October 06, 2014

Milestone Apartments REIT Announces US$40.5 Million Property Acquisition in Denver and C$100 Million Bought Deal Equity Offering

Reduces MileSouth Ownership Interest in the REIT to Approximately 29.0% Down From 37.9%

TORONTO, ONTARIO and DALLAS, TEXAS--(Marketwired - Oct. 6, 2014) -


Milestone Apartments Real Estate Investment Trust (TSX:MST.UN) ("Milestone" or the "REIT") today announced that it has entered into an agreement to purchase The Village at Legacy Ridge ("Legacy Ridge" or the "Property"), a 221-unit multifamily apartment community located in the Westminster submarket of Denver, Colorado, for a purchase price of US$40.5 million, representing an estimated year one capitalization rate of 6.31% (the "Acquisition"). The Acquisition is expected to be accretive to the REIT.

The REIT also announced that it has reached an agreement with a syndicate of underwriters co-led by BMO Capital Markets and CIBC to issue 8,700,000 trust units of the REIT (the "Units") on a bought deal basis for gross proceeds of approximately C$100 million (the "Offering"). The REIT has also granted the Underwriters an option to purchase up to an additional 1,305,000 Units on the same terms and conditions, exercisable at any time, in whole or in part, up to 30 days after the closing of the Offering (the "Over-Allotment Option"). BMO Capital Markets is the sole bookrunner on the Offering.

The Acquisition

Legacy Ridge was built in 2001 and is currently approximately 97% occupied, with average monthly rents of approximately US$1,200 per unit. The Property is located within the Westminster submarket of Denver, Colorado, 15 miles north of downtown Denver. The Interlocken Business Park, which includes 3.7 million square feet of office space and major employers such as Hunter Douglas, Sun Microsystems and Level 3 Communications, is located within 5 miles of the Property. Local shopping, dining and entertainment options near the Property include the Westminster Mall Redevelopment, a 105-acre site completed in 2013 with plans for over 600,000 square feet of retail space and restaurants, 2 million square feet of office space and a 250-room hotel, and the Flatiron Crossing Mall, a 1.5 million square foot mall with over 200 retailers anchored by Dillard's, Macy's and Nordstrom.

Similar to the Villas at Shadow Creek property in Houston, Texas, which the REIT entered into an agreement to purchase on September 15, 2014, Legacy Ridge features a higher proportion of two and three-bedroom apartment suites compared to the REIT's portfolio average, in part leading to higher average monthly rents for these assets.

As part of the purchase consideration for Legacy Ridge, the REIT will assume a fixed rate mortgage of approximately US$23.6 million, at an interest rate of 3.00% and fully amortized on a 35 year schedule maturing in October 2047. These financing terms will further decrease the REIT's weighted average interest rate and extend the maturity of its mortgage note obligations. The balance of the purchase price will be funded using proceeds raised by the Offering. The Acquisition, which is subject to customary closing conditions, is expected to close by October 30, 2014. The REIT will disclose the final financing terms of the purchase following closing of the Acquisition.

The Offering

The REIT also announced today that it has entered into an agreement to sell to a syndicate of underwriters co-led by BMO Capital Markets and CIBC including RBC Dominion Securities Inc., National Bank Financial Inc., Soctiabank, TD Securities Inc., GMP Securities L.P., Dundee Securities Ltd., Laurentian Bank Securities Inc. and Raymond James Ltd. (collectively, the "Underwriters"), on a bought deal basis, 8,700,000 Units (10,005,000 Units if the Over-Allotment Option is exercised in full) at a price of C$11.50 per Unit for gross proceeds to the REIT of approximately C$100 million (C$115 million if the Over-Allotment Option is exercised in full).

It is expected that approximately C$60 million of the proceeds from the Offering will be used to fund the equity portion of the purchase price for the acquisition of Legacy Ridge and the recently announced acquisition of Villas at Shadow Creek. The remaining proceeds (including any amounts received on the exercise of the Over-Allotment Option) are expected to be used to redeem class B limited partnership units of Milestone Multifamily Investors LP ("Class B Units") held by MileSouth Apartment Portfolio LP, an affiliated entity of Invesco Ltd. ("MileSouth").

Upon completion of the Offering, Milestone expects that MileSouth will own approximately 14,000,000 Units and 3,867,981 Class B Units, representing collectively an approximate 29.0% ownership interest in the REIT, down from approximately 37.9%. If the Over-Allotment Option is exercised in full, Milestone expects that MileSouth will own approximately 14,000,000 Units and 2,562,981 Class B Units, representing collectively an approximate 26.9% ownership interest in the REIT.

The Units will be offered in each of the provinces and territories of Canada pursuant to the REIT's base shelf prospectus dated August 27, 2014. The terms of the Offering will be described in a prospectus supplement to be filed with Canadian securities regulators. The Offering is expected to close on or about October 16, 2014 and is subject to certain conditions including, but not limited to, the receipt of all regulatory approvals including the approval of the Toronto Stock Exchange (the "TSX") and securities regulatory authorities. The Offering is not conditional upon the closing of the Acquisition.

The Units have not been, nor will they be, registered under the United States Securities Act of 1933, as amended, (the "1933 Act") and may not be offered, sold or delivered, directly or indirectly, in the United States, or to, or for the account or benefit of, "U.S. persons" (as defined in Regulation S under the 1933 Act), except pursuant to an exemption from the registration requirements of the 1933 Act. This press release does not constitute an offer to sell or a solicitation of an offer to buy any Units in the United States or to, or for the account or benefit of, U.S. persons.

About Milestone

Milestone is an unincorporated, open-ended real estate investment trust that is governed by the laws of Ontario. The REIT's portfolio consists of 57 multifamily garden-style residential properties, comprising 18,772 units that are located in 12 major metropolitan markets throughout the Southeast and Southwest United States. Milestone is the largest real estate investment trust listed on the TSX focused solely on the United States multifamily sector. The REIT operates its portfolio through its internal property management company, Milestone Management, LLC, which has more than 900 employees across the United States. Based in Dallas, Texas, TMG Partners, L.P., an affiliate of The Milestone Group, LLC, is the external asset manager of the REIT. For more information, please visit www.milestonereit.com.

About The Milestone Group, LLC

The Milestone Group is a privately-held real estate investment management company with expertise and presence in major metropolitan markets throughout the United States. The firm has corporate offices in Dallas, Texas and New York, New York with regional acquisition and management offices across the United States. Founded in 2004, The Milestone Group has a strong track record of investing in the U.S. multifamily sector, including completion of more than US$4.5 billion in multifamily transactions. For more information, please visit www.milestonegp.com.

Forward-looking information and non-IFRS measures

This news release may contain forward-looking statements (within the meaning of applicable securities laws) relating to the business of the REIT and the environment in which it operates. Forward-looking statements are identified by words such as "believe", "anticipate", "expect", "intend", "plan", "will", "may", "estimate" and other similar expressions. These statements are based on the REIT's expectations, estimates, forecasts and projections and include, without limitation, statements regarding the anticipated closing date of the Acquisition, the estimated year one capitalization rate of the Acquisition, the effect of the Acquisition on the financial performance of the REIT (including the degree to which the Acquisition will be accretive), the proposed financing of the Acquisition, the completion of the Offering, the proposed use of proceeds of the Offering and MileSouth's interest in the REIT upon completion of the Offering. They are not guarantees of future performance and involve risks and uncertainties that are difficult to control or predict. A number of factors could cause actual results to differ materially from the results discussed in the forward-looking statements, including, but not limited to, the factors discussed under the heading "Risk Factors" in the REIT's annual information form available at www.sedar.com. The forward-looking statements in this news release are based on certain assumptions, including that the economy remains stable, rental rates at Legacy Ridge will continue to grow, interest rates remain stable, the REIT will continue to have access to capital and that the REIT will satisfy all conditions to completion of the Acquisition and Offering. There can be no assurance that forward-looking statements will prove to be accurate as actual outcomes and results may differ materially from those expressed in these forward-looking statements. Readers, therefore, should not place undue reliance on any such forward-looking statements. Further, these forward-looking statements are made as of the date of this news release and, except as expressly required by applicable law, the REIT assumes no obligation to publicly update any such statement, whether as a result of new information, future events or otherwise.

"Year one capitalization rate" is not a measure recognized under IFRS and does not have a standardized meaning prescribed by IFRS. Year one capitalization rate is presented in this news release because management of the REIT believes that this measure is relevant in interpreting the purchase price of the Property. Capitalization rate, as computed by the REIT, may differ from similar computations as reported by other similar organizations and, accordingly, may not be comparable to capitalization rate reported by such other organizations.

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