Canadian REIT Enters US Market
RioCan Real Estate Investment Trust (REIT), will make a move into the US market through an alliance with Port Washington, NY-based REIT Cedar Shopping Centers (CDR). The Canadian REIT owns and manages Canada's largest portfolio of shopping centers with interests in a portfolio of 247 retail properties, with more than 59m square feet of leasing space. Cedar’s business is primarily in the ownership, operation, development and redevelopment of “bread and butter” supermarket-anchored shopping centers in coastal mid-Atlantic and New England states, owning and operating 13.2m square feet of leasing space at 124 shopping centers. As part of the arrangement, RioCan will make a capital investment in Cedar through a stock purchase and the two firms will create a joint venture. RioCan intends to purchase more than 6.6m shares of Cedar for $40m, with warrants good for two years to purchase an additional 1.4 shares worth $10m. RioCan will own an 80% interest in the joint venture, which will own seven supermarket-anchored properties with a combined more than 1.1m square feet Cedar currently owns. About 50,000 square feet are currently unoccupied. "We believe that this transaction with Cedar presents an excellent opportunity for RioCan to make a cautious introduction into the United States and to build a defensive portfolio which includes the potential to achieve greater returns not only from organic rent growth but through the leasing of vacant space over the next 12-24 months,” said RioCan president and CEO Edward Sonshine. During the next two years, a second joint venture between the two REITs will invest as much as $500m in supermarket-anchored shopping centers in the northeastern US. As part of the stock purchase, RioCan will designate one director to Cedar’s board. If RioCan exercises its rights on the second stock purchase, the REIT will own a 15% stack in Cedar, but the companies also made a “standstill” agreement that prohibits RioCan from making any additional stock purchases with the consent of the Cedar board of directors. “We expect the great financial strength of RioCan and its commitment to our Company to be beneficial for both companies in the coming years,” said Cedar CEO Leo Ullman. “We believe that this important investment in our Company will lead to the creation of meaningful added value for the benefit of shareholders as we move forward. We have been impressed by RioCan and its management team led by Ed Sonshine." Ullman added: "Through many meetings and a great deal of time spent by RioCan with us in its due diligence process, we have come to recognize great symmetry in our conservative approaches to our respective property portfolios at every level of our respective operations.” Write to Austin Kilgore.