Ivanhoé Cambridge's decision to sell a portfolio of its smaller shopping centres follows similar moves by other major real estate players.
Ivanhoé, the real estate arm of the Caisse de dépôt et placement du Québec, announced on Tuesday that it will be selling 11 shopping centres, three office buildings and one industrial property to Cominar Real Estate Investment Trust for $1.527-billion. Two of the properties involved in the acquisition are co-owned by third parties. The REIT will make offers to acquire those interests, which if accepted, would increase the purchase price to $1.63-billion.
All of the shopping centres except for one, Mississauga Ont.-based Dixie Outlet Mall, are in Quebec.
Ivanhoé CEO Daniel Fournier said in an interview that the deal is the result of the process that Ivanhoé has been undergoing in recent years to refine its strategy, but he also noted that global real estate firms have been moving in this direction.
Indianapolis-based shopping mall giant Simon Property Group, which owns a stake in more than 325 properties around the world, spun off a new REIT called Washington Prime a few months ago that will hold strip centres and smaller enclosed malls. Paris-based Unibail-Rodamco, a major European real estate firm, is selling a large chunk of its properties and shifting its focus to its biggest shopping centres.
Ivanhoé will now be dedicating more of its retail muscle towards its portfolio of super-regional shopping centres. "You can't be all things to all people," Mr. Fournier said, a line he's used more than once in recent years as he's sought to concentrate Ivanhoé 's efforts on the things it does best. That's included making decisions such as selling the vast majority of its hotels.
As part of the deal with Cominar, Cominar will issue $500-million worth of new units, half of which will be bought by Ivanhoé directly. That will leave Ivanhoé with an 8.5-per-cent stake in Cominar, making it the REIT's largest unit holder. Ivanhoé will also place a candidate on Cominar's board.
Cominar already boasts that it is the third-largest diversified REIT in Canada and the largest commercial property owner in Quebec, but it has even bigger ambitions.
It struck this deal at a 6.5-per-cent cap rate (or capitalization rate, a measure of the return that an owner will likely receive from a real estate investment), which one industry insider described as a good price for the REIT.
Cominar CEO Michel Dallaire stated in a press release that the deal marks a milestone in the company's development and will further enhance its growth strategy. The teams at Cominar and Ivanhoé Cambridge have known each other for some time.
"Cominar described it as a marriage that took a while but was worth it in the end," Mr. Fournier said. "I got a big smile out of that, but it's not a bad description."