TORONTO-Locally based Primaris Retail REIT expects to grow its portfolio to 20 properties totaling about 7.75 million sf in Canada when it closes a $114.3-million deal by June 15 on four shopping centers in Ontario and New Brunswick, according to Primaris CEO R. Michael Latimer. The contract price equates to an average $162.21 per sf.

The transaction will increase the book value of the portfolio to more than $1.2 billion, Latimer says in a prepared statement. The purchase will be financed by $55 million of debt and $59.3 million of cash on hand. The closing date could be delayed if Primaris doesn't obtain a lender's consent to assume a loan on one of the assets, Latimer says.

One of the four assets will not be encumbered by debt. The entire debt load on the acquisition will be a combination of the assumption of an existing loan and the refinancing of some existing loans, according to Louis M. Forbes, senior vice president and chief financial officer at Primaris.

The properties are the 191,126-sf, open air, 98.7%-leased Alliston Mills Shopping Center in Alliston, ON; the 127,058-sf, open-air, 89.34%-leased Forest Glen center in Kitchener, ON; the 190,130-sf, open air, 100%-leased South Cambridge Shopping Center in Cambridge, ON; and the enclosed 196,291-sf, 90.34%-leased Sugar Loaf Mall in Campbellton, NB. Latimer says the portfolio is being acquired from a private seller.

Latimer says the portfolio to be acquired is composed of 84% nationally branded tenants and has a portfolio occupancy of 94.5%. Major tenants include Zellers, Loblaw (under the Zehrs and Valu Mart banners) and two new-format Shoppers Drug Mart pads. Of the 40,178 sf of vacant space, 90% or 36,061 sf will be head leased by the vendor for three years at market rates, Latimer says. The leases have an average term to maturity of about 7.5 years. "The portfolio has a smooth lease expiry profile with no more than 19% of total area expiring in any one year," the Primaris chief adds.

"The acquisition will further diversify Primaris' holdings in the Ontario market as well as make an initial investment in a new market, New Brunswick," Latimer says. "The potential for future acquisitions of similar property types will be facilitated by the management team applied to this investment."

At March 31 of this year, Primaris had a debt to gross book ratio of about 48%. "This ratio increases to approximately 52.5% after giving pro forma effect for this acquisition and the previously announced refinancing of Orchard Park Shopping Center, completed since March 31," Latimer says. "Management believes it has additional acquisition capacity of $190 million, while remaining within a comfortable debt to gross book value ratio of 57%."