TORONTO, Sept. 03, 2019 (GLOBE NEWSWIRE) -- RioCan Real Estate Investment Trust (“RioCan”, TSX:REI.UN) announced today that it has completed the acquisition of KingSett Capital’s Canadian Real Estate Income Fund (“KingSett”) non-managing, 50% co-ownership interest in Yonge Sheppard Centre (the “Centre”) for $357.6 million, based on KingSett’s share of costs as of August 30, 2019, net of certain working capital adjustments. As part of the transaction, KingSett took a material equity position in RioCan through an investment of $100.0 million in RioCan units with a one-year lock-up agreement commencing August 30, 2019.
This transaction brings RioCan’s ownership of the nearly one million square foot, urban mixed-use property at the intersection of Yonge Street and Sheppard Avenue in Toronto, Ontario to 100%. The fully revitalized property serves as the hub of this important and rapidly growing Toronto neighbourhood. With direct access to intersecting subway lines and with 401,000 square feet of office, 299,000 square feet of retail, and 258,000 square feet of residential rental space, Yonge Sheppard Centre is an example of RioCan’s growing portfolio of dynamic mixed-use urban assets, which includes Yonge Eglinton Centre, King Portland Centre and The Well, all in Toronto, ON.
“Yonge Sheppard Centre is a quintessential example of how RioCan is able to drive value from existing assets,” said Edward Sonshine, Chief Executive Officer of RioCan. “In addition to the new revenue stream RioCan will realize from the rental residential component of the development, RioCan sees tremendous upside potential in Yonge Sheppard Centre’s expansive and newly re-clad office space. We have acquired the property on the basis that approximately 63% of the current office leases will expire in the next five years. Market rents have increased substantially in the area and are estimated to be approximately 50% higher than the current average in-place rents for the office leases expiring over the next five years.”
The value of the property has been further increased through a transformative renovation of its retail space that has attracted a desirable, high quality tenant mix. The newly revitalized Centre will celebrate its grand opening in October 2019, with compelling tenants including Longo’s and LA Fitness, multiple new food and beverage offerings, a daycare and a Montessori school. Cactus Club Café is scheduled to open in 2020 and will solidify Yonge Sheppard Centre’s positioning as an urban mixed-use destination that will contribute to RioCan’s growth.
The residential rental component is a 361-unit, 36-storey tower known as Pivot™ and is currently under construction. The topping-off of the building will coincide with October’s grand opening celebration of Yonge Sheppard Centre. Rental residential leasing is expected to commence in 2020 and, similar to other RioCan Living buildings, Pivot occupants will enjoy the benefits of professional management, communal amenities designed to cater to the building demographics, and the vast retail and service options at their doorstop. Yonge Sheppard Centre retailers will benefit from additional consumer traffic as residents move into their new homes, who will add to the already strong customer base generated by the Centre’s direct subway access and the more than 150,000 people living in its immediate trade area.
As part of the transaction, RioCan assumed KingSett’s share of the existing property debt and has issued $100.0 million of RioCan units out of treasury to KingSett at the 5-day volume weighted average unit trading price of $26.25 as of June 5, 2019, the date the firm agreement was entered into by the parties. Subsequent to the transaction closing, RioCan effectively used a portion of the net proceeds from its recently announced $500.0 million Series AB debenture issuance, which carries a coupon rate of 2.576% per annum, to repay without prepayment penalty $265.6 million of existing property debt on Yonge Sheppard Centre. The existing property debt was a floating rate loan which carried an interest rate of 3.15% based on prevailing rates, resulting in further interest savings for RioCan.
The acquisition of the remaining interest in this important asset accelerates RioCan’s major market and Greater Toronto Area presence, expands our RioCan Living portfolio and provides significant income and value growth potential.
RioCan is one of Canada’s largest real estate investment trusts with a total enterprise value of approximately $14.3 billion as at June 30, 2019. 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. RioCan’s portfolio is comprised of 230 properties with an aggregate net leasable area of approximately 39.1 million square feet, including residential rental and 13 development properties. To learn more about how we deliver real vision on solid ground, 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, 2019 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.
RioCan Real Estate Investment Trust
Senior Vice President and Chief Financial Officer
416-866-3033 | www.riocan.com