Choice Properties Real Estate Investment Trust Completes Acquisition of Portfolio of Five properties from Loblaw Companies Limited

TORONTO, Oct. 26, 2016

TORONTO, Oct. 26, 2016 /CNW/ - Choice Properties Real Estate Investment Trust ("Choice Properties" or the "Trust") (TSX: CHP.UN) today completed the acquisition of a portfolio of five properties from certain subsidiaries of Loblaw Companies Limited (collectively, "Loblaw").  The portfolio comprises one Shoppers Drug Mart ("Shoppers") distribution centre, one Shoppers standalone store, two multi-tenant sites anchored by a Loblaw food store, and one parcel of land that is currently being developed with a Loblaw food store. The aggregate purchase price of the portfolio was approximately $40.9 million, excluding transaction costs and was funded by a combination of cash (approximately 71%) and equity (approximately 29%). 

Highlights of Acquired Portfolio

• Expands portfolio by approximately 394,000 square feet ("sq. ft.") of gross leasable area ("GLA") that is currently 99.7% occupied;
• Accretive upon closing with a stabilized net operating income of approximately $2.6 million representing an implied capitalization rate of approximately 6.5%. Upon completion of the Loblaw food store on the parcel of land, the stabilized net operating income increases to approximately $3.1 million representing an implied capitalization rate of approximately 6.6%; and
• Offers development opportunities with a potential to develop up to 344,000 sq. ft. of incremental GLA, including approximately 310,000 sq. ft. of mixed-use development at the Mississauga, Ontario property and the ongoing greenfield development of a new 28,510 sq. ft. Loblaw food store on a parcel of land in Edmonton, Alberta.

With the acquisition of these five properties, Choice Properties' portfolio consists of 534 properties comprising 513 retail properties, 14 industrial properties, one office complex, and six parcels of undeveloped land, totaling approximately 42.9 million sq. ft. of GLA across Canada. Upon completion of this transaction, the total number of Shoppers Drug Mart-anchored or standalone sites in Choice Properties' portfolio increased to 11 retail sites and one industrial site.

The acquisition was funded through the issuance of 878,713 Class B LP Units of Choice Properties Limited Partnership, which have a value of approximately $12.0 million, and the balance in cash. With the completion of this transaction, Loblaw's and George Weston Limited's effective ownership interests in the Trust are 82.7% and 5.8%, respectively.

Portfolio Summary

The acquired portfolio comprises approximately 394,000 sq. ft. of GLA.  As principal tenant, Loblaw represents approximately 77.7% and 95.0% of total GLA and stabilized NOI, respectively, of this portfolio.  Following the completion of the new Loblaw food store in Edmonton, Alberta, Loblaw will represent approximately 79.2% and 95.9% of total GLA and stabilized NOI, respectively. The leases with Loblaw for the retail properties have an initial term of 15 years, with multiple renewal options and include rent escalations of approximately 7.7% every five years. The industrial property has an 18-year initial lease term with multiple renewal options and includes rent escalations of approximately 6.1% after the first three years and 10.4% every five years thereafter.