Loblaw Cos. (L), Canada’s largest grocery chain by market value, is seeking to raise about C$400 million ($387 million) in an initial public offering of its Choice Properties Real Estate Investment Trust, according to two people familiar with the transaction.
Loblaw created the REIT to spin off about 75 percent of its real estate, the Brampton, Ontario-based grocer said today in a statement. Properties include 415 stores, one office complex and nine warehouses totaling 35.3 million square feet. The REIT will sell units for C$10 each, said the people, who asked not to be identified because the terms aren’t public.
George Weston Ltd. (WN), the parent of Loblaw, will acquire an additional C$200 million of the REIT units on completion of the sale, which is being led by Canadian Imperial Bank of Commerce, Royal Bank of Canada and Toronto-Dominion Bank, the company said.
Choice Properties will also will sell senior unsecured debentures, with proceeds used to repay debt owed to Loblaw. That sale is led by CIBC, Royal Bank, TD and Bank of Montreal.
Loblaw rose 0.8 percent to close at C$49.53 in Toronto trading.
Julija Hunter, a Loblaw spokeswoman, and Kim Lee, who represents the REIT, didn’t immediately return messages seeking comment.
John Morrison, Choice Properties chief executive officer, was CEO of Primaris Real Estate Investment Trust from 2009 until the company was acquired by a group led by H&R REIT and KingSett Capital Inc. in April.
The grocery retailer disclosed plans in December to spin off property valued at more than C$7 billion in what it said would be one of the country’s largest REITs. The company said it could use the proceeds to pay down debt or buy back shares.
A C$400 million initial sale would make Choice Properties Canada’s largest REIT public offering, surpassing the C$270 million raised in Dundee International REIT’s July 2011 sale, according to data compiled by Bloomberg. This would be the largest Canadian-listed IPO since Gibson Energy Inc. (GEI) raised C$500 million in June 2011, Bloomberg data show.
REITs, which receive preferential tax treatment from the government, are companies that invest in income-producing real estate and pay out most of their income to investors through unit distributions.
Loblaw joins Canada’s biggest retailers in adopting a REIT for its properties. Canadian Tire Corp., the country’s largest sporting goods chain, said May 9 that it will create a C$3.5 billion REIT holding about 250 properties with 18 million square feet. Hudson’s Bay Co. (HBC), Canada’s oldest company, is also mulling a REIT “sometime in the future,” CEO Richard Baker said last month.
Empire Co., parent of Canadian grocery chain Sobeys, spun off properties into an investment trust called Crombie REIT (CRR-U) in March 2006 through a C$204.8 million IPO. Crombie REIT gained 44 properties with about 7.2 million square feet, Empire said in a statement at the time.
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