Canada's largest residential real estate investment trust has agreed to sell its mobile-home business to an entity controlled by TPG Real Estate, and the United States investment giant said it plans to expand the housing portfolio north of the border.

Canadian Apartment Properties REIT or CAPREIT said TPG has agreed to purchase the business for $740 million, or 542 million U.S. dollars. CAPREIT's manufactured home portfolio includes 12,138 residential lots across 75 sites throughout Canada.

"TPG Real Estate has advised CAPREIT that, as a longstanding investor in the Canadian real estate sector, it intends to partner with the existing team to manage and grow the MHC portfolio going forward," CAPREIT President and CEO Mark Kenney said in a statement.

The purchase price will be paid through an interest-only vendor take-back loan of $140 million at 3% per annum for a five-year term, with the remaining $600 million paid in cash.

CAPREIT said it will use the net sale proceeds to repay the outstanding balance on its revolving credit facility that stood at $187 million on June 30.

The REIT also said it will also look to use the cash influx to fund future acquisitions of rental properties in Canada that fit its investment and general business purposes, which may include capital expenditures, debt repayment and the repurchase of its own units.

"We intend to use the net proceeds from this strategic sale to strengthen our balance sheet, enhance our liquidity and further fuel our high-grading capital allocation strategy," said Julian Schonfeldt, chief investment officer of CAPREIT, in a statement.

The REIT that owns more than 45,000 residential apartments across Canada has been looking to reduce the age of its portfolio by selling off older buildings and buying newer ones.

"This pivotal transaction is not only providing CAPREIT with a significant amount of capital, but it also increases management's focus as a pure play apartment REIT," said Schonfeldt

In a May filing, the REIT said that as of March 31, its MHC portfolio was 95.9% occupied with an average monthly rate of $447.

It estimated the portfolio's fair value at $708 million at the end of the first quarter based on a 6.1% capitalization rate. The mobile home portfolio accounts for 5% of CapREIT's Canadian asset base and 5.8% of its net operating income.

The transaction is subject to compliance with the Competition Act and other closing conditions but the REIT expects the deal to close in the fourth quarter.

San Francisco-based TPG's real estate division was founded in 2009 and has 18 billion in U.S. dollars invested over with multiple strategies, including private equity, core plus, and residential and commercial debt.

Colliers Capital Markets | Canada acted as the advisor to CAPREIT on the sale of the $740m Canadian MHC Portfolio to TPG Real Estate.