Winnipeg Free Press - PRINT EDITION

Timing right for Loblaw's new REIT, Weston says

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TORONTO -- Loblaw Companies Ltd. is creating a real estate investment trust that will be one of the country's largest commercial landlords, an announcement that sent it shares soaring Thursday.

The REIT, which would operate as a subsidiary of Loblaw, would see Canada's biggest supermarket operator contribute real estate assets with a current market value of more than $7 billion to the venture.

Units of the REIT would then be sold in an initial public offering expected to be completed in mid-2013, subject to regulatory approvals.

"However, it is our intention to retain a significant majority interest in the REIT -- over 80 per cent," Loblaw chief financial officer Sarah Davis told a conference call with analysts.

"While we expect to generate funds from the IPO, it is anticipated that the long-term source of capital and the structural advantage of the REIT are the real benefits," Davis added.

Details on pricing and the number of units to be offered in the IPO were not disclosed. Those details typically are determined after a preliminary prospectus is issued and underwriters gauge investor interest.

Loblaw executive chairman Galen G. Weston called Thursday's announcement an exciting development for Loblaw. "The creation of the REIT is expected to build long-term value both for Loblaw and the REIT," Weston said in the statement.

"This strategic initiative positions Loblaw's core businesses well for the future. We expect the REIT to not only unlock value for our shareholders, but also increase our financial capacity to pay down debt, buy back shares and create a long-term source of capital to invest and grow."

Loblaw isn't the first such chain to make the move. Empire Co. Ltd., operator of the Sobey's supermarket chain, spun off a number of properties into Crombie Real Estate Investment Trust in 2006.

The Weston family controls Loblaw through its stake in George Weston Ltd., where Weston's father, W. Galen Weston, is executive chairman of the board.

The younger Weston told analysts Thursday Loblaw is making the move now "because we feel the timing is right for both our business and the capital markets. REITs are recognized as an optimal vehicle to acquire and develop real estate and the size and quality of our real estate assets should be appealing to investors," he said.

 

-- The Canadian Press

Republished from the Winnipeg Free Press print edition December 7, 2012 B15

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