RioCan Real Estate Investment Trust
TSX : REI.UN

RioCan Real Estate Investment Trust

December 01, 2009 08:13 ET

RioCan Real Estate Investment Trust Announces Firm Contracts on Four Anchored Retail Properties in Canada

TORONTO, ONTARIO--(Marketwire - Dec. 1, 2009) - RioCan Real Estate Investment Trust ("RioCan") (TSX:REI.UN) today announced that it has waived conditions and expects to close on four new format retail shopping centres before the end of the year. These four properties, located in British Columbia and Alberta, have all been developed within the last several years by the vendors. Three of the four properties are anchored by Walmart, which represents 54% of the occupied space by gross leasable area and generates 34% of the gross rental revenue. In addition, 86% of the rental revenue for the portfolio is generated by national or anchor tenants. The portfolio, which totals approximately 1.2 million square feet, is currently 98% occupied and the vacancy is subject to an earn-out mechanism described below.

The total purchase price for these properties is approximately $280 million; RioCan's interest will be approximately $166 million. The overall weighted average cap rate for this portfolio of four new format retail properties is approximately 7.1%. RioCan has arranged five year conventional first mortgage financing for three of the four properties in the amount of approximately $113 million, of which RioCan's share will be approximately $94.5 million at an interest rate expected to be approximately 5.0%. The financing is expected to close shortly after the closing of the purchase of these four properties. RioCan's equity investment will be funded from existing resources.

RioCan will complete the purchase of Grandview Corners in Surrey, BC, and Edmonton West Retail Centre in Edmonton, AB, on a joint venture basis with CPPIB and Sun Life respectively. In both cases, RioCan will act as property and asset manager.

Three of the four properties are located in the primary markets of Vancouver, BC, Calgary, AB and Edmonton, AB. The portfolio benefits from a well staggered lease rollover profile with approximately 9,000 square feet, or 0.8%, on average, of the total leaseable area due for renewal, each year, for the next five years. The average lease term for these four properties is approximately ten years. The average base rental rate on the portfolio is approximately $17.70 per square foot. RioCan will benefit from additional leasing of vacant space or additional density by way of an earn-out mechanism whereby proceeds will be paid to the vendor upon completion and lease-up of the added density or vacant space as the case may be. Through the earn-out mechanism there is the potential to add approximately 86,000 square feet at a total cost of approximately $24 million, of which RioCan's proportionate share would be approximately $17 million. RioCan will maintain certain approval rights over the leasing process.

Properties under firm contract

Grandview Corners is a 529,827 square foot recently developed new format shopping centre located in the Greater Vancouver Area market of Surrey, BC. The property is situated on a 42 acre site and is anchored by a 217,278 square foot Walmart. Other national tenants include The Brick, Future Shop, and Indigo. The property is currently 95% occupied and there is the potential to add 5,360 square feet of additional density. The property is being acquired unencumbered, however RioCan has arranged secured financing to close shortly after the purchase of this property. RioCan will acquire a 50% interest in this property on a joint venture basis with CPPIB and will act as property and asset manager on CPPIB's behalf.

Edmonton West Retail Centre is a recently completed 292,826 square foot new format retail centre located in Edmonton, AB within close proximity to Mayfield Commons, a 444,263 square foot new format retail centre. Edmonton West Retail Centre is anchored by a 204,944 square foot Walmart. Other national tenants at the property include Golf Town and PetSmart. The property is currently 99% occupied with an additional 38,900 square feet of additional density available for and subject to an earn-out mechanism with the vendor. The property is being acquired unencumbered, however RioCan has arranged secured financing to close shortly after the purchase of this property. RioCan will acquire a 40% interest in this property on a joint venture basis with Sun Life, who is also a partner with RioCan on the nearby Mayfield Commons. RioCan will act as property and asset manager on Sun Life's behalf.

Lethbridge North Retail Centre is a recently completed 279,760 square foot new format retail centre located in Lethbridge, AB. The property is anchored by a 213,309 square foot Walmart. Other national tenants include Shoppers Drug Mart and TD Bank. The property is currently 100% occupied with an additional 36,800 square feet of additional density available for and subject to an earn-out mechanism with the vendor. RioCan will be the sole owner of the property. The property is being acquired unencumbered, however RioCan has arranged secured financing to close shortly after the purchase of this property.

Calgary East Retail Centre is a recently completed 83,603 square foot new format shopping centre located in Calgary, AB. The property is tenanted by national tenants such as Designer Depot and Golf Town. The property is currently 100% occupied and the vendor has entered into a firm ground lease agreement with Lowe's Home Improvement Warehouse for a 127,333 square foot store. Site preparations have commenced, and completion of the building is expected to be sometime in the second half of 2010 or early 2011. RioCan has agreed to acquire the remainder of the property at a cost of approximately $19 million, which equates to a cap rate of 7.3%, once the Lowe's store is open and paying rent. In addition to Lowe's, there is the potential for 5,000 square feet of additional density available and subject to an earn-out mechanism with the vendor. RioCan will be the sole owner of the property. The property is being acquired unencumbered.

"RioCan is excited to be able to acquire these very well anchored centres in excellent markets as well as expanding our relationship with Walmart, which will become RioCan's third largest tenant upon the completion of this acquisition," said Edward Sonshine, Q.C., President and CEO of RioCan. "These four centres represent an excellent addition to RioCan's core portfolio and provide an opportunity to acquire a number of strategic assets while expanding our important relationships with CPPIB and Sun Life. We are particularly gratified with the acquisition in Surrey, BC, as it is a very competitive and desirable market where we are purchasing an asset of a type and quality that rarely come to market in Canada."

About RioCan

RioCan is Canada's largest real estate investment trust with a total capitalization of approximately $7.8 billion as at September 30, 2009. It owns and manages Canada's largest portfolio of shopping centres with ownership interests in a portfolio of 247 retail properties, including 13 under development, containing an aggregate of over 59 million square feet. RioCan has also agreed to acquire an 80% interest in seven grocery anchored shopping centres in the United States and owns a 15% equity interest in Cedar Shopping Centers, Inc., a real estate investment trust focused on supermarket-anchored shopping centres and drug store-anchored convenience centres located predominantly in the Northeastern United States. For further information, please refer to RioCan's website at www.riocan.com.

Forward Looking Information

This news release contains forward-looking statements within the meaning of applicable securities laws. These statements include, but are not limited to, statements made in "Property Closings", "Properties Under Contract" and "Acquisition Pipeline", and other statements concerning RioCan's objectives, its strategies to achieve those objectives, as well as statements with respect to management's beliefs, plans, estimates, and intentions, and similar statements concerning anticipated future events, results, circumstances, performance or expectations that are not historical facts. Forward-looking statements generally can be identified by the use of forward-looking terminology such as "outlook", "objective", "may", "will", "would", "expect", "intend", "estimate", "anticipate", "believe", "should", "plan", "continue", or similar expressions suggesting future outcomes or events. Such forward-looking statements reflect management's current beliefs and are based on information currently available to management. All forward-looking statements in this Press Release are qualified by these cautionary statements.

These statements are not guarantees of future events or performance and, by their nature, are based on RioCan's estimates and assumptions, which are subject to risks and uncertainties, including those described under "Risks and Uncertainties" in its management discussion and analysis dated September 30, 2009 which could cause actual events or results to differ materially from the forward-looking statements contained in this News Release. Those risks and uncertainties include, but are not limited to, those related to: liquidity in the global marketplace associated with current economic conditions, tenant concentrations, occupancy levels, access to debt and equity capital, interest rates, joint ventures/partnerships, the relative illiquidity of real property, unexpected costs or liabilities related to acquisitions, construction, environmental matters, legal matters, reliance on key personnel, unitholder liability, income taxes, the conditions to the transactions not being satisfied resulting in the failure to complete some or all of the proposed transactions, real estate and capital market conditions. Material factors or assumptions that were applied in drawing a conclusion or making an estimate set out in the forward-looking information may include: a less robust retail environment than has been seen for the last several years; relatively stable interest costs; an increase in acquisition capitalization rates; a decrease in land costs for greenfield development; a continuing trend towards land use intensification in high growth markets; more limited but available access to equity and debt capital markets to fund, at acceptable costs, the future growth program and to enable the Trust to refinance debts as they mature and the availability of purchase opportunities for the joint venture. Although the forward-looking information contained in this Press Release is based upon what management believes are reasonable assumptions, there can be no assurance that actual results will be consistent with these forward-looking statements. Certain statements included in this Press Release may be considered "financial outlook" for purposes of applicable securities laws, and such financial outlook may not be appropriate for purposes other than this Press Release.

Contact Information

  • RioCan Real Estate Investment Trust
    Rags Davloor
    Senior Vice President & CFO
    (416) 642-3554