RioCan Real Estate Investment Trust (TSX: REI.UN) has posted strong results for Q3 2024, achieving a record-high retail committed occupancy of 98.6%, as high-quality, open-air assets continue to thrive in Canada’s competitive retail landscape.
Overall committed occupancy for RioCan’s portfolio reached 97.8%, a 30-basis-point sequential increase, with the Trust’s lease renewal retention ratio remaining high at 92%, the company reported in a news release.
RioCan said it celebrated its third consecutive quarter of double-digit leasing spreads, reaching 14.2% on a blended basis. The REIT reported that more than 1.28 million square feet of leases were completed, including 251,000 square feet of new leases.
Jonathan Gitlin, RioCan’s President and CEO, highlighted the Trust’s ongoing resilience in the current market: “Our expertise allows RioCan to capitalize on the favorable environment for retail real estate,” he said, adding that the team’s strategic tenant curation has enhanced both income stability and growth prospects.
The Trust backfilled all 10 large units affected by tenant failures earlier in the year, securing top-tier tenants at higher rent levels, driving an average rent increase of nearly 24% across these leases. This improvement reflects RioCan’s proactive approach to enhancing asset value and tenant quality, it said.
RioCan is one of Canada’s largest real estate investment trusts. RioCan owns, manages and develops retail-focused, mixed-use properties located in prime, high-density transit-oriented areas where Canadians want to shop, live and work. As at September 30, 2024, its portfolio was comprised of 186 properties with an aggregate net leasable area of approximately 33 million square feet.
RioCan said it also cut almost 10 per cent of its staff in October.
“The corporate restructuring is part of RioCan’s ongoing responsible cost management, enhances workflow efficiency, and optimizes resource allocation to better align with business needs.
“RioCan does not intend to commence new physical construction of mixed-use properties in 2024 and well into 2025. Development Spending on mixed-use projects, which were in progress prior to the reduction in new construction starts, is expected to be between $250 million to $300 million. Development Spending for retail in-fill projects is expected to be between $30 million to $40 million,” it said.
Oliver Harrison, Senior Vice President, Leasing & Tenant Experience at RioCan, said: “We’re very pleased with our operating results particularly within our commercial portfolio, having demonstrated in a few cases record high results whether it’s occupancy, spreads on our new leasing deals and renewals, retention ratio in the low 90%. Definitely very happy with those results.”
Harrison said the retail sector continues to be historically strong.
“I’ve been at RioCan for 25 years. I don’t think I’ve ever seen retail fundamentals as strong as they are right now. You’re seeing it in the results we’ve produced in the past few quarters. And you continue to hear it when you talk to our retail partners whether it’s grocery retailers, whether it’s value retailers, whether it’s kind of value apparel. They’re all performing well, they’re all looking to grow their store count and they’re very pleased with their performance.”
For RioCan, one of the jewels in its portfolio is The Well in downtown Toronto.
“The Well continues to perform at or in certain cases above expectations,” said Harrison. “We’re almost one year out from having opened up The Well. We’re at close to 95 per cent occupancy. We’re seeing business in the range of 180,000 to 220,000 people a week. Some really strong sales numbers coming out of the retailers at The Well by and large. And the residential component of the project of which we have a 50 per cent interest in one of the residential buildings, we started leasing it up in August of last year and I think we are either at or close to stabilization already which would be 90 per cent leased and occupied at rents that are equal to or marginally ahead of our pro forma.
“So The Well has been a very positive headline for us, looking back on one year of operation.”
Other notable highlights from the RioCan financial results included a landmark land lease agreement for a 158,000-square-foot Costco store at RioCan Centre Burloak. In addition to driving traffic and attracting complementary tenants, the addition of a service-based anchor is expected to fortify the property’s long-term appeal, said the company.
RioCan said it also maintained a strong financial position, with liquidity of $1.3 billion and an Adjusted Debt to EBITDA ratio of 9.1x. Recent financing initiatives include $1.05 billion in debt restructuring at favorable rates, positioning RioCan to navigate future growth opportunities.
These results underscore the continued demand for RioCan’s necessity-based retail centres and mixed-use developments across major Canadian markets, as the Trust looks forward to sustained momentum heading into 2025, it said.
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