By RACHELLE YOUNGLAI
Friday, November 17, 2017
Ivanhoé Cambridge is trying to sell its stakes in three Canadian malls - a deal that could be worth more than $1-billion, according to people with knowledge of the matter.
The real estate investment arm of the Caisse de dépôt et placement du Québec has put its 50-per-cent nonmanaging interest in the malls on the market for about a month, according to the sources.
Fairview Mall in Toronto, Market Mall in Calgary and Richmond Centre in Richmond, B.C., are each valued around $1-billion and passive stakes could be sold separately or as a bundle, according to the sources.
Whoever ends up buying Ivanhoé Cambridge's interest would partner with mall manager and property owner Cadillac Fairview, which owns the remaining half. Cadillac Fairview, the real estate unit of Ontario Teachers' Pension Plan, would retain control and continue operating the malls.
The sale has moved into the second round of bids, sources said.
Royal Bank of Canada and CBRE commercial real estate firm were hired to run the process, the sources said.
A spokesman for Ivanhoé Cambridge said: "We don't comment on rumours about our investment strategy." Spokesmen for RBC and CBRE both declined comment.
The shopping centre partial sale is occurring during a tumultuous time in the industry. Malls and other brick-and-mortar stores are facing increased competition from online retailers and are scrambling to find new tenants for unwanted retail space. Sears Canada Inc. is closing 131 stores across the country. Toys "R" Us Canada is operating under creditor protection and it is unclear whether its physical stores will remain open.
Meanwhile, property developers are trying to turn large retail spaces in prime locations into something more lucrative, such as high-end condominiums or office space.
Brookfield Property Partners is trying to gain complete control over GGP Inc.'s suite of top malls in the United States.
Hudson's Bay Co. announced a $1-billion deal to sell a top department-store building in Manhattan to office sharing company WeWork and will be leasing some of its Vancouver department store floors to the shared office space.
The three Cadillac Fairview-Ivanhoé Cambridge malls are among the top 20 most lucrative shopping centres in Canada. Richmond Centre, Fairview and Market Mall each generate around $900 in sales per square foot, according to the Retail Council of Canada.
"The top malls are in great locations and will always do well," said Alex Arifuzzaman, a retail real estate adviser with InterStratics Consultants.
Ivanhoé will be left with a higher share of malls under its control if it succeeds in divesting its passive stakes in the three Cadillac Fairview operated malls. Currently, Ivanhoé owns 29 malls in Canada and manages 22. The pension fund also owns shopping centres in Brazil, China and Germany, as well as office and residential property.
According to its most recent activity report, Ivanhoé said it is redeveloping and expanding three other shopping centres in Quebec and British Columbia. The company said it would continue to "increase the value" of its shopping centres and "capitalize on development opportunities."
Over all, Ivanhoé said it planned to "significantly increase the proportion of growth market investments in its overall portfolio, with the goal of diversifying its markets and asset base."
Other mall owners such as RioCan Real Estate Investment Trust are also retooling their portfolios.
Richmond Centre in Richmond, B.C., is one of three shopping-centre properties that Ivanhoé Cambridge is looking to sell its stakes in. The sale has moved into the second round of bids, sources say.
RAFAL GERSZAK/THE GLOBE AND MAIL