ING sells off Canadian industrial property holdings
REAL ESTATE REPORTER
ING Groep NV has sold its Canadian industrial real estate portfolio to KingSett Capital and Alberta Investment Management Corp. (AIMCo.) in a $2-billion deal.
The industrial properties - warehouses and factory spaces, for the most part - were owned by Summit REIT before the Dutch giant bought it six years ago for $2.1-billion cash. This deal may value the portfolio at roughly the same amount, but also includes the debt of the Canadian real estate holdings.
The portfolio is the largest in Canada with more than 450 properties, although most of the buildings are rated "B" and "C" in quality and in need of upgrading. The deal has been in the works for months, and kept many companies on the sidelines as they tried to make their bids work.
"It goes to show that there's a substantial amount of money out there seeking properties - and not just the high-quality ones," Jeffrey Roberts, an analyst at Desjardins Securities, said Friday.
"This portfolio includes a lot of fixer-uppers. But it's worth it if you're willing to put in the time and effort to work on it."
ING put most of its global real estate portfolio on the market this year to help pay down its government aid. It received more than $13.5-billion in emergency payments through the recession and has been selling assets to bolster its balance sheet and repay the loan.
Earlier this year, insiders believed a new owner would form a new real estate investment trust through an initial public offering. But with new offerings receiving a cool reception amid turmoil in global markets, that option seems to be off the table.
"This deal shows there's a good demand for real estate in this country and I would hope that the new owners' exit strategy would be to form a REIT down the road," said Michael Smith of Macquarie Securities, who said Canada lacks a large industrial publicly-traded company.
Neither Canadian company, which have formed a joint venture to manage the portfolio, could be reached for comment. AIMCo is an Edmonton-based fund manager owned by the Alberta government that manages $69-billion in assets for pensions, endowments and government funds.
KingSett is a private Toronto-based fund manager focused on office, retail and industrial properties in Canada's major markets.
A second deal was announced Friday, with the Alberta pension fund and Ontario money manager buying the portfolio's manager, ING Real Estate Canada, for an undisclosed price.
"As we focus on improving the performance of the banking and insurance businesses, managing risk and our business portfolio remain important priorities," said Jan Hommen, chief executive officer of ING Groep. "This transaction is in line with ING's stated objective of reducing its exposure to the real estate industry."
