Largest Retail Landlord Sets Sights on High-Value Tenants
There is still life in the retail market. Canada’s RioCan Real Estate Investment Trust is banking on this as the REIT attempts to grow its way out of the sector’s decline.
Canada’s largest retail landlord projects growth of 2 to 3 percent in net operating income from long-held properties this year, Chief Operating Officer Raghunath Davloor reported. Growth was 2.1 percent last year.
Although some tenants “have failed to adapt or disappeared, many others are thriving and eager to expand in the major markets,” Davloor stated. RioCan, which owns 289 Canadian properties, will benefit from more-valuable tenants, CEO Edward Sonshine said on Wednesday morning’s earnings call.
RioCan has taken a hit as traditional shopping malls and fashion outlets have closed their doors with the increase in consumer online shopping. The biggest impact came in 2015 when Target Corp., one of RioCan’s largest tenants, announced that it would cease operating in Canada. This time around, it’s looking to profit from Sears Canada Inc.’s liquidation of its remaining stores across Canada. RioCan is in the end stages of negotiation over 84 percent of the vacated space, with new rents jumping 60 percent, it has reported.
The company announced on Tuesday evening that net operating income rose 2.9 percent in the fourth quarter from the previous year. RioCan is ramping up its effort to sell about 100 properties by 2020 to pay down debt and finance development and REIT unit repurchases.