On Wednesday, Toronto-based Primaris REIT (TSX: PMZ.UN) announced $585 million in transactions pertaining to the Southgate Centre mall in Alberta and the Oshawa Centre mall in Ontario, in an early contender for the largest transaction of the year.
Primaris REIT is acquiring a 50% interest in Southgate Centre and a 100% interest in Oshawa Centre for an aggregate price of $585 million that consists of $335 million in cash, $75 million of series A units of the REIT (at $21.82 per unit), and $175 million in exchangeable preferred units in a newly formed subsidiary limited partnership.
The transaction, with CBRE and TD Securities serving as the advisors, is expected to close on January 31.
Primaris REIT did not identify the vendor, but both stakes were owned by Montreal-based Ivanhoé Cambridge, which still lists the properties under its portfolio on its website. Ivanhoé Cambridge is the real estate subsidiary of Caisse de dépôt et placement du Québec (CDPQ), the pension fund that manages investments on behalf of the Quebec Pension Plan. Both malls are currently managed by JLL.
Southgate Centre
The mall in Alberta is Southgate Centre at 5015 111 Street NW in the Malmo Plains neighbourhood of Edmonton.
The mall sits on a sprawling 39 acres of land, with site coverage of approximately 66%. It houses 846,000 sq. ft of retail space, with tenants including Hudson's Bay, Winners, Safeway, Uniqlo, Apple, Sephora, and Lululemon.
An overview of the Southgate Centre mall at 5015 111 Street NW in Edmonton, Alberta. / JLL
In recent years, a $93 million redevelopment of 260,000 sq. ft of space formerly occupied by Sears was completed in 2022.
According to Primaris REIT, Southgate Centre has a long-term in-place occupancy rate of 87.5%, a weighted average lease term (WALT) of 5.9 years, and recorded a total sales volume of $300 million for the 12-month period ending August 31, 2024.
Oshawa Centre
The mall in Ontario is Oshawa Centre at 419 King Street West in Oshawa, approximately 40 minutes east of downtown Toronto.
The mall sits on an even-more-sprawling 79 acres of land, with site coverage of approximately 47%. It houses 1,215,200 sq. ft of retail space, with tenants including Hudson's Bay, Marshalls, H&M, Uniqlo, Zara, Sport Chek, Aritzia, and Sephora. (The Regional Municipality of Durham is also a tenant.)
An overview of the Oshawa Centre mall at 419 King Street West in Oshawa, Ontario. / JLL
It has also undergone improvements relatively recently, with a $230 million redevelopment of 375,000 sq. ft and addition of 260,000 sq. ft completing in 2016.
According to Primaris REIT, Oshawa Centre has a long-term in-place occupancy rate of 73.8%, a WALT of 3.8 years, and recorded a total sales volume of $242 million for the 12-month period ending August 31, 2024.
Primaris REIT
Primaris describes itself as "Canada's only enclosed shopping centre focused REIT," with a primary focus on leading enclosed shopping centres located in growing mid-sized markets.
"Economies of scale are achieved through its fully internal, vertically integrated, full-service national management platform," the REIT says on its website. "Primaris is very well-capitalized and is exceptionally well positioned to take advantage of market opportunities at an extraordinary moment in the evolution of the Canadian retail property landscape."
The REIT was initiated formed in 2003 as Borealis Retail REIT and was sponsored by the Ontario Municipal Employees Retirement System (OMERS) — whose real estate investments are now managed through Oxford Properties. In 2009, management of the REIT was internalized, before it was then acquired by H&R REIT in 2013. On December 31, 2021, H&R REIT then spun-off Primaris REIT, which saw the Healthcare of Ontario Pension Plan (HOOPP) contribute six large-format shopping centres in exchange for 26% of the units in Primaris REIT.
According to its announcement on Wednesday, Primaris REIT says its portfolio now totals 15 million sq. ft valued at approximately $4.6 billion at Primaris' share price.
"Since December 31, 2021, Primaris has acquired $2.4 billion of leading enclosed shopping centres from five of Canada's 10 largest pension funds, with the vendors taking back equity and exchangeable preferred equity investments in the REIT," said CEO Alex Avery. "The transactions announced today improve the overall quality of our enclosed shopping centre portfolio, driving the portfolio's annual same store sales productivity from $684 per square foot as at September 30, 2024 to $736 per square foot, on a proforma basis."
"Southgate and Oshawa Centre are two market leading regional enclosed shopping centres with all of the property characteristics Primaris is targeting with its growth strategy," added President & COO Patrick Sullivan. "Both are located in large and growing markets, with access to mass transit, and with very strong sales volumes. There is significant opportunity for growth at both centres including the conversion of tenants from variable to net rent deals, leasing up vacant space and temporarily tenanted space, and optimizing former department store space."
