Melcor Real Estate Investment Trust (MR-UN-T) has an agreement to acquire a 283,235-square-foot retail power centre containing 15 buildings in Grande Prairie, Alta., for $54.8 million.
The property is an open retail complex located on a 33.3-acre site at 108th Street (Highway 40/43) and 100th Avenue (Highway 43), a regional destination corridor. It has approximately 2,400 feet of highway frontage.
The purchase will increase the gross leasable area of Melcor’s portfolio by almost 10 per cent, to 3.21 million square feet, and $766.5 million of gross book value.
“This acquisition again demonstrates Melcor REIT’s ability to execute on our growth strategy,” said Darin Rayburn, Melcor’s president and chief executive officer, in a release. “This latest acquisition increases our portfolio gross leasable area by 9.7 per cent and is expected to be immediately accretive to AFFO per unit.
“The property is 98.9 per cent occupied with a complementary mix of tenants. This acquisition is an important step in building value for unitholders and demonstrates the strong accretive growth potential of the REIT.”
RONA, Cineplex, London Drugs tenants
The centre was constructed in phases between 1997 and 2006 and has parking for 1,264 vehicles.
The property is leased to 29 tenants (including one tenant in the fixturing stage), and has a weighted average lease term of 4.4 years. Known as the RioCan Centre Grande Prairie, It is shadow-anchored by a Walmart Supercentre and a Save On Foods.
Key tenants include a 40,145-square-foot RONA, London Drugs and a Cineplex Odeon theatre.
As part of its financing for the acquisition, the REIT will issue $40 million of convertible debentures on a bought-deal basis with up to an additional $6 million over-allotment option. The debentures will have a coupon of 5.1 per cent, a conversion price of $8.90 and a maturity date of Dec. 31, 2024.
The offering is expected to close on or about Oct. 29.
The balance of the purchase price will be funded by a combination of proceeds of a concurrent private placement and a draw on the REIT’s revolving credit facility.
Melcor private placement
The private placement involves between $10 and $15 million of class-B LP units which will be issued to Melcor Developments Ltd. (MRD-T) by Melcor REIT Limited Partnership.
The units will be valued at a 1.5 per cent premium to the five-day average closing unit value on the TSX on the trading day prior to closing of the acquisition.
The private placement is conditional upon closing of the acquisition.
Following the closing, Melcor intends to obtain approximately $35.6 million of new mortgage financing for the property.
This will facilitate redemption of its series 5.50 per cent, $34.5 million in convertible debentures which are currently outstanding and scheduled to mature on Dec. 31, 2019.
This is the first major transaction for Melcor REIT with Rayburn at the helm. He assumed the president and CEO positions on Oct. 1 after Andrew Melton stepped down as part of a planned succession.
Rayburn is now CEO and president of both the REIT and Melcor Developments.
About Melcor Developments Ltd.
Melcor is a diversified real estate development and asset management company in both residential and commercial sectors. Melcor develops and manages mixed-use residential communities, business and industrial parks, office buildings, retail commercial centres and golf courses.
Melcor owns a well-diversified portfolio of assets in Alberta, Saskatchewan, British Columbia, Arizona and Colorado.
Melcor has been focused on real estate since 1923. The company has built over 140 communities across Western Canada and today manages over four million square feet in commercial real estate assets and over 600 residential rental units.
Melcor’s headquarters are located in Edmonton with regional offices throughout Alberta and in British Columbia and Phoenix.