Canadian Tire Said to Raise C$260 Million in REIT IPO

Canadian Tire Corp. (CTC/A), the country’s largest sporting goods retailer, plans to raise about C$260 million ($251 million) in an initial public offering of its newly formed real estate investment trust, according to two people familiar with the sale.

Canadian Tire is seeking to sell trust units of CT REIT for C$10 apiece in the IPO, according to the people, who asked not to be identified because the terms aren’t public. A message left with Rob Nicol, a Canadian Tire spokesman, wasn’t immediately returned.

Canadian Tire created CT REIT to spin off about 72 percent of its real estate portfolio, the Toronto-based retailer said today in a statement. CT REIT will acquire 255 Canadian Tire stores and a distribution center, totaling 19 million square feet, the company said.

Canadian retailers are selling off stakes in their real estate portfolios, unlocking value from their stores in North America’s largest cities.

Hudson’s Bay Co. (HBC), Canada’s oldest department store chain, is considering a REIT after it closes its $2.4 billion takeover of New York-based Saks Inc. (SKS) Loblaw Cos., Canada’s largest grocery chain, raised C$400 million after selling a stake in its Choice Properties REIT. (CHP-U)

Canadian Tire said on May 9 that it planned to create a C$3.5 billion REIT and sell units through an IPO this year. The retailer planned to keep 80 percent to 90 percent of the REIT, which would have a minimal effect on earnings, the company said at the time.

Main Tenant

Canadian Tire will be CT REIT’s most significant tenant “for the foreseeable future” with the company’s stores and distribution center representing about 96 percent of the REIT’s minimum rent in 2014, the company said today.

The IPO is led by Royal Bank of Canada and Canadian Imperial Bank of Commerce.

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.

Canadian Tire dropped 0.7 percent to C$91.65 at 4 p.m. in Toronto, after earlier reaching a record high. The stock has risen 32 percent this year.

To contact the reporter on this story: Doug Alexander in Toronto at dalexander3@bloomberg.net

To contact the editors responsible for this story: David Scheer at dscheer@bloomberg.net; David Scanlan at dscanlan@bloomberg.net

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