RioCan Real Estate Investment Trust (TSX: REI.UN) has agreed to acquire Canada Pension Plan Investment Board‘s 50 percent interest in four properties for $352 million. The deal is expected to close this month. The properties, which are currently co-owned, are retail centres located in British Columbia, Alberta and Ontario. RioCan also reported on other recent acquisitions, including a joint buy with Tricon Capital Group of The Shops of Summerhill, a retail asset in Toronto. Announced in June, the deal reflects a purchase price of $42 million.
RioCan Announces Firm Agreement to Acquire CPPIB’s Interest in Four Properties and Provides an Update on Recent Acquisition Activities
TORONTO, ONTARIO–(Marketwired – July 21, 2016) – RioCan Real Estate Investment Trust (“RioCan”) (TSX:REI.UN) today announced that it has entered into a firm agreement with Canada Pension Plan Investment Board’s (“CPPIB”) to acquire their interest in four properties that are currently co-owned, which is anticipated to close before the end of July 2016. RioCan will purchase CPPIB’s 50% interest at an aggregate purchase price of $352 million and will not assume any additional mortgage debt from the seller in connection with the acquisition. As a result of the purchase, RioCan will own 100% of these four assets.
“We are very pleased to be able to complete this transaction with CPPIB, further improving our focus on Canada’s core urban markets to approximately 77%. These properties are all high quality institutional properties, and as with our earlier acquisitions from our partners we are able to integrate this acquisition seamlessly into our portfolio,” said Edward Sonshine, Chief Executive Officer of RioCan. “This acquisition, together with the acquisitions that have been completed since September 30, 2015, represents more than $1.2 billion dollars of acquisition activity. An impressive accomplishment in what remains a challenging market to acquire quality assets in an accretive manner. These acquisitions, together with organic growth will be the key drivers to the short-term performance in our Canadian portfolio. Long-term, our active development pipeline of largely urban mixed use properties improves the overall quality of the portfolio and will further support our growth profile.”
Grandview Corners Surrey, British Columbia 530,000
RioCan Meadows Edmonton, Alberta 310,000
RioCan Beacon Hill Calgary, Alberta 530,000
RioCan Centre Burloak Oakville, Ontario 455,000
The acquisition is immediately accretive, and is expected to generate additional annualized net operating income of approximately $18 million (net of fees previously earned from CPPIB). The transaction will be funded through internal resources including lines of credit.
Other Acquisition Activities:
RioCan has entered into a firm purchase agreement with Trinity Development Group Inc. (“Trinity”) to purchase their 25% interest in Chapman Mill Marketplace in Ottawa, Ontario. RioCan will own 100% in the centre and will purchase Trinity’s interest for $35.6 million. In connection with the purchase price RioCan will assume $18.2 million of the in place debt, which carries an interest rate of 3.9% and is scheduled to mature in 2018. Also from Trinity, during the second quarter RioCan acquired an additional 25% interest at a purchase price of $11.8 million, bringing RioCan’s ownership interest in South Bank Centre in Okotoks, Alberta, to 75%. In connection with the purchase, RioCan assumed an additional $6.2 million of the in place debt on the property that carries an interest rate of 3.3% and matures in 2017. RioCan will continue to act as property and asset manager for the centre. Collectively, these two acquisitions are expected to generate additional annualized net operating income of approximately $2.5 million (net of lost property management fees).
During the second quarter 2016, RioCan acquired the remaining 50% interest in RioCan Thickson Ridge, located in Whitby, Ontario from its partner, Kimco Realty Corporation at a purchase price of $45.0 million at RioCan’s interest. The property was acquired unencumbered by any third party debt. The acquisition is expected to generate additional annualized net operating income of approximately $2.9 million (net of lost property management fees).
RioCan and Tricon Capital Group Inc. (“Tricon”) acquired the Shops of Summerhill in Toronto, Ontario on a 75% RioCan, 25% Tricon joint venture basis at a purchase price of $31.5 million at RioCan’s interest ($42 million at 100%), which equates to a 4.0% capitalization rate. RioCan will act as property manager for this fully occupied landmark property, located in one of Toronto’s most exclusive areas. The partners assumed the in place mortgage financing of $13.6 million (at 100%) that carries an interest rate of 3.9% and matures in 2022.
Forward Looking Advisory
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 regarding RioCan’s recent acquisitions and development portfolio, together with 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, leverage ratios, circumstances, performance or expectations that are not historical facts, including but without limitation to the intended use of proceeds from the sale. 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.
Forward-looking information is not a guarantee of future events or performance and, by its nature, is based on RioCan’s current estimates and assumptions, which are subject to numerous risks and uncertainties, including those described under “Risks and Uncertainties” in RioCan’s Management’s Discussion and Analysis for the year ended March 31, 2016 (“MD&A”) and the Trust’s most recent Annual Report and Annual Information Form, which could cause actual events or results to differ materially from the forward-looking information contained in this News Release. Those risks and uncertainties include, but are not limited to, those related to: liquidity and general market conditions; tenant concentrations and related risk of bankruptcy or restructuring (and the terms of any bankruptcy or restructuring proceeding), defaults, including the failure to fulfill contractual obligations by the tenant or a related party thereof; retailer competition; access to debt and equity capital; interest rate and financing risk; joint ventures and partnerships; the relative illiquidity of real property; development risk associated with construction commitments, project costs and related approvals; environmental matters and property management. 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) contains provisions which potentially impose tax on publicly traded trusts (the SIFT Provisions). However, the SIFT Provisions do not impose tax on a publicly traded trust which qualifies as a REIT. RioCan currently qualifies as a real estate investment trust for Canadian tax purposes and intends 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 undertakes no obligation to publicly update or revise any forward-looking information, whether as a result of new information, future events or otherwise.
RioCan is Canada’s largest real estate investment trust with a total enterprise value of approximately $16 billion as at March 31, 2016. RioCan owns and manages Canada’s largest portfolio of shopping centres with ownership interests in a portfolio of 303 Canadian retail and mixed use properties, including 16 properties under development, containing an aggregate net leasable area of 46 million square feet. For further information, please refer to RioCan’s website at www.riocan.com.
RioCan Real Estate Investment Trust
Cynthia J. Devine
Executive Vice President, Chief Financial Officer
and Corporate Secretary
Photo courtesy of Riocan Real Estate Investment Trust