One of Canada's largest commercial property owners is selling the Dixie Outlet Mall near Toronto and Calgary's Scotia Centre tower, as it unloads about 100 properties following a ratings downgrade to focus on its base in Quebec and the Ottawa region.
Cominar Real Estate Investment Trust (TSX:CUF.UN) said it plans to allocate more than $1.2 billion in expected proceeds primarily to reduce its debt. The remaining $325 million will be used to repurchase units and for acquisitions in core markets.
The plan announced this week comes after the Quebec City-based company was weighed down by debt from a series of acquisitions that made it Canada's third-largest diversified REIT and the largest commercial property owner in Quebec.
Chief executive Michel Dallaire said Thursday that Cominar can proceed with its restructuring after credit rating agency DBRS downgraded its unsecured debentures to BB high from BBB, freeing it up from national diversification to support an investment grade rating.
Cominar has previously sold properties to strengthen its balance sheet and enhance its flexibility.
"In the continuing pursuit of our primary deleveraging goal, we have decided to sell more properties and to concentrate our business on those markets where we have dominant position," Dallaire said during a conference call.
That means selling office, industrial and retail space in Alberta and Ontario sites, aside from Ottawa, and the Atlantic provinces. Other properties include strip malls, the Place Bathurst Mall and Phoenix Square in New Brunswick, a new office tower in Burlington, Ont., and a downtown Toronto office building.
Locally, Cominar owns the Vanguard Building at 171 Slater St., three lowrise office buildings at 700, 750 and 770 Palladium Dr. in Kanata and the 184,000-square-foot office building at 400 Cooper St. in Centretown, among other properties in Nepean, Gatineau, Kanata and elsewhere in Ottawa, according to its website.
The sale of 14 per cent of its portfolio over the next 24 months will leave Cominar with 428 properties and 38 million square feet of space. Two-thirds will be located in Montreal, 27 per cent in Quebec City and 6.5 per cent in Ottawa and Gatineau, Que.
Dallaire said he anticipates the biggest challenge will be unloading the 42-storey downtown Calgary Scotia Centre because of soft market conditions caused by a glut of available office space.
Analyst Heather Kirk of BMO Capital Markets said focusing on the Quebec market will reduce risk and provide the company more financial flexibility to pursue acquisitions and development projects in the province.
"The strategy brings Cominar back to its roots and what it was known for when it first went public," she wrote in a report.
Cominar's units have risen more than seven per cent to $13.46 since the plan was unveiled on Tuesday. They hit a more than eight-year low earlier in the month, almost half its 2012 peak level of $25.46.