Canada's RioCan says to explore sale of U.S. portfolio

Fri Jul 31, 2015 11:47am EDT
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TORONTO, July 31 (Reuters) - Canada's largest real estate investment trust RioCan said on Friday it is exploring a potential sale of its assets in the United States, valued by analysts at between $2 billion and $2.25 billion.

The company, which acquired most of its assets on the cheap in the midst of the global financial crisis, said it has benefited from the growth in the value of its U.S. portfolio and the cash flow generated from the business.

Toronto-based RioCan said that not only has the asset value of the portfolio grown, but it has also benefited significantly since buying the assets when the Canadian dollar was largely at par with the greenback.

As the loonie has now weakened quite significantly against the U.S. dollar, RioCan said it stands to reap big gains if it opts to sell the U.S. assets.

"With increased competition for U.S. assets, it would be an opportune time to consider divesting this portfolio," Mark Rothschild, an analyst at Canaccord Genuity, said in a note to clients.

RioCan said it has retained Morgan Stanley and RBC Capital Markets to explore "strategic options" around the U.S. assets, adding the strategic alternatives will include, but are not limited to, continuing to operate and invest in the United States, a sale of some or all of its properties there and other strategic joint venture alternatives.

On a conference call with analysts, RioCan Chief Executive Edward Sonshine said it was way too early to say whether a sale of the assets would result in any tax hit in Canada, adding that the company has many options beyond an outright sale of the U.S. assets.

The company also reported funds from operations of some 43 Canadian cents a share in its second quarter ended June 30. That was in line with the average forecast of analysts polled by Thomson Reuters I/B/E/S.

Units in RioCan were up about 1.84 percent at C$26.55 in late morning trading on the Toronto Stock Exchange on Friday. ($1 = 1.3015 Canadian dollars) (Reporting by Euan Rocha, editing by G Crosse)