RioCan REIT (REI-UN-T) has paid $114.1 million to acquire the remaining 50 per cent interest of the apartment component, eCentral, the remaining 50 per cent interest in the retail component and 70 commercial parking stalls at the ePlace mixed-use development in Toronto.
The purchase price was determined based on cost plus $10 million for eCentral and a seven per cent cap rate on the stabilized NOI for the retail component.
The development yield for the commercial and retail components is estimated at 5.3 per cent and the total value creation is estimated at approximately $120 million, RioCan said, which includes gains from the condominium component of the project.
ePlace is located at the northeast corner of Yonge Street and Eglinton Avenue.
“This acquisition represents another important step forward in our transformation to a major market, mixed-use focused REIT,” said Ed Sonshine, the chief executive officer of RioCan, in a release issued Friday morning.
“RioCan recognizes the thriving, transit-oriented intersection of Yonge and Eglinton has significant income and value growth potential and we are well-positioned as the dominant landlord in the area.”
eCentral apartment leasing
Residential leasing commenced at eCentral in December 2018 and is progressing ahead of both schedule and anticipated rental rates. As of Sept. 26, 72 per cent of the units had been leased at an average monthly rent of $3.88 per square foot for market rent units.
RioCan has secured $150 million of financing to replace the existing construction financing for both the residential and retail components of the development, at 2.58 per cent interest for an 11-year term.
Upon stabilization, which is expected by the end of Q1 2020, it is anticipated the loan will become CMHC-insured at which time the interest rate will drop to 2.33 per cent.
Also upon stabilization, a second tranche of funding estimated to be approximately $40 million will be advanced.
ePlace is a 705,000-square-foot mixed-use development comprising:
* 22,000 square feet of retail space;
* 20,000 square feet of fully sold-out commercial office condominium space;
* and eCentral, a 36-storey, 466-unit rental residential tower.
Retail leasing at ePlace is essentially complete with leases in place for a flagship TD Bank and food service tenants.
“Prototypical” RioCan development
eCentral is what RioCan Living calls one of its a “prototypical” developments. The company says it has emphasized design, professional management, customized amenities, retail integration and access to transit.
The development will have direct underground access to both the Yonge/University subway line and the future Eglinton Crosstown LRT. Adjacent to the retail space in ePlace, and across the street from Yonge Eglinton Centre, eCentral residents will have access to extensive retail and service options.
“ePlace joins, among others, Yonge Eglinton Centre, Yonge Sheppard Centre, King Portland Centre and The Well, all in Toronto, Ontario, as part of RioCan’s expanding portfolio of dynamic mixed-use urban assets,” Sonshine said in the release.
The completion of ePlace marks the end of the transformation of the north side of the Yonge and Eglinton intersection.
RioCan is one of Canada’s largest real estate investment trusts with a total enterprise value of approximately $14.3 billion as of June 30, 2019.
RioCan owns, manages and develops retail-focused, increasingly mixed-use properties located in high-density transit-oriented areas
As at June 30, 2019, RioCan’s portfolio is comprised of 230 properties with an aggregate net leasable area of approximately 39.1 million square feet, including residential rental and 13 development properties.