Crombie Real Estate Investment Trust (CRR.UN-T) is eyeing adding a “significant” residential component to its most recent purchase, a $42-million strip plaza on McCowan Road in Toronto.
The REIT announced Thursday it has closed on the purchase of 1215-1255 McCowan Road, the McCowan Square, from a third-party vendor. The site includes 4.5 acres of land next to the McCowan TTC Station.
The property is currently income-producing and consists of a 100 per cent occupied 61,000-square-foot, FreshCo-anchored strip retail plaza. FreshCo is a discount banner of Sobeys Inc. (EMP.A-T). Other tenants include Shoppers Drug Mart, the Bank of Montreal and AllStar Wings and Ribs.
And, in line with a company strategy Crombie president and CEO Donald Clow discussed at CIBC’s annual real estate forum in Toronto, the purchase was made with an eye to future expansions or redevelopment.
“Significant residential density”
“Our initial assessment is that there is opportunity to add significant residential density to this site over time as the property is currently not utilized at its highest and best use,” Clow said in a release about the purchase.
At the CIBC real estate forum in April, Clow laid out Crombie’s vision to expand into the multi-residential sector.
“As we go forward,” he told attendees at the forum, “a portion of our business will be in the mixed-use and multi-family space. We have an opportunity, primarily through the acquisition of the Safeway portfolio that we acquired in 2013, as well as some others that we’ve acquired, to develop up to 6,500 units, which represents about $3 billion in residential opportunity.
“These are grocery store sites with parking lots in the middle of big cities with towers all around them. It’s a great source of land.”
Moving into multi-residential sector
Crombie has traditionally been a retail-focused enterprise. It owns about 280 properties comprising 19 million square feet, many of them grocery- and drug store-anchored retail sites. The enterprise value of its portfolio is about $4.8 billion.
The McCowan acquisition adds to Crombie’s existing pipeline of development sites which, as of March 31, consisted of 19 properties representing up to 6,500 residential units and total estimated cost-to-develop of $2 to $3 billion.
The 20 sites are positioned as follows: three in Toronto and the Greater Toronto Area; nine in Vancouver; four in Calgary and Edmonton; three in Halifax; and one in St John’s.
“These tremendous opportunities exemplify Crombie’s strategic advantage of having a strong relationship with a leading national grocery retailer,” Clow said in Thursday’s release.
“Through close collaboration with our largest tenant Sobeys Inc., we are confident we can create significant incremental unitholder value over the medium to long term.”