RioCan to Acquire Regional Malls in Greater Toronto Area
- Feb 12, 2013
RioCan Real Estate Investment Trust has entered into a conditional agreement with Primaris Retail REIT to acquire two regional shopping malls in the Greater Toronto Area (GTA) for a combined gross purchase price of approximately $362 million.
RioCan intends to acquire a 50 percent interest in Burlington Mall in Burlington, Ontario and a 100 percent interest in Oakville Place in Oakville, Ontario. The transaction is conditional on the successful completion of the H&R REIT and KingSett Consortium acquisition of Primaris. On closing, which is expected to occur in April, RioCan will acquire the assets as part of the KingSett Capital led Consortium.
RioCan will assume, at its interest, the in-place first mortgage financing of approximately $165 million in aggregate. At the time of the acquisition, the purchase price will be reduced by a mark-to-market adjustment in consideration of the debt’s above market interest rate, currently estimated at approximately $8 million.
With the addition of Oakville Place and Burlington Mall, Canada’s largest real estate investment trust will gain an even stronger foothold in the enclosed mall sector of the GTA. RioCan’s other properties in the region include Georgian Mall, RioCan Yonge Eglinton Centre, RioCan Sheppard Centre and Shoppers World Brampton.
“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 unit holders. 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 (pictured) is a fashion focused, two-level regional mall strategically located in one of Canada’s most affluent, high-income communities. Built in 1981, the property offers approximately 455,000 square feet of gross leasable area. Significant renovations occurred in 2004 and 2008. Anchored by The Bay and Sears, the mall is now fully leased and its tenants include American Eagle, H&M, Jacob, Birks, Roots, Laura, Mexx and Shoppers Drug Mart. On September 30, 2012, the property’s Commercial Retail Units (CRU) generated average sales of approximately $493 per square foot.
RioCan will purchase a 100 percent interest in Oakville Place for $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 percent, maturing in 2021.
Burlington Mall is a 782,000 square-foot enclosed shopping center located near the Queen Elizabeth Way at Guelph Line and Fairview Street. Built in 1968, the property has undergone significant renovations in 2001, 2004 and 2006. Anchored by Target (opening this spring), Canadian Tire and Winners/HomeSense, the mall is 99 percent occupied and includes The Bay, Dollarama, Old Navy, Shoppers Drug Mart and SportChek among its tenants. On September 30, 2012, the property’s CRU generated average sales of approximately $386 per square foot.
RioCan will own the mall on a 50/50 joint venture basis with the KingSett Canadian Real Estate Investment Fund. At 100 percent, the price of the property is $206 million ($103 million at RioCan’s interest). 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 percent, maturing in 2016.