RioCan REIT Completes the Establishment of Its American Platform

 RioCan REIT Completes the Establishment of Its American Platform

RioCan Real Estate Investment Trust announced that its operating platform in the United States is now fully staffed and operational. RioCan has consolidated its ownership of virtually all of the US properties that were previously owned through joint venture arrangements. Working from two regional offices located in Mount Laurel, New Jersey and Dallas, Texas and supported by RioCan's headquarters in Toronto, Ontario, Canada, RioCan's 26 full time employees in the United States will manage RioCan's American portfolio.
 
In less than four years, RioCan has assembled a US portfolio that comprises 47 properties with nearly ten million square feet of net leaseable area representing approximately 20% of RioCan's total portfolio by square feet. RioCan's US portfolio is diversified across two regions in the US, the Northeast and Texas, with more than one thousand tenancies. This high quality portfolio derives 86% of its annualized rental revenue from National and Anchor tenants, with the largest tenant being grocery operator Royal Ahold (10.4%). No other US tenant represents more than 5% of RioCan's US rental revenue. Together, grocery tenants generate 20% of RioCan's US annualized rental revenue.
 
"Our expansion into the United States has been a tremendous source of growth for RioCan. It has been nearly four years since our first US acquisitions, and through our initial partnerships we have developed the local knowledge that we felt we needed before assuming management ourselves," said Edward Sonshine, Chief Executive Officer of RioCan. "RioCan's American portfolio currently represents approximately 14.1% of RioCan's revenue base, and with our regional offices in place we have a scalable American platform that will be the foundation for RioCan's continued growth in the United States and serve as diversification from our Canadian assets. Not only do we expect that our cost of operating this platform will be less than the third party fees we were paying, we are also confident that RioCan's US portfolio will be an important part of our organic growth."
 
As described below, with the exception of one property, RioCan will own a 100% interest in all of its US properties. RioCan's Texas portfolio focused in the four major markets of Dallas, Houston, San Antonio and Austin, will total 5.1 million square feet in 19 properties and will generate approximately 54% of RioCan's annualized rental revenue in the US.
 
Summary of RioCan's US Property PortfolioTexas Portfolio
RioCan                           GLA Major Tenants
 
Click here to view breakdown
 
Dissolution of Texas Joint Ventures:
RioCan has successfully completed the dissolution of its joint venture arrangements with its Texas partners, Retail Properties of America, Inc. ("RPAI") and Dunhill Partners ("Dunhill"). RioCan has also entered into an agreement to dissolve its joint venture arrangement with Sterling Corporation ("Sterling") by agreeing to purchase their managing interest in two properties in Texas.
In total, RioCan has acquired its partners' interests in 14 properties at a total purchase price of US$211.7 million at a weighted average capitalization rate of 6.6%. RioCan has completed two additional acquisitions, the Kroger grocery store parcel at Great Southwest Crossing at a purchase price of US$6.3 million at a capitalization rate of 6.8% and Beekman Stop & Shop, Hopewell Junction, New York at a purchase price of US$15.3 million at a capitalization rate of 6.2%.
 
In addition, RioCan has entered into a firm contract to purchase the Gander Mountain parcel which is part of Riverpark Shopping Center in Houston, Texas at a purchase price of US$9.3 million. RioCan has also entered into an agreement with Sterling to acquire their 10% interest in Ingram Hills, and their 20% interest in Cinco Ranch.
 
Terms of the RPAI Transaction:
RioCan and RPAI's joint portfolio totalled 13 properties in Dallas, Houston, Austin, San Antonio and Temple, Texas that were owned on an 80/20 basis (80% owned by RioCan and 20% owned by RPAI). Under the terms of the dissolution, RPAI sold its 20% managing interest in eight properties to RioCan. RioCan, in turn, sold its 80% interest in the remaining five properties to RPAI.
 
Texas Properties acquired from RPAI by RioCan:
1890 Ranch, Austin Southpark
Meadows, Austin
Bear Creek Shopping Center, Houston
Riverpark Phase, Houston
Great Southwest Crossing, Dallas
Suntree Square, Dallas
Alamo Ranch, San Antonio
Bird Creek Crossing, Temple
 
RioCan acquired the 20% interest in the eight properties at a purchase price of US$96.6 million, (US$95.5 million net of a US$1.1 million mark to market adjustment on the outstanding debt) representing a capitalization rate of 6.9%. Under the terms of the transaction, RioCan assumed RPAI's share of the existing in place mortgage financing on five of the properties aggregating US$41.8 million, which carries an average interest rate of 3.7% and has an average term to maturity of 2.5 years. Three of the properties were acquired free and clear of financing.
 
As part of the dissolution, RioCan sold its 80% interest in five properties that were previously owned through the joint venture for US$102.8 million (US$99.9 million net of a US$2.9 million mark to market adjustment on the outstanding debt), representing a capitalization rate of 6.8% and represents a total of approximately 600,000 square feet (at a 100% interest). RPAI assumed RioCan's portion of the in place mortgage financing of US$54.3 million that carries a weighted average interest rate of 4.8%.
 
Texas Properties sold to RPAI:
Coppell Town Center, Dallas
Southlake Corners, Dallas
Cypress Mill, Houston
Sawyer Heights, Houston
New Forest Crossing, Houston
RioCan has also agreed to purchase the Riverpark Shopping Center Phase III at a purchase price of US$9.3 million which equates to a capitalization rate of 8.0%. Riverpark Shopping Center Phase III is a 64,329 square foot sporting goods store operated by Gander Mountain as part of the Riverpark Shopping Center that was originally part of the joint venture arrangement. This parcel will be acquired free and clear of financing.
 
Additional Acquisitions
RioCan has acquired Beekman Stop & Shop in Hopewell Junction, New York from RPAI at a purchase price of US$15.3 million which equates to a capitalization rate of 6.2%. The property is a standalone 40,416 square foot Stop & Shop grocery store (Royal Ahold). The property was acquired free and clear of financing.
 
RioCan has also purchased the Kroger at Great Southwest Crossing in Grand Prairie, Texas from DDR at a purchase price of US$6.3 million which equates to a cap rate of 6.8%. The Kroger at Great Southwest Crossing is a 60,835 square foot grocery store operated by Kroger and is part of the Great Southwest Crossing shopping centre that was originally part of the joint venture arrangement. This parcel was acquired free and clear of financing.
 
Terms of the Dunhill Transaction:
RioCan and Dunhill's joint portfolio totalled six properties in Dallas, Houston, San Antonio and El Paso, Texas. Under the terms of the dissolution, RioCan has purchased Dunhill's managing interest at a total purchase price of US$83.5 million at a weighted average capitalization rate of 6.4%. RioCan has assumed Dunhill's share of the existing in place mortgage financing of US$41.9 million that carries a weighted average interest rate of 5.0%.
 
RioCan also acquired Kimco's 31.7% interest in Las Palmas Marketplace in El Paso, which was previously owned in a joint venture arrangement with Dunhill and Kimco, at a purchase price of US$31.7 at a capitalization rate of 6.4%. RioCan assumed Kimco's share of the existing in place mortgage financing of US$15.5 million that carries an interest rate of 5.4%.
 
Texas Properties acquired from Dunhill by RioCan:
Las Colinas, Dallas
Lincoln Square, Dallas
Arbor Park, San Antonio
Las Palmas Marketplace, El Paso
Timber Creek Crossing, Dallas
Louetta Central, Houston
Terms of the Sterling Transaction
RioCan and Sterling's joint portfolio totalled two properties in Houston, and San Antonio, Texas. RioCan has agreed to purchase Sterling's managing interest in Ingram Hills, San Antonio and Cinco Ranch, Houston at a total purchase price of US$6.2 million at a weighted average capitalization rate of 6.2%. RioCan will assume Sterling's share of the existing in place mortgage financing of US$2.3 million that carries a weighted average interest rate of 7.1%.
 

on October 15, 2013