MONTREAL – Cominar Real Estate Investment Trust has signed a deal to buy a portfolio of 15 properties including shopping centres, office buildings and an industrial park in Quebec and Ontario from Ivanhoe Cambridge for $1.53 billion.
The trust also said the total purchase price could increase to $1.63 billion if it acquires the interests in two of the properties that are co-owned by third parties and a third that has first right of refusal.
The Quebec City-based real estate firm said its (TSX:CUF.UN) assets will increase 25 per cent to more than $8.1 billion once the deal with the real estate arm of the Caisse de depot et placement du Quebec is complete.
“This acquisition represents an opportunity for Cominar to acquire a unique portfolio of landmark retail properties from Ivanhoe Cambridge, which is a natural and highly complementary fit with our own retail platform,” stated Cominar CEO Michel Dallaire.
He said the deal strengthens Cominar’s position by enhancing the diversification of its asset base with retail properties contributing 38 per cent of net operating income, up from 24 per cent before the deal.
The shopping malls include Rockland in Montreal, Centropolis in Laval, and the Dixie Outlet Mall in Mississauga, Ont. The office buildings are located in Quebec City, Laval and Toronto, while the industrial park is in Quebec City.
Ivanhoe Cambridge chairman and CEO Daniel Fournier called the deal “a win-win.”
“This transaction allows us to reach a key milestone in the implementation of our business plan for the commercial sector which calls for more strategic focus,” Fournier said.
“As we have chosen to focus on our super-regional shopping centres, among others, Cominar possesses the right expertise to ensure the future success of the properties we are selling them.”
Ivanhoe Cambridge has also been selling its portfolio of 70 hotels in Europe, the U.S., Canada, Barbados and India for about two years to concentrate on retail, office and residential multi-family units that generate more stable returns.
It will retain three luxury hotels in Quebec, but has sold the Empress Hotel in Victoria and Ottawa’s Chateau Laurier. The Fairmont Royal York in Toronto are among the hotels that are up for sale.
About 120 Ivanhoe Cambridge employees working at the properties will transfer to Cominar.
To pay for the deal, Cominar has signed a deal with a syndicate of underwriters to raise $250 million in an offering nearly 13.2 million trust units at a price of $19 per unit.
Ivanhoe Cambridge has also agreed to buy an additional $250 million in new trust units at the same price in a deal that will make it Cominar’s largest unitholder and give it a seat on its board of trustees.
Otera Capital, the commercial real estate financing subsidiary of the Caisse, will also provide a new $250-million 10-year mortgage.
The balance of the money for the deal will come from up to $950 million in loans underwritten by the National Bank of Canada (TSX:NA) and Bank of Montreal (TSX:BMO).
Cominar owns a real estate portfolio of 526 properties across Canada.
Ivanhoe Cambridge has more than $40 billion of assets located mainly in Canada, the United States, Europe, Brazil and Asia.
Cominar units were up six cents at $19.60 on the Toronto Stock Exchange on Tuesday before trading was halted pending the announcement.
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