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Canada's Largest REIT Doing $200 Million Acquisition Deal for 7 Shopping Centers Totaling 1.8 Million Feet
Edward Sonshine
The $200 million deal for five grocery anchored and new format retail centers totaling 1.8 million square feet is expected to close by year end, according to Bloomberg and Market Watch online sources.
"We are very pleased with the progress we have had through our joint venture platform with Cedar to attract high quality acquisition opportunities," Edward Sonshine, Queen's Counsel, President and CEO of RioCan, said in a prepared statement.
"This portfolio of new format retail and grocery anchored retail centers in well established markets represents an excellent opportunity for RioCan to expand its portfolio in the Northeastern US at an attractive cap rate and with an excellent opportunity to realize additional growth through leasing."
The joint venture will acquire five properties in Pennsylvania, New Jersey and Virginia for $134 million. RioCan will own an 80-percent interest; Cedar will hold the remaining 20 percent.
The sale of Red Rose Commons shopping center in Lancaster, PA, is subject to terms from a third-party joint venture partner and PREIT.
Cedar and RioCan will equally share the Whitehall Mall in Allentown, PA. The joint venture has plans to redevelop the shopping center.
Purchase of a sixth property located in Pennsylvania is subject to certain conditions, and subject to reaching agreement with a third party joint-venture partner of PREIT, according to Market Watch.
These properties will be purchased on the same 80/20 basis as past joint venture acquisitions with Cedar Shopping Centers, Inc
RioCan has, through its joint venture with Cedar, also agreed to purchase from PREIT a seventh property, also located in Pennsylvania, which will be owned on a 50-50 basis with Cedar.
The parties plan to eventually redevelop this property. Closing of the purchase of this property is also subject to reaching agreement with a third-party joint venture partner of PREIT.
The portfolio to be acquired has a weighted average remaining lease term of approximately 9.2 years, and an average lease rate of US $10.06 per square foot.
Four of the properties are anchored or shadow-anchored by supermarkets. The aggregate owned-gross leasable area of the initial five properties is approximately 936,000 square feet. For the seven properties, the total owned-GLA is approximately 1.8 million square feet.
The aggregate purchase price for the initial five properties is about $107 million at RioCan's interest. For all seven properties, the aggregate purchase price for RioCan's interest would be approximately $150 million, exclusive of closing costs and adjustments.
The purchase price may be increased by certain "earnout" arrangements with respect to lease-up of certain vacant premises and/or outparcels during the two year period following closing of the purchase of the properties.
The initial five properties include:
Monroe Marketplace:
Located in Sellinsgrove, PA, in central Pennsylvania along the Susquehanna River, Monroe Marketplace is a 335,000 square foot grocery-anchored shopping center constructed in 2008.
The property is anchored by a 76,000 square foot Giant Supermarket (lease expiry 2028), a 68,000 square foot Kohl's Department Store (lease expiry 2029), and is shadow anchored by a 127,000 square foot Target.
The property has a weighted average remaining lease term of 11.7 years.
Creekview Center:
Located in Warrington, PA, a suburb of Philadelphia, Creekview Center is a 136,000 square foot grocery-anchored shopping centre constructed in 2001.
The property is anchored by a 49,000 square foot Genuardi's Supermarket (Safeway) (lease expiry 2021) and is shadow anchored by a 126,000 square foot Target and an approximately 163,000 square foot Lowe's Home Improvement Warehouse
Other major tenants at the subject property include Bed Bath & Beyond and LA Fitness. The property has a weighted average remaining lease term of 7.2 years.
Sunrise Plaza:
Located in Forked River, NJ approximately 90 kilometers east of Philadelphia, Sunrise Plaza is a 254,000 square foot new format retail center built in 2007.
The property is anchored by a 131,000 square foot Home Depot (lease expiry 2038), a 96,000 square foot Kohl's Department Store (lease expiry 2029), and a 20,000 square foot Staples. The property has a weighted average remaining lease term of 22.2 years.
New River Valley Center:
Located in Christiansburg, VA about 90 kilometers north of the Virginia / North Carolina state border in close proximity to Virginia Tech University, New River Valley is a 165,000 square foot new format retail center constructed in 2007.
The tenants at the property include a 30,000 square foot Best Buy (lease expiry 2018), Old Navy, Ross Dress for Less, Bed Bath & Beyond, Staples, and PetSmart. The property has a weighted average remaining lease term of 7.1 years.
Pitney Road Plaza:
Located in Lancaster, PA, which is situated midway between Philadelphia and Harrisburg Pennsylvania, Pitney Road Plaza is a new format retail center constructed in 2009.
The property to be acquired is a 46,000 square foot freestanding Best Buy (lease expiry 2020), which is part of the overall center that is shadow anchored by Costco and Lowe's.
The two properties presently owned by PREIT together with joint venture partners, which are under contract to be sold, but subject to closing conditions, including purchase of the interests of the third party partners, are:
Red Rose Commons:
Located in Lancaster, PA, about midway between Philadelphia and Harrisburg Pennsylvania, Red Rose Commons is a 263,000 square foot new format retail center, built in 1998. The center is shadow anchored by a Weis Markets grocery store, and Home Depot.
Major tenants at the site include Sports Authority, H. H. Gregg, PetSmart Office Max, and Barnes & Noble. The property has a weighted average remaining lease term of 4.6 years.
Whitehall Mall:
Whitehall Mall
The property is anchored by a 213,000 square foot Sears and an 82,000 square foot Kohl's Department Store. Other major tenants at the property include Bed Bath & Beyond, Michael's, and Gold's Gym.
The property has a weighted average remaining lease term of 5.7 years. This property will be acquired with Cedar on a 50/50 joint venture basis.
The joint venture anticipates obtaining fixed-rate financing at approximately 50-60% loan-to-value for the acquisition of the seven properties.
The Whitehall Plaza property is subject to a first mortgage which matures in November 2018. The current remaining balance on the loan is presently less than $12 million; the interest rate is 7% and amortization is on a 20-year schedule. The loan is not assumable by right and is subject to a prepayment penalty.
The five initial properties being acquired have a weighted average occupancy of approximately 97%. Occupancy at Red Rose Commons is 85% and at Whitehall Mall (including the covered mall area) is about 92% occupied.
Market Watch reports PREIT will continue to provide certain property management and leasing services for the properties under an agreement for a three-year period to be entered into with the joint venture, terminable by the parties after 12 months.
Cedar will retain overall asset and financial management responsibilities.
RioCan had a total capitalization of about $8.6 billion as at June 30, 2010. It owns and manages Canada's largest portfolio of shopping centers with ownership interests in a portfolio of 267 retail properties, including 11 under development, containing an aggregate of over 60 million square feet.
RioCan owns an 80% interest in nine grocery anchored shopping centers in the United States through its joint venture arrangement with Cedar.
In addition, RioCan owns a 14% equity interest in Cedar Shopping Centers, Inc., a real estate investment trust focused on supermarket-anchored shopping centers and drug store-anchored convenience centers located predominantly in the Northeastern United States.
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