Canadian Tire Corp. Ltd. is selling two distribution centres to H&R Real Estate Investment Trust for $229-million in a deal that will see the hardware merchant lease the properties back.
The two centres in Brampton, Ont., and Calgary total 2.1 million square feet on 100 hectares of land. Proceeds from the sale will be used to fund Canadian Tire's new five-year strategic plan in which it plans to replace 76 traditional stores with larger formats, while renovating 175 outlets and adding two dozen new locations.
"The current real estate environment is favourable for this type of transaction," Canadian Tire president Wayne Sales said.
"We were able to take advantage of market opportunities for the sale and leaseback of the distribution centres in a manner that maintains our operating flexibility while freeing up capital to redeploy in the business," Mr. Sales said.
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"The leases we have negotiated have lengthy and favourable terms and we have secured complete operating control of the two facilities over the long term."
Canadian Tire expects to book a pretax gain of about $50-million on the sale, which will be amortized over the initial 21-year term of the leases, which Canadian Tire has an option to renew.
Financial terms of the leaseback were not released.
"Characteristic of our acquisitions, this transaction involves two well-located, state-of-the-art distribution facilities leased back long-term to a publicly listed, investment-grade tenant," said H&R president and chief executive officer Tom Hofstedter.
"The acquisition will be accretive to our unitholders and increases the size of our portfolio by almost 6 per cent." CTR.NV (TSX) rose 19 cents to $67.35. HR.UN (TSX) rose 25 cents to $19.99. CP
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