RioCan Real Estate Investment Trust
TSX : REI.UN

RioCan Real Estate Investment Trust

September 06, 2012 16:18 ET

RioCan Real Estate Investment Trust Announces Dissolution of Joint Venture Agreement With Cedar Realty Trust

TORONTO, ONTARIO--(Marketwire - Sept. 6, 2012) - RioCan Real Estate Investment Trust (TSX:REI.UN) ("RioCan") today announced that it has entered into an agreement to dissolve its joint venture agreement with Cedar Realty Trust, Inc. ("Cedar"). Through its Limited Partnership Agreement dated December 10, 2009 RioCan and Cedar have amassed a portfolio of 22 properties that are owned on an 80/20 basis (80% owned by RioCan and 20% owned by Cedar). Under the terms of the dissolution, Cedar will convey its 20% portion owned in 21 properties to RioCan. RioCan will, in turn, convey its 80% interest in Franklin Village to Cedar. RioCan continues to hold 9.4 million shares of Cedar and has relinquished its right to a seat on Cedar's Board of Directors.

Terms of the transaction:

The gross purchase price for the 20% interest in the 21 properties to be acquired by RioCan is $120 million, representing a capitalization rate of 6.5%. Under the terms of the transaction, RioCan will assume Cedar's share of the existing in place mortgage financing of $54.4 million, which carries an average interest rate of 5.2% and has an average term to maturity of 5.2 years. RioCan's purchase price is to be reduced by $750,000 to reflect a mark-to-market adjustment to the assumed financing. The gross sale price of the 80% interest in Franklin Village is $60 million.

US$ Amount in '000s
Purchase Price for 21 properties from Cedar
(based on a 6.5% capitalization rate)
$119,521
Less Debt Assumed by RioCan from Cedar ($54,377)
Less mark to market debt adjustment ($750)
Net Purchase Price $64,394
Sale price of RioCan's 80% interest in Franklin Village
(based on a 6.5% capitalization rate)
$60,102
Less debt assumed by Cedar from RioCan ($34,696)
Cash to be paid by RioCan $38,988

"RioCan has benefited greatly from our joint venture with Cedar. In less than three years, through the hard work of our partnership, we have amassed an exceptional portfolio of 25 retail assets in the northeastern United States," said Edward Sonshine Chief Executive Officer of RioCan. "Cedar has played an integral role in the acquisition of these assets, as well as their leasing and management. While RioCan's objective is maintaining its growth trajectory in the northeastern United States through acquisitions, Cedar is seeking to consolidate its portfolio. Given these diverging objectives, both parties have agreed that the dissolution of our joint venture is the sensible path to take. We are pleased that Cedar is maintaining its management position of these assets for the near future, while we finalize alternative arrangements."

Once completed RioCan will own a 100% interest in 21 properties in the Northeastern US that were previously owned jointly with Cedar plus three properties where RioCan already owns a 100% interest. Under the terms of the agreement, Cedar will continue to provide property management services for a period of up to one year, cancelable on 90 days notice, under similar terms as the property management services currently provided by Cedar. RioCan's total portfolio in the northeastern US will include 25 properties totalling 5.3 million square feet (including shadow anchors) in the states of Connecticut, New Hampshire, New Jersey, New York, Massachusetts, Maryland, Pennsylvania, and Virginia.

Properties to be acquired from Cedar:

Blue Mountain Commons, Harrisburg, PA Northland Centre, State College, PA
Columbus Crossing, Philadelphia, PA Northwoods Crossing, Taunton, MA
Creekview, Warrington (suburban Philadelphia), PA Pitney Road, Lancaster, PA
Cross Keys Place, Turnersville (suburban Philadelphia), NJ Shaw's Plaza, Raynham, MA
Exeter Commons, Reading, PA Stop N Shop Plaza, Bridgeport, CT
Gettysburg Marketplace, Gettysberg, PA Sunrise Plaza, Forked River, NJ
Loyal Plaza, Williamsport, PA Sunset Crossing, Dickson City, PA
Marlboro Crossroads, Upper Marlboro, MD Town Square Plaza, Reading, PA
Monroe Marketplace, Selinsgrove, PA Towne Crossing SC, Richmond, VA
Montville Commons, Montville, CT York Marketplace, York, PA
New River Valley, Christianburg, PA

Additional properties owned 100% by RioCan where Cedar will continue to provide property management services:

  • Huntington Square, East Northport, NY
  • Shoppes at Salem, Salem, NH
  • Super Stop & Shop Plaza, Richmond, RI
  • Deptford Landing, Depford, New Jersey (currently under contract)

About RioCan

RioCan is Canada's largest real estate investment trust with a total capitalization of approximately $13.6 billion as at June 30, 2012. It owns and manages Canada's largest portfolio of shopping centres with ownership interests in a portfolio of 336 retail properties containing an aggregate of 79.4 million square feet, including 48 grocery anchored and new format retail centres containing 12.3 million square feet in the United States through various joint venture arrangements as at June 30, 2012. RioCan's portfolio also includes 10 properties under development in Canada. 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 this News Release, 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 News Release are qualified by these cautionary statements.

These forward-looking statements are not guarantees of future events or performance and, by their nature, are based on RioCan's current estimates and assumptions, which are subject to risks and uncertainties, including those described under "Risks and Uncertainties" in RioCan's latest financial statements and management's discussion and analysis for the quarter ending March 31, 2012, 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: the ability of the parties to complete the transactions contemplated herein as currently intended, the ability of RioCan to liquidate its currently held shares of Cedar as currently intended, 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 investment in the United States of America ("US"), US currency exchange fluctuations and RioCan's qualification as a real estate investment trust for tax purposes. Material factors or assumptions that were applied in drawing a conclusion or making an estimate set out in the forward-looking information may include, but are not limited to: a more robust retail environment compared to recent years; relatively stable interest costs; a continuing trend toward land use intensification in high growth markets; access to equity and debt capital markets to fund, at acceptable costs, the future growth program to enable the Trust to refinance debts as they mature; the availability of purchase opportunities for growth in Canada and the US; and the impact of accounting principles adopted by the Trust effective January 1, 2011 under International Financial Reporting Standards ("IFRS") which includes application to the Trust's 2010 comparative financial results. 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.

The Income Tax Act (Canada) (the "Act") contains legislation affecting the tax treatment of publicly traded trusts (the "SIFT Legislation"). The SIFT Legislation will not impose tax on a trust which qualifies under such legislation as a real estate investment trust (the "REIT Exception"). RioCan currently qualifies for the REIT Exception and intends to continue to qualify for future years. Should this not occur, certain statements contained in this News Release may need to be modified.

Except as required by applicable law, RioCan under takes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.

Contact Information

  • RioCan Real Estate Investment Trust
    Edward Sonshine, O.Ont, Q.C.
    Chief Executive Officer
    (416) 866-3018