RioCan Makes Short Work of Retail Space Emptied by Bankruptcies
RioCan Makes Short Work of Retail Space Emptied by Bankruptcies
Canada’s Oldest REIT Also Sees Widening Lease Spreads in New Deals
Canada’s oldest and second-largest real estate investment trust said its retail portfolio can withstand an economic downturn and it has been able to quickly backfill space from tenant bankruptcies in the previous quarter while also getting record spreads on new leases.
Toronto-based RioCan Real Estate Investment Trust said that, for the three months ended June 30, its committed occupancy increased to 98.3% compared with 98% a year earlier.
“The strength of our assets and favourable market conditions resulted in record-breaking leasing spreads as we strategically selected resilient tenants while achieving higher rents, further improving our portfolio quality and our future growth potential,” said Jonathan Gitlin, president and CEO of RioCan, in a statement.
Royal Bank of Canada said in a recent report that consumer spending appeared to be finally pulling back this summer after what it called “pandemic revenue spending” and noted the decline in July retail sales.
“Appetite for discretionary goods remained limited, though July’s decline was broad-based. A decrease in spending on clothing, groceries and gasoline accounted for the fall,” according to the report.
RioCan’s net income increased to $122.4 million in the quarter from $112 million a year earlier. Spreads on new leases were up 52.5% in the quarter. On renewals, the REIT still saw a jump of 10.7% in lease margins year over year.
As of Aug. 8, RioCan reported that eight of the 10 initial vacant units resulting from tenant failures mentioned in previous quarters were filled in the second quarter and negotiations for the two remaining units were in the final stages. The retailers involved in the two remaining spaces were Bad Boy and Rooms + Spaces.
“Retail space is scarce, and building new supply is at a standstill,” said Gitlin on a call with analysts earlier this month. “Canada’s major markets are experiencing substantial population growth.”
RioCan’s 187-property portfolio, at 33 million square feet, is concentrated in Canada’s six largest metropolitan areas, which the REIT maintains are the most desirable places for retailers.
The REIT said its residential arm, RioCan Living, had a net operating income of $7.2 million in the quarter, up 40.7% from a year ago. RioCan Living has 14 buildings containing 3,160 residential units, 12 of the 14 buildings are stabilized.
“We recognize that sales of new condominiums have slowed, but fortunately, we have presold about 90% of over 2,500 units we will complete through 2026,” said Gitlin. “The majority of these firm deals were made before prices peaked.”
Source CoStar. Click here for the full story.
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