Managers of Canada’s largest REIT announced it bought out its U.S. partners earlier this month, signalling its intent to keep growing south of the border.
RioCan Real Estate Investment Trust consolidated its U.S. joint ownership properties along with the establishment of two fully staffed American offices consisting of 26 full-time staff.
Several other purchases are involved, including US$9.3 million to buy a Gander Mountain store, which is part of the Riverport Shopping Centre in Houston.
47 properties in U.S.
RioCan’s American holdings include 47 properties with nearly 10 million square feet of leasable space. It represents approximately 20 per cent of RioCan’s total portfolio in terms of square footage.
The REIT’s portfolio encompasses more than 1,000 tenants throughout the American Northeast and Texas. National and anchor tenants contribute 86 per cent of the annual rental revenue. The largest grocery tenant is Ahold at 10.4 per cent. Overall, groceries represent 20 per cent of RioCan’s annual revenues.
Edward Sonshine, RioCan’s CEO, said the regional offices give the REIT a scalable platform for U.S. expansion, which will allow the company to diversify its Canadian assets.
“Not only do we expect that the cost of operating this platform will be less than the third-party fees we were paying, we are also confident that RioCan’s U.S. portfolio will be an important part of our organic growth,” Sonshine said in a statement.
In four Texan cities
The REIT’s Texan portfolio is focused on Dallas, Houston, San Antonio and Austin and generates approximately 54 per cent of RioCan’s annual American rental revenue.
RioCan has also amassed property in Maryland, Massachusetts, New Hampshire, New Jersey, New York, Pennsylvania and West Virgina.
RioCan is Canada’s largest REIT with a total capitalization of US$13.7 billion as of June 30. It owns and manages Canada’s largest portfolio of shopping centres with 348 retail properties containing more than 83 million square feet.
According to its Q2 2013 report, the REIT is monitoring the consolidations among Loblaw and Shoppers Drug Mart, Sobeys and Canada Safeway, and Empire, Landmark Theatres and Cineplex, but that it did not expect the mergers to impact its business in the short and medium term.
RioCan didn’t mention, though, what effect Canadian Tire’s impending REIT might have. Canadian Tire is RioCan’s second-largest tenant, trailing only Walmart, and the retailer’s 96 locations represent 3.5 per cent of RioCan’s annual rental revenue.
Canadian Tire expects to raise $263.5 million from its initial public offering, with the IPO expected to close around the third week of October. Canadian Tire expects to hold approximately 85 per cent interest in the REIT and anticipates owning a portfolio of 256 properties with a total leasable space of approximately 19 million sq. ft.