Allied Properties Real Estate Investment Trust announces agreement to internalize property management

About this update from Allied Properties Real Estate Investment Trust

[{"type":"text","content":"\n\n\n\n\nTORONTO, June 9 /CNW/ - Allied Properties REIT (TSX:AP.UN) today\nannounced that it has entered into an agreement with Allied Canadian\nCorporation to acquire Allied Canadian's property management business, which\ninvolves the provision of property management and related services to the REIT\nand to third-party owners of commercial real estate in Toronto.\nAllied Canadian was appointed by the REIT as its property manager at the\ntime of the REIT's IPO. The principal reason for the external arrangement was\nthe fact that the REIT's initial portfolio was not large enough on its own for\nthe property management function to be undertaken profitably.\nRecognizing the very substantial growth in the size of the REIT's\nportfolio over the past two years, the Trustees of the REIT established an\nIndependent Committee comprised of Robert Martin (Chairman), Iain Ronald and\nDan Sullivan to consider the possibility of internalizing the property\nmanagement function. The Independent Committee retained Desjardins Securities\nInc. to act as its financial advisor.\nOn completion of the evaluation process by the Independent Committee and\nDesjardins Securities Inc., the independent Trustees of the REIT approved the\nacquisition for a base price of $8.5 million and an additional payment on\nMarch 31, 2007, equal to the lesser of $0.9 million and the amount, if any, by\nwhich a five-times multiple of actual EBITDA from the business in 2006 exceeds\nthe base price.\nDesjardins Securities Inc. has delivered its opinion that the acquisition\nis fair, from a financial point of view, to the REIT's unitholders. The REIT\nexpects the acquisition to increase its net operating income by approximately\n$1.9 million in 2006 and to increase its Distributable Income per unit by\napproximately five cents in 2006.\n\"This is an important step in the evolution of Allied Properties REIT,\"\nsaid Michael R. Emory, President and CEO. \"Not only will it internalize an\nimportant operating function at a time when appropriate economies of scale are\nin place, it will enable the REIT to develop additional service-based sources\nof income as it continues to grow.\"\nThe REIT expects the acquisition to close on or about July 1, 2005,\nsubject to customary conditions. The REIT will finance the acquisition with\navailable cash and a portion of the proceeds from a ...

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