RioCan Real Estate Investment Trust Q2 2026 Earnings Report

RioCan Real Estate Investment Trust EPS Results

• Actual EPS: C$0.52
• Consensus EPS: N/A
• Beat/Miss: N/A
• One Year Ago EPS: N/A

RioCan Real Estate Investment Trust Revenue Results

• Actual Revenue: $304.36 million
• Expected Revenue: N/A
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

RioCan Real Estate Investment Trust Announcement Details

• Quarter: Q2 2026
• Date: 8/4/2026
• Time: After Market Closes
• Conference Call Date: Wednesday, August 5, 2026
• Conference Call Time: 10:00AM ET

RioCan Real Estate Investment Trust (TSE:REI.UN) is a Canadian real estate investment trust which owns, develops, and operates Canada's portfolio of retail-focused, increasingly mixed-use properties. The REIT's property portfolio includes shopping centers and mixed-use developments, with most of its properties located in Ontario, Canada. Riocan's tenants consist of grocery stores, supermarkets, restaurants, cinemas, pharmacies, and corporates. By geography, the company operates in Canada, which generates the majority of total revenue, and in the United States.

RioCan Real Estate Investment Trust Q2 2026 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: Strong retail operating performance: Retail occupancy reached a record 98.8%, commercial same-property NOI grew 4.3%, and blended leasing spreads were 23.1%, supported by a 40.8% new-lease spread and 20.7% renewal spread.
• Positive Sentiment: RioCan raised its 2026 commercial same-property NOI growth guidance to 4%–4.5% from 3.5%–4%, citing sustained retailer demand, constrained supply, and embedded mark-to-market opportunities; however, it maintained core FFO per-unit guidance at CAD 1.60–CAD 1.62.
• Positive Sentiment: The RioCan Living monetization is substantially complete, with approximately CAD 1.26 billion of assets sold or under contract toward the CAD 1.3 billion target, while unsold residential inventory fell to about CAD 86 million, or roughly 1% of NAV.
• Positive Sentiment: The balance sheet remains flexible, with unsecured debt at approximately 70% of total debt, an unencumbered asset pool of about CAD 9.7 billion, approximately CAD 700 million of liquidity, and only CAD 30 million of remaining 2026 maturities.
• Neutral Sentiment: Management said the market for excess residential density land remains stagnant, with limited transactions and demand, and is not assuming land-sale proceeds in its projections; acquisitions may become more attractive as RioCan’s cost of capital declines.

Presentation

[Operator]

Good day, ladies and gentlemen. Welcome to the RioCan Real Estate Investment Trust first quarter 2026 conference call and webcast. Apologies. Welcome to the RioCan Real Estate Investment Trust second quarter 2026 conference call and webcast. As a reminder, this conference call is being recorded. I would now like to turn the conference over to Ms. Jennifer Suess, Senior Vice President, General Counsel, ESG, and Corporate Secretary. Ms. Suess, you may begin.

[Jennifer Suess, SVP, General Counsel, ESG, and Corporate Secretary at RioCan Real Estate Investment Trust]

Thank you. Good morning, everyone. I am Jennifer Suess, Senior Vice President, General Counsel, ESG, and Corporate Secretary of RioCan. Before we begin, I am required to read the following cautionary statement. In talking about our financial and operating performance, in responding to your questions, we may make forward-looking statements, including statements concerning RioCan's objectives, its strategies to achieve those objectives, as well as statements with respect to management's beliefs, plans, estimates and intentions, and similar statements concerning anticipated future events, results, circumstances, performance, or expectations that are not historical facts. These statements are based on our current estimates and assumptions and are subject to risks and uncertainties that could cause our actual results to differ materially from the conclusions in these forward-looking statements.

[Jennifer Suess, SVP, General Counsel, ESG, and Corporate Secretary at RioCan Real Estate Investment Trust]

In discussing our financial and operating performance, in responding to your questions, we will also be referencing certain financial measures that are not generally accepted accounting principle measures, GAAP under IFRS. These measures do not have any standardized definition prescribed by IFRS and are therefore unlikely to be comparable to similar measures presented by other reporting issuers. Non-GAAP measures should not be considered as alternatives to net earnings or comparable metrics determined in accordance with IFRS as indicators of RioCan's performance, liquidity, cash flows and profitability. RioCan's management uses these measures to aid in assessing the trust's underlying core performance and provides these additional measures so that investors may do the same.

[Jennifer Suess, SVP, General Counsel, ESG, and Corporate Secretary at RioCan Real Estate Investment Trust]

Additional information on the material risks that could impact our actual results, the estimates and assumptions we applied in making these forward-looking statements, together with details on our use of non-GAAP financial measures, can be found in the financial statements filed yesterday and management's discussion and analysis related thereto, as applicable, together with RioCan's most recent annual information form that are all available on our website and at www.sedarplus.com. I will now turn the call over to RioCan's President and CEO, Jonathan Gitlin.

[Jonathan Gitlin, President and CEO at RioCan Real Estate Investment Trust]

Thank you, Jennifer. Good morning, everyone, and thanks for joining us. Our second quarter results reinforce the message we've been delivering since our November 2025 Investor Day. RioCan's strategy is working. We own an irreplaceable retail portfolio in Canada's most in-demand markets. We've simplified the business. We're allocating capital with discipline, and we're translating those advantages into durable growth, increased financial flexibility, and long-term value creation. Progress in the quarter was broad-based across operations, leasing, capital recycling, and the balance sheet. This progress is supported by our proven independent future-focused platform, a culture of excellence, continued innovation, technology advancement, and prudent ESG practices. We believe RioCan is demonstrating exactly what our stakeholders are looking for: a simpler business model, greater earnings visibility, and a clear path to sustained, durable cash flow growth. Delivering on that path requires not only strong execution, but also strong governance and strategic oversight.

[Jonathan Gitlin, President and CEO at RioCan Real Estate Investment Trust]

With that in mind, I'd like to extend a warm welcome to Susan McArthur, who has recently been appointed to RioCan's Board of Trustees. Susan brings deep public company governance and capital markets experience, and we look forward to benefiting from her insight as we continue executing on our strategy. I'll start now with our operating results. Retail fundamentals remain exceptionally strong. Demand for high-quality retail space continues to exceed supply across our markets, supporting high occupancy, leasing spreads, and same property NOI growth. Retail occupancy is at a record high of 98.8%. Commercial SPNOI growth was 4.3% in the quarter, representing the fourth straight quarter of 4% or higher. This continued strength is reflected in our updated SPNOI guidance. Sustained organic growth reflects the success of our leasing strategy. Leasing spreads continue to underscore strong retailer demand for RioCan's well-located, high demographic, necessity-based assets.

[Jonathan Gitlin, President and CEO at RioCan Real Estate Investment Trust]

The blended leasing spread of 23.1% in the quarter was supported by new and renewal leasing spreads of 40.8% and 20.7% respectively. Average net rent for new leasing was CAD 37.73 per square foot. This is 60% above average net rent per occupied square foot. For RioCan, the retail leasing super cycle is not a short-term phenomenon. With approximately 1 million square feet of lease maturities remaining for the balance of this year and an additional 3.7 million square feet of lease maturities in each of 2027 and 2028, we have significant mark-to-market opportunities. Approximately 30% of RioCan's portfolio leases roll through 2028, and there remains a meaningful gap between in-place rents and market rents. That embedded mark-to-market opportunity provides visibility into future growth. What makes RioCan's platform especially powerful is that we aren't simply capturing rent growth. We're also improving the quality of our income.

[Jonathan Gitlin, President and CEO at RioCan Real Estate Investment Trust]

As an independent Canadian REIT, RioCan is directly accountable to unit holders and is not influenced by an external sponsor. That gives us the flexibility to make tenant and capital decisions based on what's best for each property and the portfolio overall. Citing only one example, we were able to double the renewal rent of a grocery store in the GTA during the quarter. The only influence on this outcome was market rents. There were no extraneous considerations other than what was best for our property and best for our unit holders. We can be selective, choose the right tenants on the right terms while minimizing downtime and capital outlay. The result is a more productive portfolio, more durable cash flow, and attractive risk-adjusted returns. Today's leasing spreads are tomorrow's SPNOI growth. Increasingly, they're also laying the foundation for stronger long-term cash flow generation.

[Jonathan Gitlin, President and CEO at RioCan Real Estate Investment Trust]

Leasing spreads are not simply an operating metric. They represent embedded future earnings growth that has already been substantially secured. As those rents commence and annual escalations take effect, leasing will remain an important contributor to durable, ongoing growth. Our operating performance demonstrates our ability to execute the commitments we made at Investor Day. This extends beyond operations to capital allocation, where we've made significant progress, including the near completion of the RioCan Living portfolio monetization. Including transactions completed over the last 18 months and assets currently under contract, we have sold CAD 1.26 billion of RioCan Living assets. We've effectively reached our CAD 1.3 billion capital repatriation target. We've said before, this is about more than dispositions. It's about simplifying the business, enhancing financial flexibility, and directing capital to opportunities where it can create the greatest long-term value for our unit holders.

[Jonathan Gitlin, President and CEO at RioCan Real Estate Investment Trust]

Capital allocation remains an important differentiator for RioCan. Our objective is straightforward: generate capital from lower growth or non-core assets, reallocate that capital toward opportunities that improve per unit value creation, and do so while maintaining balance sheet strength. Whether we're repurchasing units, investing in retail intensification opportunities, enhancing existing assets, or reducing leverage, the common thread is disciplined capital deployment. Many of our highest return opportunities already exist within our portfolio, and we have the talent, relationships, and expertise to unlock that value efficiently. With the right team and disciplined execution, opportunities such as unlocking retail density, optimizing the merchandising mix, and repositioning vacant space generate highly attractive returns with a fraction of the capital required for ground-up development.

[Jonathan Gitlin, President and CEO at RioCan Real Estate Investment Trust]

We invested CAD 44 million in retail infill and asset enhancement projects in the first half of the year, and we remain on track to deploy approximately CAD 100 million into RioCan's portfolio in 2026. About half of that capital is being directed to asset enhancements, such as the Metro expansion and LCBO relocation at Yonge Eglinton Centre. The remainder is being invested in high return retail infill projects, including the new Costco at RioCan Burloak and additional retail at RioCan's East Hills, Windfields Farm, and South Edmonton Common sites. In a market where capital remains expensive, this is a meaningful advantage. It allows us to drive growth, improve property performance, and preserve financial flexibility while maintaining a disciplined approach to capital outlay. Our credit metrics remain within our target ranges, and our balance sheet continues to be a source of strength.

[Jonathan Gitlin, President and CEO at RioCan Real Estate Investment Trust]

It provides optionality, resilience, and the ability to act and create value when attractive opportunities become available. Looking ahead, based on the performance we've delivered so far this year, we now expect commercial same-property NOI growth to modestly exceed our original guidance range of 3.5%-4%. As a result, we are raising our 2026 commercial SPNOI guidance to 4%-4.5%. Given the many factors that contribute to core FFO, we are maintaining our 2026 core FFO per unit guidance range of CAD 1.60-CAD 1.62. I'll close with three points. First, retail fundamentals continue to support growth. Demand remains strong, supply remains constrained, and we continue to see significant embedded leasing upside throughout the portfolio. Second, RioCan is a simpler and more focused business. We're enhancing earnings visibility and increasing financial flexibility. Third, we remain disciplined stewards of capital.

[Jonathan Gitlin, President and CEO at RioCan Real Estate Investment Trust]

Every major decision we make is evaluated through the lens of long-term value creation. As we increase the earnings power of our business, we create value within our portfolio. This quarter's NAV growth is evidence of that. It was driven primarily by organic growth and higher cash flows rather than cap rate compression. With meaningful embedded growth remaining, we believe RioCan is well-positioned to continue creating and compounding value for unitholders over the long term. We have significant opportunities ahead, and we remain confident in our ability to continue delivering durable growth and value for our unitholders. With that, I'll turn the call over to Franca.

[Franca Smith, SVP of Finance at RioCan Real Estate Investment Trust]

Thank you, Jonathan, and good morning, everyone. Our second quarter results reflect the strength of our core retail, the near completion of our RioCan Living monetization strategy, and disciplined capital allocation. Together, they are improving our financial flexibility and strengthening our balance sheet. I'll walk through the quarter starting with core FFO. Core FFO in the second quarter was CAD 0.40 per unit, up 5.3% year-over-year. There were four primary drivers of these results. Commercial same-property NOI increased 4.3% year-over-year, contributing CAD 0.02 per unit. The accretive impact of unit repurchases pursuant to our NCIB also contributed approximately CAD 0.01 per unit. These factors were partially offset by higher net interest expense and lower interest income, which had a combined impact of approximately CAD 0.01 per unit.

[Franca Smith, SVP of Finance at RioCan Real Estate Investment Trust]

Our core FFO payout ratio was 73.8% on a trailing 12 months basis, approximately 100 basis points lower than last quarter and trending towards our long-term target of 70%. Looking at other financial results, adjusted G&A expense was 4.1% of rental revenue for the quarter and 3.7% year-to-date. We continue to expect full year adjusted G&A expense to be below 4% of rental revenue. Maintenance CapEx for the quarter was CAD 14 million and CAD 21 million year-to-date. We expect full year spend to be in line with our normalized CapEx level of CAD 55 million. The strength of our operating performance is also translating into value creation. During the second quarter, net asset value increased by CAD 0.23 per unit or CAD 68 million compared to the prior quarter. This was driven largely by CAD 52 million of net fair value gains on our investment properties.

[Franca Smith, SVP of Finance at RioCan Real Estate Investment Trust]

Higher stabilized NOI from rent steps, rent increases on renewals and new deals, and strong leasing activity across the portfolio supported the increase. This quarter's valuation gains highlight the power of compounding NOI growth from our retail core, driving higher property values and long-term NAV creation. Turning to capital recycling. During the quarter, we closed on the sale of FourFifty The Well and Bellevue Phase One and Two for total gross proceeds of CAD 234 million, bringing total RCL disposition gross proceeds to approximately CAD 280 million year-to-date. Subsequent to quarter end, we entered into two conditional deals to sell our interest in two additional RioCan Living properties for total gross proceeds of CAD 206 million. With respect to residential inventory, we have repatriated CAD 143 million of proceeds year-to-date, primarily from the collection of accounts receivable in 2026 related to prior year sales.

[Franca Smith, SVP of Finance at RioCan Real Estate Investment Trust]

Since the start of 2025, we have repatriated CAD 365 million, largely in line with our stated target of CAD 370 million. As a result, the balance of unsold units has been reduced to CAD 86 million or approximately 1% of our NAV. With only a de minimis residual balance remaining, this component of the RCL monetization program is now substantially complete. Our balance sheet remains strong, and our credit metrics are in line with the targets we provided at Investor Day. As we continue to execute our financing plan, we are reducing our secured debt obligations and broadening our unencumbered asset pool. Our mix of unsecured debt to total debt improved to approximately 70%, bringing this metric in line with our internal target range. As a result, our unencumbered asset pool increased to approximately CAD 9.7 billion on a proportionate share basis.

[Franca Smith, SVP of Finance at RioCan Real Estate Investment Trust]

During the quarter, we repaid the CAD 500 million Series AD unsecured debentures and CAD 91 million of maturing mortgages using existing liquidity. We also repaid construction loans related to condo projects of approximately CAD 114 million on a proportionate share basis, including the full repayment of the Queen & Ashbridge facility. Following these repayments, only CAD 30 million of debt maturities remain for the balance of the year. With approximately CAD 700 million of available liquidity, additional proceeds expected from capital recycling

[Franca Smith, SVP of Finance at RioCan Real Estate Investment Trust]

Access to diverse sources of funding, we are well-positioned to proactively manage our 2027 debt maturities. To conclude, the second quarter demonstrated strong operational execution, substantial completion of our RioCan Living monetization plan, and disciplined approach to capital allocation. We remain focused on delivering against the strategy we outlined at Investor Day and creating long-term value for our unitholders. With that, I will turn the call back to the operator to begin the question and answer session.

[Operator]

Thank you. We will now begin the question and answer session. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. We ask that you pick up your handset when asking a question, and if you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question comes from the line of Sam Damiani from TD Cowen. Please go ahead.

[Sam Damiani, Analyst at TD Cowen]

Thanks. Good morning, everyone. I just want to congratulate everyone on the good quarter, good progress on several fronts as you alluded to, Jonathan. I guess, just on the guidance raise for this year, it seems to be a result of realized leasing spreads sort of tracking ahead of what you had assumed for the year. What spreads are assumed in your three-year guidance of 3.5%+ same property? Just curious how you view the upside potential to that guidance at this point, given the trends you're seeing.

[Jonathan Gitlin, President and CEO at RioCan Real Estate Investment Trust]

Good morning, Sam. Thank you for the congratulatory wishes. We are proud of the quarter. The question is answered by, if you look at the package that we had put up at the Investor Day, the list of assumptions show that we had a 15% leasing spread assumption for the three years. We've certainly outperformed in this first year of that three-year period.

[Sam Damiani, Analyst at TD Cowen]

I guess, just the rest of the question was really how you're feeling about the likelihood of being able to increase that guidance. I know you're just being cautious and maybe conservative. If trends hold, is there anything out there that would hold you back from raising the guidance?

[Jonathan Gitlin, President and CEO at RioCan Real Estate Investment Trust]

Look, there's always risks in the retail business. We feel that we've done a good job of mitigating against those risks like large tenant failures. Again, if you look at our top 30 list of tenants, there are very few, if any, weak spots at this point. The economy is always a question mark. Again, we've also taken big strides in ensuring that we've got necessity-based tenants that are quite resilient to any economic gyrations. The short answer is we feel very good about our path going forward. I would also say that the backdrop is very strong. We've spoken about it a number of times. There really is a significant supply constraint, high barriers to entry, and we feel that we are well-positioned to absorb whatever demand there is, as is evidenced by the fact that we're 98.8% full.

[Jonathan Gitlin, President and CEO at RioCan Real Estate Investment Trust]

We feel very strong about the backdrop. We feel very good about our positioning within that backdrop, we feel that the trends right now are sustainable. Again, there'll always be fluctuations. Yeah, the 15% at this point is looking quite conservative.

[Sam Damiani, Analyst at TD Cowen]

Thank you. One more from me before I turn it back is just on the cap rates. We've seen cap rate surveys come out and call out grocery anchored open-air shopping center cap rates coming down notably this year, I notice, RioCan, you haven't really changed your cap rates too much on a same property basis. Just curious what's holding you back from adjusting your fair value cap rates lower at this time?

[Jonathan Gitlin, President and CEO at RioCan Real Estate Investment Trust]

We're seeing organic growth in our valuations coming largely from an increase in NOI, that's a really good thing, which is something that is more within our control. Cap rates, of course, are outside of our control. We are looking at some of the transactions that haven't yet closed, like the First Capital transaction, which serve as indicators that the type of product we have is highly sought after and very valuable, we'll continue to assess that and work those factors into our valuations. For now we're just, again, waiting for some of those to finalize and close, we'll keep on relying on the market and third-party appraisals, as well as our own internal assessments as to where cap rates should be. Right now we're comfortable with what we have in our portfolio.

[Sam Damiani, Analyst at TD Cowen]

Great. Thank you, I'll turn it back.

[Jonathan Gitlin, President and CEO at RioCan Real Estate Investment Trust]

Thanks, Sam.

[Operator]

Your next question comes from the line of Lorne Kalmar from Desjardins. Please go ahead.

[Lorne Kalmar, Analyst at Desjardins]

Thanks. Good morning, everyone. Congratulations on the progress made on the disposition side. It looks to be tracking pretty darn well. Wondering on the three remaining RioCan Living assets, if you back into sort of the target and where you guys are pro forma these deals, I think you get about just over CAD 50 million of value. Seems a little light for three multi-res assets. Just wanted to get an idea if you can give us maybe an idea of the value on those and perhaps a stabilized cap rate?

[Jonathan Gitlin, President and CEO at RioCan Real Estate Investment Trust]

We don't have a specific valuation for those assets, you're right to assume that they're higher than CAD 50 million. You may recall that our original range was CAD 1.3 billion-CAD 1.4 billion. We just sort of simplified that message to say CAD 1.3 billion, we'll of course exceed that once the remainder of the assets are sold. The cap rates, we've seen a very vibrant market for our RioCan Living assets based on the fact that they are new, they don't have rent control, there's limited CapEx. We expect that trend to continue regardless of what's going on in the broader multi-res market. I feel quite confident in our ability to sell those at our current IFRS valuations or hopefully in that range.

[Jonathan Gitlin, President and CEO at RioCan Real Estate Investment Trust]

In terms of the overall number, you're right to assume that CAD 1.3 billion was our conservative estimate, and we will ultimately likely exceed that.

[Lorne Kalmar, Analyst at Desjardins]

Okay. That's very helpful. Thank you.

[Jonathan Gitlin, President and CEO at RioCan Real Estate Investment Trust]

Keep in mind, Lorne, too, that that included condo dispositions as well, and we still have about CAD 85-ish million of condo inventory that we feel confident will be sold over the short to medium term as well. That's why we express that confidence in our ability to exceed that CAD 1.3 billion number.

[Lorne Kalmar, Analyst at Desjardins]

Okay. Thank you very much for that. I was going to say, switching to the other side of the coin, on the acquisition side. I believe it's the Heartland Centre that's been rumored to be out there, and I'm sure with the FCR deal closing, there will be some opportunities there. Just wondering how you're thinking about acquisitions, if you're seeing anything interesting at this time that you guys could action.

[Jonathan Gitlin, President and CEO at RioCan Real Estate Investment Trust]

Yeah. Look, acquisitions was always one of the levers we had for capital allocation. When we did our Investor Day, obviously our cost of capital was a lot higher and acquisitions were less logical than some of the other opportunities we had, like NCIB, paying down debt and building up pads and strips. As our cost of capital decreases and these opportunities come into view, RioCan feels well positioned to be able to take some of the assets that may become available, add the value that our platform can create to them, and really see growth drivers going forward. Again, we always have to weigh that against the other possibilities for capital allocation, which thankfully we have as well in our purview.

[Lorne Kalmar, Analyst at Desjardins]

Okay. Just one kind of ticky-tacky one here. I think there was some aborted deal costs in the quarter. Just wondering if you could shed some light on what that was related to.

[Jonathan Gitlin, President and CEO at RioCan Real Estate Investment Trust]

Some normal course deals that we had started down the road for a few different reasons didn't work out for the benefit of our unit holders, so those deals didn't go through. Again, they were de minimis in the scheme of things, and I think as a active REIT, we're always pursuing very good and logical transactions. As you know, Lorne, sometimes they just don't work out, but thankfully most of the time they do.

[Lorne Kalmar, Analyst at Desjardins]

Fair enough. Okay. Thanks so much. I'll turn it back.

[Jonathan Gitlin, President and CEO at RioCan Real Estate Investment Trust]

No problem, Lorne. Take care.

[Operator]

Your next question comes from the line of Pammi Bir from RBC Capital Markets. Please go ahead.

[Pammi Bir, Analyst at RBC Capital Markets]

Thanks. Good morning. Just want to come back to the FFO guidance and the same property NOI and the increase in the same property NOI. Just can you maybe reconcile maybe the rationale for not increasing the FFO guidance range? Or maybe what were some of the offsetting factors that have impacted that?

[Jonathan Gitlin, President and CEO at RioCan Real Estate Investment Trust]

Thanks, Pammi. The outperformance in SPNOI, it's definitely showing up in core FFO, but our CAD 1.60-CAD 1.62 core FFO guidance range, it was designed to accommodate a range of outcomes across the underlying drivers, including same property NOI, the timing of capital recycling activities, interest expense, and other items below NOI. There's a lot of factors that go into core FFO. We remain confident that the existing core FFO guidance range remains appropriate. And we're going to wait and see what happens throughout the course of the year just to ensure that that is the case. But we just felt that SPNOI, the increase in that guidance was only one factor of many. We feel very confident in keeping the core FFO guidance intact.

[Pammi Bir, Analyst at RBC Capital Markets]

Okay. Got it. Maybe switching to, again, the fundamentals. Given the strength and demand that you are seeing, has your thinking evolved at all in terms of pushing for some higher embedded annual rent steps in the leases or on new leasing? Any color you can share there?

[Jonathan Gitlin, President and CEO at RioCan Real Estate Investment Trust]

Well, it's really embedded within our leasing team and our operations team to always push for the highest possible going-in rents, the highest annual bumps, as well as the best, call them non-financial terms. This leasing team is, I will say it hyperbolically, but the best in Canada and possibly the best in North America. They understand the environment and what we are offering and will push for the best terms always. Now, the backdrop obviously serves us well right now, and in recognition of that, we continue to see embedded growth in these leases increase over time, and I think that's a very good thing. You can rest assured that our team is always looking at ways to improve the overall spectrum of matters that come out of a lease, including annual bumps.

[Pammi Bir, Analyst at RBC Capital Markets]

Okay. Coming back to the unsold condo inventory, I think it was CAD 86 million that Franca cited. Any consideration at this point as to maybe selling some of that to bulk buyers that are out there? I think you mentioned you do expect to eventually move some of it, but curious if you can shed any light on the process there.

[Jonathan Gitlin, President and CEO at RioCan Real Estate Investment Trust]

I would say the answer to that, Pammi, is that we're considering all options for that inventory. It's certainly something that would be better served in someone else's hands, and so we are looking at bulk purchasers. We're looking at also just selling them individually with the current sales program. There's a number of different outcomes possible, but bulk sellers, or bulk buyers I should say, is certainly one of those opportunities, and we have been in touch with some of those organizations. Thankfully, it's quite a vibrant business at this point.

[Pammi Bir, Analyst at RBC Capital Markets]

Okay.

[Jonathan Gitlin, President and CEO at RioCan Real Estate Investment Trust]

Again, just going back to the fact that it's CAD 86 million. It's de minimis in the scheme of things. It is now effectively wound down, so the tail end of it would benefit us to sell. Either way, it doesn't have a significant impact on RioCan's performance going forward.

[Pammi Bir, Analyst at RBC Capital Markets]

Okay. Just last one. I think the total value for the proportionate residential inventory sits at about CAD 480 million. Has that value been marked down over time? Just curious if you're still comfortable with that figure at this point.

[Jonathan Gitlin, President and CEO at RioCan Real Estate Investment Trust]

We are comfortable with the figure. The valuations, like all of our properties, will fluctuate over time, and our valuations group does a very good job of keeping their ear close to the ground and ensuring that whatever market fluctuations occur, we reflect those in our IFRS values, and the RioCan Living assets are no different.

[Pammi Bir, Analyst at RBC Capital Markets]

Great. Okay. Thanks very much. I'll turn it back.

[Jonathan Gitlin, President and CEO at RioCan Real Estate Investment Trust]

Thanks, Pammi.

[Operator]

A reminder, if you would like to ask a question, to please press star one on your telephone keypad. Your next question comes from the line of Matt Kornack from National Bank Capital Markets. Please go ahead.

[Matt Kornack, Analyst at National Bank Capital Markets]

Morning, guys. Just wanted to quickly walk through the occupancy change in the retail portfolio. You had some transitory vacancy into Q1, I think some lease up in the HBC stuff. It seems like that's leased at this point and it may be in straight line rent. Is there something incremental on top of that straight line rent that you expect from the occupancy gains? Also, how should we think of it converting over to cash from straight line rent?

[Jonathan Gitlin, President and CEO at RioCan Real Estate Investment Trust]

There's always going to be some movement between in-place occupancy and committed occupancy, then the transformation over to cash paying rent. I think this quarter, there is some of that, the HBC space is currently leased, they're not yet rent paying, and that will be reflected going forward. Sorry. Yeah. The amount is about CAD 10 million-CAD 12 million of straight line rents in 2026.

[Matt Kornack, Analyst at National Bank Capital Markets]

98% occupancy. You've been 20 basis points, I think, above that, but that's full for all intents and purposes. Is the primary driver other than kind of the quarterly uptick going to be leasing spreads going forward? Maybe if you could quickly touch on what you're seeing in the tenant market. We had the benefit of meeting someone on your team that said you're in control, I think, in all circumstances, maybe -1 with tenants across the country. Is that continuing to be the case where landlords have the upper hand at this point?

[Jonathan Gitlin, President and CEO at RioCan Real Estate Investment Trust]

Leasing spreads are definitely a significant driver of growth going forward, but there are other things as well. FFO is influenced by so many different things. Leasing spreads is definitely one of them. Occupancy, look, we are, for all intents and purposes, full. We see this as a very good thing. It does make us rely on things like renewal spreads a little bit more than we would've if we had a portfolio that was 5% vacant. We're not in that position, we find our upside elsewhere, and we're very good at finding that upside. It just speaks to the quality of our portfolio as well, that we are at such a full state. With respect to tenants in the upper hand, look, this is a relationship with many of these tenants that has been garnered over the last 31 years.

[Jonathan Gitlin, President and CEO at RioCan Real Estate Investment Trust]

We don't really view it as upper hand, lower hand. There's always going to be tension in any negotiating process, no matter how well positioned we are. We make sure that we treat our tenants very well while also keeping a view on getting the highest outcome as possible. We want to make sure that we are a favored nation amongst the retail landlords and that these tenants will always want to be in RioCan spaces. There's, again, there is a good backdrop right now. We are certainly availing ourselves of that backdrop to get a good outcome. Using the term upper hand, lower hand, those sorts of things, I want to be careful around those terminologies. We feel very good about our positioning when it comes to any negotiations for new space or renewals at this point.

[Jonathan Gitlin, President and CEO at RioCan Real Estate Investment Trust]

That's simply a reflection of the fact that there is very little retail supply, particularly in areas where RioCan currently owns with the demographic profile that we have. This allows us to really get some very good leasing outcomes, as evidenced by a lot of the KPIs that we put out this quarter.

[Matt Kornack, Analyst at National Bank Capital Markets]

Fair point on the terminology. Market rent is market rent.

[Jonathan Gitlin, President and CEO at RioCan Real Estate Investment Trust]

Right

[Matt Kornack, Analyst at National Bank Capital Markets]

You guys will negotiate accordingly. Maybe lastly, for me, just in terms of the capital allocation, this stock's traded relatively well, but still at a bit of a discount to your book value. You've identified kind of intensification opportunities where you're going to get an 8%+ return on cost. How are these buckets plus maybe the acquisition market if we see some assets come out of the First Capital portfolio should it close?

[Jonathan Gitlin, President and CEO at RioCan Real Estate Investment Trust]

Yeah. The good news for RioCan is that we've got a multitude of options when it comes to capital allocation, and depending on the circumstances at the time and depending on what serves as the best outcome for us, we will toggle amongst those opportunities. Right now, we're seeing acquisitions as sort of a rising prospect simply because our cost of capital has come down. As you mentioned, there is looking to be some availability of very good assets or assets that might not be as good, but RioCan can utilize its very excellent platform to enhance value. We will look at those as one of the potential levers for capital allocation. That said, we also have other opportunities. NCIB, of course, is a little less prominent given where our share price is.

[Jonathan Gitlin, President and CEO at RioCan Real Estate Investment Trust]

There are things like building out pads and strips where we have allocated a fair bit of cash towards this year, about CAD 100 million. We're seeing very good return profiles there, including enhanced NAV, enhanced same property NOI, and just a better cross-shopping experience. That's something that we definitely favor from a capital allocation perspective. Of course, acquisitions does enter the frame given where we currently stand in the opportunity set out there.

[Matt Kornack, Analyst at National Bank Capital Markets]

Okay, perfect. Thanks for the detailed answers.

[Jonathan Gitlin, President and CEO at RioCan Real Estate Investment Trust]

No problem, Matt. Thank you.

[Operator]

Your next question comes from the line of Brad Sturges from Raymond James. Please go ahead.

[Brad Sturges, Analyst at Raymond James]

Hey, good morning. Just one real quick one for me. You've talked, Jonathan, you've talked in the recent past about the runway for market rent growth, and you talked a little bit about the dynamics on this call. I guess my question would be, have you seen any material change in trend on the quantum of market rent growth in the market today, and how would you frame, I guess, the potential for growth in the next 12-24 months relative to what the market's been experiencing in the last year or so?

[Jonathan Gitlin, President and CEO at RioCan Real Estate Investment Trust]

My view, and then I'm going to turn it over to Oliver Harrison who oversees leasing for RioCan, my view is that there's nothing to me that serves as a catalyst to have the current conditions change significantly. There is a supply constraint. We see our Canadian retail or domestic retailers really growing in a meaningful way. We also see international retailers look at Canada more prominently, all those things factor into a pretty good positioning for RioCan, particularly when you look at the demographics and some of the elements of our portfolio. I don't see a catalyst to really change that, Brad, but I'm going to turn it over to, again, someone who's a little closer to this matter. Oliver.

[Oliver Harrison, SVP of Leasing and Tenant Experience at RioCan Real Estate Investment Trust]

The only thing I would add to what you said, Jon, is if you look back over our last three quarters, we've been in the mid 20% on blended leasing spreads. I would say that there is sort of your answer. We've kind of landed in this 25% range for almost the last year. As long as occupancy remains where it's at, we're comfortable that that is a range that will exist in for the near term.

[Brad Sturges, Analyst at Raymond James]

Okay. I guess my other question would be just as you're starting to review acquisition opportunities, would that be more of a preference towards on your own, or would you consider JV partnerships for something more strategic in nature?

[Jonathan Gitlin, President and CEO at RioCan Real Estate Investment Trust]

I'd say that there's openness to all ways of owning property. We have certainly in the past demonstrated that we're a very good partner and a good manager for those who have capital but no platform. That's something we'd certainly look at, we're also very good at owning assets by ourselves, if the opportunity is more suited for that and we don't need to spread risk or we have the capital for it, that's certainly something we would pursue as well. I know that's a bit of a wishy-washy answer, Brad, the truth is, we would look at either outcome.

[Brad Sturges, Analyst at Raymond James]

Okay. Sounds good. I'll turn it back.

[Operator]

Your final question comes from the line of Sam Damiani from TD Cowen. Please go ahead.

[Jonathan Gitlin, President and CEO at RioCan Real Estate Investment Trust]

You're back.

[Sam Damiani, Analyst at TD Cowen]

Yeah, thanks. Sorry, just a couple quick follow-ups. I guess firstly, maybe for Oliver, I guess he's on the line here. That gross lease in the GTA where the rent doubled, just curious, what was the vintage of that lease? When was it last negotiated at market? Just give a sense of kind of where it came from.

[Oliver Harrison, SVP of Leasing and Tenant Experience at RioCan Real Estate Investment Trust]

Yeah, it was I think approximately 30 years ago it was last negotiated at market.

[Jonathan Gitlin, President and CEO at RioCan Real Estate Investment Trust]

This is obviously-

[Sam Damiani, Analyst at TD Cowen]

Were there renewal increases over the term, or was it fairly flat?

[Oliver Harrison, SVP of Leasing and Tenant Experience at RioCan Real Estate Investment Trust]

It was relatively flat based on the structure of the original lease where the tenant had just come off of their fixed option structure.

[Sam Damiani, Analyst at TD Cowen]

Okay. That's awesome. Appreciate it. The last question from me is just on the market for density land. Are you seeing any green shoots in the market for liquidity for that asset on the balance sheet?

[Jonathan Gitlin, President and CEO at RioCan Real Estate Investment Trust]

No. I think that the land market is still very stagnant. There might be the odd inquiry, but the truth is, Sam, that we don't rely on any land sales for any of our projections going forward. We've got limited value in our balance sheet for excess density. Look, I am very much an optimist when it comes to real estate, particularly in the GTA as well as other major cities in Canada. I do view that this is a situation that has its end, and everything cycles. I think at some point there will be value and hopefully high value in well-positioned density. Right now, we are not seeing green shoots. Andrew, am I wrong in that assessment?

[Andrew Duncan, CIO at RioCan Real Estate Investment Trust]

You're not wrong. Yeah, the short answer is no. There's not a lot of transactions, and there's not a lot of demand in the market for zone residential density.

[Sam Damiani, Analyst at TD Cowen]

That's great. Thank you very much. I'll turn it back.

[Jonathan Gitlin, President and CEO at RioCan Real Estate Investment Trust]

Thanks, Sam.

[Operator]

At this time, there are no further questions. I would now like to turn the conference back to President and CEO, Jonathan Gitlin.

[Jonathan Gitlin, President and CEO at RioCan Real Estate Investment Trust]

Thank you. I'll leave you with a couple of points. Our momentum is strong. Continued retailer demand, meaningful embedded growth opportunities, and disciplined capital allocation position RioCan to continue growing cash flow and creating value over the long term. Thanks so much for joining us today. Bye.

[Operator]

This concludes today's call. Thank you for attending. You may now disconnect.

Participants

Executives

• Jennifer Suess, SVP, General Counsel, ESG, and Corporate Secretary
• Jonathan Gitlin, President and CEO
• Franca Smith, SVP of Finance
• Oliver Harrison, SVP of Leasing and Tenant Experience
• Andrew Duncan, CIO

Analysts

• Sam Damiani, Analyst at TD Cowen
• Lorne Kalmar, Analyst at Desjardins
• Pammi Bir, Analyst at RBC Capital Markets
• Matt Kornack, Analyst at National Bank Capital Markets
• Brad Sturges, Analyst at Raymond James