UPDATE 2-Homburg REIT to acquire Quebec property portfolio

Fri Sep 16, 2011 8:51am EDT

* Transaction valued at C$114.9 million

* Most of the properties are in greater Montreal area

* Also to sell non-strategic portfolio in Atlantic Canada (Adds details from fourth paragraph)

By Pav Jordan

TORONTO, Sept 16 (Reuters) - Homburg Canada Real Estate Investment Trust HCR_u.TO said on Friday it agreed to buy a portfolio of 29 neighborhood shopping centers in Quebec for C$114.9 million ($116.7 million) as it expands in the French-speaking province.

The properties, 26 of which are located in the greater Montreal area, are anchored by Canadian pharmacy chain the Jean Coutu Group (PJCa.TO), and are to be acquired from a group led by Delek Global Real Estate (DGRE).

"With this acquisition, the REIT continues to grow its retail footprint in Quebec and particularly in Montreal," said Homburg President and Chief Executive Jim Beckerleg.

Homburg will finance the purchase through the assumption of C$74.6 million in existing mortgages and through net equity of C$40.3 million. The equity portion will be funded through cash on hand, the proceeds of a Sept. 13 bought deal and an existing line of credit.

Canadian REITs have benefited in the wake of the global financial crisis as investors looked to them for a high-yield haven for retirement savings and other capital.

Homburg, which raised about C$250 million ($255 million) in an initial public offering in May, has been an aggressive buyer this year, particularly in Montreal, where it is based.

Montreal is enjoying an extended real estate boom as occupancy rates rise and little new development comes on line.

Homburg said that Jean Coutu Group stores anchor 24 of the 29 properties in it acquired under the deal, making up about half of the portfolio's net income.

Other brand-name tenants with long-term leases in the portfolio include IGA, METRO, Shoppers Drug Mart SC.TO and Dollarama (DOL.TO).

"This broad portfolio provides us with additional access to Jean Coutu Group and other high quality tenants, enabling us to further leverage our existing retail platforms in the Greater Montreal Area," said Beckerleg.

The transaction is expected to close in late September.

Homburg also said on Friday it agreed to sell its non-strategic, multi-residential portfolio in Atlantic Canada for some C$65 million. After repayment of mortgages and mortgage-related costs, net proceeds will be about C$37 million.

(Reporting by Pav Jordan, editing by Dave Zimmerman)

Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.