Partners Real Estate Investment Trust has entered into an agreement for the sale of its 11 Quebec retail properties. The Quebec Sale Transaction is subject to completion of satisfactory due diligence by the purchaser, satisfaction of any applicable Competition Act requirements and certain customary closing conditions.
According to a prepared statement, the Quebec Sale Transaction is expected to close early in the second quarter of 2019. If completed, the Quebec Sale Transaction is currently expected to result in net cash proceeds to the REIT, after payment of related mortgages and transaction expenses, of approximately $65 million.
In September 2018, the REIT retained BMO Capital Markets Real Estate Inc. to explore the possible sale of some or all of the REIT’s retail properties in Quebec. After considering a variety of factors, including among others, general industry, retailer and economic conditions in the markets in which the REIT operates and the anticipated effect of those conditions on the value of the REIT’s properties, and after receiving financial and legal advice, the board of trustees of the REIT determined that pursuing the Quebec Sale Transaction is in the best interests of the REIT.
According to a prepared statement, the carrying value of the Quebec retail properties on the REIT’s September 30, 2018 interim financial statements was approximately $194 million. Current negative market conditions in Quebec, including recent increases in the supply of retail properties on the market and reduced demand for these properties, have resulted in the selling price under the Quebec Sale Transaction being lower than such September 30, 2018 carrying value.
In the event that the Quebec Sale Transaction is completed, the REIT will then own 11 retail properties in Ontario and one in Manitoba, aggregating approximately 623,000 square feet of leasable space. As the REIT previously disclosed, in those circumstances the Board expects it would likely consider a possible sale of either the REIT itself or such remaining 12 properties. The carrying value of these 12 properties on the REIT’s September 30, 2018 interim financial statements was approximately $120 million.
According to the statement, the REIT believes that the realizable value of these properties would currently be lower as a result of negative market conditions in Ontario, including recent increases in the supply of retail properties on the market and reduced demand for these properties, which are generally resulting in higher capitalization rates and lower values particularly for retail properties in secondary markets such as those owned in Ontario by the REIT.
Partners REIT is a real estate investment trust that manages a portfolio of retail and mixed-use community and neighborhood shopping centers located in both primary and secondary markets located mainly in Ontario and Quebec, Canada.