Loblaw Cos. Ltd. filed a preliminary prospectus Friday aimed at creating one of Canada's largest commercial real estate trusts including some 75 per cent of the company's real estate assets.
Choice Properties Real Estate Investment Trust will hold 415 retail properties, one office complex and nine warehouse properties totalling 35.3 million square feet of gross leasable area.
Loblaw valued the properties at $7-billion when it first announced the plan in December, however the company said Friday the aggregate purchase price for the properties will be determined in connection with the pricing of the units.
Loblaw has said it is creating the REIT in order to optimize the value of the company's real estate portfolio, lower the cost of capital for real estate and increase the speed of development of new retail sites.
The grocery chain will be the REIT's most significant tenant for the foreseeable future, accounting for 91 per cent of its annual base-minimum rent and 88 per cent of gross leasable area on closing.
In addition to the offering of units to the public, Loblaw parent George Weston Ltd will acquire $200-million of units on closing, Loblaw said in a statement.
"I am excited about the potential of Choice Properties REIT to maximize the value of Loblaw's real estate over time while ensuring that Loblaw remains well positioned to grow the business going forward," George Weston executive chairman W. Galean Weston said in a statement.
"I believe a direct investment in the REIT is a good investment for Weston that will yield incremental value to our shareholders."
Concurrent with the initial public offering of units, the REIT will also offer two classes of senior unsecured debentures. The proceeds will be used to repay debt owed to Loblaw.
Loblaw said it expects that S&P and DBRS Ltd. will provide the REIT with a provisional issuer credit rating of "BBB" with a "stable" outlook, and each series of debentures with a provisional rating of "BBB" with a "stable" outlook. Loblaw also said it expects that both rating agencies will confirm Loblaw's credit ratings at "BBB" with a "stable" outlook.
Loblaw is Canada's largest grocer with more than 1,000 corporate and franchised stores from coast to coast. The company and its franchisees employ approximately 134,000 full-time and part-time employees.