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

Executive summary

• Achieved record leasing spreads, strong operational momentum, and high occupancy, with retail committed occupancy at 98.3% and over 1.15 million sq. ft. leased, including significant new leases and successful backfilling of anchor spaces.

• FFO per unit reached $0.88 for H1 2024, on track for annual guidance of $1.79–$1.82 per unit, with net income for Q2 2024 at $122.4 million, up $10.4 million year-over-year.

• Strategic focus on high-quality, essential tenants and grocery-anchored centers, with 94% of rent from Canada’s six largest markets and a portfolio of 187 properties totaling ~33M sq. ft. net leasable area.

• Balance sheet improvement prioritized, with net debt to EBITDA targeted at 8–9x by 2025–2026, supported by condo sales proceeds and EBITDA ramp-up.

• Launched Wellington Market at The Well, with 97% of commercial space leased and strong retail tenant momentum.

Financial highlights

• Q2 FFO was CAD 0.43 per unit, with H1 2024 FFO at $0.88 per unit; NOI for Q2 2024 was $178.7 million, up from $175.3 million in Q2 2023.

• Organic NOI growth and development ramp-up contributed a combined CAD 0.02 per unit to FFO; residential rental NOI rose 40.7% year-over-year to $7.2 million.

• Same-property NOI growth was 0.3%, or 2.6% excluding provision impacts; commercial Same Property NOI excluding provision grew 2.6% year-over-year in Q2 2024.

• Record new leasing spread of 52.5%, blended leasing spread at 23.4%, renewal leasing spread at 10.7%, and 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; average net rent per sq. ft. increased to $22.03, with a 3.1% CAGR since 2020.

Outlook and guidance

• 2024 FFO per unit expected in the range of $1.79 to $1.82, with FFO 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.

• Development spending for 2024 expected at CAD 250–300 million for mixed-use projects; retail in-fill project spending revised to $30–$40 million due to permitting delays.

• Net debt to EBITDA targeted to reach 9x by year-end and 8x by 2025–2026, supported by condo sales proceeds and EBITDA ramp-up.

• Development pipeline of 44.1M sq. ft. provides flexibility to time project starts.