Loblaw Cos. Ltd announced Thursday (Dec. 6, 2012) that it plans to create a Real Estate Investment Trust (REIT). The grocer based in Brampton, Ontario will create the trust to get together its real estate assets, as well as its trust units, which will be sold in an initial public opening (IPO).
The IPO is intended to give the retailer a source of capital and increase their financial capacity. They also hope to help shareholders get more value from their units. The grocer estimates to contribute holdings of about $7 billion into the REIT. The retailer will hold a major stake in the trust, which will be publicly traded through the IPO in mid-2013. The firm wants to ensure that their portfolio of real estate’s value is maximized and that projects for store developments are geared up.
Consolidation of the trusts financials result in facilitating financial reporting. Loblaw does not expect the transaction to affect its investment credit rating and minimal effect of the company’s consolidated profitability.
The retailer wants the REIT to help enhance and manage its portfolio and expand in the future. The portfolio has a market value estimated at $9.08-$10.09 billion. The real estate encompasses at least 47 million square feet of which at least 35 million will go to the trust. Loblaw has office buildings, warehouses, shopping centers and stores. The trust will have a management team overseeing its properties and to increase the size of the portfolio resulting from lower capital cost.
Loblaw Cos. Ltd is George Weston Ltd’s subsidiary and is the biggest food retailer in Canada. It has franchised and corporate stores that number at least 1,000, with employees numbers of more than 135,000, both part-time and full-time associates.