What RioCan Real Estate Investment Trust (REI.UN) Said on Its Q3 Earnings Call

Key Points

• Core FFO rose 5.1% year over year to C$0.41 per unit, with same-property NOI growth of 4.2%. RioCan reaffirmed its 2026 guidance of C$1.60–C$1.62 per unit and now expects results at the high end.
• Retail committed occupancy hit a record 98.9%, and leasing spreads reached 17% for the quarter. Management said rent increases as leases renew should support future same-property NOI growth.
• RioCan has effectively met its C$1.3 billion residential-asset sale target and plans to redeploy capital toward retail investment, debt reduction, or other opportunities. It also agreed to buy an additional 37.5% stake in Calgary’s East Hills shopping center for about C$55 million.

RioCan Real Estate Investment Trust TSE: REI.UN reported higher third-quarter funds from operations and record retail occupancy, as the Canadian retail landlord continued to shift capital toward its core necessity-based retail portfolio.

Core funds from operations rose 5.1% year over year to C$0.41 per unit in the third quarter, supported by 4.2% commercial same-property net operating income growth, according to Chief Financial Officer Dennis Blasutti. Year-to-date Core FFO was C$1.19 per unit, up 2.6% from a year earlier.

President and CEO Jonathan Gitlin said the results reflected progress against the strategy the company detailed at its 2025 investor day: concentrating on high-quality retail properties in major Canadian markets, simplifying the business through residential asset sales, and maintaining balance-sheet discipline.

Leasing Strength Supports Higher Guidance Expectations

Retail committed occupancy reached a record 98.9% during the quarter, while the retention rate was nearly 90%. RioCan completed roughly 1.1 million square feet of leasing activity, including about 900,000 square feet of renewals.

The company reported a blended leasing spread of 17% in the quarter and 22.7% over the past 12 months. Average rent on new leases was C$31.45 per square foot, 32% above the average rent on occupied space across the portfolio at quarter-end.

Gitlin said about 15% of RioCan’s leases roll annually, leaving a continuing opportunity to capture the difference between in-place rents and market rents as leases mature. “Today’s leasing spreads are tomorrow’s same property NOI growth,” he said.

RioCan also cited activity among grocery tenants. The company completed two transactions with national grocery retailers totaling approximately 63,000 square feet, including one 35,000-square-foot deal at a 64% rent increase. Over the past 12 months, it completed 11 grocery renewals representing more than 400,000 square feet at an average blended leasing spread of about 35%.

Management reaffirmed its 2026 Core FFO guidance of C$1.60 to C$1.62 per unit and said it now expects results at the high end of that range. RioCan also reaffirmed its outlook for same-property NOI growth of 4% to 4.5%.

Residential Monetization Program Nears Completion

RioCan said it has effectively completed its C$1.3 billion RioCan Living capital-repatriation target. During the quarter, the trust closed the sale of the Pivot apartment building in Toronto, bringing proceeds from completed residential dispositions to about C$1.2 billion.

Including a C$110 million conditional sale, the company said it has effectively met its C$1.3 billion target. Blasutti said three RioCan Living assets remain to be sold after this year and that ultimate proceeds are expected to exceed the target.

The company has also shifted C$235 million of residential inventory density to investment properties and properties under development for retail use. Blasutti said management expects those assets to generate more durable and recurring cash flows over time.

Gitlin said the proceeds and the company’s growing free cash flow will provide greater capacity to invest in retail, reduce debt, or pursue other capital-allocation opportunities.

Retail Investments and Acquisition Discipline

RioCan agreed during the quarter to acquire its partner’s 37.5% interest in the East Hills shopping center in Calgary for about C$55 million. Once the transaction closes, RioCan’s ownership stake in the Costco-anchored property will rise to 77.5%.

Blasutti said the acquisition is expected to exceed RioCan’s 9% unlevered internal-rate-of-return hurdle. The transaction will initially cause a modest increase in debt-to-EBITDA, though the company expects the effect to become neutral after a full year of EBITDA contribution.

Gitlin said the trust remains disciplined in evaluating acquisitions, comparing potential purchases against alternatives such as retail pad development, investments in existing properties, debt repayment and, potentially, unit repurchases. RioCan said it is comfortable operating within a net-debt-to-EBITDA range of 8 times to 9 times.

The company invested C$77.5 million in retail infill and asset-enhancement projects in the first nine months of 2026 and remains on track to invest roughly C$100 million for the full year. Projects include work at Yonge Eglinton Centre and the addition of retail gross leasable area at nine existing sites, along with a new Costco at RioCan Burloak.

Financing Costs Remain a Focus

RioCan said it continues to face higher financing costs as interest rates remain elevated. During the quarter, the company entered into a new C$400 million, 7.3-year term loan and used the net proceeds to reduce its line of credit. It also extended C$400 million of term loans from 2030 to 2032 since the second quarter.

At quarter-end, RioCan had met its target of having 70% of total debt unsecured and had increased its unencumbered asset pool to C$9.7 billion. The company reported more than C$1.1 billion of liquidity.

Blasutti said the cost of unsecured debentures had risen by roughly 40 to 50 basis points at the long end of the curve compared with assumptions used at the company’s investor day. However, he said stronger same-property NOI growth has helped offset the impact.

Management said it does not expect the near-term refinancing environment to disrupt its plans. Gitlin said RioCan has flexibility from remaining residential-sale proceeds and available liquidity to meet obligations due next March without being forced to raise capital immediately.

On tenant conditions, Gitlin said retailers continue to pursue expansion, particularly discount-oriented banners and established Canadian and global chains. Management said its tenant watch list remains minimal and it does not currently see a material change in tenant behavior heading into 2027.

About RioCan Real Estate Investment Trust (TSE:REI.UN)

RioCan meets the everyday shopping needs of Canadians through the ownership, management and development of necessity-based retail properties in densely populated communities. As at June 30, 2026, our portfolio is comprised of 164 properties with an aggregate net leasable area of approximately 31 million square feet (at RioCan's interest).

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