Primaris REIT (PMZ.UN-T) is continuing to buy premium retail properties across Canada, announcing Monday morning it has an agreement to acquire the Halifax Shopping Centre and the Annex for $370 million.
Together, the properties comprise 974,000 square feet of retail and commercial space.
The Halifax Shopping Centre has annual sales of over $1,000 per square foot, and comprises approximately 562,000 square feet on 20.9 acres of land. It is anchored by large-format stores including Walmart, Sobeys and Dollarama and also has significant densification potential.
“We are very pleased to add Atlantic Canada’s premiere shopping centre complex to the Primaris portfolio,” said Alex Avery, chief executive officer of Primaris, in the announcement. “This acquisition further demonstrates Primaris as an attractive buyer for Canadian pension fund vendors of market leading Canadian shopping centres, with multiple discussions continuing for further acquisitions.
“Primaris is uniquely positioned as a buyer, with institutional scale as the second-largest owner-operator of enclosed shopping centres in Canada with proforma assets of approximately $3.9 billion, a differentiated financial model featuring a very well capitalized balance sheet, and a clear mandate for growth.”
It has been managed by Cushman and Wakefield Asset Services.
The asset is the second major Canadian retail acquisition for Primaris in 2023. The REIT also bought the Conestoga Mall in Waterloo from Ivanhoé Cambridge this spring for $270 million – meaning it has invested $640 million in major enclosed retail facilities so far this year.
Extensive future development potential
The Halifax Shopping Centre property is designated as a future growth node by the city, which allows for a master-planning application for approximately 1,800 residential units plus a mixed-use component. Future phases of allowable development could include approximately 5,500 additional residential units.
The shopping centre has 69 per cent in-place occupancy, and 96.2 per cent committed occupancy including leases commencing over the coming months as part of the $54-million Sears redevelopment including Simons, Winners, Dollarama and PetSmart.
The centre also underwent about $70 million of upgrades, including a food court expansion, in 2017.
The facility is certified BOMA BEST, and other notable tenants include large-format Sport Chek and Zara, stores as well as Apple, Aritzia, Michael Kors, Victoria’s Secret, Browns, Nespresso, Sephora and Lululemon.
“Halifax Shopping Centre and the Annex exemplify the quality and market leading nature of Primaris REIT’s target acquisition profile. The shopping complex is extremely well located in central Halifax, adjacent to Halifax Transit’s Mumford Terminal and at the gateway to the Halifax peninsula, with a market leading position in one of Canada’s fastest growing mid-sized population centres,” said Patrick Sullivan, president and chief operating officer of Primaris, in the announcement.
“With very strong sales performance trending above $1,000 per square foot, this acquisition enhances the REIT’s portfolio value proposition with retailers, and offers a significant income growth opportunity consistent with the growth we see ahead for our existing assets.”
Annex includes major transit terminal
The Annex is an open-air centre comprising 412,000 square feet adjacent to Halifax Shopping Centre and is the site of the Halifax Transit Mumford Bus Terminal, one of the city’s busiest. It has 99.7 per cent in-place occupancy, and 93.9 per cent committed occupancy including the impact of Winners moving to Halifax Shopping Centre.
The adjoining 187,000 square foot Mumford Road Office Complex has 95.4 per cent in-place occupancy and 96.2 per cent committed occupancy.
Primaris will fund the acquisition via $200 million in cash, $45 million of series A units and $125 million of exchangeable preferred units in a newly formed subsidiary LP at a rate of six per cent.
The shopping centre and annex are currently unencumbered.
“Closing this second significant acquisition in 2023, while maintaining industry-leading credit metrics, is a testament to the strategic advantages provided by Primaris REIT’s differentiated financial model, including very low leverage, a low payout ratio and significant retained free cash flow,” Rags Davloor, chief financial officer for Primaris, said in the release.
“Our commitment to maintain an extremely well capitalized balance sheet positions Primaris as a highly credible transaction counter-party, at a time when many other groups are finding access to capital, and particularly financing, challenging.”
The transaction is expected to close on Nov. 30 pending the receipt of customary approvals. Competition Bureau of Canada approval has already been received.
The Conestoga mall transaction
The Halifax acquisition has some parallels with the Conestoga Mall, which is the leading shopping centre in the Kithener-Waterloo, Guelph and Cambridge region just west of Toronto.
The 585,000-square-foot Conestoga Mall is a regional shopping centre on 49.8 acres of land, featuring a range of major retailers including HBC, Galaxy Cinema, Sport Chek, Indigo and H&M. It is shadow-anchored by a Zehrs food store with direct access to the mall.
One key feature of the centre for Primaris was a regionally unique selection of retailers including Apple, Lululemon and Nespresso, with other notable tenants including Aritzia, Sephora, Aerie, Old Navy and RW & Co.
It had a 94.4 per cent in-place occupancy when it was acquired, and is situated on the Conestoga Station stop on the region's light-rail transit system.