Toronto REIT Announces Major Mall Deal in One of Canada's Fastest-Growing Markets
Toronto REIT Announces Major Mall Deal in One of Canada’s Fastest-Growing Markets
Toronto-based Primaris Real Estate Investment Trust has agreed to acquire two Halifax shopping facilities in a $370 million deal, the second major announced transaction of 2023.
The REIT, which started publicly trading just under two years ago, will have a proforma portfolio of 37 properties, or 12.5 million square feet, valued at approximately $3.9 billion, with deals for the Halifax Shopping Centre and the Annex in Nova Scotia.
“Halifax Shopping Centre and the Annex exemplify the quality and market leading nature of Primaris REIT’s target acquisition profile. The shopping complex is extremely well located in central Halifax, adjacent to Halifax Transit’s Mumford Terminal and at the gateway to the Halifax peninsula, with a market leading position in one of Canada’s fastest-growing mid-sized population centres,” said Patrick Sullivan, president and chief operating officer of Primaris, in a statement.
Halifax is experiencing significant population growth, and has been one of Canada’s top five fastest-growing areas for the past four years. The region’s population is expected to grow 18.4% by 2033, outpacing the national average of 13.6% during that time, according to the statement from Primaris.
The deal is the second major transaction for Primaris to announce in 2023 after the REIT paid $270 million to buy Conestoga Mall in Waterloo from the real estate arm of the Caisse de dépôt et placement du Québec.
“Closing this second significant acquisition in 2023 while maintaining industry-leading credit metrics is a testament to the strategic advantages provided by Primaris REIT’s differentiated financial model, including very low leverage, a low payout ratio and significant retained free cash flow,” said Rags Davloor, chief financial officer of the REIT, in the statement.
Area’s Top Mall
The Halifax Shopping Centre is the top enclosed mall in Halifax, with 562,000 square feet on 20.9 acres. The mall had $1,012 per square foot of same-store sales and annual all-store sales volume of $260.8 million as of Sept. 30, Primaris said in the statement.
The mall has 69% in-place occupancy and 96.2% committed occupancy, including executed leases commencing over the next few months as part of the Sears redevelopment, including with tenants such as Simons, Winners, Dollarama and PetSmart, according to the statement.
The Annex property is a 412,000-square-foot open-air facility next to the Halifax Shopping Centre, almost 100% currently leased. The site is home to the Halifax Transit Mumford Bus Terminal, one of the city’s busiest terminals. It is designated as a future growth node by the city, with an application for approximately 1,800 residential units with mixed-use components and future phases of roughly 5,500 residential units.
“Primaris is uniquely positioned as a buyer, with institutional scale, as the second largest owner-operator of enclosed shopping centres in Canada,” said Alex Avery, chief executive of Primaris, in a statement on the deal.
The deal, expected to close on Nov. 30, is being funded with $200 million in cash. Another $45 million of units of the trust and $125 million of 6% exchangeable preferred units are being issued.
Brad Sturges, an analyst with Raymond James, said as the dominant mall in one of Canada’s fastest-growing cities, the deal leaves room for future growth and value creation.
“The REIT’s Halifax Shopping Centre and The Annex purchase hits several key investment metrics for Primaris, including strong competitive positioning as the local market dominant mall, significant net operating income growth potential, other avenues available to create value and recent capital improvements completed that reduce near-term, future maintenance expenditure requirements,” said Sturges in a note to investors.
Sturges said the going-in capitalization rate of the deal is expected to be in the low 6% range, while future net operating growth in the next three to five years may push the stabilized yield to over 7%.
For the Record
Desjardins Capital Markets, TD Securities and CBRE Canada acted as advisers to Primaris REIT on the deal.
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