RioCan in $40M Sale-Leaseback of Ottawa Retail Property
- Jul 31, 2008
RioCan Real Estate Investment Trust, Canada’s largest REIT, has purchased a 142,000-square-foot, two-story retail building in Ottawa for $40 million and agreed to a 15-year lease to the seller and primary tenant, Canadian Tire. The property was acquired for cash, at a cap rate of 6.4 percent, according to a prepared statement. The building has a Canadian Tire store on the second floor and a Mark’s Work Wearhouse (a subsidiary of Canadian Tire) on the first floor, along with two smaller occupancies. The sale-leaseback is structured as a headlease, Rags Davloor, RioCan’s senior vice president and CFO, told CPN, under which Canadian Tire Real Estate Ltd. guarantees payments not only for the two Canadian Tire occupancies, but also for the two smaller tenants. The lease provides for a net rental rate increase of 10 percent every five years, according to the statement. The store, on Carling Avenue in Ottawa’s West End, was a build-to-suit both for Canadian Tire and for this specific store format, Davloor said, and was completed earlier this year. Primarily through stores in larger retail centers across Canada, Canadian Tire is RioCan’s fifth-largest tenant, Davloor said, accounting for 3.6 percent of RioCan’s gross income and 55 locations within properties owned by RioCan. “It’s a very strong relationship.” RioCan has a total capitalization of approximately $7.6 billion and owns and manages Canada’s largest portfolio of shopping centers, including ownership interests in 227 retail properties, among them 15 under development, totaling almost 59 million square feet.