RioCan Real Estate Investment Trust
TSX : REI.UN

RioCan Real Estate Investment Trust

May 20, 2010 15:46 ET

RioCan Real Estate Investment Trust Announces Agreement With Inland Western Retail REIT to Acquire Eight Retail Properties in Texas

TORONTO, ONTARIO--(Marketwire - May 20, 2010) - RioCan Real Estate Investment Trust ("RioCan") (TSX:REI.UN) today announced the execution of definitive agreements with Inland Western Retail Real Estate Trust, Inc. ("Inland Western"), a self-administered, publicly registered, non-listed U.S. based real estate investment trust. Inland Western is focused on the acquisition, development, and management of retail properties including lifestyle, power, neighbourhood, and community centres. Inland Western is one of five REITs sponsored by an affiliate of the Inland Real Estate Group of Companies, Inc.

Under the terms of the agreements, through RioCan Holdings USA Inc, RioCan will acquire an on an 80/20 joint venture basis a portfolio of eight retail properties ("Portfolio") with Inland Western. The properties are located in three major markets within Texas; Dallas-Fort Worth, Houston, and Austin. In aggregate, these three markets have a total population in excess of 14 million people, and together provide a diverse economic base with exposure to energy, government services, and technology sectors; with a large concentration of corporate headquarters.

The total consideration to be paid by RioCan is approximately US$138 million resulting in a net equity investment of US$53 million after the assumption of US$85.6 million of property level mortgage debt (RioCan's share) on the Portfolio. The existing non-recourse first mortgage financing has a weighted average interest rate of 5.6%. The weighted average cap rate for the portfolio will be approximately 7.7%.

"This acquisition represents a great opportunity to expand RioCan's US portfolio into a second geographic market with a partner that has an excellent market position within Texas" said Edward Sonshine Q.C. President and CEO of RioCan. "Texas has performed very well throughout this past recession, it is an important market and it has been one of the stronger regional economies in the US. This acquisition is an opportunity to further RioCan's investment strategy to acquire high quality defensive assets in large and growing urban markets."

Portfolio Acquisition

RioCan will acquire from Inland Western an 80% interest in eight new format and grocery-anchored shopping centres that total approximately 1.2 million square feet for a total purchase price of US$138 million (US$173 million at 100%) and will assume US$85.6 million of property level debt (US$107 million at 100%). Going forward, while there is no formal agreement between RioCan and Inland Western it is anticipated that future acquisitions from third parties with Inland Western in Texas would be completed on the same basis.

In keeping with RioCan's strategy to acquire high quality defensive assets in large and growing major markets, this portfolio of eight grocery-anchored and new format retail centres has strong anchor tenants, are well located in strong urban markets, and are well occupied (Portfolio occupancy of 97%). Approximately 82% of the gross rents from the Portfolio are generated by national or regional tenants and approximately 30% from grocery and pharmacy tenants. The weighted average remaining lease term of the grocery anchors in the Portfolio is approximately 12 years.

Two of the largest tenants in the Portfolio are grocery tenants: HEB and Tom Thumb (Safeway). HEB is one of largest grocers in Texas, with over 300 stores in Texas and Mexico. A privately held company, HEB has been in operation for over 100 years and is a dominant grocer in the Texas market. Tom Thumb is owned by Safeway who operates 112 stores in Texas under the Randall's and Tom Thumb banners. Safeway is one of North America's largest food and drug retailers operating over 1,700 stores in Canada and the US.

The Portfolio will continue to be managed by Inland Western, a seasoned property manager pursuant to a standard property management agreement. As at December 31, 2009, Inland Western owned in excess of 46 million square feet across the US including over 9 million square feet in Texas.

Properties in the Portfolio (at 100%)

Southpark Meadows I

Located in Austin, Southpark Meadows I is a 266,840 square foot new format retail centre that is anchored by a 205,736 square foot Walmart Supercenter (ground lease expiry 2024). Other major tenants at the subject property include, PetSmart, Subway and Starbucks. The property is adjacent to phase II which is anchored by a Super Target and JC Penny and includes other major retailers such as Bed Bath & Beyond, Best Buy, Office Max, and Marshalls.

Riverpark Shopping Center I & II

Located in the Houston submarket of Sugar Land, Riverpark Shopping Center is a 311,270 square foot shopping centre that is anchored by a 80,460 square foot HEB Supermarket (lease expiry 2023) and a 64,329 square foot Gander Mountain (lease expiry 2020). Gander Mountain Company operates one of the largest networks of stores for hunting, fishing, camping, and marine products and accessories in the United States with 119 stores in 23 states. Other major tenants include, Walgreen's, Bank of America, Starbucks, and Dollar Tree.

Bear Creek Shopping Center

Located in northwestern Houston, Bear Creek Shopping Center is an 87,912 square foot grocery-anchored shopping centre. The property is, anchored by a 61,805 square foot HEB Supermarket (lease expiry 2016). Other major tenants at the subject property include GNC and Papa John's.

Suntree Square

Located in the Dallas-Fort Worth high income submarket of Southlake, Suntree Square is a 96,390 square foot grocery-anchored shopping centre that is anchored by 63,556 square foot Tom Thumb (Safeway, lease expiry 2020). Other major tenants include, Starbucks, Subway, and T-Mobile.

Coppell Town Center

Located in Dallas-Fort Worth submarket of Coppell, Coppell Town Center is a 91,357 square foot grocery-anchored shopping centre that is anchored by a 63,150 square foot Tom Thumb (Safeway, lease expiry 2025). Other tenants include, Starbucks and the UPS Store.

Great Southwest Crossing

Located in the Dallas-Fort Worth submarket of Grand Prairie, Great Southwest Crossing is a 92,270 square new format retail centre located that is anchored by a 20,515 square foot Office Depot and 18,875 square foot PetSmart and is shadow anchored by a Kroger grocery store. Other major tenants include Dollar Tree and Sprint.

New Forest Crossing

Located in eastern Houston, New Forest Crossing is a 148,065 square foot new format retail centre that is shadow anchored by a Lowe's Home Improvement Warehouse and adjacent to a Walmart and is tenanted by PetSmart, Ross Dress for Less, Big Lots, Payless Shoes, and Applebees.

Cypress Mill Plaza

Located in the Houston submarket of Cypress Cypress Mill Plaza is 116,406 square foot new format retail centre that is anchored by a 59,898 Hobby Lobby. The property is shadow anchored by a Walmart and Home Depot. Hobby Lobby is a specialty retailer selling arts and crafts and home decor items with over 440 stores in 35 states. Other major tenants include Dollar Tree and Palais Royal (Stage Stores, Inc.).

Definitive documentation has been signed by Inland Western and RioCan. The transaction remains subject to completion of due diligence work and receipt of lender consents. While RioCan will aim to complete these transactions, no such assurance can be given. RioCan anticipates that the acquisitions will be completed sometime during the third and fourth quarter.

About Inland Western

Inland Western Retail Real Estate Trust, Inc. is a self-managed real estate investment trust that acquires, manages and develops a diversified portfolio of real estate, primarily multi-tenant shopping centers across the United States. As of December 31, 2009, the portfolio under management totalled in excess of 46 million square feet, consisting of 299 consolidated operating properties. The company also has interests in 11 unconsolidated operating properties and 11 properties under development.

About RioCan

RioCan is Canada's largest real estate investment trust with a total capitalization of approximately $8.4 billion as at March 31, 2010. It owns and manages Canada's largest portfolio of shopping centres with ownership interests in a portfolio of 261 retail properties, including 12 under development, containing an aggregate of over 60 million square feet. RioCan owns an 80% interest in seven grocery anchored shopping centres and owns a 14% 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 "Portfolio Acquisition" 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 March 31, 2010 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, lack of availability of future acquisition opportunities and exposure to economic, real estate and capital market conditions in the United States. 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 News 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 News 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 News Release.

Contact Information

  • RioCan Real Estate Investment Trust
    Edward Sonshine, Q.C.
    President & CEO
    (416) 866-3018
    www.riocan.com