First Capital REIT has agreements to sell three of its Western Canadian shopping centres, and has entered into partnerships on two major Toronto development properties. In total the four transactions amount to approximately $400 million.
The REIT is selling neighbouring retail properties in Airdrie, Alta., the Towerlane Centre and Airdrie Village. It is also selling the Langley Mall in Langley, B.C.
In Toronto, First Capital is selling a 50 per cent interest in its Station Place mixed-use development at Dundas Street West and Aukland Road to Centurion Apartment REIT. It will also partner with Pemberton Group to develop the 28-acre former Christie Cookie factory site located at 2150 Lake Shore Blvd. W. at Park Lawn Road.
“Collectively, these transactions achieve several of First Capital’s strategic objectives, including crystallizing value created through the zoning, entitlement, and property development processes while also maintaining a share of future potential value growth, strengthening our balance sheet, and further aligning our real estate portfolio with our super-urban strategy,” said Adam Paul, the president and chief executive officer of First Capital, in the announcement Tuesday night. “Notably, we have met these objectives while selling the properties at prices that are well in excess of their respective IFRS values.
“In a broader sense, the transactions exemplify the significant future value enhancing opportunities embedded in First Capital’s deep development and density pipeline.”
First Capital is an owner, operator and developer of grocery-anchored and mixed-use properties in Canada’s largest cities. It has $10 billion of assets under management.
Pemberton partners on Lake Shore development
First Capital exercised its option to purchase CPP Investments’ 50 per cent interest of their 28-acre development site in Etobicoke for $56 million, and subsequently sold it to Pemberton Group for $156 million.
“The master plan is complete and zoning will soon be in place, permitting 7.5 million square feet of density plus many elements reminiscent of a complete community, including parks, public realm, transit and other infrastructure, as well as extensive community services,” Paul said during the REIT’s Aug. 5 Q2 2021 earnings call.
“Therefore, it is the appropriate time to add a strategic and aligned partner with deep residential and major construction expertise. We feel Pemberton Group, an existing partner of FCR, was a superb candidate, and we’re thrilled to expand our partnership on such an important development.”
The purchase price will be paid in three installments: $56 million on closing; $50 million on or before Dec. 31, 2022; and the remaining $50 million plus interest on or before the fifth anniversary of the closing.
Pemberton is one of the largest residential condominium developers in the Greater Toronto Area. It has completed more than 17,000 units and has 6,000 under construction.
This will be First Capital’s largest development and involves multiple phases spanning several years.
First Capital and CPP Investments acquired the site in 2016 to transform the large brownfield site. They engaged the U.K.-based Allies and Morrison architectural firm to help bring the project’s vision to life.
The next phase will include site and transit infrastructure improvements, followed by residential and mixed-use construction. Plans are for residential, retail and commercial uses, including approximately 750 affordable housing units and a minimum of 3,000 family-oriented units.
The development will also include: two large public parks; two civic squares; provision for two elementary schools; a covered retail galleria; a public library; a community recreation centre; public daycares; and a multi-modal transit hub integrating Toronto Transit Commission and upcoming GO Transit train service.
“Pemberton will provide all development and construction management services in connection with the residential and the infrastructure works,” First Capital executive vice-president and chief operating officer Jordie Robins said during the earnings call. “First Capital will act as development manager of the retail and commercial components and, upon completion, will act as property and leasing manager for the retail and commercial space.”
The Station Place partnership
First Capital has a binding agreement to sell a 50 per cent interest in Station Place to Centurion Apartment REIT. The agreement also involves its existing partner at the site, Main & Main.
When the transaction completes, which is expected in Q3 of 2021, First Capital’s stake in the property will be 35.4 per cent, down from 70.8 per cent currently.
Station Place is a purpose-built rental development consisting of a 40-storey tower containing 333 rental apartment units and 50,000 square feet of retail, anchored by Farm Boy. It’s nearing completion, with the first residential occupancies having commenced in June.
The property is adjacent to Kipling Station, a multi-modal transit hub with connectivity to the TTC, the GO train and the Metrolinx Kipling bus terminal.
“The transaction partners First Capital with an aligned residential owner and manager that has experience with multi-residential assets in Canada and the United States,” the announcement states.
Centurion will be the property manager on completion of the development.
Towerland Centre, Airdrie Village and Langley Mall
Located in the Calgary suburb of Airdrie, the Towerland and Airdrie Village centres are situated on 22 acres of land and anchored by Safeway, Dollarama, Staples, Shoppers Drug Mart and Goodlife Fitness. The properties have 250,000 square feet of net rentable area and are 95 per cent leased.
Langley Mall is a 137,000-square-foot shopping centre anchored by a No Frills grocery store and is 96 per cent leased. The property has long-term redevelopment potential but, like the two Airdrie properties, its demographic statistics are “notably inferior” to First Capital’s overall profile, the trust says in the announcement.
One of Langley Mall’s anchor tenants failed in early 2020. Owing to the tenant’s long-term lease at a below-market rate, the turnover created a substantial increase in property value and presented an opportunity for First Capital to divest.
Both the retail transactions are slated to close later in 2021.
All the transactions remain subject to customary closing conditions.
– With files and updates by Don Wilcox
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Forest Gate buys Niagara Falls shopping centre | RENX – Real Estate News EXchange
Forest Gate Financial Corp. has acquired a Niagara Falls shopping centre as the newly formed investment firm begins building a portfolio and executing on its strategy to acquire a diverse range of properties.
The Mount Carmel Centre was purchased from a private investment group for $37 million. The 30-acre site at 3930 Montrose Rd. is occupied by a shopping centre with tenants that include Food Basics, The Sleep Factory, Tim Hortons, Swiss Chalet and Harvey’s, among several other retailers and food, beverage and service providers.
“We really believe in the Niagara Falls market and think this is an excellent opportunity for us,” Forest Gate chief executive officer and managing partner Dan Marinovic told RENX. “We like the site because it’s a very large property that we feel we can add value to.”
Forest Gate will manage the property, which is in close proximity to a residential neighbourhood and Mount Carmel Park. Niagara Falls has natural attractions, a strong tourism industry and a manufacturing base.
The city will benefit from improved GO Transit service, which Marinovic believes will make it an attractive location for people looking to work remotely while seeking a more affordable and relaxed lifestyle than can be found in larger markets.
Forest Gate seeks variety of asset classes
While there are no immediate plans for redevelopment, the Mount Carmel Centre site is large enough to accommodate future multifamily and mixed-use development.
Forest Gate is establishing a stand-alone purpose-built rental apartment vertical and Marinovic said it has close to 500 units under management or in its acquisition pipeline.
The company is looking to add at least 1,000 units annually over the next several years. It’s targeting value-add opportunities in Southern Ontario communities like Niagara Falls where there’s access to public transit and pleasant environments for living and working from home.
Forest Gate is also seeking income-producing industrial and retail properties, as well as development and redevelopment opportunities.
The Vaughan-headquartered boutique real estate private equity, private debt and advisory investment firm was launched in March by Marinovic and partner and chief financial officer Frank DelZotto to deliver premium risk-adjusted returns on its own and in partnerships with developers, builders, investors and capital providers.
Forest Gate can be nimble in making acquisitions and Marinovic is excited by the momentum the company has achieved in its first six months.
“We’re big believers in the Canadian real estate landscape, especially as things start to normalize and we get immigration back to pre-pandemic levels,” said Marinovic. “We’re looking at very significant growth over the next 12 months.”
The Forest Gate team
Marinovic was most recently chief development officer of Dream Unlimited, where his responsibilities covered finance, development, construction and operations. Before joining Dream in 2013 he was vice-president of finance for First Gulf, the commercial real estate arm of Great Gulf, for seven years.
DelZotto was previously a partner at BDO Canada LLP for 19 years.
Forest Gate just hired Justin Hawkins, formerly First Gulf’s senior manager of development and planning, as director of development. Hawkins worked for RioCan REIT, Dream and SmartCentres REIT before that.
Vaughan-based home-builder Treasure Hill Homes is a partner in Forest Gate. Forest Gate’s advisory board is comprised of Marinovic, DelZotto, Treasure Hill president Nicholas Fidei and Treasure Hill CFO Mark Caruso.
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