TORONTO, ONTARIO--(Marketwired - May 6, 2013) - RioCan Real Estate Investment Trust ("RioCan") (TSX:REI.UN) today announced that it has entered into an agreement to dissolve its joint venture arrangement with Retail Properties of America, Inc. ("RPAI"). Since 2010, RioCan and RPAI have amassed a high quality portfolio of 13 properties in Dallas, Houston, Austin, San Antonio and Temple, Texas that are owned on an 80/20 basis (80% owned by RioCan and 20% owned by RPAI). Under the terms of the dissolution, RPAI will convey its 20% managing interest in eight properties to RioCan. RioCan will, in turn, convey its 80% interest in the remaining five properties to RPAI. The transaction is expected to close on October 1 2013.
When completed, RioCan will increase its ownership in eight high quality retail assets in Texas from 80% to 100%, including the dominant power centres in Austin and San Antonio. The portfolio includes four Target shadow anchored centres in Austin, San Antonio and Temple, as well as four exceptional grocery anchored or shadow anchored centres in Houston and Dallas. The additional 20% interest will provide RioCan with a 100% ownership interest for 2.5 million square feet of RioCan's 4.3 million square foot portfolio in Texas. The aggregate value of the eight properties exceeds $480 million. RioCan will take over the leasing and management functions of the properties on closing, thereby establishing the basis for a second regional office in Texas, which is in addition to RioCan's northeastern US office that was opened earlier this year.
Included in the transaction are properties such as Southpark Meadows and 1890 Ranch, which serve as two of Austin's dominant power centres. Both are shadow anchored by a Super Target. Southpark Meadows is also anchored by a Super Walmart on a ground lease. At over one million square feet, Southpark Meadows is a key shopping destination in the Austin market, one of America's top performing local economies.
Similarly, Alamo Ranch, shadow anchored by a Super Target, serves as the dominant power centre in the growing northwest region of San Antonio.
Riverpark Shopping Center, is a dominant shopping centre located in the Houston submarket of Sugar Land, with more than 300,000 square feet that is anchored by a 80,460 square foot HEB Supermarket on a long term lease (2023 maturity). Bear Creek Crossing, also in Houston, benefits from a HEB anchor. HEB is one of the United States' largest independent food retailers and the dominant grocer in Texas.
RioCan sees a meaningful growth trajectory in the eight asset portfolio it is acquiring as a result of both absorption of vacant units (the portfolio is currently 94.4% occupied) and organic rental growth.
"Our relationship with RPAI has been a great experience for RioCan, as we have amassed an exceptional portfolio of thirteen retail assets in Texas, the second region that RioCan has entered into in the United States. We have been able to acquire from RPAI a number of grocery anchored or Target anchored centres consistent with our disciplined approach to expansion in the United States," said Edward Sonshine Chief Executive Officer of RioCan. "We have developed a great deal of local knowledge these past three years and RPAI has been an important partner in their contribution to the acquisition and management of these assets. When complete, RioCan will manage a portfolio of 2.5 million square feet in Texas, and we are excited about opening RioCan's second office in the United States. Our presence in Texas will provide RioCan the ability to take advantage of the opportunities within our portfolio and will substantially increase the scale of our operating platform in the United States."
Texas Properties to be owned 100% by RioCan:
Super Target (shadow), Ross Dress for Less, Beall's, PetSmart
Southpark Meadows I & II
Walmart (ground lease), Super Target (Shadow), Bed Bath & Beyond, Marshalls, Ross Dress for Less, Sports Authority
Great Southwest Crossing
Sam's Club (shadow), Kroger (Shadow), PetSmart, Office Depot
Tom Thumb (Safeway)
Bear Creek Shopping Center
Riverpark Phase I & II
HEB, LA Fitness, Dollar Tree
Super Target (shadow), Ross Dress for Less, Dick's Sporting Goods, PetSmart, Michaels
Bird Creek Crossing
Target (Shadow), Home Depot (Shadow), PetSmart, Michaels, Office Max
Terms of the transaction:
The gross purchase price for the 20% interest in the eight properties to be acquired by RioCan is $96.6 million, representing a capitalization rate of 6.9%. Under the terms of the transaction, RioCan will assume RPAI's share of the existing in place mortgage financing on five of the properties aggregating $41.8 million, which carries an average interest rate of 3.7% and has an average term to maturity of 2.9 years. Three of the properties will be acquired free and clear of financing. The properties to be acquired have an average occupancy of 94.4%.
The gross sale price for the 80% interest in the five properties owned by RioCan is $102.8 million, representing a capitalization rate of 6.8% and represents a total of approximately 600,000 square feet (at a 100% interest). RPAI will assume RioCan's portion of the in place mortgage financing of $54.3 million that carries a weighted average interest rate of 4.8%.
Purchase Price for eight properties from RPAI
Less Debt Assumed by RioCan from RPAI
Less mark to market debt adjustment
Net Purchase Price by RioCan
Sale price of RioCan's 80% interest in five properties to RPAI
Less debt assumed by RPAI from RioCan
Less mark to market debt adjustment
Net Proceeds from Sale to RPAI
Texas Properties to be sold to RPAI:
Coppell Town Center, Dallas
Cypress Mill, Houston
New Forest Crossing, Houston
Southlake Corners, Dallas
Sawyer Heights, Houston
Once completed, in Texas, RioCan will own a 100% interest in eight properties that were previously owned jointly with RPAI in addition to two properties that were previously owned 100%, and a majority interest in eleven properties that are owned jointly with its partners Dunhill, Kimco and Sterling Corporation, which are unaffected by this announcement. RioCan also owns a 100% interest in 26 properties located in the Northeastern United States.
RioCan's total portfolio in the US will include 45 properties totalling 8.9 million square feet. This portfolio includes 26 properties totalling 4.6 million square feet are located in the northeastern US and 19 properties totalling 4.3 million square feet are located in Texas.
RioCan is Canada's largest real estate investment trust with a total capitalization of approximately $14.4 billion as at March 31, 2013. It owns and manages Canada's largest portfolio of shopping centres with ownership interests in a portfolio of 344 retail properties containing more than 84 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 March 31, 2013. RioCan's portfolio also includes 11 properties under development in Canada. For further information, please refer to RioCan's website at www.riocan.com.
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, 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 March 31, 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.