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Press release from Marketwire

RioCan Real Estate Investment Trust Announces That it has Completed the Establishment of Its American Platform

Thursday, October 10, 2013

RioCan Real Estate Investment Trust Announces That it has Completed the Establishment of Its American Platform

08:00 EDT Thursday, October 10, 2013

TORONTO, ONTARIO--(Marketwired - Oct. 10, 2013) - RioCan Real Estate Investment Trust ("RioCan") (TSX:REI.UN) today announced that its operating platform in the United States is now fully staffed and operational. RioCan has consolidated its ownership of virtually all of the US properties that were previously owned through joint venture arrangements. Working from two regional offices located in Mount Laurel, New Jersey and Dallas, Texas and supported by RioCan's headquarters in Toronto, Ontario, Canada, RioCan's 26 full time employees in the United States will manage RioCan's American portfolio.

In less than four years, RioCan has assembled a US portfolio that comprises 47 properties with nearly ten million square feet of net leaseable area representing approximately 20% of RioCan's total portfolio by square feet. RioCan's US portfolio is diversified across two regions in the US, the Northeast and Texas, with more than one thousand tenancies. This high quality portfolio derives 86% of its annualized rental revenue from National and Anchor tenants, with the largest tenant being grocery operator Royal Ahold (10.4%). No other US tenant represents more than 5% of RioCan's US rental revenue. Together, grocery tenants generate 20% of RioCan's US annualized rental revenue.

"Our expansion into the United States has been a tremendous source of growth for RioCan. It has been nearly four years since our first US acquisitions, and through our initial partnerships we have developed the local knowledge that we felt we needed before assuming management ourselves," said Edward Sonshine, Chief Executive Officer of RioCan. "RioCan's American portfolio currently represents approximately 14.1% of RioCan's revenue base, and with our regional offices in place we have a scalable American platform that will be the foundation for RioCan's continued growth in the United States and serve as diversification from our Canadian assets. Not only do we expect that our cost of operating this platform will be less than the third party fees we were paying, we are also confident that RioCan's US portfolio will be an important part of our organic growth."

As described below, with the exception of one property, RioCan will own a 100% interest in all of its US properties. RioCan's Texas portfolio focused in the four major markets of Dallas, Houston, San Antonio and Austin, will total 5.1 million square feet in 19 properties and will generate approximately 54% of RioCan's annualized rental revenue in the US.

Summary of RioCan's US Property Portfolio Texas Portfolio
RioCan GLA Major Tenants
Austin
1890 Ranch 486,896 Cinemark, Office Depot, Petsmart, Target*, Hobby Lobby*
Southpark Meadows 921,141 Walmart, JC Penny, Hobby Lobby, Target*
Total 1,408,037
Dallas/Fort Worth
Lincoln Square 471,577 Best Buy, Ross, Petsmart, Stein Mart, Michael's
Market Street - Colleyville Centre 72,617 Market Street Supermarket
Great Southwest Crossing 153,105 Office Depot, PetsMart, Kroger Supermarket, Sam's Club*
Timber Creek 474,441 Walmart, Sam's Club, JC Penny
Montgomery Plaza** 232,897 Marshalls, Ross, Office Depot, Petsmart, SuperTarget*
Las Colinas Village 104,741 Staples
Market Street - Stonebridge Ranch 88,389 Market Street Supermarket
Suntree Square 99,269 Tom Thumb Supermarket
Total 1,697,036
Houston
Cinco Ranch 97,761 HomeGoods, Michaels, Office Max, SuperTarget*
Bear Creek Shopping Centre 87,912 HEB Supermarket
Louetta Central 179,995 Kohl's, Ross, Michael's, Walmart*
Riverpark Shopping Centre 253,011 HEB Supermarket, Walgreen's, L.A. Fitness, Dollar Tree
Total 618,679
San Antonio
Alamo Ranch 465,371 Dick's Sporting Goods, Best Buy, Ross, Marshalls
Arbor Park 139,718 Ross, Office Max, Michael's
Ingram Hills Shopping Centre 80,347 La Fiesta Supermarket
Total 685,436
Other Texas Markets
Las Palmas Marketplace El Paso 637,272 Lowe's, Kohl's, Bed Bath & Beyond, Ross
Bird Creek Crossing Temple 124,941 Best Buy, Petsmart, Target*, Home Depot*
Total 762,213
Total Texas: 5,171,401
* Shadow Anchor ** RioCan owns an 80% interest in Montgomery Plaza.
RioCan Northeastern US Portfolio
Connecticut City RioCan GLA Major Tenants
Montville Commons Montville 117,916 Stop & Shop Supermarket, Home Depot*
Stop & Shop Plaza Bridgeport 54,510 Giant Foods Supermarket
Total 172,426
Maryland
First Colony Centre California 98,186 Giant Foods Supermarket, Michaels, Target* Lowe's*
Marlboro Crossroads Upper Marlboro 67,975 Giant Foods Supermarket
Total 166,161
Massachusetts
Northwoods Crossing Taunton 159,562 BJ's Wholesale Club
Shaw's Plaza Raynham 176,609 Shaw's Supermarket, Marshalls
Total 336,171
New Hampshire
Village Shoppes at Salem Salem 170,270 Sports Authority, PetSmart, Best Buy, Michaels, DSW
New Jersey
Cross Keys Place Turnersville 148,173 Sports Authority, Old Navy, Bed Bath & Beyond, Home Depot*
Deptford Landing Deptford 517,096 Walmart, Sam's Club, hhgregg, Michael's, Petsmart
Sunrise Plaza Forked River 260,895 Home Depot, Kohl's
Total 926,164
New York
Beekman Stop & Shop Hopewell Junction 40,416 Stop & Shop Supermarket
Huntington Square East Northport 116,221 Stop & Shop Supermarket, Best Buy
Total 156,637
Pennsylvania City RioCan GLA Major Tenants
Blue Mountain Commons Harrisburg 123,353 Giant Foods Supermarket
Columbus Crossing Shopping Centre Philadelphia 142,166 Super Fresh Supermarket, Old Navy, AC Moore
Creekview Warrington 136,423 Giant Foods Supermarket, LA Fitness, JoAnn Fabrics, Lowe's*, Target*
Exeter Commons Exeter 361,321 Lowe's, Giant Foods Supermarket, Target*
Gettysburg Marketplace Gettysburg 82,785 Giant Foods Supermarket
Loyal Plaza Williamsport 293,825 Kmart, Giant Foods Supermarket, Staples
Monroe Marketplace Selinsgrove 364,929 Giant Foods Supermarket, Kohl's, Dick's Sporting Goods, Best Buy, Target*
Northland Centre State College 111,496 Giant Foods Supermarket, CVS Pharmacy
Pitney Road Lancaster 45,915 Best Buy, Lowe's*
Sunset Crossing Dickson City 74,142 Giant Foods Supermarket
Town Square Plaza Muhlenberg 127,678 Giant Foods Supermarket, Petsmart, AC Moore, Target*
York Marketplace York 305,410 Giant Foods Supermarket, Lowes
Total 2,169,443
Rhode Island
Super Stop & Shop Plaza Richmond 60,488 Stop & Shop Supermarket
Virginia
New River Valley Christiansburg 164,663 Best Buy, Ross, Bed Bath & Beyond
Towne Crossing Shopping Centre Richmond 111,016 Bed Bath & Beyond, Michael's
Total 275,679
West Virginia
The Commons Martinsburg 274,096 Dick's Sporting Goods, Best Buy, TJ Maxx, Petsmart, Target*
Total Northeast 4,707,535
Total US PORTFOLIO: 9,878,936

* Shadow anchor

Dissolution of Texas Joint Ventures :

RioCan has successfully completed the dissolution of its joint venture arrangements with its Texas partners, Retail Properties of America, Inc. ("RPAI") and Dunhill Partners ("Dunhill"). RioCan has also entered into an agreement to dissolve its joint venture arrangement with Sterling Corporation ("Sterling") by agreeing to purchase their managing interest in two properties in Texas.

In total, RioCan has acquired its partners' interests in 14 properties at a total purchase price of US$211.7 million at a weighted average capitalization rate of 6.6%. RioCan has completed two additional acquisitions, the Kroger grocery store parcel at Great Southwest Crossing at a purchase price of US$6.3 million at a capitalization rate of 6.8% and Beekman Stop & Shop, Hopewell Junction, New York at a purchase price of US$15.3 million at a capitalization rate of 6.2%.

In addition, RioCan has entered into a firm contract to purchase the Gander Mountain parcel which is part of Riverpark Shopping Center in Houston, Texas at a purchase price of US$9.3 million. RioCan has also entered into an agreement with Sterling to acquire their 10% interest in Ingram Hills, and their 20% interest in Cinco Ranch.

Terms of the RPAI Transaction :

RioCan and RPAI's joint portfolio totalled 13 properties in Dallas, Houston, Austin, San Antonio and Temple, Texas that were owned on an 80/20 basis (80% owned by RioCan and 20% owned by RPAI). Under the terms of the dissolution, RPAI sold its 20% managing interest in eight properties to RioCan. RioCan, in turn, sold its 80% interest in the remaining five properties to RPAI.

Texas Properties acquired from RPAI by RioCan:

  • 1890 Ranch, Austin Southpark
  • Meadows, Austin
  • Bear Creek Shopping Center, Houston
  • Riverpark Phase, Houston
  • Great Southwest Crossing, Dallas
  • Suntree Square, Dallas
  • Alamo Ranch, San Antonio
  • Bird Creek Crossing, Temple

RioCan acquired the 20% interest in the eight properties at a purchase price of US$96.6 million, (US$95.5 million net of a US$1.1 million mark to market adjustment on the outstanding debt) representing a capitalization rate of 6.9%. Under the terms of the transaction, RioCan assumed RPAI's share of the existing in place mortgage financing on five of the properties aggregating US$41.8 million, which carries an average interest rate of 3.7% and has an average term to maturity of 2.5 years. Three of the properties were acquired free and clear of financing.

As part of the dissolution, RioCan sold its 80% interest in five properties that were previously owned through the joint venture for US$102.8 million (US$99.9 million net of a US$2.9 million mark to market adjustment on the outstanding debt), representing a capitalization rate of 6.8% and represents a total of approximately 600,000 square feet (at a 100% interest). RPAI assumed RioCan's portion of the in place mortgage financing of US$54.3 million that carries a weighted average interest rate of 4.8%.

Texas Properties sold to RPAI:

  • Coppell Town Center, Dallas
  • Southlake Corners, Dallas
  • Cypress Mill, Houston
  • Sawyer Heights, Houston
  • New Forest Crossing, Houston

RioCan has also agreed to purchase the Riverpark Shopping Center Phase III at a purchase price of US$9.3 million which equates to a capitalization rate of 8.0%. Riverpark Shopping Center Phase III is a 64,329 square foot sporting goods store operated by Gander Mountain as part of the Riverpark Shopping Center that was originally part of the joint venture arrangement. This parcel will be acquired free and clear of financing.

Additional Acquisitions

RioCan has acquired Beekman Stop & Shop in Hopewell Junction, New York from RPAI at a purchase price of US$15.3 million which equates to a capitalization rate of 6.2%. The property is a standalone 40,416 square foot Stop & Shop grocery store (Royal Ahold). The property was acquired free and clear of financing.

RioCan has also purchased the Kroger at Great Southwest Crossing in Grand Prairie, Texas from DDR at a purchase price of US$6.3 million which equates to a cap rate of 6.8%. The Kroger at Great Southwest Crossing is a 60,835 square foot grocery store operated by Kroger and is part of the Great Southwest Crossing shopping centre that was originally part of the joint venture arrangement. This parcel was acquired free and clear of financing.

Terms of the Dunhill Transaction :

RioCan and Dunhill's joint portfolio totalled six properties in Dallas, Houston, San Antonio and El Paso, Texas. Under the terms of the dissolution, RioCan has purchased Dunhill's managing interest at a total purchase price of US$83.5 million at a weighted average capitalization rate of 6.4%. RioCan has assumed Dunhill's share of the existing in place mortgage financing of US$41.9 million that carries a weighted average interest rate of 5.0%.

RioCan also acquired Kimco's 31.7% interest in Las Palmas Marketplace in El Paso, which was previously owned in a joint venture arrangement with Dunhill and Kimco, at a purchase price of US$31.7 at a capitalization rate of 6.4%. RioCan assumed Kimco's share of the existing in place mortgage financing of US$15.5 million that carries an interest rate of 5.4%.

Texas Properties acquired from Dunhill by RioCan:

  • Las Colinas, Dallas
  • Lincoln Square, Dallas
  • Arbor Park, San Antonio
  • Las Palmas Marketplace, El Paso
  • Timber Creek Crossing, Dallas
  • Louetta Central, Houston

Terms of the Sterling Transaction

RioCan and Sterling's joint portfolio totalled two properties in Houston, and San Antonio, Texas. RioCan has agreed to purchase Sterling's managing interest in Ingram Hills, San Antonio and Cinco Ranch, Houston at a total purchase price of US$6.2 million at a weighted average capitalization rate of 6.2%. RioCan will assume Sterling's share of the existing in place mortgage financing of US$2.3 million that carries a weighted average interest rate of 7.1%.

About RioCan

RioCan is Canada's largest real estate investment trust with a total capitalization of approximately US$13.7 billion as at June 30, 2013. It owns and manages Canada's largest portfolio of shopping centres with ownership interests in a portfolio of 348 retail properties containing more than 83 million square feet, including 50 grocery anchored and new format retail centres containing 13.7 million square feet in the United States through various joint venture arrangements as at June 30, 2013. RioCan's portfolio also includes 15 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 (including the sections entitled "Summary of RioCan's US Property Portfolio", "Dissolution of Texas Joint Ventures", "Terms of the RPAI Transaction", "Terms of the Dunhill Transaction" and "Terms of the Sterling Transaction"), 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 RioCan's Management's Discussion and Analysis for the period ended June 30, 2013, 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 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"), fluctuations in the currency exchange rate between the Canadian and US dollar 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 stable retail environment; relatively low and 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"). 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.

FOR FURTHER INFORMATION PLEASE CONTACT:

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

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