* Properties to be co-owned on 50-50 basis
* Intention is to develop 10-15 Canadian outlet centers
* Deal latest involving U.S. companies entering Canada
(Adds comments from RioCan COO, details)
By Pav Jordan and S. John Tilak
TORONTO, Jan 24 RioCan Real Estate Investment
Trust (REI_u.TO) announced plans on Monday for a C$1 billion
($1.01 billion) joint venture to develop outlet malls in Canada
with U.S.-based Tanger Factory Outlet Centers (SKT.N).
The deal comes as U.S. companies, struggling with a weaker
market at home, line up for retail space in Canada, which
suffered less in the global recession. Top U.S. brand names are
also seeking exposure in Canadian cities.
The plan follows a C$1.83 billion deal announced on Jan. 13
by U.S. retailer Target Corp (TGT.N) to take over Canadian
leases for Zellers stores owned by Hudson's Bay Co, North
America's oldest company. [ID:nN13272785]
The move was driven by demand from its U.S. customers, said
Fred Waks, executive vice-president and chief operating officer
at RioCan. "There is nothing like it right now in Canada."
The joint venture is looking at initial properties in the
Greater Toronto Area, Calgary and Montreal, Waks said in an
interview with Reuters.
In a statement, RioCan said this would be Canada's first
portfolio of U.S.-style outlet centers.
As the Canadian dollar has strengthened against the
greenback in recent years, more Canadian shoppers have crossed
the U.S. border to take advantage of their increased buying
The agreement will see RioCan and Tanger acquire and lease
sites across Canada and redevelop them into discount shopping
malls in the image of Tanger Outlet Centers in the United
States, which cater to brand-name and designer manufacturers.
RioCan, Canada's oldest and largest REIT, and Greensboro,
North Carolina-based Tanger will co-own any projects they
develop on a 50-50 basis.
A lot of U.S. retailers want to expand to Canada and they
have existing relationships with Tanger, Edward Jones analyst
John Sheehan said.
"If I was RioCan, I would want to have a partner who
understands how this business works and has existing
relationships with these retailers," Sheehan said.
Tanger, a publicly held real estate investment trust since
1993, operates or has ownership stakes in 33 outlet shopping
centers in 22 states, leased to more than 2,100 stores.
Companies such as Saks SKS.N, Nordstrom (JWN.N), Ralph
Lauren and Lord & Taylor have, or plan to have, outlet centers,
New entrants to the Canadian market include Victoria's
Secret, a unit of Limited Brands LTD.N which brought its sexy
lingerie to the Toronto and Edmonton areas last year. Other
U.S. retailers tipped to expand into Canada include Marshalls
(TJX.N) and Dick's Sporting Goods (DKS.N).
U.S. retailers with a presence in Canada already include
Wal-Mart (WMT.N), Home Depot (HD.N), Lowe's (LOW.N) and Best
Buy (BBY.N). [ID:nN13214984]
RioCan outlined plans in October to spend C$600 million on
acquisitions in the coming year, including C$150 million in
Canada and C$450 million in the United States.
"It is the intention of the joint venture to develop as
many as 10 to 15 outlet centers in larger urban markets and
tourist areas across Canada, over a five- to seven-year
period," the companies said in a joint statement.
Canada's largest independently owned commercial real estate
services company, Avison Young, said in a recent report that
retail properties were the most actively traded asset class in
the country in the first nine months of 2010, and the ones with
the greatest improvement over the same period a year before.
(Editing by Peter Galloway)