Crombie REIT (CRR.UN-T) will sell an 89 per cent, non-managing interest in 26 retail properties across Canada to an undisclosed U.S. private equity group. The sale price for the interest in the portfolio of mainly grocery-anchored properties is $161.6 million.
New Glasgow, N.S.-based Crombie will retain an 11 per cent ownership and will continue to manage and operate the properties, the trust said in a release Thursday morning. The buyer has waived due diligence on the 26 assets, but is still conducting diligence on an additional three assets – for a total of 29 properties if the entire transaction is completed.
The aggregate purchase price would be approximately $190.9 million.
The portfolio comprises approximately 883,167 square feet of primarily free-standing, grocery-anchored properties (Sobeys and its related banners). All are located in secondary or tertiary markets in 10 Canadian provinces and territories.
The sites range from an 8,992-square-foot Foodland in Sheet Harbour, N.S., to the Fairview Plaza in Lethbridge, a 63,514-square-foot shopping centre anchored by Safeway.
Crombie actively recycling capital
Crombie says the transaction is part of its previously announced plan to recycle capital from the sale of non-core and/or lower-growth assets. None of the 29 assets in the transaction are included in Crombie’s mixed-use development pipeline.
“This transaction is another example of our team’s solid execution against strategy,” said Don Clow, president and CEO, in the release. “Such partial dispositions at pricing in line with IFRS fair values highlight the quality and value of our portfolio and demonstrate our attractiveness as a strong managing partner.”
As such, the transaction is the third significant sale Crombie has made in the past year, in addition to some smaller divestments. When this deal closes the trust will have transacted on about $374 million in properties (at the buyers’ shares).
Crombie is in the midst of a multi-year development and redevelopment plan during which it plans to spend about $500 million at its core properties and new projects.
Among the largest are two joint ventures in which it partnered with Prince Developments on mixed-use, multi-residential developments in Montreal and in suburban Oakville, just outside Toronto. Those two projects alone are valued at about $402 million. Both the sites are anchored by, or contain, an existing Sobeys grocery store.
About the properties
All the properties in the latest transaction also feature long-term leases with Sobeys, under a variety of its retail banners. Crombie will head lease the properties from a new, jointly owned venture with terms mirroring those of the Sobeys leases.
Among the properties included in the portfolio are (click here for a PDF of all 29 properties):
* 151 Church St., in Antigonish, N.S., 51,272 sq. ft., anchored by Sobeys;
* 105-107 Catherwood St., in Saint John, N.B., 45,916 sq. ft., anchored by Lawtons;
* 3156 Bird’s Hill Rd. E., in St. Paul, Man., 39,193 sq. ft., anchored by Sobeys;
* 410-610 Big Rock Lane in Okotoks, Alta., 41,844 sq. ft., anchored by Safeway;
* 215 Park Ave. W., in Chatham, Ont., 48,000 sq. ft., anchored by Sobeys;
* 11200 8th Street in Dawson Creek, B.C., 42,754 sq. ft., anchored by Safeway;
* Fairview Plaza in Lethbridge, Alta., 63,514 sq. ft., anchored by Safeway;
* 395 Sirois Ave., in Rimouski, Que., 47,135 sq. ft., anchored by IGA Extra;
* 8980 Lacroix Blvd., St. Georges de Beauce, Que., 44,247 sq. ft., anchored by IGA.
As part of its financing, the buyer will assume its share of 10 mortgages under the new jointly owned venture, with Crombie remaining as guarantor.
Net proceeds to Crombie are estimated to be approximately $107.8 million, or approximately $123.6 million if the additional three properties close.
“Use of proceeds will be directed towards pursuing our value creating mixed-use major development pipeline, funding of capital investments in Sobeys occupied properties, repaying existing indebtedness and general trust purposes.”
Both transactions are to close on or about April 25 pending the customary approvals and completion of diligence.
BMO Capital Markets Real Estate is acting as advisor to Crombie on the transaction.