Primaris REIT has signed a deal to buy a shopping centre complex in Halifax for $370 million, and the company’s CEO says more mall acquisitions could soon follow.
Alex Avery told BNN Bloomberg that despite the prevailing sentiment that shopping malls are on their way out, demand for them has returned at a sharp pace post-pandemic.
“The mall business, as I think everyone is aware, went through some difficult times after target closed in Canada, and then Sears closed in Canada, and there was the onset of e-commerce,” Avery said in a television interview on Monday.
“So, it took a number of years to work through that, but the business has been stabilizing and recovering quite sharply.”
Primaris’ purchase includes the Halifax Shopping Centre – an enclosed mall with tenants like Sport Check, Aritzia and Apple – and the Annex, which sits adjacent to the mall and features a Walmart, Sobeys and Dollarama.
Under the agreement, which is expected to close by the end of the month, Primaris will pay $200 million in cash, $45 million in series A units in the trust and $125 million in exchangeable preferred units.
‘A FABULOUS MARKET’
Avery said that the decision to purchase property in Halifax was made in part because it’s "a fabulous market” that’s seen significant growth in recent years.
“Halifax has a remarkable story right now, the population growth last year was four and a half per cent, and we think that that's going to be a trend that's going to be durable,” he said.
Avery cited record immigration numbers to big cities such as Toronto and Vancouver as a main driver of population growth for midsized markets like Halifax.
“A very large chunk of those that land displace others and they move from large markets to midsized markets where the cost of living is so much better,” he said.
Avery added that the purchase follows another shopping centre acquisition this past summer, when Primaris bought Conestoga Mall in Waterloo, Ont.
He said the deal was executed with a similar cash and stock transaction model, which has since “accelerated discussions with other potential vendors.”
MALL DEMAND RETURNING
Avery said that in both 2021 and 2022, Primaris saw 10 per cent net operating income growth at their existing shopping centres, which he describes as “fantastic numbers” in the REIT space.
He said he expects that type of growth to continue for several more years, partly because most developers stopped building shopping centres about 10 years ago as demand for them waned, but the Canadian population has grown since then and demand has followed.
“We want to own malls, and the malls are doing really well. Despite the growth of e-commerce… people want to be able to shop the way that they want to shop,” Avery said.
“Sometimes that means they want to order something online, sometimes that means they want to go in and talk to a salesperson… and sometimes they don't know what exactly they want, but they just go to the shopping centre and find something.”
With files from the Canadian Press