RioCan keeps buying as market improves

Here's another sign that the commercial real estate investment dam is about to burst.
RioCan REIT announced this week that it will spend $170 million on eight Canadian retail properties. The properties range from Ottawa to Winnipeg to Fort McMurray and offer a healthy 7.9 per cent cap rate.
The move comes after Toronto-based RioCan agreed to purchase seven grocery-anchored properties in the Northeastern U.S. as part a joint venture with U.S.-based Cedar Shopping Centers Inc. for $141 million. Two of those deals will close by the end of this year and the rest will be finalized in the first quarter of 2010.
RioCan, Canada's largest REIT, also expects to buy six more properties in Western Canada for $335 million by 2010. The properties, which comprise 1.4 million square feet, are under conditional contract and proceeding through various stages of due diligence.
"These acquisitions represent an excellent opportunity to put to work some of the capital raised over the course of this year in a manner that is accretive to our unitholders," said Edward Sonshine, president and CEO of RioCan, in a news release. "These largely grocery and drugstore anchored retail properties represent a continued execution of RioCan's growth strategy in Canada. They are primarily located in well established urban centres with strong national and anchor tenants that will provide a stable source of cash flow as well as the potential to enhance returns through the leasing of currently vacant space."
In other words, RioCan has committed to investing almost $1 billion in recent months.
But RioCan is just one of many REITs that have accumulated cash and cleaned up their balance sheets lately after muddling through the after-shocks of the U.S. financial meltdown and global recession. Some observers might have expected more investment to have occurred by now. but a lot of niggling points kept them at bay.
These RioCan deals offer more strong evidence that the once wide buyer and seller expectation gap is reaching the point where many deals can be done. Meanwhile, credit is more easily attainable, yields are at the point where REITs can justify the investments to their boards, and institutional investors are gaining more confidence in the Canadian commercial real estate market and economy as a whole.
In other words, the dam that has blocked many deals in 2009 is about to break.