection and depends on closing and subsequent performance.
The use of vendor financing and existing mortgages illustrates the capital structuring behind large multifamily portfolio investments, particularly when a buyer is acquiring a partial ownership stake rather than purchasing an entire property portfolio.
Management mandate already reshapes Morguard’s scale
Separately from the pending ownership transaction, Morguard said it transitioned property-management responsibility during the second and third quarters for a broader TD Asset Management portfolio valued at approximately C$5.4 billion. That management mandate covers 109 properties and roughly 15,800 suites, a larger group of assets than the 91 properties included in the proposed ownership investment.
Following the management transition, Morguard reported approximately C$24.1 billion in owned and managed assets. Its residential platform comprises C$12.3 billion in assets, 164 properties and 33,213 suites across Canada and the United States.
For investors, the distinction matters: the November 2 milestone is the firming of a previously announced investment agreement, not the closing of a new C$1.1 billion purchase. The expanded property-management responsibilities have already been implemented, while the minority-stake acquisition remains conditional.
Primary sources: Morguard’s November 2 transaction update; Morguard’s February 25 initial agreement announcement.
Featured photograph: Illustrative residential towers, not identified as properties in the transaction. Photo: Amir Arsalan Shamsabadi/Unsplash.
