Canadian Real Estate Investment Trust has purchased another 25% interest in parts of the Dartmouth Crossing Shopping Centre for $41 million, increasing its holding in the open air shopping centre to 75%.
CREIT had owned a 50% interest in portions of Dartmouth Crossing made up of fully developed income producing property and future development land. Approximately 600,000 square feet of leasable area (at 100%) is included in the deal and CREIT continues to own a 50% interest in the future development of land related to the property.
The purchase price of $41.0 million was partially settled by the assumption of $20.2 million of first mortgage debt, carrying an interest rate of 5.4% and a term to maturity of 1.4 years. The balance of the purchase price was funded through CREIT’s bank facility.
Inclusive of space directly owned by retail anchors (a list that includes Wal-Mart, Costco, Home Depot and Empire Theatres) the shopping centre is at the moment made up of 1.3 million square feet of retail and commercial space.
A Player in Halifax
Although CREIT has holdings across Canada, the company is a major presence in the Halifax Regional Municipality (HRM), owning a portfolio of office, industrial and retail properties there. About 14% of CREIT’s net operating income is earned in the Halifax region.
“It’s a market that we have been in for a long time and we are familiar with,” said Adam Paul, CREIT’s Executive Vice President, Investments and Leasing. An attraction of East Coast cities such as Halifax is that they have not gone through the highs and lows of many other Canadian metropolitan centres over the past decade or so.
“While it is not as large of a market as some of the other markets we are invested in, we have done very well over a long period of time and part of that can be attributed to the stability of the economic environment in Halifax,” he explained. “It has been more stable than Calgary or Toronto or most other cities. For us, what we are looking for is a high-quality portfolio to deliver steady growth over a long period and our Halifax portfolio has delivered that.”
CREIT would add further to its Halifax area assets if it could, but it is finding it difficult to make acquisitions in the region given its status as a major property owner already. “One of the challenges that we will have going forward in Halifax is that our opportunities will be limited as a result of our current position in the market relative to its overall size.”
To illustrate his point, he brings up Dartmouth’s Burnside Park, the largest industrial park in Atlantic Canada, where CREIT already owns about 20% of that development. “To continue to add to that is more difficult than it is in a market where you may own two percent of the inventory,” he said.
Paul said that CREIT sees growth in all of the major markets in Canada. Currently about two-thirds of its portfolio is in Ontario and Alberta, primarily the Greater Toronto Area, Calgary and Edmonton. “Because of the size of those markets and our current position, we have seen more opportunities there and we have added assets there but our continued focus is on all of the major markets in Canada.”
Steady Pace of Investment for CREIT
In 2011, CREIT invested about $300 million in income producing property and so far this year it is close to another $300 million worth of acquisitions. “We are a company that doesn’t set targets and if we can’t find the right assets we won’t buy anything.” Suitable acquisitions are high quality assets that will lease well over the long term and where we can increase net operating income “over a reasonable period of time.”
The company also transferred approximately $40 million of property from its development program to its income producing portfolio and expects to have more assets coming out of its development stream later this year.
CREIT is invested in three asset classes across the country – office, retail and industrial, with a portfolio of more than 190 properties with more than 22 million square feet of leasable space.