Pivot (left), a new apartment tower at the Yonge-Sheppard Centre in Toronto. BentallGreenOak is acquiring a 50 per cent interest in the tower from RioCan. (Courtesy RioCan)

RioCan REIT (REI.UN-T) and BentallGreenOak are expanding an existing partnership with a transaction valued at $151.2 million, under which BGO will acquire a 50 per cent non-managing interest in three Greater Toronto Area multifamily and retail properties.

BGO is making the acquisition on behalf of Sun Life Assurance Company of Canada.

The portfolio includes RioCan’s 36-storey multifamily rental property Pivot, in Toronto, and two grocery-anchored retail assets – RioCentre Oakville and Spring Farm Marketplace in Thornhill. It is expected to close later in Q3 2021, subject to customary closing conditions.

“We will continue to capitalize on new opportunities as they arise to attract institutional investment and monetize the value that we have created in our portfolio,” said Jonathan Gitlin, president and chief executive officer of RioCan, in the announcement. “RioCan’s capital recycling activity provides an extremely effective source of capital to fund value creation initiatives, including future mixed-used developments that generate additional fee income and fortify our balance sheet to set us up for sustainable growth.”

The agreement represents a blended cap rate of 4.1 per cent based on in-place NOI for the income-producing retail properties, and stabilized NOI for the residential property which is currently in lease-up.

“BentallGreenOak, on behalf of Sun Life, is pleased to have creatively structured a complimentary portfolio deal, in two highly-favoured asset classes,” said Christina Iacoucci, managing partner and Canadian chief investment officer for BentallGreenOak, in the announcement.

“We are leveraging the strength of our relationships to immediately add high-quality, multi-family rental stock in a top market, and two well-positioned, needs-based retail assets to our portfolio, to deliver valuable income-producing assets that are rare finds in today’s real estate market.”

The relationship between RioCan and BentallGreenOak / Sun Life stretches back to at least the early 2000s, when the REIT and Sun Life became co-owners of Mayfield Common in Edmonton. Sun Life acquired a majority interest in BentallGreenOak in 2019, and BGO has been the manager of its real estate holdings ever since.

Pivot and the retail properties

Pivot is RioCan Living’s newest 36-storey residential high-rise.

The 361-unit tower is connected to RioCan’s recently redeveloped Yonge Sheppard Centre (YSC) with direct access to the intersecting subway lines of Yonge Street and Sheppard Avenue. RioCan paid its development partner KingSett Capital $331 million in early 2019 for KingSett’s 50 per cent stake in the YSC, to become the sole owner and operator of the retail and office facility.

YSC contains 237,000 square feet of retail and 395,000 square feet of office space. The breadth of YSC’s retail and food service offering features tenants such as Longo’s grocery store, Winners and Shoppers Drug Mart.

Leasing for Pivot began in December 2020, and the building is approximately 45 per cent leased.

RioCan has obtained CMHC financing for its 50 per cent interest in Pivot – a key part of the REIT’s debt strategy as it offers access to a new source of financing and lowers the overall debt cost.

RioCentre Oakville and Spring Farm Marketplace are grocery-anchored, open-air shopping centres comprising approximately 107,000 square feet and 73,000 square feet of retail space, respectively.

The properties feature needs-based tenants and are located in growing suburbs within the Greater Toronto Area, characterized by high traffic and affluent demographics.

RioCan will remain property manager for both sites.

About RioCan, BentallGreenOak

RioCan is one of Canada’s largest REITs with a portfolio of increasingly mixed-use properties in high-density, transit-oriented areas. As at March 31, RioCan’s portfolio was comprised of 223 properties with net leasable area of approximately 38.0 million square feet (at RioCan’s interest) including office, residential rental and 15 development properties.

RioCan’s development pipeline as at March 31 is estimated at 41.8 million square feet, of which 14.1 million square feet is already zoned primarily for mixed-use developments.

BentallGreenOak is a global real estate investment management advisor and provider of real estate services. BentallGreenOak serves more than 750 institutional clients with approximately $62 billion USD of assets under management (as of March 31) in office, industrial, multi-residential, retail and hospitality property.

BentallGreenOak has offices in 24 cities across 12 countries and is a part of SLC Management, the alternatives asset management business of Sun Life.