RioCan Real Estate Investment Trust is seizing the opportunity to get whatever financing it can to fund its acquisition plan and to also re-finance some outstanding debt.
On Monday the REIT hit the market with both rate reset preferred shares and senior unsecured debt. The $100-million of preferred shares pay 5.25 per cent annually and came at a spread of 262 basis points above Government of Canada 5-year bonds. The issue was RioCan's first of preferred shares, forcing the REIT to get a pref rating. DBRS assigned a preliminary Pfd-3 (High) rating and S&P assigned a P-3 (High) rating.
RioCan also issued 5-year senior unsecured debt that pays 4.499 per cent annually. The deal was initially worth $175-million but was later upsized to $225-million. The new debt will be used to redeem an outstanding $180-million of debentures that currently cost RioCan 8.33 per cent in interest each year.
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This isn't the first issue for RioCan in a while. Just over a month ago the REIT came to market with $140-million of trust units to help build up its acquisition cash.
RBC Capital Markets, Macquarie Capital Markets and Scotia Capital led Monday's preferred share offering. Macquarie is an interesting name in that group because the big, liquid REIT has typically opted for the big banks as its lead underwriters.
RBC, CIBC World Markets and TD Securities led the debt offering.