RioCan Real Estate Investment Trust

RioCan Real Estate Investment Trust

March 01, 2005 09:18 ET

RioCan Real Estate Investment Trust Announces Redemption Of Unsecured Debentures




MARCH 1, 2005 - 09:18 ET

RioCan Real Estate Investment Trust Announces
Redemption Of Unsecured Debentures


RioCan Real Estate Investment Trust (TSX:REI.UN) ("RioCan") announced
today that it is issuing a notice of redemption to holders of its $150
million 7.05% RealFund Series A August 1, 2007 senior unsecured
debentures ("RealFund Debentures"). The RealFund Debentures will be
redeemed on March 31, 2005, in accordance with their terms, at a
redemption price of $108.423 plus accrued and unpaid interest of
$1.120274 both per $100 principal amount.

RioCan also announced its plan to seek approval for amendments to be
made to permit it to redeem all of its October 31, 2007 7.07% Series A
and January 18, 2006 7.20% Series C senior unsecured debentures ("As"
and "Cs", respectively). The As and Cs are currently not redeemable.
Subject to the consent of debentureholders, RioCan intends to amend the
trust indenture for each of the As and Cs to permit their redemption and
then complete the redemption of these debentures. The trust indenture
for the As and Cs provides that the written consents of debentureholders
representing at least 75% of the aggregate principal amounts of each
series of debentures outstanding is required. RioCan will seek and
accept the written consents from debentureholders of each series by no
later than 5:00 pm on March 21, 2005 (unless otherwise extended) and,
assuming the requisite consents are obtained, intends to redeem the
debentures by no later than April 25, 2005. RioCan has retained RBC
Capital Markets as dealer manager in conjunction with this consent
solicitation. RioCan intends to fund the redemption of the As and Cs
using a combination of then existing cash resources and new debt
financing to be obtained.

RioCan today also announced that it has agreed to issue, on a bought
deal basis, $200 million principal amount of senior unsecured debentures
with a maturity date of March 8, 2011 and a coupon rate of 4.91%. The
offering is being underwritten by RBC Capital Markets. Closing of this
issue is expected on or about March 8, 2005. This offering is being made
under RioCan's shelf prospectus dated February 21, 2005 and the net
proceeds from it will be used to fund the redemption of the RealFund
Debentures and to pay for the maturity of its $50 million 6.75% Series B
due April 25, 2005. The debentures have been provisionally rated BBB
(Stable) by DBRS and BBB- by S&P.

Edward Sonshine, Q.C., President and C.E.O. of RioCan said, "RioCan
currently has four Series of debentures outstanding totalling $338
million, each with a covenant pattern that effectively limits us to a
55% of historic book cost leverage limit. Successful completion of the
transactions we are announcing today, coupled with the repayment on
maturity of our April 25, 2005 6.75% Series B unsecured debentures, will
result in our being able to increase our leverage limit to 60% of the
historic book cost of our total assets, which is what our unitholders
approved in 2001 and is consistent with the covenant pattern on our
Series D and E unsecured debentures and the new unsecured debenture
issue announced today.

While our key goal is to continue to be a conservatively financed,
investment-grade rated entity, the fact that our leverage limits are
measured against historic book cost makes our cost of capital unduly
higher than it need be. The value of our property portfolio far exceeds
the amount indicated by our approximate $9 book value per unit. This is
evidenced by the fact that: (i) approximately 25% of our 37 million
square foot portfolio (including partners' interests) have been
developed or constructed by RioCan (and partners) at initial returns
generally in the double digits; and (ii) of our approximately $3.8
billion income property portfolio (at historic book cost), approximately
$3.1 billion was acquired or developed prior to 2003, well before the
increases in market values for our kinds of assets occurred.

These initiatives will enable RioCan to lock in long term financing at
today's generational-low interest rates, take advantage of the abundance
of capital available in the market today and significantly reduce our
refinancing requirements through 2008. With the ability to finance
future acquisitions with low cost debt capital, RioCan will be
significantly more capable of being active in an extremely competitive
acquisition market. This will ultimately lead to increased returns to
our unitholders without negatively impacting the stability and
reliability of our distributions or negatively impacting our
debentureholders or our credit ratings."

The estimated costs of successfully completing all of the initiatives
described herein (other than the costs associated with today's offering
of new unsecured debentures) are estimated to be approximately $18
million. These costs will be expensed in full in RioCan's financial
statements as incurred.

This press release shall not constitute an offer to sell, or the
solicitation of an offer to buy, any securities in any jurisdiction. The
debentures being offered have not been and will not be registered under
the U.S. Securities Act of 1933 and state securities laws. Accordingly,
the debentures may not be offered or sold to U.S. persons except
pursuant to applicable exemptions from registration.

About RioCan

RioCan's purpose is to deliver to its unitholders stable and reliable
cash distributions, which continuously increase over time. RioCan is
Canada's largest real estate investment trust with total assets of
approximately $4.1 billion. It has ownership interests in a portfolio of
186 retail properties across Canada containing an aggregate of
approximately 45 million square feet, including partners' and shadow
anchors' interests.


Contact Information

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