Weston family poised to create nation’s largest REIT in $3.9 billion deal
Choice Properties Real Estate Investment Trust, the real estate arm of Loblaw Cos., agreed to buy Canadian Real Estate Investment Trust for about $3.93 billion to add more industrial and office space to its retail portfolio.
Canadian REIT holders will get $53.61 per unit in cash and stock, a 23 per cent premium to Wednesday’s closing share price, according to a statement Thursday. The cash portion of the offer will be capped at $1.65 billion.
The companies said the deal will create Canada’s largest REIT, with an enterprise value of approximately $16 billion, 752 properties and 69 million square feet of leasable space. Choice will acquire all of Canadian REIT’s assets and assume all liabilities. Loblaw, Canada’s biggest grocer, and George Weston Ltd., its biggest shareholder, will have joint ownership of about two thirds of the combined portfolio.
“This transformational combination creates immediate value for CREIT and provides tremendous opportunity for Choice Properties to capitalize on Canada’s leading development pipeline and create long term value,” Canadian REIT Chief Executive Officer Stephen Johnson said in a statement. “The combined REIT is uniquely positioned to deliver results for unitholders as the owner, manager and developer of a high quality portfolio of diversified assets.”
The deal adds to a flurry of REIT transactions across Canada as investors seek to profit from a commercial property boom in everything from warehouses to offices and as shopping malls come under pressure from online sales. Blackstone Group LP agreed to buy Pure Industrial REIT, Canada’s biggest multi-tenant industrial landlord, for about $2 billion last month. Blackstone is also teaming up with Ivanhoe Cambridge Inc. on the purchase, according to people familiar with the matter.
Choice and Canadian REIT have dropped at least 8 per cent over the past 12 months, lagging the 2.6 per cent decline in the Bloomberg Canadian REIT Index. Choice owns a majority of retail properties, including the Loblaw grocery chain. The company will get access to Canadian REIT’s commercial-property portfolio, a sector that posted a seventh year of record sales in Toronto in 2017.
On closing, Johnson will take over as CEO of Choice while Choice CEO John Morrison will step down from his roles and serve as non-executive vice chairman of the combined REIT. The deal requires the approval of at least 66 votes from shareholders of Canadian REIT; the vote is expected in April.
The deal will allow Choice to boost their development opportunities in a Canadian retail landscape that’s been difficult to access, said Matt Kornack, an analyst with National Bank Financial.
“They want to become more than just a captive entity with their exposure,” he said by phone. “They want to be more than an anchored real-estate entity so this provides them with a platform to do that.”