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Oakridge and Pacific Centre transactions: tale of two malls

Institutional investors buy stakes in B.C.’s two most productive shopping centres
The Ontario Pension Board and the Workplace Safety and Insurance Board have teamed up to buy a 50% stake in CF Pacific Centre | Chung Chow

Stakes in two major Vancouver malls have been sold within as many weeks, although while one came as a surprise, the other makes sense, according to observers.

Ivanhoé Cambridge’s decision to sell Oakridge Centre to QuadReal Property Group makes sense if the price was right because redeveloping the 58-year-old mall requires a substantial capital investment, according to retail analyst and Retail Insider Media owner Craig Patterson. QuadReal Property Group is a subsidiary of British Columbia Investment Management Corp.  (bcIMC).

It is Cadillac Fairview’s decision to sell a 50% stake in its CF Pacific Centre that confuses Patterson.

“Cadillac Fairview’s strategy could be to spread the risk, but there’s no risk with Pacific Centre,” he said. “It’s the best mall and the only major shopping centre in downtown Vancouver. It has really high sales per square foot and strong retailers.”

Indeed, Oakridge and Pacific Centre are the two most productive malls in B.C. with sales of $1,537 and $1,523 per square foot, respectively, according to a December study by Retail Council of Canada. Only Toronto's Yorkdale Shopping Centre is more productive in Canada, with $1,650.85 in sales per square foot.

Cadillac Fairview’s decision is also curious because it might make Pacific Centre harder to manage.

The subsidiary of the Ontario Teachers’ Pension Plan announced January 20 that it would sell the stake in CF Pacific Centre as well as 50% stakes in 12 other properties, which combine to have four million square feet of leasable space, for an undisclosed sum to Ontario Pension Board (OPB) and the Workplace Safety and Insurance Board (WSIB).

The 710,623-square-foot Pacific Centre alone is assessed at more than $786 million, up 11.5% from last year. Oakridge, in contrast, is 573,920 square feet and is assessed at more than $611.2 million.

Although observers believe Cadillac Fairview must have been offered a price too good to refuse to agree to sell half of the structure, it’s not the only B.C. mall in which Cadillac Fairview has a 50% stake.

Cadillac Fairview and Caisse de dépôt et placement du Québec-owned Ivanhoé Cambridge entered into a joint venture in 2011 to each own 50% of CF Richmond Centre. The mall was previously two separate but connected properties. Ivanhoé Cambridge owned and managed the north end; Cadillac Fairview owned and managed the south end.

Cadillac Fairview now manages all of CF Richmond Centre, and it is expected to continue to manage CF Pacific Centre.

“I’m sure that before [Cadillac Fairview, the OPB and WSIB] struck the deal they would have ironed out how they would manage Pacific Centre,” said Thomas Fung, who owns Richmond’s Aberdeen Centre. 

“It must have been a very high price in order for Cadillac Fairview to sell.”

Fung told Business in Vancouver that he has never considered selling a 50% stake in his mall because it could make the property harder to manage.

Several groups have approached him with offers to buy the mall in the past year, but Fung said he has no interest in selling.

Partnering with Cadillac Fairview makes sense for OPB and WSIB given that the two organizations do not have mall-management divisions.

The arrangement is similar to the only other large Metro Vancouver mall to have joint ownership: the McArthurGlen Designer Outlet Vancouver Airport.

The Vancouver Airport Authority (VAA) entered into a partnership with European mall developer McArthurGlen Group to build and manage the mall on Sea Island because the airport authority had no experience in that sector while McArthurGlen did.

“[VAA’s] stake in the designer outlet centre fits our business model to grow non-aeronautical revenue,” VAA spokeswoman Alana Lawrence told BIV. “Future revenue from the designer outlet centre will be reinvested.”

Malls have been popular assets for property managers.

Shape Properties CEO John Horton told an Urban Development Institute luncheon last year, when asked what he would do if he could have anything he wanted, that he would buy more local malls on transit.

“I would phone up Ivanhoé Cambridge and convince them to sell me Oakridge,” said Horton, whose company owns Metro Vancouver malls such as Burnaby's Brentwood Town Centre and Lougheed Town Centre.

“Then I’d get back on the phone to Cadillac Fairview and get them to sell me Pacific Centre. Then I’d phone up both Cadillac Fairview and Ivanhoé Cambridge together and get them both to sell me Richmond Centre.” •

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