RioCan Real Estate Investment Trust entered the New Year with the announcement of two new 50/50 partnerships for the development of two major mixed-use sites in Toronto and Montreal.
RioCan, one of Canada’s largest real estate investment trusts, has a new 50/50 partnership with Fieldgate Urban for a mixed-use condominium development with the combination of respective properties along Bloor Street West in Toronto’s Kingsway neighbourhood. It also has a new 50/50 co-ownership with Broccolini Real Estate Group with the sale of a 50 percent interest in RioCan’s mixed-used development of its RioCan Centre Kirkland in Montreal.
In early January, RioCan also announced the dissolution of a co-ownership with Talisker Corporation with RioCan’s acquisition of the remaining 50 percent interest in the development component of the Queensway property in Toronto and the disposition of its 50 percent interest in the Cineplex component of the property.
“We are very pleased to announce the completion of these transactions to further advance our exciting mixed-use developments in Toronto and Montreal. These projects are prime examples of how RioCan continues to expand its value creation opportunities based on its strong foundation of well-located properties,” said Edward Sonshine, Chief Executive Officer of RioCan, in a statement.
“We look forward to working with our two new best-in-class partners as we create long-term value and increasingly transform our portfolio of assets into transit-oriented, mixed-used communities in Canada’s growing major markets.”
RioCan owns, manages, and develops retail-focused, mixed-use properties located in prime, high-density, transit-oriented areas where Canadians want to shop, live, and work. As of September 30, 2020, its portfolio comprised 221 properties with an aggregate net leasable area of approximately 38.4 million square feet (at RioCan’s interest) including office, residential, and 16 development properties.
The Toronto mixed-use condominium project, along Bloor Street West, directly across from the TTC’s Royal York subway station, is in Toronto’s affluent Kingsway neighbourhood. The transaction involves the sale of a 50 percent interest in RioCan’s 2939 – 2943 Bloor Street West property to Fieldgate and the acquisition of a 50 percent interest in Fieldgate’s 2915 – 2917 Bloor Street West property, resulting in both partners having a 50 percent interest in the combined site. The transaction is valued at $180 per square foot buildable density. The net transaction price was approximately $8 million paid by RioCan to Fieldgate, including reimbursement of its share of development costs incurred to date.
RioCan said the combination of the two adjacent sites will allow for a development project of increased scale with greater density allowance and development efficiencies. The project is expected to receive final approvals and initiate pre-sales by year end 2021 followed by condominium sales activity to be launched in the second half of 2022. RioCan will act as retail property manager and Fieldgate as construction and development manager for the project. The company is hoping to start construction in the second quarter of 2023 with completion in 2025.
RioCan said the project expands the company’s growing presence in this highly-coveted area. It is ideally located, situated in the heart of the Kingsway neighbourhood which is recognized as a prime Toronto destination with an abundance of urban amenities. The project will include about 240 units in a seven-storey condo building with about 18,000 square feet of retail at grade.
“This development, along with RioCan’s strategic assembly of three other nearby properties along this Bloor Street West corridor, provides RioCan a unique opportunity to capitalize on residential intensification within this highly attractive node,” said the Trust.
John Ballantyne, Senior Vice-President, Asset Management for RioCan, said Bloor Street West is an extremely popular area in Toronto right now. The location is right on the subway line, literally steps away from a station and very close to the Humber Valley Park area.
“It’s an area that only has become more and more popular for residents, especially I would say for people in their 20s and 30s starting up new families,” he said. “This is a younger demographic area. People who are building families. They want to be on the transit, very close to the downtown and there’s still a ton of green space all around this area. A great place to raise kids.”
Two buildings currently on the site will be demolished to build the mixed-use development.
RioCan said the sale of a 50 percent co-ownership interest in Centre Kirkland to Broccolini was for about $19 million. Centre Kirkland is an open air centre anchored by a Cineplex cinema.
“This development project will involve a complete revitalization of the site decreasing RioCan’s exposure to Cineplex with the development of a diverse mix of new buildings and replacing under utilized space with highest and best uses. As a multi-phase project, each staggered phase of the project will remain income producing prior to its development start. As a result, the partners have entered into an agreement whereby RioCan will have a 100 percent interest in the pre-development leases. RioCan and Broccolini will share costs to develop each phase as it becomes development ready. Broccolini will be the development, and construction manager and once each phase of the development is complete, RioCan will serve as the retail/residential property manager and Broccolini will manage the office components,” said RioCan.
Centre Kirkland features easy access from the TransCanada Highway (Hwy 40) and will have direct access to the Kirkland Station of the future Reseau Express Metropolitan light rail transit network that links downtown Montreal with the South Shore and the West Island via the Trudeau Airport.
RioCan built the Centre as a commercial retail property about 20 years ago. It is 42 acres with about 315,000 square feet of retail. When it was built, it was anchored by a large, at the time, new format Famous Players movie theatre which is about 88,000 square feet with surrounding commercial retail strip buildings around it.
The new mixed-use development, which will take about 15 years for full build out, will include between 2,500 and 2,800 residential units, about 240,000 square feet of office space and about 135,000 square feet of retail with a connected network of streets. The site will be about 2.8 million square feet of built space. Residential towers will range between 10 and 26 storeys as well as some townhomes, explained Ballantyne.
Construction of the REM is well underway with trains expected to be put into service gradually starting in 2022 and the Kirkland station ready in 2023-2024.
“There’s huge opportunity here to redevelop this property as a mixed-use, primarily residential site,” said Ballantyne, adding the site will have between 15 and 20 residential buildings. The residential component will be a mix between rental and condos for sale.
Demolition for the first phase of the project is targeted for late 2022 to early 2023.
RioCan said its Queensway property, which was co-owned 50/50 by RioCan and Talisker, comprises two parcels: the development land component and the Cineplex land component. The 14.6-acre Cineplex component is occupied entirely by a Cineplex cinema. Spanning 3.2 acres, the development component fronts the Cineplex component along the Queensway and is currently occupied by three Recipe Unlimited banner restaurants and a Scotiabank branch, it said.
“With the last of the leases for the four units of the development component expiring July 2022, RioCan’s best-in-class development team has already rezoned this component to permit a 500,000 square feet mixed-use development,” said the Trust.
“RioCan has acquired the remaining 50 percent interest in the development component, which the Trust now owns 100 percent post this transaction. RioCan has also disposed of its 50 percent interest in the Cineplex component, which Talisker now owns 100 percent post this transaction. The development component is valued at $80 per square foot of zoned density and the Cineplex component is valued at a capitalization rate of 6.95 percent based on in-place net operating income in the Cineplex component. The net transaction price was $9.3 million paid by RioCan to Talisker.
“The Queensway development component is located at the corner of Islington Avenue and the Queensway in the west end of Toronto. This property is minutes away from the TTC’s Bloor subway line and Mimico Go Station as well as in close proximity to major highways and directly off an exit from the Queen Elizabeth Way (QEW) highway. The Queensway area has been subject to new high-rise residential development given its proximity to conveniences including transit, schools, retail outlets and an easy commute to Toronto’s downtown core. As a mixed-use condominium development, this project contemplates approximately 460,000 square feet for residential use and approximately 40,000 square feet for retail use. With zoning approval in place, construction is currently anticipated to commence in 2022. In addition, RioCan is in discussions with potential capital partners, where RioCan would serve as development manager for the project.”