RioCan to sell 100 properties worth about $2 billion over two to three years

TORONTO _ Canada’s largest real-estate trust says it’s planning to sell about $2 billion worth of properties _ primarily open-air malls or power centres _ in secondary markets across the country.

RioCan Real Estate Investment Trust (TSX:REI.UN) expects to net about $1.5 billion after expenses from the sale of about 100 properties by late 2018 or 2019, with exact details yet to be revealed.

About half of the net proceeds will be used to repurchase RioCan trust units from the open market.

RioCan also plans to invest $300 million to $400 million per year on property development in the six major markets that already account for about 75 per cent of its annual rental revenue.

RioCan chief executive Edward Sonshine told analysts that its properties in secondary markets generally have less growth potential than its holdings in Toronto, Montreal, Ottawa, Calgary, Edmonton and Vancouver.

“We have always known that the best assets, from a growth perspective, are located where there’s population growth,” Sonshine said Monday during a conference call with analysts.

“In Canada, that population growth is essentially in the six major markets of this country.”

Although Sonshine said RioCan won’t be revealing the exact list of properties until individual deals are reached, he said that many of them will be in Ontario and Quebec, with a smaller number in Atlantic Canada, Alberta and British Columbia.

Among the communities he identified as potential markets for sales were London, Ont., and smaller Ontario communities such as Collingwood, Renfrew, and Leamington.

He also said that Orillia, Ont., is home to a RioCan property with a vacant space formerly occupied by Target.

However, Sonshine said RioCan is flexible about what it sells and will keep some of its secondary market properties, including one in Barrie, Ont., that is part of a joint venture with Hudson’s Bay Co. (TSX:HBC).

The B.C. capital of Victoria also has a property that RioCan will likely hold onto because of its potential for growth, he said.

As for the plan to buy back some of RioCan’s equity, Sonshine said it made sense because of the relatively low market value of its units.

RioCan units were at $24.10 at mid-day on the Toronto Stock Exchange, little changed since Friday and well off their 2017 closing high of $27.08 on Jan. 6.