Strategy focused on high-growth, high population
hubs in Canada’s six major markets
RioCan Real Estate Investment Trust (“RioCan”) (TSX:REI.UN) today
announced its plan to accelerate its portfolio focus in Canada’s
six major markets through the sale of approximately 100 properties
located primarily in secondary markets across Canada over the next
two to three years. On completion, RioCan expects to generate in
excess of 90% of its annualized rental revenue from Canada’s six
major markets (currently 75%). This strategy will further
enhance the quality, growth profile and resilience of the Trust’s
portfolio of retail focused, increasingly mixed-use properties
located in prime, high density, transit oriented areas where
Canadians want to shop, live and work.
The key elements of RioCan’s strategy
include:
- The sale of over $2.0 billion of income properties primarily
located in Canada’s secondary markets, including certain non-core
assets in major markets, representing approximately 100 of RioCan’s
properties to be sold in phases over the next two to three years.
The sales are expected to generate total net proceeds of
approximately $1.5 billion;
- Repurchase and cancellation of the Trust’s units through the
Trust’s Normal Course Issuer Bid (“NCIB”) program while maintaining
its strong credit fundamentals. It is estimated that approximately
half of the net proceeds will be used for its NCIB
program;
- Continued investment of approximately $300 million to $400
million per year into RioCan’s robust development pipeline, which
is focused exclusively in Canada’s six major markets;
and
- Suspension of its Distribution Reinvestment Plan (“DRIP”)
effective November 1, 2017, in order to maximize the effectiveness
of the NCIB
Through the realignment of the portfolio, RioCan
is targeting to achieve an annual same property net operating
income growth rate of 3% or better, which would result in annual
funds from operations per unit growth of 5% or more before gains
from marketable securities, gains from residential inventory and
fee income in years subsequent to the completion of our disposition
program. The enhanced business profile will facilitate growth in
RioCan’s distributions and net asset value creation for our
unitholders.
“Our strategy to accelerate our portfolio’s
focus on Canada’s six major markets will streamline our business
model, advance the growth profile of RioCan to one of the strongest
organic growth models in Canada, and improve the resilience of our
portfolio in the ever changing retail environment,” said Edward
Sonshine, CEO of RioCan. “Under this strategy, we will continue to
be Canada’s largest REIT, with an enhanced focus on optimizing the
value of our existing properties through redevelopment and
intensification, diversifying our portfolio into residential real
estate, and advancing our robust development pipeline to deliver
distribution growth and enhanced net asset value creation for the
benefit of our unitholders while meeting the evolving needs of our
tenants and the communities we serve.”
RioCan intends to complete the sales in a
targeted and phased approach over the next two to three years,
which will help mitigate the risks associated with the sale of a
portfolio of this size. Given the preliminary nature of these
planned dispositions and the flexibility that the Trust intends to
maintain over the disposition process, there can be no assurance
regarding the timing or expected proceeds of the planned asset
sales.
As noted earlier, the proceeds from completed
sales will be used to repurchase units under RioCan’s NCIB program,
maintain RioCan’s strong credit profile, and fund the Trust’s
development activities. The current NCIB will expire on October 19,
2017 and the Trust has received approval from the Board of Trustees
to file an application to renew its NCIB program, subject to TSX
approval.
In order to maximize the effectiveness of the
NCIB, RioCan will suspend its DRIP until further notice effective
November 1, 2017. Unitholders that are enrolled in the DRIP will
receive the future distributions in cash commencing with any
distribution declared in November 2017. If RioCan elects to
reinstate the DRIP in the future, unitholders that were enrolled in
the DRIP at the time of its suspension and remain enrolled at the
time of its reinstatement will automatically resume participation
in the DRIP.
Rags Davloor, President and COO of RioCan, said,
“The repositioning of RioCan’s portfolio to further prioritize
high-growth, high-population hubs will streamline our property and
asset management platform, improve operating efficiencies and
enhance the Trust’s competitive advantage. Further, this will
enable RioCan to capitalize on its portfolio of well-located
properties, and support the ongoing development pipeline that will
contribute to both RioCan’s long term cash flow growth and net
asset value creation.”
CONFERENCE CALL ON OCTOBER 2,
2017
Management will hold a conference call on
October 2, 2017 at 10:00am ET to discuss its plan to
accelerate its portfolio focus in Canada’s six major markets.
Interested participants may take part by dialing 647-427-3230 or
toll-free at 1-877-486-4304. A replay of this call will be
available until November 3, 2017 by dialing 1-855-859-2056 and
entering the passcode 92513086#.
Alternatively, to access the simultaneous
webcast, go to the following link on RioCan’s website
http://investor.riocan.com/investor-relations/events-and-presentations/
and click on the link for the webcast. The webcast will be archived
24 hours after the end of the conference call and can be accessed
for 120 days.
ABOUT RIOCAN
RioCan is Canada’s largest real estate
investment trust with a total enterprise value of approximately
$13.9 billion as at June 30, 2017. RioCan owns, manages and
develops retail-focused, increasingly mixed-use properties located
in prime, high-density transit-oriented areas where Canadians want
to shop, live and work. Our portfolio is comprised of 299
properties, including 15 development properties, with an aggregate
net leasable area of approximately 45 million square feet. To learn
more about how we deliver real vision on solid ground, visit
www.riocan.com.
FORWARD LOOKING INFORMATION
This news release contains forward-looking
information within the meaning of applicable Canadian securities
laws. This information includes, but is not limited to, statements
concerning RioCan’s strategic objectives to increase its focus in
Canada’s six major markets, the ability and timing needed to
complete the sale of assets in its disposition program, as well as
statements with respect to management’s beliefs, plans, estimates,
and intentions, and similar statements concerning anticipated
future events or expectations that are not historical facts.
Forward-looking information generally can be identified by the use
of forward-looking terminology such as “may”, “will”, “would”,
“expect”, “intend”, “estimate”, “anticipate”, “believe”, “plan”, or
similar expressions suggesting future outcomes or events. Such
forward-looking information reflects management’s current beliefs
and is based on information currently available to management. All
forward-looking information in this News Release is qualified by
these cautionary statements.
Forward-looking information is not a guarantee
of future events or performance and, by its nature, is based on
RioCan’s current estimates and assumptions, which are subject to
numerous risks and uncertainties, as described under “Risks and
Uncertainties” in RioCan's Management's Discussion and Analysis for
the period ended June 30, 2017 ("MD&A") and the Trust’s most
recent Annual Information Form, and including that the transactions
contemplated herein are completed, which could cause actual events
or results to differ materially from the forward-looking
information contained in this News Release. Although the forward
looking information contained in this News Release is based upon
what management believes are reasonable assumptions, there can be
no assurance that actual results will be consistent with these
forward-looking statements. Certain statements included in this
News Release may be considered "financial outlook" for purposes of
applicable securities laws, and such financial outlook may not be
appropriate for purposes other than this News Release.
Except as required by applicable law, RioCan
undertakes no obligation to publicly update or revise any
forward-looking information, whether as a result of new
information, future events or otherwise.
INFORMATION CONTACT:
Edward Sonshine, O. Ont., Q.C.Chief Executive
Officer(416) 866-3018 | sonshine@riocan.com
MEDIA CONTACT
Christian GreenAVP Investor Relations and
Compliance(416) 864-6483 | ir@riocan.com
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