St. Vital Centre Purchased for $160 Million

St. Vital Centre was built in 1979 for about $40 million just when a flurry of other malls were going up in including Kildonan Place, Winnipeg Square, Eaton Centre and Unicity. That was a lot of malls all at once and some of them did not survive or have been drastically changed over the years. Most of the malls were owned by real estate companies in the beginning but many including Primaris and Cadillac Fairview are now owned all or in part by the Maple 8, Canadians top government pension funds. For the last numbers of years St. Vital Centre has been owned by the Ontario Pension Board.

In recent years some private players have been making inroads as owners. It is unclear who their shareholders might be. In many cases their financing still comes from pension funds as in the case of Brookfield Asset Management. The fact that a pension fund sells a property doesn't mean they are not part of shareholding or or financing the deal to enhance their balance sheets. 

In the case of the sale of St. Vital Centre to Leyad, a Quebec-based real estate company, it appears the sale was financed by six credit unions in a syndicate. Since Leyad is a private company, it doesn't have to disclose its financial structure except to the banks and paying taxes. 

This is not the first foray into real estate in Winnipeg by Leyad. They have purchased Garden City Square, Johnston Terminal, CDI College and the Canada Goose Distribution Centre over the years for a pretty significant footprint in the city. Next to Montreal, it might be the biggest holdings right in the company. 

For many years St. Vital Centre has been firmly entrenched as the second largest mall in the city. Due to the location, it is hard for it to expand much beyond what it is now unless they build up. However, they still have to fill the empty Bay store location. This is an issue for Polo Park as well. Since the other large story closures led to knew tenants, it is expect that by year end announcements will be made on new uses for the space. And Leyad seems well suited to investing in their properties but that remains to be seen. The Johnston Terminal took a while to get going again after Covid but seems better now.

There is no record of what the purchase price of the mall when it was taken over by the Ontario Pension Board. However, with the original price being $40 million and the sale price being $160.5 million that is a very healthy price for a mall still producing income. The powerful Canadian pensions probably can't quit malls completely. They are too big and growing to not buy real estate. The U.S. could be less attractive if their economy tanks but who knows? That could be the perfect time to invest. Just ask the people who bought dirt cheap after the last crash in Florida and Arizona.

As mentioned, there have been some malls across Canada that have closed. In Winnipeg, that would be Portage Place, Unicity and a few strip malls. However, Canada never really overbuilt the way the U.S. has and done. In Grand Forks, North Dakota, you could call Columbia Mall a failed mall. It is embarrassing to see.

The purchase by Leyad is probably an attempt by St. Vital Centre to remain the second largest mall in the province ahead of Outlet Collection Mall and the rest of the Seasons development. This may be a losing battle because the Seasons development had been going strong for 13 years. There has never been a stop in building on the site although it is possible this year might see the last few spots filled up in the surrounding mall spaces.

St. Vital's hosting of the Children's Hospital Book Sale at least two to three time a year also fills the place with people from all over the city and beyond. For those who don't remember, it used to be Polo Park that hosted this. The destination malls usually have things over seasonal times to attract shoppers. The more unique, the better. For many decades it was mini-concerts and fashion shows.

It seems Leyad's purchase of St. Vital Centre will be followed up with a multimillion investment in the former Bay location soonest. There are few if any big retailers out there that could take the full space over. Some are still hankering for a Simons department store but it might be wishful thinking as the company takes a long time to expand their private company. Others believe there might be a new grocery coming courtesy of rule changes that block competitor from opening in the same mall. Many places have agreements that are paid for to keep other grocery and pharmacy out. This has been ruled as anti-competitive. Those that continue to practice may face penalties and fines.

It used to be that malls had long lists of retailers wanting to move in but the need to expand the hours and reasons to go to the mall have had to increase. It can't be all fashion stores that don't last a season. Expect to see more moved development in the near future.