Toronto-based Primaris Real Estate Investment Trust (REIT) announced a $585 million transaction involving two prominent shopping centres. The deal is positioned as one of the largest retail real estate transactions of the year and marks a strategic expansion for Primaris REIT. The acquisitions include a 50% interest in Edmonton’s Southgate Centre and full ownership of Ontario’s Oshawa Centre.
The transaction, facilitated by advisors CBRE and TD Securities, is expected to close by January 31, 2025. Payment for the acquisitions will be a combination of $335 million in cash, $75 million in series A units of the REIT valued at $21.82 per unit, and $175 million in exchangeable preferred units in a newly created subsidiary partnership.
The assets were previously owned by Ivanhoé Cambridge, the real estate subsidiary of Caisse de dépôt et placement du Québec (CDPQ). Both malls are currently managed by JLL.
Southgate Centre: A Key Asset in Edmonton
Located in Edmonton’s Malmo Plains neighbourhood, Southgate Centre spans 846,000 square feet of retail space on 39 acres, with a site coverage of approximately 66%. The mall features a tenant mix that includes Hudson’s Bay, Winners, Safeway, Uniqlo, Apple, Sephora, and Lululemon, among other tenants.
Southgate Centre recently underwent a $93 million redevelopment of 260,000 square feet, repurposing the former Sears space. This project, completed in 2022, introduced a modernized retail offering and enhanced the mall’s overall appeal. According to Primaris, Southgate has a long-term occupancy rate of 87.5%, a weighted average lease term (WALT) of 5.9 years, and generated $300 million in total retail sales for the 12 months ending August 31, 2024.
Edmonton’s growing population, forecasted to increase by 28.2% over the next decade, further strengthens Southgate Centre’s market potential. The city’s diverse economy, anchored by energy, government, and education sectors, positions the mall as a key retail hub for the region.
Oshawa Centre: Eastern Ontario’s Retail Landmark
Situated 40 minutes east of downtown Toronto, Oshawa Centre is one of Ontario’s largest malls. The property encompasses 1,215,200 square feet of retail space on 79 acres, with a lower site coverage of 47%, offering ample opportunities for future development.
The tenant roster at Oshawa Centre includes Hudson’s Bay, Marshalls, H&M, Uniqlo, Zara, Aritzia, and Sephora, as well as the Regional Municipality of Durham as an office tenant. A major $230 million redevelopment in 2016 added 375,000 square feet, expanding the food court and introducing more retail space.
Despite its size and tenant mix, Oshawa Centre’s long-term occupancy rate currently stands at 73.8%, with a WALT of 3.8 years. The mall reported $242 million in sales for the 12 months ending August 31, 2024. The Oshawa area is experiencing strong demographic growth, with a projected 22% population increase over the next decade, making it an attractive investment for Primaris.
Primaris REIT: Building a Dominant Portfolio
Primaris REIT, known as Canada’s only enclosed shopping centre-focused REIT, has been actively executing a growth strategy centered on acquiring leading malls in mid-sized Canadian markets. Since its spin-off from H&R REIT in 2021, Primaris has acquired over $2.4 billion in assets, including prominent properties from several of Canada’s largest pension funds.
With these latest acquisitions, Primaris’ portfolio now totals 15 million square feet, valued at approximately $4.6 billion. The REIT’s same-store sales productivity is set to increase from $684 per square foot as of September 30, 2024, to $736 per square foot on a pro forma basis. The addition of Southgate Centre and Oshawa Centre further solidifies Primaris’ position in the market and provides opportunities for income growth through leasing vacant space, converting tenants to net lease agreements, and optimizing former department store areas.
“This transaction highlights the strategic advantages of our vertically integrated management platform and robust balance sheet,” said Rags Davloor, Chief Financial Officer at Primaris. Patrick Sullivan, President and COO, added, “Southgate and Oshawa Centre align perfectly with our growth strategy, offering strong sales volumes and significant potential for value creation.”
Divestitures and Future Outlook
In addition to the acquisitions, Primaris announced the sale of Sherwood Park Mall in Alberta for $107 million and Edinburgh Market Place in Guelph, Ontario, for $31.5 million. These dispositions, part of a broader capital recycling strategy, allow the REIT to focus on high-performing assets in growing markets.
Primaris’ proactive approach to managing tenant risk was also addressed in light of Comark Group filing for creditor protection under Canada’s Companies’ Creditors Arrangement Act. Comark operates 36 stores in Primaris’ portfolio under the banners Bootlegger, Cleo, and Ricki’s. With most leases structured on a short-term basis, Primaris has been preparing to replace these tenants with stronger retail brands.
Positioning for Long-Term Growth
The acquisition of Southgate Centre and Oshawa Centre marks a pivotal step in Primaris’ strategy to dominate Canada’s enclosed shopping centre sector. By leveraging its scalable management platform and focusing on high-quality assets, the REIT is well-positioned to capitalize on evolving market opportunities.
“These acquisitions enhance our value proposition with retailers while providing significant growth opportunities for our unitholders,” said Alex Avery, Chief Executive Officer of Primaris. “We remain committed to maintaining industry-leading financial metrics and delivering consistent returns.”
As the new landlords maybe they can tell Hudson’s Bay to clean up the Edmonton South Gate location. Beautiful mall but shabby Hudson’s Bay.