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RioCan Real Estate Investment Trust Announces Conditional Agreement to Acquire Two Regional Malls in the Greater Toronto Area
By: Marketwired .
Feb. 5, 2013 07:42 AM
TORONTO, ONTARIO -- (Marketwire) -- 02/05/13 -- RioCan Real Estate Investment Trust ("RioCan") (TSX:REI.UN) is pleased to announce that it has entered into a conditional agreement with Primaris Retail REIT ("Primaris") to purchase a 50% interest in Burlington Mall in Burlington, Ontario and a 100% interest in Oakville Place in Oakville, Ontario. The purchase is conditional on the successful completion of the H&R REIT and KingSett Consortium acquisition of Primaris, which pursuant to its Board supported agreement was announced earlier today. RioCan will purchase the assets as part of the KingSett Capital led Consortium.
The aggregate gross purchase price for these two properties is approximately $362 million (at RioCan's interest). In connection with the purchase, RioCan will assume, at its interest, the in place first mortgage financing of approximately $165 million in aggregate. The purchase price will be reduced by a mark-to-market adjustment on closing in consideration of the debt's above market interest rate, which is currently estimated at approximately $8 million. RioCan will fund this acquisition through cash on hand and existing operating facilities.
These properties will add to RioCan's growing enclosed mall portfolio that includes such properties as Georgian Mall, RioCan Yonge Eglinton Centre, RioCan Sheppard Centre and Shoppers World Brampton, all located in the GTA and surrounding markets. The acquisition of Oakville Place and Burlington Mall will allow RioCan to gain a stronger foothold in the enclosed mall sector, specifically in the GTA, a segment otherwise difficult to enter. As well as strengthening RioCan's market leading retail platform, there are additional opportunities for organic growth within both shopping centres, which RioCan believes it can realize with its deep infrastructure and management strength. It is expected that the purchase will be completed in early April.
"This acquisition represents an excellent opportunity to acquire two prominent regional malls, in communities with excellent demographics, high barriers to entry, and great potential to create additional value for our unitholders. We look forward to working with KingSett, our partners, who have done an excellent job in bringing this transaction into reality," said Edward Sonshine, CEO of RioCan. "These two properties strengthen RioCan's portfolio of enclosed malls, and will reinforce our competitive position in the GTA, Canada's largest market. RioCan's expanding enclosed mall portfolio with its strong fashion component will further support RioCan's relationships with its growing North American tenant base. RioCan is uniquely positioned to offer our tenants the opportunity to locate within multiple locations and retail formats."
Oakville Place is located directly off of Queen Elizabeth Way ("QEW"), the major highway running through Ontario's "Golden Horseshoe", in Oakville, Ontario. Oakville is a fast growing community with a strong, diversified economic base, and possesses one of Canada's highest income demographics with an average household income statistic that is well above the national average. Oakville Place is a fashion focused, two level regional mall containing approximately 455,000 square feet of gross leasable area. The property was built in 1981 and has undergone significant renovations in 2004 and 2008. Oakville Place is 100% occupied and is anchored by The Bay and Sears. Other major retail tenants at Oakville Place include American Eagle, H&M, Jacob, Birks, Roots, Laura, Mexx and Shoppers Drug Mart. At September 30, 2012, the property's Commercial Retail Units ("CRU") generated average sales of approximately $493 per square foot. Approximately 94% of the gross rent is generated by national and regional tenants. RioCan will purchase a 100% interest in the property at a purchase price of $259 million. In connection with the purchase, RioCan will assume the in place first mortgage financing of $112 million which carries an interest rate of 4.7%, maturing in 2021.
Burlington Mall, located near the QEW at Guelph Line and Fairview Street, is a 782,000 square foot enclosed mall. The property will be owned on a 50/50 joint venture basis with the KingSett Canadian Real Estate Investment Fund. Burlington Mall was constructed in 1968 and has undergone significant renovations in 2001, 2004 and 2006. The property is 99% occupied and is anchored by Target (opening Spring 2013), Canadian Tire and Winners/HomeSense, and is shadow anchored by The Bay. Other major tenants include Dollarama, Old Navy, Shoppers Drug Mart and SportChek. At September 30, 2012, the property's CRU generated average sales of approximately $386 per square foot. Approximately 87% of the gross rent is generated by national and regional tenants. RioCan will provide asset and property management functions for the property. The purchase price for the property is $206 million at 100% ($103 million at RioCan's interest).In connection with the purchase, the parties will assume the in place first mortgage financing of $105 million ($52.5 million at RioCan's interest) which carries an interest rate of 3.8%, maturing in 2016.
This acquisition is in conjunction with, and subject to the successful completion of, the amended arrangement (the "Amended Arrangement") between H&R REIT and Primaris announced earlier today. Pursuant to the Amended Arrangement, KingSett Capital and certain other parties including RioCan have agreed to purchase certain properties from Primaris. The previously announced property acquisition agreements with KingSett Capital have been terminated and, as a result, the previously announced financing agreements with The Toronto-Dominion Bank for an aggregate amount of $635 million, which would have been used to finance said transaction have also been terminated.
RioCan is Canada's largest real estate investment trust with a total capitalization of approximately $13.9 billion as at September 30, 2012. It owns and manages Canada's largest portfolio of shopping centres with ownership interests in a portfolio of 338 retail properties containing more than 80 million square feet, including 49 grocery anchored and new format retail centres containing 12.4 million square feet in the United States through various joint venture arrangements as at September 30, 2012. RioCan's portfolio also includes 10 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 management's discussion and analysis for the three and nine months ending September 30, 2012, 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 current 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"), US currency 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 more robust retail environment compared to recent years; relatively 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") which includes application to the Trust's 2010 comparative financial results. 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.
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