RioCan Real Estate Investment Trust (REI-UN) Q2 2024 earnings summary

Executive summary

• Achieved record leasing spreads, with new leasing at 52.5%, blended at 23.4%, and renewal at 10.7%, driving strong demand for high-quality retail space in major Canadian markets.

• Committed occupancy reached 98.3% in Q2, with over 1.15 million sq ft leased, including 0.5 million sq ft of new leases; H1 2024 saw 2.5M sq ft leased and 97.5% overall occupancy.

• Net income for Q2 2024 was $122.4 million, up $10.4 million year-over-year, aided by a $16.5 million favorable change in fair value of investment properties.

• Strategic focus on replacing transitional tenants with resilient, essential retailers, including new grocery leases, and enhancing long-term organic growth.

• Added $120.4M of new retail and residential space as income-producing assets; portfolio consists of 187 properties and ~33M sq ft net leasable area.

Financial highlights

• FFO for Q2 2024 was $127.8 million ($0.43 per unit, down 2.3% year-over-year); H1 2024 FFO was $263.7 million ($0.88 per unit), supporting annual guidance of $1.79–$1.82 per unit.

• Same-property NOI growth was 0.3% in Q2; excluding provision impacts, growth was 2.6%.

• Residential portfolio delivered nearly 9% same-property NOI growth; residential rental NOI rose 40.7% year-over-year to $7.2 million.

• Blended leasing spread at 14.5% on a rolling twelve-month basis; average net rent for new leases was CAD 26.16 per sq ft, a 19% increase over the portfolio average.

• Distribution yield stands at 8.7%, above peer average; 2024 FFO payout ratio is 63%, the lowest among peers.

Outlook and guidance

• 2024 FFO per unit expected in the range of $1.79 to $1.82, with payout ratio targeted between 55% and 65%.

• Commercial Same Property NOI excluding provision growth forecasted at 2.0%–2.5% for 2024, with a 3% target for future years.

• Net debt to EBITDA expected to reach 9x by year-end and 8x by 2026, supported by condo proceeds and EBITDA ramp-up.

• Development pipeline of 44.1M sq ft provides flexibility to time project starts; development spending for 2024 guided at CAD 250–300 million.

• Focus on scaling down capital-intensive construction spend and leveraging pre-sold condo proceeds.