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RioCan Unlocks Value and Enhances Balance Sheet Through New Partnerships

Posted

10/28/2020

TORONTO, Oct. 28, 2020 (GLOBE NEWSWIRE) -- RioCan Real Estate Investment Trust (“RioCan” or the “Trust”) (TSX: REI.UN) announced today a firm agreement to sell a 50% non-managing interest in the residential rental component, eCentral™, and the commercial component, ePlace™, of its mixed-used property in Toronto, to its current partner on other projects, Woodbourne Capital Management on behalf of itself and one of its institutional pension fund clients (collectively, “Woodbourne”). The total sale price of $150.8 million represents capitalization rates of 3.5% and 4.5% for the residential and retail components, respectively, based on stabilized net operating income (“NOI”).

RioCan has also agreed to sell Woodbourne Capital Management (“Woodbourne Fund”) a 50% non-managing interest in its Rhythm™ residential rental development, the first phase of a multi-phased mixed-use development on a discrete portion of RioCan’s Westgate Shopping Centre (“Westgate”) in Ottawa, for $5.4 million at $51 per square foot of buildable gross floor area. Woodbourne Fund will also reimburse RioCan for its share of all pre-closing development and construction costs with some exceptions.

“Amidst a global pandemic and economic slowdown, these transactions and strong deal pricing are a testament to the strength of our mixed-use assets,” said Edward Sonshine, Chief Executive Officer of RioCan. “The quality of our assets and our in-house development expertise continue to attract investment from well-respected partners and institutional funds. Such transactions not only allow us to realize inherent value and drive net asset value growth but also reduce the amount of capital required to build out our urban mixed-used development pipeline, enhance our balance sheet and liquidity position, and generate additional fee income.”

New Co-ownership with Woodbourne at eCentral and ePlacein Toronto

The total sales price of $150.8 million for the 50% non-managing interest is in line with IFRS value. The transaction is expected to close in January 2021, subject to customary closing conditions.

Upon closing, Woodbourne will assume 50% of the existing CMHC mortgage for the property with an estimated loan balance of $165.3 million as of the closing date. The CMHC insured loan consists of two tranches both maturing October 2030 with a blended annual contractual interest rate of 2.27%. Maximizing CMHC financing is a key component of the Trust’s debt strategy as it provides access to a new source of financing and lowers the overall cost of debt.

Completed in 2019, eCentral marks RioCan Living’s™ first purpose-built rental project. It is a 36-storey, 466-unit professionally managed building with superior tenant amenities. Aligned with RioCan’s commitment to community leadership, eCentral’s 466 units include 65 apartments that offer affordable housing. This property’s locational attributes highlight the strength of this property such as its direct access to two rapid transit lines, the existing Yonge-Eglinton subway line and the future Eglinton Crosstown LRT, as well as its close proximity to RioCan’s Yonge-Eglinton Centre. Also nearby, is the 623-unit fully sold and completed e8 Condos, RioCan’s office and retail at 2323 Yonge Street, and e2 Condos, a 440-unit condo development currently underway in which RioCan has a partial interest. As one of Canada’s most densely populated urban nodes, the highly trafficked Yonge and Eglinton area, where RioCan has a commanding presence, offers attractive growth opportunities.

Leasing of eCentral began in January 2019. Currently, it is approximately 92% leased, with rents averaging $3.90 per square foot for market rental units. ePlace is comprised of approximately 23,600 square feet of newly constructed retail located at the base of the luxury condominium tower e8 Condos. It is anchored by a flagship TD Bank branch and includes 131 commercial parking stalls. The available commercial space is fully leased and only a certain portion of the concourse space remains to be leased once the direct connection to the Yonge-Eglinton Subway reopens in late 2021.

Woodbourne Capital Management is a Canadian private real estate fund with capital commitments from a high-quality base of institutional partners in Canada and the United States. It has already partnered with RioCan on three urban mixed-use developments in Toronto currently under construction or development, including the residential tower FourFifty The Well™, Litho™ at 740 Dupont Street, and 3180 Dufferin Street.

New Co-Ownership with Woodbourne Fund at Rhythmin Ottawa

Located on a discrete and underutilized portion of the property adjacent to Westgate, Rhythm is another example of RioCan’s strategy to surface embedded value in its portfolio. Construction of Rhythm has already commenced with completion expected in 2022/2023. When complete, Rhythm will feature a 24-storey, 213-unit residential rental building with approximately 20,000 square feet of podium retail and will also be served by the existing retail amenities at Westgate. RioCan will act as development manager for the project and upon completion, property manager of the commercial component of Rhythm. The transaction is expected to close in late February 2021, subject to customary closing conditions. This co-ownership will mark the fifth co-owned project between RioCan and Woodbourne Fund, including the three existing projects plus the aforementioned new partnership at eCentral and ePlace.

Located in Central Ottawa, in close proximity to the downtown core, Westgate tenants include Shoppers Drug Mart, Royal Bank and TD Canada Trust. The site has immediate access to major arterial roads and will benefit from the development of proposed Light Rail Transit routes in its vicinity. RioCan first acquired Westgate in 1997 and in May 2017 received zoning approval for its mixed-use development. RioCan plans to redevelop the entire site that spans 9 acres. The complete multi-phase project, contemplates approximately 729,000 square feet of residential distributed over 1,180 units and approximately 88,000 square feet of retail with parking.

Other Capital Recycling Initiatives Underway at RioCan

Monetizing the value inherent in its portfolio and development pipeline is an important part of RioCan’s strategy to reduce the amount of capital required to build out its urban mixed-used development. In addition to the aforementioned transactions, RioCan has entered into a number of firm or conditional agreements to dispose of 100% or partial interests in a number of properties, most of which are located in the major markets, for aggregate sales proceeds of $104.8 million. These dispositions consist of $76.8 million of income producing properties and $28.0 million of development properties. The income producing properties have a weighted average in-place capitalization rate of 3.3% based on firm or conditional deal prices. The development properties do not have material in-place NOI.

About RioCan

RioCan is one of Canada’s largest real estate investment trusts. RioCan owns, manages and develops retail-focused, increasingly mixed-use properties located in prime, high-density transit-oriented areas where Canadians want to shop, live and work. As at June 30, 2020, our portfolio is comprised of 221 properties with an aggregate net leasable area of approximately 38.6 million square feet (at RioCan's interest) including office, residential rental and 15 development properties. RioCan’s development pipeline as at June 30, 2020, is estimated at 42.7 million square feet, of which 14.8 million square feet is already zoned primarily for mixed-use developments. To learn more about us, please visit www.riocan.com.

Forward Looking Information

This News Release contains forward-looking information within the meaning of applicable Canadian securities laws. This information reflects RioCan’s objectives, our strategies to achieve those objectives, as well as statements with respect to management’s beliefs, estimates and intentions concerning anticipated future events or expectations that are not historical facts. Forward-looking information 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 information reflects management’s current beliefs and is based on information currently available to management. All forward-looking information in this News Release is 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 in the “Risks and Uncertainties” section in RioCan's MD&A for the period ended June 30, 2020 and in our most recent Annual Information Form, which could cause actual events or results to differ materially from the forward-looking information contained in this News Release.

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 this forward-looking information.

The forward-looking statements contained in this News Release are made as of the date hereof, and should not be relied upon as representing RioCan’s views as of any date subsequent to the date of this News Release. Management undertakes no obligation, except as required by applicable law, to publicly update or revise any forward-looking information, whether as a result of new information, future events or otherwise.

Contact Information

RioCan Real Estate Investment Trust Qi Tang Senior Vice President and Chief Financial Officer 416-866-3033 | www.riocan.com
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Source: RioCan Real Estate Investment Trust

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