The unique joint venture that RioCan REIT and Allied Properties REIT announced Monday came about thanks to Google Earth, says RioCan chief executive Ed Sonshine.
He and his executive team have a yearly offsite meeting where they spend two days poring over their portfolio, looking for challenges and opportunities. IPads and Google Earth have dramatically cut down on the amount of paper and books they have to lug to the gathering.
This time around, they were looking at a Google Earth aerial shot of a liquor store they bought in downtown Toronto last year.
"It sort of flashed up on the screen and I said 'wait a minute, there's a parking lot next to the LCBO, do we own that?" Mr. Sonshine recalls. The answer, it would turn out, was that Allied Properties owned the lot. And that happened more than once.
So, Mr. Sonshine says, he had lunch with Allied CEO Michael Emory, whom he's known for some time, and pitched him on the idea of teaming up on some developments.
There was some irony to Mr. Sonshine's request. He acknowledges that about a decade ago when Mr. Emory was developing heritage brick-and-beam buildings, he was doubtful.
"I was dubious about it for many reasons, mostly the credit quality of the tenants, but I think that Allied really showed that there's a real business there through the recent recession," Mr. Sonshine says.
The two companies are now pairing up to create a non-exclusive joint venture to acquire urban sites in major Canadian cities, such as Toronto, Montreal and Calgary, for mixed-use intensification. Allied will offer up its office expertise, and RioCan its retail chops.
Mr. Sonshine believes it's part of the start of a trend towards joint ventures among Canadian real estate investment trusts - especially the focused REITs - as they look for new ways to grow.
For now, the new joint venture is looking at the possibilities for two properties in downtown Toronto. RioCan and Allied's senior people will soon be sitting down to confidentially go through one another's portfolios to decide whether there are other properties that should become part of the venture, or whether there are adjacent properties that might be up for grabs. Mr. Sonshine declined to put a number on the ultimate number of sites that could become part of the partnership. "It could be a lot or it may only be half a dozen," he said.