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“It is opportunity specific,” said Snyder, adding that some retail acquisitions in the U.S. have been pursued to keep the anchor tenant in a shopping mall and preserve so-called co-tenancy provisions. Once an anchor tenant leaves, these co-tenancy clauses can trigger reduced rents for other mall tenants or allow them to get out of lease commitments relatively unscathed.
It’s going to make sense in certain circumstances that these landlords back or buy some of these material retailers
Bradley Snyder, Tiger Capital Group
Some landlords, spooked by the complications of running a retail operation, have sought strategic partners, Snyder said, pointing to another form of deal that has gained traction in the U.S.
Simon Property Group, which has bid on struggling retailers including Brooks Brothers, Forever21 and Lucky Brands, partnered with Authentic Brands Group to acquire apparel and accessories brand Aéropostale, for example.
Still, some industry watchers are skeptical Canadian landlords will follow the path of their U.S. counterparts, suggesting that the risk profile of a retailer doesn’t fit the investment appetite of pension funds in which they are housed.
“I would be surprised if the big pension funds were going down this path,” said Charlene Schafer, a partner specializing in commercial real estate and private equity at law firm Torys LLP in Toronto.
She noted that such investments would have to meet the specific criteria of the risk officers or committees at some of Canada’s largest and most sophisticated pension funds.
Cadillac Fairview, which owns 19 shopping malls across the country including the Toronto Eaton Centre, is part of the Ontario Teachers’ Pension Plan. OMERS, which oversees the pension of municipal workers in Ontario, owns Oxford Properties, another large owner of shopping centres. And Ivanhoé Cambridge, owner of 26 shopping malls across Canada, is housed within the Caisse de dépôt et placement du Québec.
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