Conestoga Mall in Waterloo. (Google Maps)
Primaris REIT is moving forward with a major purchase of Conestoga Mall in Waterloo, acquiring it from Ivanhoé Cambridge for $270 million.
This regional shopping centre covers 585,000 square feet and sits on nearly 50 acres. It hosts big-name stores like HBC, Galaxy Cinema, Sport Chek, Indigo and H& M. Plus, there’s a Zehrs food store right next door that connects straight to the mall.
What makes this mall stand out are some retailers you won’t find elsewhere in the region – including Apple, Lululemon and Nespresso. Other well-known shops include Aritzia, Sephora, Aerie, Old Navy and RW & Co.
“This landmark transaction is the culmination of months of collaboration with Ivanhoé Cambridge, and further validates and demonstrates support for Primaris’ platform, strategy and value proposition,” said Alex Avery, Primaris’ CEO, during the announcement. “Since the inception of Primaris REIT, we have been very clear about the significant opportunity to acquire additional market-leading Canadian shopping centres.
“Primaris is uniquely positioned as a potential buyer, with institutional scale as the third largest owner-operator of enclosed shopping centres in Canada with pro forma assets of approximately $3.5 billion, a very well capitalized balance sheet, a differentiated financial model and a mandate for growth.”
Highlights of Conestoga Mall
Conestoga Mall is the top enclosed shopping spot in Kitchener-Waterloo area just west of Toronto’s metro zone.
The mall sits right next to Conestoga station on ION light rail – which has 19 stations across the system.
It pulls in annual sales across all stores totaling about $180.8 million and holds occupancy at 94.4 percent.
Ivanhoé Cambridge did a big $46-million upgrade on it back in 2018.
“Conestoga was identified early in the process of evaluating potential acquisition targets for a number of notable characteristics, including its leading market position, strong sales performance, mass rapid transit connection and its attractive location within a growing market,” said Patrick Sullivan, president and chief operating officer for Primaris.
The team at Primaris thinks that much like their current properties they own already – Conestoga offers plenty of room to grow net operating income over time. The mall currently doesn’t have any debts tied to it.
Two main areas they’re focusing on are filling up 58,000 square feet now only temporarily leased out plus switching tenants who enjoy special lease deals over to standard agreements.
“Our team is very excited to add Conestoga Mall to our property portfolio,” said Rags Davloor CFO at Primaris during the announcement. “With significant income growth potential consistent with what we see ahead for our existing assets.” He added that having retailers unique here like Apple or Lululemon really sets this mall apart among Canada’s top-performing centres.
“Our differentiated financial model includes very low leverage,” Davloor continued. “We keep payout ratios low while holding onto plenty of free cash flow which gives us an edge strategically.”
How They’re Funding This Deal
A few years back Ivanhoé started selling off some retail properties aiming to diversify its holdings more broadly beyond malls alone.
“We are very pleased to have executed this transaction with Primaris REIT,” said Annie Houle head of Canada at Ivanhoé Cambridge during their statement. She mentioned how Primaris’ clear business plan combined with smart management convinced them this would be good for unlocking more value from this established mall near Kitchener-Waterloo.”
The deal breaks down into $165 million paid upfront in cash; $25 million through series A units sold by the trust priced whichever’s lower between $21.49 per unit or NAV per unit from recent reports; plus another $80 million via exchangeable preferred units through a new limited partnership setup specifically for this deal.
If all goes smoothly approvals are expected by July after clearing hurdles like Toronto Stock Exchange greenlights plus Competition Act reviews here in Canada.
The real estate advisors were CBRE while TD Securities handled financial advising duties on behalf of Ivanhoé Cambridge. Investor relations advice came from Real Asset Strategies Inc., working alongside Primaris REIT throughout this process.
A Bit About Both Companies
Primaris stands out as Canada’s only REIT focused solely on enclosed malls located mostly within growing markets nationwide.
Their total footprint measures around 10.9 million square feet worth roughly $3.1 billion based on what they own directly or partly share ownership interests in currently.
Ivanhoé Cambridge develops real estate projects worldwide ranging across industrial warehouses/logistics hubs along with offices/residential buildings plus retail spaces too wherever opportunities arise globally.
The company manages interests spanning about 1 ,500 properties mainly split between industrial/logistics sectors alongside office towers plus residential complexes & retail storefronts. As reported December 31 ,2022 their asset value hit close to $77 billion making them one big arm under CDPQ , a huge global investment group.
