PrefBlog

First, the Loblaws REIT facilitated the Shoppers’ deal:

For too long, Loblaw shares traded at a valuation discount to Shoppers that made the math of any acquisition difficult. That finally changed when Loblaw announced its intention to create a real estate investment trust last December to hold the real estate housing the company’s grocery stores.

Loblaw’s price-earnings ratio jumped from 13 times earnings to more than 15, and then soared again in recent weeks to more than 17. Shoppers, meantime, was trading in the 14-15 times earnings range, down from much higher levels a few years earlier when growth was headier. Now the transaction, with synergies, could be solidly additive to earnings per share.

Such valuation advantages can be fleeting, so Mr. Weston moved fast when the opportunity arose and Shoppers opened the door to finally consummating a transaction.

The transaction and the cheers from shareholders and analysts should cement the influence of the new guard in the Weston empire, as their push for a REIT proved the catalyst.

Weston Chief Financial Officer Richard Dufresne, a former investment banker, and Khush Dadyburjor, who runs corporate development, were among those who pushed hardest for the REIT. They were up against concern among some of the old guard inside Loblaw and its parent company, George Weston Ltd., that the REIT was simply financial engineering that would bring no real advantage for the company, according to one person familiar with the transaction.

Loblaw’s ability to finally buy one of the most coveted assets in Canadian retailing should end any doubts about the REIT, and put the dealmakers firmly in charge. (That assumes of course, that the Shoppers transaction does not turn out to be a bust.)

Now, there’s a massive REIT coming out in the States:

The initial public offering of Brixmor Property Group, the second-largest U.S. shopping center landlord, may be the biggest for a retail real estate investment trust since Simon Property Group Inc.’s IPO 20 years ago.

The sale of shares in New York-based Brixmor, a Blackstone Group LP (BX) unit, probably “will raise $700 million or more,” according to Renaissance Capital LLC, a Greenwich, Connecticut-based research firm. That would be the largest IPO by a shopping-focused REIT since Simon’s $840 million share sale in 1993, data from the National Association of Real Estate Investment Trusts show.
…
Brixmor owns 522 shopping centers with 87 million square feet (8.1 million square meters) of space. The assets that form Brixmor’s core were acquired in Blackstone’s $9 billion purchase of U.S. shopping centers from Australia’s Centro Properties Group in 2011. Brixmor is second to Kimco Realty Corp. (KIM) among U.S. shopping-center landlords by number of properties.

Hmmm … looks like the little guy’s getting in ….

DBRS confirmed PDV.PR.A at Pfd-3:

On July 20, 2012, DBRS downgraded the rating of the Preferred Shares to Pfd-3 from Pfd-3 (high) due to a drop in downside protection in the months leading up to the rating action. Since then, the NAV of the Company has recovered slowly, with downside protection available to holders increasing from 37% in July 2012 to 40% in January 2013, and stabilizing at that level over the past few months. The current dividend coverage ratio is approximately 0.88 times, so income received on the Portfolio is unable to fully cover Preferred Share distributions. As a result, the rating of the Preferred Shares has been confirmed at Pfd-3.

DBRS will continue to closely monitor changes in the credit quality of the Preferred Shares and provide rating updates as required.

It was a mixed day for the Canadian preferred share market, with PerpetualDiscounts gaining 8bp, FixedResets down 23bp and DeemedRetractibles flat. The Performance Highlights table is fairly lengthy, with a notable contingent of losing FixedResets. Volume was enormous. Massive. Humungous.

This entry was posted on Friday, July 19th, 2013 at 10:28 pm and is filed under Market Action. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.