RioCan Real Estate Investment Trust has put 100 properties up for sale, as the company exits dozens of smaller Canadian cities and focuses on the country's largest markets of Toronto, Ottawa, Vancouver, Calgary, Edmonton and Montreal.
The Canadian property owner expects the sales to generate about $1.5-billion in net proceeds, half of which will be used to buy back shares. The remaining funds will be used to develop properties such as RioCan's 7 1/2-acre residential, shopping and office complex in downtown Toronto.
For years, Canada's largest real estate trust has been streamlining its business by selling malls in smaller markets and divesting its U.S. retail venues.
The latest batch of sales is scheduled to take place over two to three years, after which RioCan will be left with assets in the largest Canadian cities as well as a few secondary markets, including Victoria, Kingston, Guelph, Ont., and Kitchener-Waterloo, Ont.
"We decided to pull the Band-Aid off. This is something we have been doing selectively for really over a decade," RioCan's chief executive Edward Sonshine said in an interview.
Currently, RioCan's secondary market properties are in about 100 cities across the country, including Leamington, Ont., London, Ont. and Quebec City.
Mr. Sonshine called them good cities, but said: "they account for a third of our properties but they account for much less than 20 per cent of the value of our portfolio."
RioCan is hoping to capitalize on areas that are heavily populated, such as the Toronto region. Once the secondary-market properties are sold, the trust expects to pull in more than 90 per cent of its rental revenue from its six major markets instead of 75 per cent.
"We are going to be very Toronto, Ontario-centric when we are done this," Mr. Sonshine said. "We will be over 50 per cent in what I will call the Greater Toronto Area," which for RioCan extends to the nearby cities of Brampton, Burlington and Oshawa.
"That is where all the growth is," he said.
Mr. Sonshine said he has already heard from potential buyers and said they include other real estate investment trusts, private investors and small pension funds. He predicted there would be a minimum of 20 buyers for the dozens of assets and said RioCan would not sell the portfolio to a single buyer.
RioCan would not publicly identify which properties were up for sale except to say they included grocers and "power centres" or large outdoor malls. RioCan's properties are home to retailers such as Wal-Mart, Canadian Tire, Dollar Tree and Shoppers Drug Mart.
As part of the overhaul, the company will suspend its distribution reinvestment plan Nov. 1.
RioCan stock rose 25 cents to $24.18 a share on Monday.