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A Safeway store in Calgary on June 13, 2013. Crombie REIT is paying $990-million for 68 properties that are currently anchored by Canada Safeway stores, a deal that has been anticipated since the recent marriage of Sobeys Inc. and Canada Safeway Ltd.Todd Korol/The Globe and Mail

Crombie REIT is paying $990-million for 68 properties that are anchored by Canada Safeway stores, a deal that has been anticipated since the recent marriage of Sobeys Inc. and Canada Safeway Ltd. and that is expected to have a significant impact on the real estate investment trust.

Sobeys' parent company, Stellarton, N.S.-based Empire Co. Ltd., announced last month that it was paying $5.8-billion for 213 Canadian Safeway stores, and said that it would raise money to help pay for the deal by selling about $1-billion worth of Safeway real estate and then leasing it back. Crombie REIT had a right of first offer on any such deal, and was widely expected to scoop up the properties. (Crombie was a creation of Empire Co., which spun the REIT off in 2006 and still owns about 40 per cent of it.)

Crombie announced Wednesday that it will be now picking up about three million square feet of properties in Western Canada (49 freestanding stores and 19 plazas), in a transaction that it says will be immediately accretive to its adjusted funds from operations, bolsters its inventory of properties with development potential, and improves its geographic diversification. Sobeys will sign leases for the stores, which will provide Crombie with at least $57.1-million in annual rent.

In a research note after the Safeway deal last month, BMO analyst Heather Kirk said that the expected $1-billion transaction of Safeway properties would be "transformational" for Crombie, increasing its asset base, boosting its liquidity and opening it up to a broader base of institutional investors.

In order to help finance the deal, Crombie is raising funds by way of a bought deal and convertible debentures, and Empire will be buying $150-million of Crombie class B limited partnership units (at the same price per unit that investors are paying in the bought deal), taking Empire's ownership stake to 42.1 per cent from 42.7 per cent (or to 39.3 per cent from 40.8 per cent on a fully diluted basis).

(Tara Perkins is a Globe and Mail real estate reporter.)

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