Ed Sonshine On RioCan's Milestone 2016

The Well is a cornerstone project in RioCan REIT’s urban intensification strategy, and CEO Ed Sonshine says the sale of its residential component means construction can launch next spring on the "new heart of Downtown West."

We snapped Ed in his office at RioCan’s Yonge-Eglinton HQ. His firm is JVing on The Well, a 3M SF mixed-use development at Front and Spadina, with Allied Properties REIT and Diamond Corp. The residential portion—1.43M SF of condos and rental apartments—sold to Tridel and Woodbourne Canada Partners for $180M. (RioCan will retain ownership of 50% of one of the rental towers, 400k SF.) “We’re quite pleased,” Ed tells us, noting the deal fetched the JV “a little more than we paid for all the land. So it was a good trade.” But it took three years and a rezoning to get here. “These things don’t just happen.”

The deal leaves The Well JV with 500k SF of retail and 1M SF of office, and unveiling of a lead tenant for the office tower, 410 Front (above right), is expected soon. It also enables the partners to build the entire project—which has official plan approval—in one continuous period, versus a phased approach. “Nine months from now I expect to be at groundbreaking,” Ed says. The Well is a key element of the trust's urban development/intensification focus. In all, RioCan has approvals for seven mixed-use, transit-oriented projects (12.4M SF), such as King-Portland Centre (with Allied), and its Sheppard Centre revamp with KingSett Capital.

It’s been a year of milestones for RioCan, none bigger than the $2.7B sale of its US ops (49 retail properties) to Blackstone Real Estate Partners. “It’s the largest deal I’ve ever done,” Ed tells us, noting the proceeds enabled the trust to shore up its balance sheet, reducing its debt-to-assets ratio to a historically low 38% (versus 46.3% last December). The deal also allowed RioCan to pursue more purchases on home soil, including its $715M takeover of a 22-property portfolio it jointly owned with Kimco Realty. “We found our happy hunting ground on the acquisition side was buying out our partners.”

RioCan subsequently acquired CPPIB’s interest in four co-owned properties for $325M, and bought out Trinity Developments’ stakes in Chapman Mills Marketplace in Ottawa and the Whole Foods-anchored retail centre at 1860 Bayview Ave. RioCan has acquired interests in more than $1.1B worth of Canadian income-producing properties since last September, including The Shops of Summerhill, above, a JV with Tricon Capital Group. (RioCan also sold eight properties for $118M in 2016’s first half.) These deals “mostly replace the income we sold down south,” says Ed, while reducing the trust's leverage ratio “quite dramatically.”

Across the road from RioCan's Yonge-Eg base, construction is “coming along great” on E-Condos, a JV with Bazis Inc and Metropia. Its 626 condos are sold out and TD Bank is taking 18k SF of the 40k SF of retail. The project includes a 450-unit rental tower, “the first jewel in our rental portfolio,” Ed notes. RioCan is aiming to develop 10,000 residential units via 46 projects in the next decade, with plans for rental towers at Sheppard Centre and Sunnybrook Plaza. It marks a new era for Canada’s largest REIT. Says Ed: “We believe urban intensification is exactly the right place to be.”