04/16/2015 18:00 EDT | Updated 06/16/2015 01:12 EDT

Calloway REIT acquires outdoor mall designer SmartCentres in $1.16-billion deal

TORONTO - Calloway Real Estate Investment Trust (TSX:CWT:UN) has a deal to buy SmartCentres, the Canadian developer of unenclosed malls, in a transaction valued at $1.16 billion.The REIT said Thursday that the acquisition will make Calloway a fully integrated real estate developer and operator, in addition to giving it interest in a $1.1-billion portfolio of 24 properties located mainly in Ontario and Quebec.SmartCentres is being purchased from billionaire developer Mitchell Goldhar, who built the first Walmart store in Canada and has anchored many of the SmartCentres across the country with a Walmart location.The company built its business on designing a variation of traditional power centres, which put less emphasis on "big box" stores and more on creating a small neighbourhood of retailers surrounded by a few larger companies, like Canadian Tire (TSX:CTC.A), Best Buy and Home Depot.SmartCentres has focused mainly on attracting "value-oriented" companies to open stores on its properties, which counters the growing popularity of high-end outlet malls in Canada.Calloway president and CEO Huw Thomas said he considers the purchase agreement a "transformational" move for his company."We will be able to better take advantage of new opportunities in the market and complete the entire development process in-house, from the identification of new sites all the way through planning, development, construction, leasing and operations," he said in a release.As part of the transaction, Goldhar will increase his indirect holdings in Calloway from 21 per cent to 23 per cent, and also sign a five-year non-compete agreement that will prevent him from buying assets comparable to Calloway's business. He must also give the company first-bidding opportunities on any retail development land he wants to buy.After the arrangement, Goldfar has agreed to use Calloway and SmartCentres for development of 55 properties he will still own.Last September, SmartCentres launched a pilot project called Penguin Pick-Up, which allows shoppers to buy products from some of its retail partners and then go to a nearby SmartCentres shopping centre pickup location.Once the agreement is finalized, Calloway plans to change its operating name to SmartREIT.Follow @dj_friend on Twitter.Note to readers: This is a corrected story: Headlines in an earlier version gave an incorrect value for the deal