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Monday, 03 December 2012 22:29

Loblaws dangles REIT before investors

Written by  Vernon Clement Jones
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It may become the blue chip of Canadian REITs, with the country's largest food store chain announcing it will roll some of its properties into an investment trust and lease back those buildings before serving up shares to hungry investors.

“The creation of the REIT is expected to build long-term value both for Loblaw and the REIT,” said Loblaw chair Galen Weston Thursday. “This strategic initiative positions Loblaw’s core businesses well for the future.”

Here’s how the REIT, due for launch in mid 2013, is expected to work: Loblaw will contribute about 35 million square feet of mostly retail space to the REIT and then sign long-term leases for those properties with their new owner.

The move will leave 12 million square feet of the retail giant’s current real estate holdings under its direct ownership and control.

Still, by transferring the majority of its properties to the REIT, the company is expected to create significant liquidity even as it plans to maintain shareholder control of the new entity.

For high-net-worth Canadians, increasingly looking to replace their own bricks-and-mortar investments with the kind of no-muss real estate investments REITs offer, the Loblaws offering may be seen as a relatively safe bet in a volatile market.

Canadian REITs, in general, continue to outperform most other equities on the TSX and other exchanges, say fans of those vehicles.

But not all of them have been immune, say analysts, pointing to the ebbs and flows of some commercially focused trusts.

Last modified on Thursday, 06 December 2012 18:10

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