Pending closure of the sale, which is expected in Q2 2019, the transaction would leave Partners with a dozen retail properties in Ontario and Manitoba.
The REIT did not disclose the purchase price, but said in its Q3 2018 financial report the Quebec assets had a carrying value of $194 million. Due to market conditions, however, Partners said in a release announcing the sale the properties are being divested for less than that amount. After mortgage and transaction expenses, the REIT expects to result in cash proceeds of $65 million.
The buyer has not been disclosed.
“In the event that the Quebec sale transaction is completed, the REIT will then own 11 retail properties in Ontario and one in Manitoba, aggregating approximately 623,000 square feet of leasable space,” says the release.
“As the REIT previously disclosed, in those circumstances the board expects it would likely consider a possible sale of either the REIT itself or such remaining 12 properties.”
Partners’ recent divestments
The release also says Partners faces similar conditions in Ontario, as well as a higher volume of retail properties on the market. As a result, it expects the potential sale price to be less than the $120-million Q3 carrying value for the properties.
The Quebec sale is the latest in a series of divestments for Partners. It put 11 Western Canada properties (in Alberta, Manitoba and B.C.) on the block early in 2018, selling all but one in two transactions.
The largest deal was announced in September, when nine of its properties were sold for about $50 million. It also sold the Mariner Square mall in Campbell, B.C., in a separate transaction. The only property left unsold from that portfolio is a retail site in Manitoba.
At the time, CEO Jane Domenico told RENX those properties had limited capacity for redevelopment or expansion. That is not the case with the Quebec portfolio, she said.
“There are some fantastic redevelopment and development opportunities,” Domenico said. “Specifically Place Desormeaux in Longueuil, Centre Le Village (in Montreal) and Saint Remi (Shopping Centre in St. Remi). This portfolio is exactly what the market is looking for.”
Partners then went on to sell the Cornwall Square Mall in Cornwall, Ont., for a reported $8.4 million. It had previously planned to redevelop that site — which had been anchored by a Sears store — with a mixed-use, multi-residential project.
Special distribution to shareholders
When it started the sale process, Partners held 34 retail properties stretching from Quebec to British Columbia, comprising about 2.3 million square feet of leasable area.
Upon closure of the Quebec transaction, Partners said it expects to make a special distribution of a portion of the proceeds to its shareholders.
It will also review the current monthly distribution of $0.015 per unit ($0.18 per unit annually) due to the reduction in the size of its portfolio. The distribution could be reduced or discontinued.