Primaris Retail REIT
TSX : PMZ.UN

Primaris Retail REIT

November 24, 2009 17:01 ET

Primaris Retail REIT Announces Significant Investment

TORONTO, ONTARIO--(Marketwire - Nov. 24, 2009) - Primaris Retail REIT (TSX:PMZ.UN) announced today that it has unconditionally agreed to purchase two retail properties from Ivanhoe Cambridge for $357.7 million dollars. Primaris will buy a 100% interest in Sunridge Mall, and a 50% non-managed interest in Woodgrove Centre. Subject to normal conditions, closing of the acquisitions are expected to occur in mid-December.

John Morrison, President and CEO, commented "we are extremely pleased to add two substantial investments in western Canada to our core portfolio. We believe that Sunridge Mall is an institutional quality asset that will greatly complement our existing portfolio. With the purchase of our interest in Woodgrove Centre, we are delighted to both invest in another institutional quality asset and to have a co-owner as strong and established as Ivanhoe Cambridge. While we expect co-ownerships to form only a small part of our business, the REIT will continue to look at a limited number of opportunities with high quality partners, where appropriate."

Mr. Morrison added that "These acquisitions represent a 12% increase to the size of our portfolio in terms of square footage. Both of these assets meet the criteria of our defined property strategy to own dominant centres in secondary markets and secondary assets in major markets. The sales per square foot for each of these assets is better than the average of that of other Primaris assets".

The Properties

Primaris estimates that it will earn a going-in capitalization rate of 6.73% (meaning the estimated first twelve months net operating income divided by the purchase price) on these acquisitions.

Sunridge Mall

Sunridge is a two-level enclosed regional shopping centre containing a net rentable area of approximately 808,000 square feet, was built in 1981 and underwent extensive renovations in 2005. The site comprises approximately 66.7 acres. Sunridge is a dominant enclosed shopping centre in the north east quadrant of Calgary, Alberta.

Woodgrove Centre

Woodgrove is a single level enclosed regional mall containing a net rentable area of approximately 719,000 square feet, was built in 1981 and underwent renovations most recently in 2005. It includes a 230,000 square foot expansion built in 2000. The site comprises approximately 66.9 acres of land. It is the largest enclosed shopping centre on Vancouver Island and is the dominant shopping destination in central and northern Vancouver Island.

Ivanhoe Cambridge, the vendor, will retain a 50% interest in the property and will continue to manage the asset. The REIT and Ivanhoe Cambridge will enter into typical co-ownership and property management agreements.

Appendices to this press release provide additional information about these assets and pro forma data about the inclusion of the assets in the Primaris portfolio.

Funding In Place

The purchase price is expected to be funded as follows (000s):



Cash on hand $125,000
Draw on line of credit 16,700
Mortgage on Sunridge 153,000
Mortgage on Woodgrove 63,000
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Total $357,700


The Sunridge mortgage will be for a seven year term and bear interest at a rate to be set at 300 basis points over a benchmark bond yield. The Woodgrove mortgage will have a term of approximately 3 years and 3 months and will bear interest at 4.75% per annum. The co-owners currently intend to jointly refinance the property upon expiry of the mortgage.

Liquidity Remains Solid

The draw on the line of credit will leave approximately $100 million dollars of unused credit capacity. Primaris has less than $5 million dollars of maturing debt before March 2011 and therefore remains in a very liquid financial position after completing this acquisition.

After this investment, Primaris' pro forma cash position will be $17 million dollars owing on its line of credit. The pro forma Debt to Gross Book Value ratio will be 53.3%, excluding convertible debentures from "debt", and will be 61.4% including convertible debentures as debt. Management believes that this cash position and amount of debt are at levels that allow the REIT to continue to comfortably meet current obligations and will continue to allow the REIT to pursue future growth opportunities as they become available.

Forward-Looking Information

The press release contains forward-looking information based on management's best estimates and the current operating environment. These forward-looking statements are related to, but not limited to, the REIT's operations, anticipated financial performance, business prospects and strategies. Forward-looking information typically contains statements with words such as "anticipate", "believe", "expect", "plan", or similar words suggesting future outcomes. Such forward-looking statements are subject to risks, uncertainties and other factors which could cause actual results to differ materially from future results expressed, projected or implied by such forward-looking statements.

Although the forward-looking statements contained in this press release are based on what management of the REIT believes are reasonable assumptions, forward-looking statements involve significant risks and uncertainties. They should not be read as guarantees of future performance or results and will not necessarily be an accurate indicator of whether or not such results will be achieved. Readers are cautioned not to place undue reliance on forward-looking statements as a number of factors could cause actual future results to differ from targets, expectations or estimates expressed in the forward-looking statements. Factors that could cause actual results to differ materially include, but are not limited to, economic, competitive and commercial real estate conditions, unplanned compliance-related expenses, uninsured property losses and tenant-related risks.

Upon completion of these acquisitions, Primaris Retail REIT will own 28 income-producing properties comprising approximately 10.5 million square feet located in Canada. As of October 31, 2009, the REIT had 62,498,120 units issued and outstanding.

Schedule A

Property Description:

Sunridge

Sunridge is a two-level enclosed regional shopping centre containing a net rentable area of approximately 808,000 square feet, including five freestanding "pad" tenants located around the perimeter of the property. It was built in 1981 and underwent extensive renovations in 2005. The site comprises approximately 66.7 acres. Sunridge is located in a major retail node and is a dominant enclosed shopping centre in northeast Calgary. Calgary is the fifth largest metropolitan area in Canada and has a population of approximately 1.1 million people.



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PROFILE OF TENANTS WITH AREA greater than 15,000 SQ FT
Tenant Name Area SF
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Anchor Tenants
The Bay 161,563
Zellers 144,010
Total Anchor Tenants 305,573
Major Tenants
Alberta Health Services 47,708
SportChek 43,910
Future Shop 34,960
H&M 23,276
World Health Club 19,561
Petland 16,100
Shoppers Drug Mart 15,012
Urban Behaviour 15,006
Total Major Tenants 215,533

TOTAL 521,106
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Sunridge is currently 97.2% occupied. Local tenants represent less than 8% of total occupancy. The weighted average lease expiry of tenants is 4.1 years. Sales figures for commercial retail units (which exclude non anchor-and-major tenants, exterior access tenants and free-standing pads) averaged $546 per square foot for the 12 months ended August 31, 2009.

Woodgrove:

Woodgrove is a single level enclosed regional mall containing a net rentable area of approximately 719,000 square feet. The centre was built in 1981 and underwent renovations most recently in 2005. It includes a 230,000 square foot expansion built in 2000. The site comprises approximately 66.9 acres of land. The property has five "pad" tenants, including Save-On-Foods, Chapters, Pier One, White Spot Restaurant, and Chevron Canada. It is the largest enclosed shopping centre on Vancouver Island and is the dominant shopping destination in central and northern Vancouver Island.



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PROFILE OF TENANTS WITH AREA greater than 15,000 SQ FT
Tenant Name Area SF
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Anchor Tenants
The Bay 146,452
Walmart 130,782
Total Anchor Tenants 277,234
Major Tenants
Save-on-Foods 45,470
Avalon Cinema 38,747
Toys "R" Us 29,385
Winners 25,076
SportChek 20,632
Chapters 20,020
Total Major Tenants 179,330

TOTAL 456,564
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Woodgrove is currently 98.0% occupied. Local tenants represent less than 5% of total occupancy. The weighted average lease expiry of tenants is 7.8 years. Sales figures for commercial retail units (which exclude non-anchor-and-major tenants, exterior access tenants and free-standing pads) averaged $488 per square foot for the 12 months ended August 31, 2009.

To view the Geographic diversification, by minimum rents, please visit the following link: http://media3.marketwire.com/docs/pmz1116_fig_graphic_diversificiation.pdf



Primaris' top ten tenants

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As of September 30, 2009
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Weighted
Percentage Average
of Total Lease
Annual Term to
Minimum Area (Sq. Maturity
Tenant Groups Rent ft.) (Years)


1 HBC 6.6% 2,049,827 7.7
2 YM 3.1% 212,557 4.8
3 Forzani 2.5% 355,927 4.6
4 Sears 2.5% 979,436 7.8
5 Shoppers Drug Mart 2.3% 147,507 6.4
6 Reitmans 2.2% 138,565 3.0
7 Loblaws 1.9% 321,621 6.1
8 Best Buy 1.7% 179,367 4.5
9 Canadian Tire 1.6% 220,194 11.1
10 Comark 1.5% 83,101 2.8
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25.9%
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The data shown here represents the pro forma combination of Primaris Retail
REIT's existing assets and Sunridge Mall and Woodgrove Centre as at
September 30, 2009.


To view the Primaris lease expiry and Primaris debt maturity, please visit the following link: http://media3.marketwire.com/docs/pmz116_leaseexpiry_debtmaturity.pdf



Primaris property list sales performance
(for the 12 months ended August 31, 2009)


Same Tenant
Sales per Square
Foot ($)
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Cornwall Centre 586
Midtown Plaza 572
Sunridge 546
Stone Road Mall 540
Dufferin Mall 523
Park Place Shopping Centre 509
Grant Park Shopping Centre 504
Orchard Park Shopping Centre 490
Woodgrove 488
Northland Village 464
Place d'Orleans 449
Place Du Royaume 385
Aberdeen Mall 382
Eglinton Square 363
Lambton Mall 351
Place Fleur de Lys 306
Heritage Place 304


The data shown here represents the pro forma combination of Primaris Retail REIT's existing assets and Sunridge Mall and Woodgrove Centre as at August 31, 2009.

Contact Information

  • Primaris Retail REIT
    John R. Morrison
    President and Chief Executive Officer
    (416) 642-7860
    or
    Primaris Retail REIT
    Louis M. Forbes
    Executive Vice President & Chief Financial Officer
    (416) 642-7810