Retrocom REIT enjoys unheralded growth

Retrocom REITOne of the most successful and unheralded REITs of the past few years has to be Retrocom Real Estate Investment Trust (TSX:RMM.UN).

Over the past two and a half years, the Toronto-based retail-focused REIT has acquired about $500 million in new properties and seen its asset base increase from 23 properties to 51.

“We have effectively tripled the size of the REIT,” said Richard Michaeloff, president and chief executive officer. “We have always been like a smaller REIT but with the acquisitions we announced last week we went through the $1-billion mark” in total assets.

Retrocom’s amazing growth spurt coincides with Michaeloff’s appointment as CEO. The 25-year real estate veteran cut his teeth during a 13-year career at Cadillac Fairview. He joined SmartCentres six years ago and took over at Retrocom three years later.

SmartCentres connection

Like Calloway REIT, Retrocom boasts an intimate connection to SmartCentres Realty Inc. Both retail REITs count SmartCentres head Mitch Goldhar as a primary shareholder and the two REITs also operate out of SmartCentres’ Toronto head office. (Goldhar has an approximately 25 per cent voting interest in Retrocom).

“We kind of stay out of each others’ way,” said Michaeloff of the REIT’s sibling-style relationship with Calloway.

Being under the SmartCentre umbrella offers benefits beyond stable ownership. Retrocom has a contract with SmartCentres to provide the REIT with leasing and development services on a “pay as you go” basis.

SmartCentres, which boasts long and deep ties to Walmart Canada, also provides Retrocom with added industry muscle, explained Michaeloff.

“SmartCentres, being such an active developer in Canada, they have a lot of relationships with tenants across the country,” he said. “A smaller REIT like when we were $300 million a few years back, you don’t have the kind of clout dealing with the various tenants out there and the relationships SmartCentres has and brings to the table are definitely an advantage for us.”

Tough start

Retrocom launched as a REIT in 2004 and underwent changes in senior management and ownership when the market turned sour in 2008. That resulted in Goldhar taking his 25 per cent voting interest position.

“We have gone through a lot of change in recent years,” said Michaeloff. “The REIT really had experienced some troubles in the past,” that brought the SmartCentres owner onto the scene.

The end of the recession in 2010 and the appointment of a new CEO turned the tide for Retrocom.

“We basically started looking for new properties and improving acquisitions opportunities,” a process that resulted in about half a billion in new asset additions.

Recent activity

Last week, Retrocom announced it had acquired Walmart-anchored shopping centres in Mission, B.C., and Fergus, Ont., for $61.6 million from Walmart Canada Realty Inc. and SmartCentres in a brokered transaction.

With the addition of the two new centres, Walmart’s status as Retrocom’s top tenant is further cemented, accounting for nine locations totalling more than 760,000 square feet, or 11.5 per cent of the REIT’s leaseable area.

Hitching its wagon to the Walmart juggernaut makes sense, given how SmartCentres owes its success to a deep relationship with the U.S. retailer.

“We are building on that,” said the REIT’s CEO. “It is a bit of a switch for us. Going back a few years, Zellers was our lead tenant.

“Walmart drives a lot of traffic so it is generally good for our properties.”

Can the REIT keep up its blazing pace of acquisitions?

“We try and make sure we pick the right properties we are pursuing, and adding to the quality of the REIT and complementing the geographic dispersion of the REIT,” he said. “The market is a little volatile at the moment; we have seen the REITs pull back a little in the last couple of months.”

Currently, Retrocom has about 50 per cent of its assets in Ontario, 25 per cent in Saskatchewan and the remainder across B.C., Alberta, Manitoba and Quebec.

Paul is a writer, editor and media trainer based in Toronto with over 25 years of experience as a business reporter. He has written for Canada’s major news services on…

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Paul is a writer, editor and media trainer based in Toronto with over 25 years of experience as a business reporter. He has written for Canada’s major news services on…

Read more

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