Primaris REIT (PMZ-UN-T) is kicking off the new year by acquiring interests in the Southgate Centre in Edmonton and Oshawa Centre in the Greater Toronto Area, and selling the Sherwood Park Mall in Edmonton.

The total value of the transactions, when combined with the closing of the previously announced sale of Edinburgh Market Place in Guelph, just outside Toronto, is $724 million.

“Southgate and Oshawa Centre are two market leading regional enclosed shopping centres with all of the property characteristics Primaris is targeting with its growth strategy. Both are located in large and growing markets, with access to mass transit, and with very strong sales volumes,” Patrick Sullivan, president and COO of Primaris, said in the announcement Wednesday morning. 

“There is significant opportunity for growth at both centres including the conversion of tenants from variable to net rent deals, leasing up vacant space and temporarily tenanted space, and optimizing former department store space.”

The Southgate and Oshawa Centre acquisitions

Primaris is acquiring a 50 per cent interest in Southgate Centre and 100 per cent of the Oshawa Centre for $585 million. They have been owned and operated by Ivanhoé Cambridge, which has been selling some of its retail properties as the firm continues reallocating its investment mix.

The transaction will be satisfied by a combination of cash and equity; $335 million of cash, $75 million of trust units (at $21.82 per unit), and $175 million of exchangeable preferred units in a new limited partnership.

The sales are expected to close on Jan. 31.

Sherwood Park Mall, in the community of Sherwood Park in the Edmonton metro area, is being sold for $107 million. The Edinburgh Market Place in Guelph was sold for $31.5 million. 

Southgate Centre is an 846,000-square-foot super-regional enclosed shopping centre at the intersection of Whitemud Drive Expressway (Hwy. 2) and 111 St. NW. It draws shoppers from across the greater Edmonton area and beyond.

It had same-store sales of $1,375 per square foot and total CRU sales of $300 million for the 12-month period ending Aug. 31, 2024. The mall boasts 91 per cent in-place occupancy and 95.8 per cent committed occupancy.

It underwent a $93-million, 260,000-square-foot redevelopment of the former Sears space in 2022.

The BOMA BEST Gold-certified property includes large-format tenants Hudson’s Bay, Winners, Safeway, London Drugs, Sporting Life, Uniqlo, and Crate & Barrel; and other notable tenants such as Apple, Ariztia, Sephora, Lululemon, Nespresso, Browns and Alo.

The Oshawa Centre is a regional enclosed shopping centre in the growing city of Oshawa, about a half-hour east of Toronto. It offers accessibility from highways 401 and 407 as well as the Greater Toronto GO Transit system.

The 1,215,200-square-foot mall includes approximately 100,000 square feet of office space and sits on 79 acres of land. Site coverage is 47 per cent.

It had $758-per-square-foot same store sales and total CRU sales of $242 million for the 12-month period ending Aug. 31, 2024. The mall has 93.2 per cent in-place occupancy and 92 per cent committed occupancy.

A $230-million, 375,000-square-foot redevelopment was completed in 2016, which included the addition of 260,000 square feet of space and a food court expansion.

The mall is BOMA BEST Platinum certified.

Its large-format tenants include Hudson’s Bay, Marshalls, H&M, Uniqlo, Zara, and Sport Chek; and other notables including Aritzia, Sephora, Browns, and Nespresso.

Sale of the Sherwood Park mall

The sale of Sherwood Park Mall is the REIT’s first enclosed shopping centre disposition since it's inception. The buyer was not identified.

Sherwood Park Mall produced total CRU sales volume of $39.3 million and same-store sales of $551 per square foot, for the 12-month period ending Aug. 31.

The Sherwood Park Mall is expected to close on Feb. 13.

The sale is part of a capital recycling initiative consistent with Primaris' "strategy of focusing on market leading enclosed shopping centres located in growing Canadian markets," the announcement states.

Proceeds from this and the dispositions of three open-air retail centres (in Winnipeg, Calgary and the Guelph property) during 2024 totalled $187 million. Primaris is allocating the proceeds toward future acquisitions and general trust purposes.

The three newly announced transactions remain subject to standard closing conditions.

Recent Primaris transaction activity

“Acquiring these high-quality assets, while maintaining industry leading credit metrics, is a testament to the strategic advantages provided by Primaris’ differentiated financial model. Our commitment to maintain an extremely well capitalized balance sheet positions Primaris as a highly credible transaction counterparty, enabling continued growth,” Rags Davloor, Primaris’ chief financial officer, added.

Primaris has been one of the busiest commercial real estate trusts in recent years, as it has built and adjusted an extensive portfolio of major Canadian retail centres.

“Since Dec. 31, 2021, Primaris has acquired $2.4 billion of leading enclosed shopping centres from five of Canada’s 10 largest pension funds, with the vendors taking back equity and exchangeable preferred equity investments in the REIT,” Alex Avery, the chief executive officer of Primaris, said in the announcement.

“The transactions announced today improve the overall quality of our enclosed shopping centre portfolio, driving the portfolio’s annual same store sales productivity from $684 per square foot as at Sept. 30, 2024 to $736 per square foot, on a proforma basis. 

“Consistent with prior acquisitions, these properties enhance the REIT’s value proposition with retailers, and offer a significant income growth opportunity consistent with the growth we see ahead for our existing assets.”

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