RioCan Real Estate Investment Trust is ending its six-year foray into the U.S. with a deal to sell its 49 shopping centers in the country to Blackstone Group LP for $1.9 billion.
The sale to the Blackstone Real Estate Partners VIII fund will provide capital for RioCan’s recently announced acquisition of 23 properties from Kimco Realty Corp. and to cut debt, Canada’s largest retail landlord said in a statement Friday. The U.S. shopping centers are located in the Northeast and Texas.
“We are very pleased to complete our strategic review, which has culminated in the decision to sell our U.S. portfolio at an opportune time, and to realize a sizable gain,” Edward Sonshine, chief executive officer of Toronto-based RioCan, said in the statement. “The sale will enable management to focus exclusively on RioCan’s operations in Canada, including its significant development pipeline.”
RioCan entered the U.S. market following the financial crisis, purchasing grocery-anchored retail sites at a discount. In July, when the company announced its strategic review of the properties, Sonshine said a weakening Canadian dollar made it costly to expand in the U.S. and RioCan was looking to get more value from the assets.
The total price RioCan paid for the 49 retail sites was C$1.7 billion. The sale at C$2.7 billion, 59 percent more, will provide an internal rate of return of about 16 percent, according to the statement. The Canadian dollar has dropped about 25 percent in the past six years to about 71 cents per U.S. dollar, giving RioCan a sizable currency gain on its investment. The sale is expected to be completed on April 30.
The U.S. properties accounted for about 18 percent of RioCan’s annual rental revenue, financial documents show. The shopping centers are predominately in Texas with the rest spread across states including New York, New Jersey and Connecticut.
Peter Rose, a spokesman for New York-based Blackstone, couldn’t immediately comment on the deal.
Blackstone, the world’s largest private equity investor in real estate, has been on a buying spree this year with transactions including a $5.3 billion deal to acquire Stuyvesant Town-Peter Cooper Village, New York City’s largest apartment complex; and an agreement with Wells Fargo & Co., to buy General Electric Co. assets valued at $23 billion. The GE deal was the first for Blackstone’s Real Estate Partners VIII fund, it’s largest at $15.8 billion.
RioCan has several large projects in Canada that it has focused on for the past few years, including The Well in downtown Toronto, with condominiums, rental towers, offices and retail. The company’s stock is down 6.8 percent since announcing the strategic review of the assets, underperforming the Standard & Poor’s/TSX index of Canadian companies.