RioCan, TIAA-CREF Form New Retail Partnership

TORONTO-Locally headquartered RioCan REIT has formed a partnership with TIAA-CREF that will combine $150 million of equity with debt to acquire $500 million of value-add retail properties. RioCan Retail Value LP II will acquire assets over the next three years and, once the money is spent, will have five years to liquidate the portfolio.

RioCan, which owns and manages a 50.8-million-sf retail shopping center portfolio, will be the partnership manager responsible. As such, it will oversee all initiatives undertaken to increase the value of the properties, including all asset and property management, leasing and construction management services. RioCan chief executive Ed Sonshine tells GlobeSt.com the goal is for a weighted average Internal Rate of Return of 15% or better.

The value-add plays that may be utilized include remerchandising the asset to enhance the overall tenant mix; taking advantage of expansion or redevelopment opportunities; solidifying income from the existing tenant base; extending the terms of the existing tenant base; and increasing the proportion of national and anchor tenants.

The first RioCan Retail Value LP, which includes TIAA-CREF and the Ontario Municipal Employees Retirement System, was fully invested last fall and is now in the selective disposition stage. Sonshine says to date four of the 12 properties in RRVLP I have been re-traded, with the results being "better than expectations."

Thomas Garbutt, managing director of TIAA-CREF's Real Estate Equities group, agrees. "We are extremely happy with the results," he says.

For RRVLP II, Sonshine says the wording has been relaxed such that it can acquire mixed-use properties that contain mostly retail. "In the original fund, it just said retail properties, so there were some opportunities we had to pass on," he says. "Now, just because something has second-floor office it doesn't mean we can't buy it."