Ottawa Citizen

Choice Properties REIT unloading portfolio of 27 properties for $426M

- COLIN MCCLELLAND

Choice Properties Real Estate Trust is selling a portfolio of Loblaw grocery stores and warehouses across the country, bringing some relief to a tight commercial real estate market that has seen sales drop amid a scarcity of large portfolios.

The $426-million Choice Properties deal includes 27 standalone retail properties and three distributi­on centres in smaller towns in every province and territory except Prince Edward Island and Nunavut, the company said in a statement.

The buyer wasn’t named in the transactio­n that’s due to close by Sept. 30, according to Toronto-based Choice Properties, which has about $9.7 billion in assets. The portfolio is being sold for “slightly above” its carrying value and proceeds will be used to pay debt, it said.

“Along with the recent issuance of equity, this transactio­n further strengthen­s our balance sheet by reducing leverage and providing additional capacity to fund our significan­t developmen­t program,” Rael Diamond, Choice Properties president and CEO, said in the statement.

Loblaw Companies Ltd. is Choice Properties principal tenant across more than 750 retail, industrial, office and commercial assets, the trust said. Other tenants include Loblaw subsidiary Shoppers Drug Mart as well as Canadian Tire, Winners, HomeSense and Dollarama. Loblaw transferre­d its interest in Choice Properties last year to its parent firm George Weston Ltd.

The deal comes as retail property markets eased in Toronto and Vancouver during the second quarter, according to a report by Colliers Internatio­nal, a Toronto-based real estate services company.

“Retail continues as a less-favoured asset class than it was in previous years, with little activity occurring of note,” James Glen, Colliers vice-president, said of the Vancouver market.

“Various properties have been offered to the marketplac­e in one manner or another, but potential buyers are looking with greater scrutiny, and vendors to date have been largely unmoved in their pricing expectatio­ns,” Glen said.

However, the quarter saw increased demand for industrial space reflected in continued optimism in Montreal and higher prices around the Greater Toronto Area, according to Colliers.

“The industrial market is now starting to witness rental rates pushing into double digit figures for prime warehouse space for the first time in the GTA,” Colliers’ Tim Loch said. “This is predominan­tly due to the tremendous lack of supply within the market for both quality spaces and large blocks of availabili­ty.”

In Calgary, demand for good quality assets remained strong despite the impact of an oil-dependent economy hurt by low crude prices, at least until the recent drone strikes on Saudi Arabia. Some investors are taking a waitand-see approach, Colliers said.

“Institutio­nal investors remain cautious about office assets and their shift in focus toward other asset classes has kept these market segments competitiv­e,” Mark Berestians­ky, managing director of Colliers in Calgary, said in the report. “The change in provincial leadership has investors waiting to see what new policy initiative­s will be unveiled and how it will impact economic developmen­t.”

Meanwhile, foreign investment in Canadian commercial real estate plummeted 70 per cent in the year’s first six months compared with last year’s first half amid a lack of asset availabili­ty, according to data from Altus Group Ltd. reported by Bloomberg.

When including Canadian buyers, the tally falls by 28 per cent, it said. Sales of rental apartments increased while those of retail properties fell, the report showed.

Sales to foreigners declined to $1.5 billion from $5 billion a year ago as top-tier office buildings or rental apartments in urban areas remained in short supply, according to Raymond Wong, vice-president of data operations at Altus.

The total will rise as announced deals close in the coming months, Altus said.

Financial Post cmclelland@postmedia.com

 ?? COLE BURSTON/BLOOMBERG ?? Choice Properties is selling 27 retail properties and three distributi­on centres, including Loblaw grocery stores.
COLE BURSTON/BLOOMBERG Choice Properties is selling 27 retail properties and three distributi­on centres, including Loblaw grocery stores.

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