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Loblaw to Spin Off Real Estate

BRAMPTON, Ontario — Loblaw Cos. last week said it plans to spin off its real estate holdings in a separate real estate investment trust in a deal it said would unlock value for shareholders and provide the retailer an additional source of capital.

Jon Springer, Executive Editor

December 10, 2012

2 Min Read
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BRAMPTON, Ontario — Loblaw Cos. last week said it plans to spin off its real estate holdings in a separate real estate investment trust in a deal it said would unlock value for shareholders and provide the retailer an additional source of capital.

Loblaw said it would contribute approximately 35 million square feet of properties to the REIT, including stores, shopping centers, warehouses and office properties. It estimated the properties have a current market value of around $7 billion. Loblaw said it intends to maintain an 80% ownership in the REIT, which would be spun off as a publicly  traded entity in mid-2013.

In a conference call discussing the deal, Galen G. Weston, Loblaw’s executive chairman, said the decision reflects favorable investor sentiment toward real estate while rents will provide Loblaw with a new source of capital it could invest in its retail stores. Company stock soared by more than 16% following the  announcement.

Read more: Loblaw Sticks to Plan Despite Q3 Dip

“We obviously believe we have an enormous amount of unrecognized value in our real estate portfolio and we’ve looked at this opportunity many times over the years,” Weston said. “And as we looked at the circumstances over the last six to nine months, we felt this was the right thing to do. But we wouldn’t be doing it if we didn’t feel it also represents a great opportunity to enhance our strategic plan for Loblaw. Part of that is long-term access to funds we can put against growth.”

Loblaw said it intended to name outside management to run the REIT. That group would have a mandate to explore opportunities outside of Loblaw as a means of diversifying its portfolio. It is also expected to add additional Loblaw properties to the REIT as the properties mature.

Loblaw said it expects to consolidate the REIT’s financial results for financial reporting purposes and believes the company’s consolidated profitability will be minimally impacted.

 

About the Author

Jon Springer

Executive Editor

Jon Springer is executive editor of Winsight Grocery Business with responsibility for leading its digital news team. Jon has more than 20 years of experience covering consumer business and retail in New York, including more than 14 years at the Retail/Financial desk at Supermarket News. His previous experience includes covering consumer markets for KPMG’s Insiders; the U.S. beverage industry for Beverage Spectrum; and he was a Senior Editor covering commercial real estate and retail for the International Council of Shopping Centers. Jon began his career as a sports reporter and features editor for the Cecil Whig, a daily newspaper in Elkton, Md. Jon is also the author of two books on baseball. He has a Bachelor of Arts degree in English-Journalism from the University of Delaware. He lives in Brooklyn, N.Y. with his family.

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