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Choice Properties to ramp up mixed-use pipeline with Canadian REIT merger


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Choice Properties to ramp up mixed-use pipeline with Canadian REIT merger

Choice Properties Real Estate Investment Trust is banking on mixed-use development as a key avenue for long-term growth and expects its proposed merger with Canadian REIT to expedite the strategy, company executives said on a conference call.

Galen Weston, chairman and CEO of Choice's controlling unit-holders Loblaw and George Weston Ltd., revealed during the call that they had long been contemplating M&A as a strategic option and decided that Canadian REIT was the right fit for Choice, given their complementary sources of value creation. Under the merger deal, Choice will acquire Canadian REIT to form Canada's largest diversified REIT with an enterprise value of roughly C$16 billion.

In selecting Canadian REIT as a partner, Choice President and CEO John Morrison said his company was particularly drawn to the location of the company's mixed-use properties in major, predominantly urban markets. The executive said he believes mixed-use is the future of real estate development for the company.

Morrison and Canadian REIT CEO Stephen Johnson said the combined entity has about 60 sites that can be developed into residential-focused mixed-use communities, 48 of which are in Choice's portfolio and the remainder of which are owned by Canadian REIT.

Morrison identified Choice's Golden Mile Shopping Centre and 2280 Dundas properties, as well as Canadian REIT's 390 Dufferin Residences and 1050 Sheppard Ave. properties, as among the sites eyed for mixed-use development.

Aside from the mixed-use opportunities, Morrison said the acquisition should also expand Choice's asset class to include office space and increase its exposure to industrial properties while diversifying its tenant mix.

George Weston President and CFO Richard Dufresne said during the call that the combined company is expected to have the capacity to deliver funds from operations of C$690 million and adjusted FFO of C$570 million.

Upon completion of the deal, Johnson will become president and CEO of the combined company, while Morrison will transition to nonexecutive vice chairman. Loblaw and George Weston will own a combined 65% of the merged entity.