TSX:REI.UN - Post by User
Comment by
hroark7on Oct 28, 2020 6:30pm
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Post# 31800203
RE:RE:Riocan sells assets at 3.5% and 4.5% CAP Rates
RE:RE:Riocan sells assets at 3.5% and 4.5% CAP RatesCANCDN wrote: how in the world did Sonshine sell a rental apartment in these conditions at a cap rate of 3.5%. This guy is good.
Really curious why the buildup of cash... Shoppers World redevelopment? Share buy backs? Would really like to know what properties we sold.
There's a really neat trick in accounting to value assets.
As real estate has fluctuating values, it's very easy to make any number up and justify it.
However, there are certain criteria in which real estate is valued.
The real estate value matters because it affects the financial reports of the company, which affects how creditors will rate their loans.
By selling a PORTION of the property at a 3.5% cap rate, Riocan has legally crystalized the value of that ENTIRE property at the 3.5% cap rate. Therefore, this is the cap rate that can be used to value the portion that Riocan still owns.
Between this and the additional cash which lowers Riocan's debt ratios, this makes Riocan even more attractive to creditors and therefore they can get even lower rates.