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TORONTO-RioCan REIT and its long-time JV partner Trinity Development Group are in the process of developing five shopping centers in Ontario and Alberta at a cost of $253 million. All of the centers, four in Ontario and one in Alberta, are either under construction or about to break ground.

The centers total 2.1 million sf, including about 800,000 sf of retailer-owned anchor space. As part of the JV agreement, RioCan will provide all management and leasing services for these shopping centers upon their completion. RioCan estimates these developments in the aggregate will produce an unlevered return of approximately 9.8%.

RioCan's joint venture relationship with Trinity has been in effect for almost 10 years and has resulted in some of RioCan's best performing properties, including RioCan Signal Hill Centre in Calgary, Alberta and RioCan Colossus Centre in Vaughan, Ontario. RioCan chief executive Edward Sonshine was not available Tuesday morning for comment.

"These new developments are representative of the type of product that has been and hopefully will continue to be created by the joint venture," he says. "The return on total investment that is achieved far exceeds that which could be earned through a purchase, if such quality properties were even available."

The largest of the bunch is the lone Alberta project, the 790,000-sf RioCan Beacon Hill located in northwest Calgary at the intersection of Sarcee and Stoney Trail Extension. The retail center will be constructed in two phases. The 441,000-sf first phase is under construction and 100% leased or sold. It will be anchored by Costco and Home Depot (both tenant-owned). Other tenants include Winners, Linens 'n Things, Michaels, Golf Town, Petsmart, Royal Bank and TD Canada Trust. Phase one will be completed in the summer of 2006. Sometime later that year, construction of phase two will get under way. Phase two will be anchored by Canadian Tire, Staples/Business Depot and Mark's Work Wearhouse. Phase two completion is slated for 2007.

The largest of the Ontario projects currently under construction is a 346,000-sf center in Ottawa at the intersection of Innes Road and Lanthier Drive. It will be anchored by a retailer-owned 150,000-sf Loblaws and is 90% preleased. Tenants include Winners, Linens 'n Things, LCBO, Michaels, Montana's Cookhouse and Swiss Chalet. Completion is scheduled for next summer.

In Hamilton, site work is under way for a 260,000-sf center at the southeast corner of Highways 5 and 6. The unenclosed shopping center will be anchored by a tenant-owned Loblaws and Rona, along with 35,000 sf to 40,000 sf of shop space. Rona is expected to open by the end of 2006 and the remaining buildings by spring 2007.

At the southwest corner of Main and Thompson in Milton, the JV is preparing to develop a 246,000-sf unenclosed center. The project is 85% preleased. A tenant-owned Loblaw's will anchor the project. Other national tenants include LCBO, Blockbuster, Bulk Barn, Wendy's and TD Canada Trust. Closing of the purchase contract and commencement of construction will take place in spring 2006, and will be completed later that year.

In the Ontario community of Richmond Hill, the JV has preleased about 80% of a planned 495,000-sf retail center at the northeast corner of Highway 404 and Elgin Mills. A retailer-owner Home Depot will anchor the project. Other signed tenants include Winners, HomeSense, Linens 'n Things, Staples/Business Depot and Michaels. Closing on the site is expected to take place by the end of this year. Construction is expected to begin in 2006 and to be complete by the spring of 2007.

RioCan has ownership interests in 198 retail properties totaling 46.5 million sf. Trinity Development develops and leases retail projects across Canada; its current portfolio of operating properties totals about 10 million sf.

Instant Insights /

RioCan-Trinity JV Spending $253M on Five Retail Centers

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