There has been so much news coming out of Partners Real Estate Investment Trust in the first two months of 2012 that the company’s lawyer jokingly sent around a mock news release stating “Partners REIT is pleased to announce that it has absolutely nothing to report today.”
A quick glance at the flurry of announcements on Partners’ website would confirm that it is a REIT in a hurry. “Our objective is to grow the asset base and therefore the market cap of the company so that we get into a mid-cap versus a micro cap (level),” said Patrick Miniutti, the REIT’s President and Chief Operating Officer.
“If you look at what our peers are doing at the mid-cap level, their yields are a lot lower than ours and therefore their cost of capital is lower which basically sort of translates into you can do more deals because you have less cost of capital. That is our objective.”
Fast growth the plan
The Victoria, B.C.-based REIT is in a hurry to grow not only to access cheaper money but to also to reach a size as which institutional investors will pay attention to it. For Miniutti, that is a market capitalization of between $200 million and $250 million. “If you can get institutions to start investing and following versus retail, it drives the price.”
Miniutti figures Partners is “halfway” to that goal, a remarkable achievement considering the fact that parent company League Assets Corp. took control of the company less than two years ago.
“When we took over in June 2010 we were about a $25 million market cap and now we are somewhere close to about $130-million market cap,” he said.
League Assets Corp. founding partner and CEO Adam Gant is also CEO of Partners.
Partners has been able to grow quickly by snapping up second-tier retail properties across much of the country. On its website, the REIT describes its investment strategy as “A assets in B markets and B assets in A markets which allows it to buy well-tenanted retail properties at attractive capitalization rates.”
The strategy places it in a sweet spot relative to competing buyers, Miniutti said. “We are looking for properties that are in the $10-million to $50 million category. That is a little bit more expensive than an individual investor or a small company could buy and too small for a larger REIT or pension fund or institution to have an interest in.
“It’s a nice niche to be in and they also fall into a category of properties that we can enhance value,” he said. Moves to enhance value include everything from attracting new national tenants by taking advantage of tenant relationships the prior owner might not have had, adding space and leasing up vacancies.
In the first two months of this year, Partners has announced the acquisition of a total of seven retail properties in Alberta and Ontario.
Although separate acquisitions, most were featured in one mid-January announcement when it said it purchased five Ontario shopping centre properties and one in Alberta for approximately $108 million.
The properties illustrate Partners’ “mid-gap” B market bias: Crossing Bridge Square (Stittsville, Ont., near Ottawa) for $11.2 million; Grand Bend Towne Centre (Grand Bend, Ont.) for $9.5 million; King George Square (Brantford, Ont.) for $16.8 million; Manning Crossing (Edmonton, Alta) for $21.3 million; St. Clair Beach Towne Centre (Windsor, Ont.) for $12.1 million; and Thunder Centre (Thunder Bay, Ont.) for $39.3 million.
On Feb. 20, it announced its most recent acquisition, $21.25-million purchase of Quinte Crossroads, a new development in Belleville, Ont. consisting of 88,319 square feet of recently constructed four-building building power centre on 14.26 acres.
To date, Partners owns (directly or indirectly) 28 retail properties located in British Columbia, Alberta, Ontario, Manitoba and Quebec compromised of about 2.1 million square feet of leasable space.
It is only recently that Partners moved beyond its original base of Ontario and Quebec and Miniutti said the REIT is open to acquiring properties anywhere in Canada. “We will continue to look in all the provinces and whatever makes reasonable sense we will do.”