Strong population growth has driven the fortunes of Western Canada retail properties, and Artis REIT is wagering that will translate into strong interest for one of the largest retail offerings to hit the market in 2023.
Avison Young has listed 17 properties totalling more than a million square feet of space in Alberta and Saskatchewan for the Winnipeg-based REIT. The properties encompass 57 buildings with 153 tenants, working out to an average occupancy of 85%.
The portfolio includes all of Artis’ retail properties in Saskatchewan, Grande Prairie, Fort McMurray and Edmonton. It does not include its four holdings in Calgary, including Crowfoot Corner, Crowfoot Village, Sunridge Pointe and Sunridge Spectrum, all located in Calgary.
In addition to retail properties, Artis owns 12 million square feet of industrial and office properties in Canada and the U.S.
“The portfolio is generating significant appeal among a range of investor types who are active locally, regionally, and nationally,” said Reed Newnham, principal with Avison Young in announcing the listing of the Western Canada portfolio. “There has been interest in individual properties, regional portfolios of varying sizes, and the entire portfolio.”
The offering is in line with a business transformation initiative the REIT launched in March 2021.
“The first step is unlocking value through the monetization of certain assets,” it says on its website. “This will be achieved by evaluating and completing the sale of a portion of its industrial, office and retail assets in an opportunistic and disciplined manner, with the goal of maximizing value on a tax-efficient basis.”
In November, Artis announced that it had retained BMO Nesbitt Burns Inc. to provide financial advisory services to the REIT as part of a strategic review process “to consider and evaluate strategic alternatives that may be available to the REIT to unlock and maximize value for unitholders.”
BMO Capital Markets will be advising on the sale process. There is no stated timeline for completion of the sale process.
Artis president and CEO Samir Manji told unitholders prior to the most recent annual general meeting that the REIT remains committed to long-term investments in key markets as it seeks to boost its net asset value (NAV) per unit.
Artis’ third-quarter financials indicate its NAV has weakened in 2023, falling to $15.26 from $17.38 at its last fiscal year-end, Dec. 31, 2022.
Manji considers the discount unacceptable to unitholders, and hopes the sales will strengthen the Artis’ performance.
However, an analysis by CBRE Ltd. earlier this year noted that decompression in cap rates has contributed to significant discounts to NAVs across REITs.
The situation has been ongoing since the start of the pandemic, exacerbated by a lack of transactions.
However, the stabilization of markets promises to improve the situation as deal-making resumes and investors have a better sense of market values.
