RioCan Real Estate Investment Trust, through its residential brand RioCan Living, is shaping the communities where Canadians shop, live, and work by delivering best-in-class purpose-built rental units and condos along Canada’s most prominent transit corridors. Many projects involve site intensification of existing RioCan retail sites.
The real estate company has 41 potential residential projects, 20,000 potential units, 2,700 units currently under construction, 2,100 additional units underway by 2021, and they’re all located in Canada’s major markets.
The mixed-use developments are in high growth, high population, and transit-oriented major markets where existing retail properties may otherwise be under-utilized.
RioCan is one of Canada’s first and largest REITs focused on the ownership, management, and development of high-quality, mixed-use properties with strategic positioning in Canada’s six major markets.
“We have seen a trend towards urbanization and we’ve seen a trend toward transit-oriented, mixed-use developments for quite some time. We’ve got a lot of really well located retail properties that have always been an important component to any community but we also sense that in order to be a thoughtful land owner and city builder that a lot of these properties that are sort of 25 per cent coverage – where you’ve got a building covering only 25 per cent of the land it’s on – is certainly not at that property’s highest and best use to be utilized as such,” said Jonathan Gitlin, RioCan President and Chief Operating Officer.
“That there’s a much more important community building exercise that we can undertake which underscores the need for housing, underscores the need for a proper community hub, and underscores the need for new and dynamic retail which all makes up a part of a lot of these mixed-use developments. Based on all those components and ideas, we have gone about reviewing our portfolio of retail properties and where we think those themes all connect to a property we’ve really gone about rezoning them, ensuring that the market and area around us will absorb the property both in the sense that they will welcome it this new more dynamic mixed-use development and another prominent feature is making sure that the city, the municipality, likes the exercise because they are promoting a lot of density where there is transit. And we happen to have a lot of properties where there is transit.”
RioCan has an enterprise value of $14.3 billion with 230 properties and net leasable area of 39.1 million square feet.
The company’s strategy is to concentrate within major markets, drive organic growth, unlock intrinsic value, and mitigate risk effectively.
Those six markets have 97.8 per cent committed occupancy.
In the six major Canadian markets, RioCan has 175 assets with 30.9 million square feet. The breakdown of the number of assets and space for those cities is: Vancouver, seven, 1.8 million square feet; Edmonton, 12, two million square feet; Calgary 14, 3.4 million square feet; Ottawa, 36, 4.8 million square feet; Toronto, 86, 15.9 million square feet; and Montreal, 20, three million square feet.
RioCan has a total development pipeline of 27.2 million square feet – 48 per cent or 13.1 million square feet has zoning approval, 27 per cent or 7.3 million square feet has applications submitted, and 25 per cent or 6.8 million square feet is future estimated density.
RioCan has 2,700 residential units under construction with an additional 2,100 units underway by 2021.
“We have really tried to create a consistent portfolio so that when people see a RioCan Living building they know it because of certain attributes. One obviously the biggest is that they’re transit-oriented. They will typically be on or near LRT or subway lines or in some cases BRT lines. That is certainly something that is consistent throughout all of our mixed-use developments,” said Gitlin.
“The other is that they are operated in a first-class manner. They’ve got modern amenities. They are new purpose-built rental buildings. They’re also representative of really good mixed-use environments where we’ve married retail and residential in a really good manner. Being Canada’s largest retail landlord we bring a lot to the table being able to curate a perfect mix of retail that serves as a great amenity to the residents above and I think it also benefits the retailers below having these residents above them. We really strive to create that perfect balance between the retail and the residential.
“The other consistent theme is always ensuring what we build fits into the fabric of the community in which those properties are located. So we’re not just building for scale for the purpose of gaining scale. We’re building something that we usually go out to the community beforehand, consult with them, get their sense of what is needed in that neighbourhood.”
Part of RioCan’s success is staying ahead of changing consumer trends. The increasing strength and quality of its income is a result of growth in necessity-based and service-oriented tenants within its portfolio. In fact, as of the second quarter of this year, 74 per cent of rent came from necessity-based and service-oriented tenants. Also, no single tenant represents more than five per cent of annualized rental revenue.
“Our portfolio alone we’ve seen a pretty dramatic shift over the last call it decade or so where we’ve seen the amount of apparel and department stores as a portion of our overall portfolio shrink quite dramatically. It’s about eight per cent now and that’s down about eight per cent in the last 10 or 11 years. So you’ve seen a shift over towards in our portfolio more necessity-based goods. Grocery and personal services and value retailers like dollar stores. Specialty retailers. Even the apparel business has shifted dramatically where we are by and large getting out of that sort of middle of the road apparel purveyors and we’re getting more into the Winners and Marshalls and more value-oriented tenants,” said Gitlin.
“The consumer out there wants value and we’re there to provide it. And these uses are harder to be disintermediated by the internet and internet shopping.”
Gitlin said that over the last few years RioCan has accelerated its shift towards being a major market portfolio.
“We announced it two years ago in 2017. At the end of 2017, we came out and said we want to be in a position where 90 per cent of our income is coming in from the six major markets in Canada and around 50 per cent of our income is coming in from the Greater Toronto Area. And we’re just about to succeed in both of those objectives and that’s simply a by-product of the fact that there’s just simply more population growth in those six markets,” he said.
“We speak to our retail tenants all the time, engage where their interest lies. More often than not, they’re looking to grow in those markets over some others. That to us has been a key strategic shift and it’s really a bit of a game change for us from the way we operated our business. Between that and our evolution to focus on developing these mixed-use communities that covers a significant amount of how we are changing our way of doing business.”
Editor’s Note: Learn more about retail site intensification as shopping centres transform to become ‘complete communities’ at Retail Council of Canada’s Brick-and-Mortar Forum, being held in the downtown Toronto Reference Library (789 Yonge Street, north of Bloor) on the morning of Tuesday, November 19th. Speakers will include:
Marcelle Rademeyer, President & CEO of Beauleigh, and
Jean-Francois Nault, Partner and COO of Beauleigh.
Craig Patterson, Editor-in-Chief, Retail Insider,
Nick Iozzo, Sr. Director Retail Innovation and Lead Generation, Oxford Properties Group,
Claire Santamaria, VP Yorkdale, Oxford Properties
Mark Palazzo, Senior Director, Leasing, Cadillac Fairview Corp.
John Crombie, Executive Managing Director, Retail Services, Canada, Cushman & Wakefield
Chris Chan, Head of Retail Industry, Google Canada, and
Tracy Smith, Senior Vice-President, Marketing & Innovation Retail, Ivanhoé Cambridge