Riocan REIT Reports Q2 2026 Results: Full Earnings Call Transcript

Riocan REIT (TSX: REI ) released second-quarter financial results and hosted an earnings call on Wednesday. Read the complete transcript below. This transcript is brought to you APIs. For real-time access to our entire catalog, please visit for a consultation.

3%, marking the fourth consecutive quarter of such growth. 1%. 3 billion capital repatriation target. Strategic capital allocation remains a priority, focusing on reducing leverage, enhancing financial flexibility, and investing in high-return projects like retail infill and asset enhancement.

62, despite raising SPNOI guidance, due to various factors influencing core FFO. Management highlighted continued strong demand for retail space, driven by supply constraints and demographic advantages, and expressed confidence in sustained growth and value creation for unitholders. Full Transcript OPERATOR Good day, ladies and gentlemen, and welcome to the Riocan REIT first quarter 2026 conference call and webcast. As a reminder, apologies.

Welcome to the Riocan REIT 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, Senior Vice President, General Counsel, ESG & Corporate Secretary Thank you and good morning, everyone. I am Jennifer Suess, Senior Vice President, General Counsel, ESG and Corporate Secretary of Riocan REIT.

Before we begin, I am required to read the following cautionary statement. In talking about our financial and operating performance and in responding to your questions, we may make forward-looking statements, including statements concerning Riocan REIT'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. In discussing our financial and operating performance and in responding to your questions, we will also be referencing certain financial measures that are not generally accepted accounting principle measures 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 REIT's performance, liquidity, cash flows and profitability. Riocan REIT'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.

Additional information on the material risks that could impact our actual results and 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 REIT's most recent annual information form that are all available on our website and at I will now turn the call over to Riocan REIT's President and CEO, Jonathan Gitlin. Jonathan Gitlin, President and Chief Executive Officer 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 REIT'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 REIT 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.

And with that in mind, I'd like to extend a warm welcome to Susan MacArthur, who has recently been appointed to Riocan REIT'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. 8%. 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 REIT's well-located, high-demographic, necessity-based assets. 7%, respectively. 73 per square foot.

This is 60% above average net rent per occupied square foot. For Riocan REIT, the retail leasing super-cycle is not a short-term phenomenon. 7 million square feet of lease maturities in each of 2027 and 2028, we have significant mark-to-market opportunities. Approximately 30% of Riocan REIT'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 REIT's platform especially powerful is that we aren't simply capturing rent growth; we're also improving the quality of our income. As an independent Canadian REIT, Riocan REIT is directly accountable to unitholders 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 unitholders. 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. 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. 26 billion of Riocan Living assets.

3 billion capital repatriation target. As 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 unitholders. Capital allocation remains an important differentiator for Riocan REIT.

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. We invested $44 million in retail infill and asset enhancement projects in the first half of the year, and we remain on track to deploy approximately $100 million into Riocan REIT'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 East Hills, and additional retail at Riocan East Hills, Winfield's 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.

It provides optionality, resilience and the ability to act and create value when attractive opportunities become available. 5% to 4%. 5%. 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 REIT is a simpler and more focused business. We're enhancing earnings visibility and increasing financial flexibility.

Third, we remain disciplined stewards of capital. 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 REIT 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 Franco.

Dennis Blasutti, Chief Financial Officer 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.

3% year over year. There were four primary drivers of these results. 02 per unit. 01 per unit.

01 per unit. 8% on a trailing twelve months basis, approximately 100 basis points lower than last quarter and trending towards our long-term target of 70%. 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 $14 million and $21 million year to date. We expect full-year spend to be in line with our normalized CapEx level of $55 million. The strength of our operating performance is also translating into value creation. 23 per unit, or $68 million, compared to the prior quarter.

This was driven largely by $52 million of net fair value gains on our investment properties. 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 450 The Well and Bellevue Phase 1 and 2 for total gross proceeds of $234 million, bringing total RCL disposition gross proceeds to approximately $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 $206 million. With respect to residential inventory, we have repatriated $143 million of proceeds year to date, primarily from the collection of accounts receivable in 2026 related to prior year sales. Since the start of 2025 we have repatriated $365 million, largely in line with our stated target of $370 million. As a result, the balance of unsold units has been reduced to $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.

7 billion on a proportionate share basis during the quarter. We repaid the $500 million Series AD unsecured debentures and $91 million of maturing mortgages using existing liquidity. We also repaid construction loans related to condo projects of approximately $114 million on a proportionate share basis, including the full repayment of the Queen and Ashbridge facility. Following these repayments, only $30 million of debt maturities remain for the balance of the year.

With approximately $700 million of available liquidity, additional proceeds expected from capital recycling, and 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, and good morning, everyone. Just want to congratulate everyone on the good quarter. Good progress on several fronts as you alluded to, Jonathan. I guess just look on the guidance raised for this year.