Primaris REIT’s $370-million acquisition of the Halifax Shopping Centre and the adjacent Annex from the Ontario Pension Board last month was a great fit for the Toronto-based trust.

“It was an off-market deal, like most significant transactions in the current environment,” Primaris chief executive officer Alex Avery told RENX. “There’s not a lot of broadly marketed large asset sales going on, given the volatility in the capital markets these days.”

Primaris (PMZ-UN-T) is focused on building a portfolio of market-leading shopping centres in medium-sized, high-growth cities across Canada and Halifax Shopping Centre and the Annex met all of those requirements.

“It's exciting to be part of a company building a great portfolio at a time when very few others in the industry are,” said Avery. “If retailers are new to the Canadian market and looking to establish a coast-to-coast presence in market-leading shopping centres, Primaris would like to be the first call for those retailers.”

Facts and figures for the acquisitions 

Avery said Halifax’s population grew 4.5 per cent over the past year and the 562,000-square-foot mall, located on 20.9 acres of land, is the leader in Atlantic Canada. 

The BOMA BEST-certified centre has sales of $1,012 per square foot with 69 per cent in-place occupancy and 96.2 per cent committed occupancy, including executed leases starting during the next few months as part of a former Sears store redevelopment that will include Simons, Winners, Dollarama and PetSmart.

Other notable tenants include Sport Chek, Zara, Apple, Aritzia, Michael Kors, Victoria’s Secret, Browns, Nespresso, Sephora and Lululemon.

The open-air Annex, encompassing 412,000 square feet on 26.7 acres, 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.

Tenants include Walmart, Sobeys, Nova Scotia Liquor Corporation, Mark’s, Shoppers Drug Mart and Bank of Montreal.

The site is also home to: the adjoining 187,000-square-foot Mumford Road Office Complex, which has 95.4 per cent in-place occupancy and 96.2 per cent committed occupancy; and the Halifax Transit Mumford Bus Terminal.

Future plans for the site

The Annex site has been designated as a future growth node by the Halifax Regional Municipality, enabling a Phase 1 master-planning application for approximately 1,800 residential units with a mixed-use component and future phases of approximately 5,500 residential units.

“There’s definitely a long-term intensification opportunity, in particular on the Annex,” Avery explained. “But our immediate priority will be to continue to carry out the planning process that was commenced under the prior owner. 

“For the most part, we’re excited to own a market-leading shopping centre of that calibre that is so complementary to the rest of our portfolio. 

“We've hired all of the existing employees and brought them on to the Primaris platform. We're excited about how they've performed with this property and I'm looking forward to adding anything we can, but they’re already doing a great job and the shopping centre is performing very well.”

Conestoga Mall acquisition

Primaris purchased Conestoga Mall in Waterloo, Ont., from Ivanhoé Cambridge for $270 million in June. 

The 585,000-square-foot regional shopping centre sits on 49.8 acres and tenants include HBC, Galaxy Cinemas, Sport Chek, Indigo, H&M, Apple, Lululemon, Nespresso, Aritzia, Sephora, Aerie, Old Navy and RW&CO.

It’s shadow-anchored by a Zehrs food store with direct access to the mall.

“Similar to Halifax, Conestoga Mall is the market-leading mall in the Kitchener-Waterloo area,” Avery said. “It’s well-run and we’re very pleased with the team that joined Primaris with that acquisition.

“In the long term there’s a significant intensification opportunity there as well, but for the time being we're very pleased with the performance of the asset and it really does add to our ambition of becoming the first call.” 

More acquisitions to come

Primaris owns (or has ownership stakes in) and manages 23 enclosed shopping centres totalling approximately 11.5 million square feet and 14 unenclosed shopping centre and mixed-use properties aggregating approximately 1.8 million square feet. 

Primaris was spun off from H&R REIT through a non-taxable distribution of units on Dec. 31, 2021. Concurrently, Healthcare of Ontario Pension Plan (HOOPP) contributed six large format shopping centres in exchange for approximately 26 per cent of Primaris’ units.

Avery said the current Canadian real estate landscape is interesting as there’s some distress as well as challenges with obtaining financing. 

“Very fortunately, Primaris was created with a differentiated financial model, including very low leverage and a low payout ratio,” he noted. “That has allowed us access to the invitation-only world of pension funds. 

“Pension funds are all very well-capitalized and there are no signs of distress. It’s a very civilized part of the property world to be a part of where there are transactions to be done. 

“We are pursuing those transactions. It’s not the same type of volatile and challenging market that’s been experienced in other parts of the real estate world.”

Primaris is well-capitalized

Ottawa’s Carlingwood Shopping Centre has been on the market. When asked if it could be a Primaris acquisition target, Avery said it may already be spoken for by another buyer and, despite having attractive investment characteristics, it didn’t fit the REIT’s strategy.

Primaris completed a $400-million bond offering last month and Avery said it also has a $400-million undrawn credit facility and $50 million in cash. 

“We're extremely well-capitalized, have liquidity and we're looking forward to our next transactions,” Avery said. “There is absolutely a lot of opportunity ahead for Primaris.”