Loblaws (TSX: L) a few months ago announced they were bundling their real estate assets and spinning them off into a REIT. They will retain control of the REIT.
Now, Canadian Tire (TSX: CTC.A) is doing the same thing.
I detect quite a bit of froth in this space.
Financial-engineering wise, this makes sense because the real estate assets are currently overvalued with very low cap rates for such assets, more so than the underlying valuation of the businesses in question (in Loblaw’s case, groceries, and in Canadian Tire’s case, retail junk).
It makes me wonder if an entity such as McDonalds will consider the same – the amount of real estate assets they have is not inconsiderable.
Smells like income trust euphoria again. Wouldn’t surprise me if Harper comes with new rule to clamp it down. The conservatives are very quick in trying to stop ‘tax leakage’.