Plaza Retail REIT has acquired interests in three properties in Quebec and Ontario, and is continuing to develop and redevelop several other properties.
“There are a number of players that are looking to readjust their portfolio mix, which probably makes it easier for us to acquire some assets that need work,” Plaza president and chief executive officer Michael Zakuta told RENX.
“We’re not going to acquire finished, polished products. That’s not our business. We’re looking to acquire shopping centres that need redevelopment, empty boxes, malls that can be converted to open-air, and land for new development.”
Plaza is a Fredericton, N.B.-headquartered, open-ended real estate investment trust which owns and develops retail properties. As of the end of September 2021, its portfolio included interests in 255 properties totalling approximately 8.6 million square feet, as well as additional lands held for development.
Plaza will continue to focus on working with as many essential needs retailers as it can in stand-alone, small-box retail outlets and open-air retail properties in Atlantic Canada, Ontario and Quebec, according to Zakuta.
He’s confident government-imposed lockdowns and restrictions to help control the latest wave of COVID-19 will be short-lived and feels good about Plaza and its tenants.
“We’re in the fifth wave now, but retailers that are growing are looking right through that,” he said. “Our core business is functioning pretty well.”
Plaza Retail REIT acquisitions
Plaza’s most recent acquisitions were in markets the REIT is familiar with, and which feature good tenant demand.
Plaza acquired a 50-per-cent interest in a property on St-Joseph Boulevard in Drummondville, Que. anchored by a newly opened Maxi grocery store. Plaza intends to redevelop 34,000 square feet of vacant space and add additional retail space so it will have a gross leasable area of 81,000 square feet upon completion.
The REIT acquired a 37.5-per-cent interest in a property at the corner of Royaume Boulevard West and Talbot Boulevard in Chicoutimi, Que. It will be developed into a 90,000-square-foot retail site, for which significant pre-leasing is in place.
Plaza also acquired a 50-per-cent interest in a property on Mapleview Drive West in Barrie, Ont. The land is intended for a 60,000-square-foot grocery-anchored development, the majority of which has been pre-leased.
Zakuta said at this point Plaza isn’t announcing the identity of the new tenants.
The acquisitions involve local partners.
“We have regional partners all over the place that we work with,” said Zakuta.
Development and redevelopment projects
Plaza continues to execute on existing development and redevelopment projects.
The first phase of the redevelopment of the seven-store, 197,000-square-foot Tri-City Plaza, at the interchange of Highway 401 and Hespeler Road, in Cambridge, Ont. is expected to be completed this spring. Phase two will start in February.
Plaza bought out the lease of a non-operating, large-box tenant at the nine-store, 180,000-square-foot Metro-anchored Northern Avenue Plaza in Sault Ste. Marie, Ont. It’s redeveloping the store for multiple tenants.
Phase one of the redevelopment is anchored by Princess Auto and is under construction. Subsequent phases are expected to start late this year.
The construction of a 46,000-square-foot grocery-anchored development on Taunton Road in Oshawa has started and is expected to be completed in mid-2023.
Plaza has completed leases on 54,000 square feet of additional space and anticipates starting construction shortly on the third phase of the 19-store, 125,500-square-foot Marshalls, HomeSense and Princess Auto-anchored Plaza des Laurentides in the Montreal suburb of Saint-Jérôme. The development is expected to be completed in Q1 2023.
Further acquisitions, development and dispositions
“We have a lot of stuff in the pipeline under contract, stuff that we’ll hopefully pursue, and stuff that we own and are working through permitting, which is a challenge today,” said Zakuta, looking further into the future.
Plaza has two properties listed as for sale on its website: two acres of development land east of Moncton, N.B.; and a 2,376-square-foot property leased to PFK (Kentucky Fried Chicken) at 620 Rue Notre-Dame Ouest in Victoriaville, Que.
“We’re actively selling what we call non-core properties that are typically old QSRs (quick-service restaurants) that fall into two categories,” said Zakuta. “There are some where their highest and best use isn’t a QSR, but some type of residential. We can sell those at a highest and best use price.
“The others are QSRs that we think can be organized differently and are too small for us.”
Plaza’s financial performance
Plaza trades on the Toronto Stock Exchange and had a market cap of $480.2 million on Jan. 19 when its unit price closed at $4.67. That’s up almost 30 per cent from a year earlier.
Net operating income (NOI) was $18.08 million in the third quarter ended Sept. 30, up 2.5 per cent from the same quarter a year earlier. NOI was up 7.9 per cent to $54.59 million through nine months year over year.
Total rent collections, including government contributions under the Canadian Emergency Commercial Rent Assistance program, were 99.4 per cent in the third quarter. The occupancy rate was 96.2 per cent and Plaza has been actively working on backfilling empty space.
“For the type of portfolio we operate, you’re not going to get much higher than that,” Zakuta said of the occupancy rate.
Zakuta said Plaza’s liquidity has never been as high as it is now, and it’s sufficient to carry out its program.
“We’ll continue to recycle capital and sell some of the small stuff and take those funds and invest them in new deals that should ultimately give us higher yields.”