You could argue that RioCan REIT is getting the short end of the stick in the revised takeover bid for Primaris Retail REIT.
Initially, RioCan teamed up with the consortium that lobbed in a hostile bid for Primaris, and was supposed to scoop up $1.1-billion in assets. Under the new deal, RioCan's acquiring just two properties for $362-million.
But that doesn't mean RioCan's losing out. Sure, it's getting fewer properties, but the acquired assets fit neatly into its new strategy to double down on urban markets – and helps the REIT bulk up its growing portfolio of enclosed malls.
Just look at RioCan's latest deals for proof. In December it jointly bought the Globe and Mail Lands in downtown Toronto, it recently bought Georgian Mall in Barrie, Ont., and signed a joint venture agreement with Allied Properties to redevelop or intensify properties in major Canadian cities.
At the same time, analyst Michael Smith at Macquarie Securities notes that RioCan is trying to sell six enclosed malls it owns in smaller markets, including one in Thunder Bay, three in Quebec City and one in Monction. Combined they amount to about $500-million in value.
"Today's acquisitions together with RioCan's decision to sell six smaller market malls makes it abundantly clear that RioCan is sharpening its focus on major urban markets including the enclosed mall space," he noted.
RioCan's latest acquisition, should the Primaris bid be approved by shareholders, adds full ownership of Oakville Place and a 50-per-cent stake in Burlington Mall, both of which are in the greater Toronto area.
Originally RioCan secured $635-million in financing from Toronto-Dominion Bank to fund the $1.1-billion acquisition, but the new purchase is much more manageable for the REIT so the credit line has been cancelled.
(Tim Kiladze is a Globe and Mail capital markets reporter.)