In the $9.4B acquisition of First Capital, Choice Properties (CHP-U) is absorbing the best $5B of the portfolio and leaving the rest to KingSett…

… which will increase its exposure to population-dense core markets post-close (Montreal, Toronto, Vancouver, etc.).

While the transaction reduces CHP’s exposure to Loblaw in favour of third party tennants, its necessity-based exposure will stay flat…

… alongside occupancy, with the acquired assets running at 98.2% - the same as Choice’s current portfolio.

To fund the deal, the company is issuing $1.7B of equity ($600M filled by George Weston) and using debt for the rest - taking pro-forma leverage to 8.5x…

… which should be manageable given the maturity ladder (worst case, could sell assets). Retail REITs caught a bid on the news, given the price tag represents an 8% premium to NAV…

… but with the rest of the group trading at a sizeable discount, time will tell if the move higher has staying power or if we’re getting a repeat of Minto and InterRent.