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Loblaws real estate spinoff Choice Properties beats IPO forecast in Q4

The real estate spinoff from Loblaw Companies Ltd. (TSX:L) is looking to cut costs as it continues to add to its portfolio of retail properties this year.

"Our development program will continue to gain momentum through the year," John Morrison, president and chief executive of Choice Properties REIT, told a conference call with analysts Tuesday.

"We will continue to contemplate acquisitions in the year ahead, both from the remaining real estate held by Loblaws and by other vendors."

Morrison said the trust plans to reduce costs by creating its own property management team that will help build "stronger tenant relationships and gain greater market intelligence."

The trust currently contracts out the management of its properties.

Choice posted a fourth-quarter loss Tuesday of $6.5 million due to a $112-million negative adjustment for the fair value of its exchangeable units, partially offset by a $68.8 million-gain on the fair value of its investment properties.

However, the trust earned an adjusted profit of $36.8 million — above a forecast of $34.6 million when it had prepared its initial public offering last year.

Funds from operations, a key financial measure for real estate companies, was $82.8 million — compared with the forecast of $78.9 million.

Choice said the better than forecast funds from operations was driven by acquisitions during the quarter and lower than expected general and administrative expenses.

During the fourth quarter which ended Dec. 31, Choice acquired 12 properties for $186 million.

Ten of the properties were announced in October 2013. The remaining two included a shopping mall in north Toronto and land in Surrey, B.C.

Morrison said a 120,000 square-foot Real Canadian Superstore will be built on the Surrey site, with construction slated to start in the second quarter of this year. The remaining area will be leased out to other retail tenants.

The trust was spun off last year by Loblaw, which remains its largest investor and tenant.

Loblaw's parent, George Weston Ltd. (TSX:WN), indirectly purchased 20 million units for $200 million, representing a 5.6 per cent interest.

At the time of the spinoff, Choice had 415 retail properties, one office complex and nine warehouse properties totalling 35.3 million square feet of gross leasable area. It now holds 435 properties with a total of 36.3 million square feet.

Choice (TSX:CHP.UN) units were up two cents to $10.47 on the Toronto Stock Exchange in mid-morning trading.

The Canadian Press


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