Q2 2026 RioCan Real Estate Investment Trust Earnings Call

August 5, 2026

Speaker #1: Good day, ladies and gentlemen, and welcome to the RioCan Real Estate Investment Trust first quarter 2026 conference call and webcast. As a reminder, apologies.

Speaker #1: Welcome to the RioCan Real Estate Investment Trust 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.

Speaker #1: Ms. Suess, you may begin.

Speaker #2: Thank you, and good morning, everyone. I am Jennifer Suess, Senior Vice President General Counsel ESG and Corporate Secretary of RioCan. Before we begin, I am required to read the following cautionary statement.

Jennifer Suess: Thank you, and good morning, everyone. I am Jennifer Suess, Senior Vice President, General Counsel, ESG, and Corporate Secretary of RioCan. 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'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.

Speaker #2: In talking about our financial and operating performance, and in responding to your questions, we may make forward-looking statements including statements concerning RioCan'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.

Speaker #2: 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.

Speaker #2: 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, GAAP, under IFRS.

Jennifer Suess: 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, GAAP, 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's performance, liquidity, cash flows, and profitability. RioCan'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.

Speaker #2: 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.

Speaker #2: Non-GAAP measures should not be considered as alternatives to net earnings or comparable metrics determined in accordance with IFRS, as indicators of RioCan's performance, liquidity, cash flows, and profitability.

Speaker #2: RioCan's management uses these measures to aid in assessing the trust's underlying poor performance and provides these additional measures so that investors may do the same.

Speaker #2: 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's most recent annual information form that are all available on our website and at www.cedarplus.com.

Jennifer Suess: 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's most recent annual information form that are all available on our website and at www.SEDAR+. I will now turn the call over to RioCan's President and CEO, Jonathan Gitlin.

Speaker #2: I will now turn the call over to RioCan's President and CEO, Jonathan Gitlin.

Speaker #3: 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.

Jonathan Gitlin: 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'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, the culture of excellence, continued innovation, technology advancement, and prudent ESG practices. We believe RioCan 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.

Speaker #3: RioCan'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.

Speaker #3: 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, the culture of excellence, continued innovation, technology, advancement, and prudent ESG practices.

Speaker #3: We believe RioCan 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.

Speaker #3: 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 McArthur, who has recently been appointed to RioCan's Board of Trustees.

Jonathan Gitlin: With that in mind, I'd like to extend a warm welcome to Susan McArthur, who has recently been appointed to RioCan'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. Retail occupancy is at a record high of 98.8%. Commercial SPNOI growth was 4.3% 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's well-located, high demographic, necessity-based assets.

Speaker #3: 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.

Speaker #3: 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.

Speaker #3: Retail occupancy is at a record high of 98.8%. Commercial SP NOI growth was 4.3% in the quarter. Representing the fourth straight quarter of 4% or higher.

Speaker #3: This continued strength is reflected in our updated SP NOI guidance. Sustained organic growth reflects the success of our leasing strategy. Leasing spreads continue to underscore strong retailer demand for RioCan's well-located, high-demographic, necessity-based assets.

Speaker #3: The blended leasing spread of 23.1% in the quarter, with supported by new and renewal leasing spreads of 40.8% and 20.7%, respectively. Average net rent for new leasing was $37.73 per square foot.

Jonathan Gitlin: The blended leasing spread of 23.1% in the quarter was supported by new and renewal leasing spreads of 40.8% and 20.7% respectively. Average net rent for new leasing was CAD 37.73 per square foot. This is 60% above average net rent per occupied square foot. For RioCan, the retail leasing super cycle is not a short-term phenomenon. With approximately one million square feet of lease maturities remaining for the balance of this year and an additional 3.7 million square feet of lease maturities in each of 2027 and 2028, we have significant mark-to-market opportunities. Approximately 30% of RioCan'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's platform especially powerful is that we aren't simply capturing rent growth. We're also improving the quality of our income.

Speaker #3: This is 60% above average net rent per occupied square foot. For RioCan, the retail leasing supercycle is not a short-term phenomenon. With approximately 1 million square feet of lease maturities remaining for the balance of this year, and an additional 3.7 million square feet of lease maturities in each of 2027 and 2028, we have significant mark-to-market opportunities.

Speaker #3: Approximately 30% of RioCan'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.

Speaker #3: What makes RioCan'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 is directly accountable to unit holders and is not influenced by an external sponsor.

Jonathan Gitlin: As an independent Canadian REIT, RioCan 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.

Speaker #3: 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.

Speaker #3: 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.

Speaker #3: 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.

Speaker #3: Today's leasing spreads are tomorrow's SP NOI growth. Increasingly, they're also laying the foundation for stronger long-term cash flow generation. Leasing spreads are not simply an operating metric.

Jonathan Gitlin: 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. Including transactions completed over the last 18 months and assets currently under contract, we have sold CAD 1.26 billion of RioCan Living assets. As such, we've effectively reached our CAD 1.3 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.

Speaker #3: 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.

Speaker #3: 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.

Speaker #3: Including transactions completed over the last 18 months and assets currently under contract, we have sold 1.26 billion dollars of RioCan Living assets. As such, we've effectively reached our 1.3 billion dollar capital repatriation target.

Speaker #3: 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.

Speaker #3: Capital allocation remains an important differentiator for RioCan. Our objective is straightforward. Generate capital from lower growth or non-core assets. Reallocate that capital toward opportunities that improve per unit value creation.

Jonathan Gitlin: Capital allocation remains an important differentiator for RioCan. 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.

Speaker #3: 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 discipline capital deployment.

Speaker #3: 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.

Speaker #3: We invested 44 million dollars in retail infill and asset enhancement projects in the first half of the year, and we remain on track to deploy approximately 100 million dollars into RioCan's portfolio in 2026.

Jonathan Gitlin: We invested CAD 44 million in retail infill and asset enhancement projects in the H1 of the year. We remain on track to deploy approximately CAD 100 million into RioCan's portfolio in 2026. 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 Burloak and additional retail at RioCan's East Hills, RioCan Windfields, 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.

Speaker #3: 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 Burlock, and additional retail at RioCan's East Hills, Winfield Farms, and South Edmonton Common sites.

Speaker #3: 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.

Speaker #3: 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.

Jonathan Gitlin: It provides optionality, resilience, and the ability to act and create value when attractive opportunities become available. Looking ahead, based on the performance we've delivered so far this year, we now expect commercial SP NOI growth to modestly exceed our original guidance range of 3.5% to 4%. We are raising our 2026 commercial SP NOI guidance to 4% to 4.5%. Given the many factors that contribute to core FFO, we are maintaining our 2026 core FFO per unit guidance range of CAD 1.60 to 1.62. 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 is a simpler and more focused business. We're enhancing earnings visibility and increasing financial flexibility. Third, we remain disciplined stewards of capital.

Speaker #3: Looking ahead, based on the performance we've delivered so far this year, we now expect commercial same-property NOI growth to modestly exceed our original guidance range of 3.5 to 4 percent.

Speaker #3: As a result, we are raising our 2026 commercial SP NOI guidance to 4% to 4.5%. Given the many factors that contribute to core FFO, we are maintaining our 2026 core FFO per unit guidance range of $1.60 to $1.62.

Speaker #3: 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.

Speaker #3: Second, RioCan 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.

Jonathan Gitlin: 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 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 Franca.

Speaker #3: 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.

Speaker #3: With meaningful embedded growth remaining, we believe RioCan is well positioned to continue creating and compounding value for unit holders 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 unit holders.

Speaker #3: With that, I'll turn the call over to Franca.

Speaker #1: 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.

Franca Smith: Thank you, Jonathan, and good morning, everyone. Our Q2 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. Core FFO in the Q2 was CAD 0.40 per unit, up 5.3% year-over-year. There were four primary drivers of these results. Commercial same-property NOI increased 4.3% year-over-year, contributing CAD 0.02 per unit. The accretive impact of unit repurchases pursuant to our NCIB also contributed approximately CAD 0.01 per unit. These factors were partially offset by higher net interest expense and lower interest income, which had a combined impact of approximately CAD 0.01 per unit.

Speaker #1: Together, they are improving our financial flexibility and strengthening our balance sheet. I'll walk through the quarter, starting with core FFO. Core FFO in the second quarter was $0.40 per unit, up 5.3 percent year over year.

Speaker #1: There were four primary drivers of these results. Commercial same-property NOI increased 4.3 percent year over year, contributing 2 cents per unit. The accretive impact of unit repurchases pursuant to our NCIB also contributed approximately 1 cent per unit.

Speaker #1: These factors were partially offset by higher net interest expense and lower interest income, which had a combined impact of approximately 1 cent per unit.

Speaker #1: Our core FFO payout ratio was 73.8 percent on a trailing 12-month basis, approximately 100 basis points lower than last quarter, and trending towards our long-term target of 70 percent.

Franca Smith: Our core FFO payout ratio was 73.8% on a trailing 12-month basis, approximately 100 basis points lower than last quarter and trending towards our long-term target of 70%. Looking at other financial results, adjusted G&A expense was 4.1% of rental revenue for the quarter and 3.7% 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 CAD 14 million and CAD 21 million year-to-date. We expect full year spend to be in line with our normalized CapEx level of CAD 55 million. The strength of our operating performance is also translating into value creation. During the Q2, net asset value increased by CAD 0.23 per unit or CAD 68 million compared to the prior quarter. This was driven largely by CAD 52 million of net fair value gains on our investment properties.

Speaker #1: Looking at other financial results, adjusted G&A expense was 4.1% of rental revenue for the quarter and 3.7% year to date. We continue to expect full-year adjusted G&A expense to be below 4% of rental revenue.

Speaker #1: Maintenance capex for the quarter was 14 million dollars and 21 million dollars year to date. We expect full-year spend to be in line with our normalized capex level of 55 million dollars.

Speaker #1: The strength of our operating performance is also translating into value creation. During the second quarter, net asset value increased by 23 cents per unit or 68 million dollars compared to the prior quarter.

Speaker #1: This was driven largely by 52 million dollars 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.

Franca Smith: 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 One and Two for total gross proceeds of CAD 234 million, bringing total RCL disposition gross proceeds to approximately CAD 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 CAD 206 million. With respect to residential inventory, we have repatriated CAD 143 million of proceeds year-to-date, primarily from the collection of accounts receivable in 2026 related to prior year sales.

Speaker #1: 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.

Speaker #1: 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 dollars, bringing total RCL disposition gross proceeds to approximately 280 million dollars year to date.

Speaker #1: 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 dollars.

Speaker #1: With respect to residential inventory, we have repatriated 143 million dollars of proceeds year to date, primarily from the collection of accounts receivable in 2026 related to prior year sales.

Speaker #1: Since the start of 2025, we have repatriated 365 million dollars, largely in line with our stated target of 370 million dollars. As a result, the balance of unsold units has been reduced to 86 million dollars or approximately 1 percent of our NAV.

Franca Smith: Since the start of 2025, we have repatriated CAD 365 million, largely in line with our stated target of CAD 370 million. As a result, the balance of unsold units has been reduced to CAD 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. As a result, our unencumbered asset pool increased to approximately CAD 9.7 billion on a proportionate share basis.

Speaker #1: 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.

Speaker #1: 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 percent, bringing this metric in line with our internal target range.

Speaker #1: As a result, our unencumbered asset pool increased to approximately $9.7 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.

Franca Smith: During the Q2, we repaid the CAD 500 million Series AD unsecured debentures and CAD 91 million of maturing mortgages using existing liquidity. We also repaid construction loans related to condo projects of approximately CAD 114 million on a proportionate share basis, including the full repayment of the Queen and Ashbridge facility. Following these repayments, only CAD 30 million of debt maturities remain for the balance of the year. With approximately CAD 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 maturity. To conclude, the Q2 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.

Speaker #1: We also repaid construction loans related to condo projects of approximately 114 million dollars on a proportionate share basis, including the full repayment of the Queen and Ashbridge facility.

Speaker #1: Following these repayments, only 30 million dollars of debt maturities remained for the balance of the year. With approximately 700 million dollars 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.

Speaker #1: 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 unit holders.

Speaker #1: With that, I will turn the call back to the operator to begin the question and answer session.

Franca Smith: With that, I will turn the call back to the operator to begin the question and answer session.

Speaker #2: 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.

Operator 2: 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 hands 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.

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 hands 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.

Speaker #2: To withdraw your question, press star 1 again. We ask that you pick up your hands when asking a question, and if you are muted locally, please remember to unmute your device.

Speaker #2: 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.

Speaker #3: 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 on the guidance raise for this year, it seems to be a result of realized leasing spreads sort of tracking ahead of what you had assumed for the year.

Sam Damiani: Thanks. 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 on the guidance raise for this year, it seems to be a result of realized leasing spreads sort of tracking ahead of what you had assumed for the year. What spreads are assumed in your 3-year guidance of 3.5% plus same property? Just curious how you view the upside potential to that guidance at this point given the trends you're seeing.

Sam Damiani: Thanks. 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 on the guidance raise for this year, it seems to be a result of realized leasing spreads sort of tracking ahead of what you had assumed for the year. What spreads are assumed in your three-year guidance of 3.5% plus same property? Just curious how you view the upside potential to that guidance at this point given the trends you're seeing.

Speaker #3: What spreads are assumed in your three-year guidance of three and a half percent plus same property? Just curious how you view the upside potential to that guidance at this point, given the trends you're seeing.

Speaker #4: Good morning, Sam. Thank you for the congratulatory wishes. We are partway through the quarter. The question is answered if you look at the package that we had put up at the Investor Day. The list of assumptions shows that we had a 15% leasing spread assumption for the three years.

Franca Smith: Good morning, Sam. Thank you for the congratulatory wishes. We are proud of the quarter. The question is answered by, if you look at the package that we had put up at the Investor Day, the list of assumptions show that we had a 15%

Jonathan Gitlin: Good morning, Sam. Thank you for the congratulatory wishes. We are proud of the quarter. The question is answered by, if you look at the package that we had put up at the Investor Day, the list of assumptions show that we had a 15% leasing spread assumption for the three years. We've certainly outperformed in this first year of that three-year period.

Jonathan Gitlin: Leasing spread assumption for the 3 years. We've certainly outperformed in this first year of that 3-year period.

Speaker #4: So we've certainly outperformed in this first year of that three-year period.

Speaker #3: I guess just roughly the question was really like how are you feeling about the likelihood of being able to increase that guidance? I know you're I guess you're just being cautious and maybe conservative, but if trends hold, is there anything out there that would hold you back from raising the guidance?

Sam Damiani: I guess, just the rest of the question was really how are you feeling about the likelihood of being able to increase that guidance? I know you're just being cautious and maybe conservative, but if trends hold, is there anything out there that would hold you back from raising the guidance?

Speaker #4: I mean, look, there's always risk in the retail business. We feel that we've done a good job of mitigating against those risks, like large tenant failures.

Jonathan Gitlin: Look, there's always risks in the retail business. We feel that we've done a good job of mitigating against those risks like large tenant failures. Again, if you look at our top 30 list of tenants, there are very few, if any, weak spots at this point. The economy is always a question mark, then again, we've also taken big strides in ensuring that we've got necessity-based tenants that are quite resilient to any economic gyrations. The short answer is we feel very good about our path going forward. I would also say that the backdrop is very strong. We've spoken about it a number of times, but there really is a significant supply constraint, high barriers to entry, and we feel that we are well-positioned to absorb whatever demand there is, as is evidenced by the fact that we're 98.8% full.

Speaker #4: But again, if you look at our top 30 list of tenants, there are very few, if any, weak spots at this point. The economy is always a question mark, but then again, we've also taken big strides in ensuring that we've got necessity-based tenants that are quite resilient to any economic gyrations.

Speaker #4: So the short answer is, we feel very good about our path going forward. I would also say that the backdrop is very strong. I mean, we've spoken about it a number of times, but there really is a significant supply constraint, high barriers to entry, and we feel that we are well positioned to absorb whatever demand there is, as is evidenced by the fact that we're 98.8% full.

Speaker #4: So we feel very strong about the backdrop. We feel very good about our positioning within that backdrop. And so we feel that the trends right now are sustainable, but again, there'll always be fluctuations.

Jonathan Gitlin: We feel very strong about the backdrop. We feel very good about our positioning within that backdrop. We feel that the trends right now are sustainable. Again, there'll always be fluctuation. Yeah, the 15% at this point is looking quite conservative.

Speaker #4: But yeah, the 15 percent at this point is looking quite conservative.

Speaker #3: Thank you. And one more for me before I turn it back is just on the cap rates. We've seen cap rate surveys come out and call out gross re-anchored open-air shopping center cap rates coming down notably this year.

Sam Damiani: Thank you. One more from me before I turn it back is just on the cap rates. We've seen cap rate surveys come out and call out grocery anchored, open air shopping center cap rates coming down notably this year. I notice, RioCan, you haven't really changed your cap rates too much on a same property basis. Just curious what's holding you back from adjusting your fair value cap rates lower at this time?

Speaker #3: And I noticed, RioCan, you haven't really changed your cap rates too, too much on the same property basis. Just curious, what's holding you back from adjusting your fair value cap rates lower at this time?

Speaker #4: Well, we're seeing organic growth in our valuations coming largely from an increase in NOI. And that's a really good thing, just which is something that is more within our control cap rates, of course, are outside of our control.

Jonathan Gitlin: Well, we're seeing organic growth in our valuations coming largely from an increase in NOI, and that's a really good thing, just which is something that is more within our control. Cap rates, of course, are outside of our control. We are looking at some of the transactions that haven't yet closed, like the First Capital transaction, which serve as indicators that the type of product we have is highly sought after and very valuable, and we'll continue to assess that and work those factors into our valuations. For now, we're just, again, waiting for some of those to finalize and close, and we'll keep on relying on the market and third-party appraisals as well as our own internal assessments as to where cap rates should be. Right now, we're comfortable with what we have in our portfolio.

Speaker #4: We are looking at some of the transactions that haven't yet closed, like the first capital transaction, which serve as indicators that the type of product we have is highly sought after and very valuable. We will continue to assess that and work those factors into our valuations.

Speaker #4: But for now, we're just, again, waiting for some of those to finalize and close. And we'll keep on relying on the market and third-party appraisals as well as our own internal assessments as to where cap rates should be.

Speaker #4: But right now, we're comfortable with what we have in our portfolio.

Speaker #3: Okay, great. Thank you and I'll turn it back.

Sam Damiani: Okay, great. Thank you, I'll turn it back.

Speaker #4: Thanks, Sam.

Jonathan Gitlin: Thanks, Dan.

Jonathan Gitlin: Thanks, Sam.

Speaker #2: Your next question comes from the line of Lauren Calmer from Desjardins. Please go ahead.

Operator 2: Your next question comes from the line of Lorne Kalmar from Desjardins. Please go ahead.

Operator: Your next question comes from the line of Lorne Kalmar from Desjardins. Please go ahead.

Speaker #5: Thanks. Good morning, everyone. Congratulations on the progress made on the disposition side. It looks to be tracking pretty darn well. Just wondering, on the three remaining RioCan Living assets, if you back into sort of the target and where you guys are pro forma these deals, I think you get about just over $50 million of value.

Lorne Kalmar: Thanks. Good morning, everyone. Congratulations on the progress made on the disposition side. It looks to be tracking pretty darn well. Just wondering, on the three remaining RioCan Living assets, if you back into sort of the target and where you guys are pro forma these deals, I think you get about just over CAD 50 million value. Seems a little light for three multi-res assets. Just wanted to get an idea if you can give us maybe an idea of the value on those and perhaps a stabilized cap rate.

Speaker #5: It seems a little light for three, three multi-res assets. So just wanted to get an idea if you can give us maybe an idea of the value on those and perhaps stabilize cap rate.

Speaker #4: We don't have a specific valuation for those assets, but you're right to assume that they're higher than $50 million. You may recall that our original range was $1.3 to $1.4 billion.

Jonathan Gitlin: We don't have a specific valuation for those assets, but you're right to assume that they're higher than CAD 50 million. You may recall that our original range was CAD 1.3 to 1.4 billion. We just sort of simplified that message to say CAD 1.3 billion, and we'll of course exceed that once the remainder of the assets are sold. The cap rates, we've seen a very vibrant market for our RioCan Living assets based on the fact that they are new, they don't have rent control, there's limited CapEx. We expect that trend to continue regardless of what's going on in the broader multi-res market. I feel quite confident in our ability to sell those at our current IFRS valuations or hopefully in that range.

Speaker #4: We just sort of simplified that message to say $1.3 billion. And we'll, of course, exceed that once the remainder of the assets are sold.

Speaker #4: But the cap rates we've seen a very vibrant market for our RioCan Living assets based on the fact that they are new. They don't have rent control.

Speaker #4: There's limited capex. And so we expect that trend to continue regardless of what's going on in the broader multi-res market. And so I feel quite confident in our ability to sell those at our current IFRS.

Speaker #4: Valuations or hopefully in that range. But in terms of the overall number, you're right to assume that $1.3 was our conservative estimate and we will ultimately likely exceed that.

Jonathan Gitlin: In terms of the overall number, you're right to assume that CAD 1.3 billion was our conservative estimate, and we will ultimately likely exceed that.

Speaker #5: Okay. That's very helpful. Thank you. And then maybe.

Lorne Kalmar: Okay. That's very helpful. Thank you.

Speaker #4: And keep in mind keep in mind, Lauren, too, that that included condo dispositions as well. And we still have about 85-ish million dollars of condo inventory that we feel confident will be sold over the short to medium term as well.

Jonathan Gitlin: Keep in mind, Lorne, too, that that included condo dispositions as well, and we still have about CAD 85 million of condo inventory that we feel confident will be sold over the short to medium term as well. That's why we express that confidence in our ability to exceed that CAD 1.3 billion number.

Speaker #4: So that's why we express that confidence in our ability to exceed that $1.3 billion number.

Speaker #5: Okay. Thank you very much for that. I was going to say, switching to the other side of the coin on the acquisition side, I know I believe it's the Heartland Center that's been rumored to be out there and I'm sure with the FCR deal closing, there will be some opportunities there.

Lorne Kalmar: Okay. Thank you very much for that. I was going to say, switching to the other side of the coin on the acquisition side. I believe it's the Heartland Town Centre that's been rumored to be out there, and I'm sure with the FCR deal closing, there will be some opportunities there. Just wondering how you're thinking about acquisitions, if you're seeing anything interesting at this time that you guys could action.

Speaker #5: Just wondering how you're thinking about acquisitions, if you're seeing anything interesting at this time that you guys could action?

Speaker #4: Yeah. I mean, look, acquisitions was always one of the levers we had for capital allocation. When we did our investor day, obviously our cost of capital was a lot higher and acquisitions were less logical than some of the other opportunities we had, like NCIB paying down debt and building up pads and strips.

Jonathan Gitlin: Yeah. Look, acquisitions was always one of the levers we had for capital allocation. When we did our investor day, obviously our cost of capital was a lot higher and acquisitions were less logical than some of the other opportunities we had, like NCIB, paying down debt, and building up pads and strips. As our cost of capital decreases and these opportunities come into view, RioCan feels well-positioned to be able to take some of the assets that may become available, add the value that our platform can create to them, and really see growth drivers going forward. Again, we always have to weigh that against the other possibilities for capital allocation, which thankfully we have as well in our purview.

Speaker #4: But as our cost of capital decreases, and these opportunities come into view, RioCan feels well positioned to be able to take some of these assets that may become available, add the value that our platform can create to them, and really see growth drivers going forward.

Speaker #4: But again, we always have to weigh that against our other the other possibilities for capital allocation, which thankfully we have as well in our purview.

Speaker #5: Okay. And then just one kind of ticky, tacky one here. I think there was some aborted deal costs in the quarter. Just wondering if you could shed some light on what that was related to.

Lorne Kalmar: Okay. Just one kind of ticky-tacky one here. I think there was some aborted deal costs in the quarter. Just wondering if you could shed some light on what that was related to.

Jonathan Gitlin: Some normal course deals that we had started down the road and then for a few different reasons didn't work out for the benefit of our unit holders. Those deals didn't go through. Again, they were de minimis in the scheme of things, and I think as a active REIT, we're always pursuing very good and logical transactions. As you know, Lorne, sometimes they just don't work out. Thankfully, most of the time they do.

Speaker #4: Some normal course deals that we that we had started down the road and then for a few different reasons didn't work out for the benefit of our unit holders.

Speaker #4: So we those deals didn't go through. But again, they were de minimis in the scheme of things. And I think as an active REIT, we're always pursuing very good and logical transactions.

Speaker #4: And as you know, Lauren, sometimes they just don't work out. But thankfully, most of the time they do.

Speaker #5: Fair enough. Okay. Thanks so much. I'll turn it back.

Lorne Kalmar: Fair enough. Okay. Thanks so much. I'll turn it back.

Speaker #4: No problem, Lauren. Take care.

Jonathan Gitlin: No problem, Lorne. Take care.

Speaker #2: Your next question comes from the line of Pammy Burr from RBC Capital Markets. Please go ahead.

Operator 2: Your next question comes from the line of Pammi Bir from RBC Capital Markets. Please go ahead.

Operator: Your next question comes from the line of Pammi Bir from RBC Capital Markets. Please go ahead.

Speaker #6: Thanks. Good morning. I just want to come back to the FFO guidance and the same property NOI increase in the same property NOI guidance.

Pammi Bir: Thanks. Good morning. I just wanted to come back to the FFO guidance and the increase in the same property NOI guidance. Just can you maybe reconcile maybe the rationale for not increasing the FFO guidance range? Or maybe what were some of the offsetting factors that impacted that?

Speaker #6: So just can you maybe reconcile maybe the rationale for not increasing the FFO guidance range or maybe what were some of the offsetting factors that have impacted that?

Speaker #4: Thanks, Pammy. So the outperformance in SPNOI is it's definitely showing up in core FFO, but our dollar 60 to dollar 62 core FFO guidance range it was designed to accommodate a range of outcomes across the underlying drivers, including same property NOI.

Jonathan Gitlin: Thanks, Pammi. The outperformance in SP NOI, it's definitely showing up in core FFO, but our CAD 1.60 to 1.62 core FFO guidance range, it was designed to accommodate a range of outcomes across the underlying drivers, including same property NOI, the timing of capital recycling activities, interest expense, and other items below NOI. There's a lot of factors that go into core FFO. We remain confident that the existing core FFO guidance range remains appropriate, and we're going to wait and see what happens over the course of the year just to ensure that that is the case. We just felt that SP NOI, the increase in that guidance is only one factor of many. We feel very confident in keeping the core FFO guidance intact.

Speaker #4: The timing of capital recycling activities, interest expense, and other items below NOI. So there's a lot of factors that go into core FFO. We remain confident that the existing core FFO guidance range remains appropriate.

Speaker #4: And we're going to wait and see what happens throughout the course of the year just to ensure that that is the case. But we just felt that SPNOI, the increase in that guidance, was only one factor of many.

Speaker #4: So we have feel very confident in keeping the core FFO guidance intact.

Speaker #6: Okay. Got it. Just maybe switching to just the again, the fundamentals. Just given the strength and demand that you are seeing, has your thinking evolved at all in terms of pushing for some higher embedded annual rent steps in the leases or on new leasing, or any color you can share there?

Pammi Bir: Okay. Got it. Just maybe switching to just, again, the fundamentals. Just given the strength and demand that you are seeing, has your thinking evolved at all in terms of pushing for some higher embedded annual rent steps in the leases or on new leasing or any color you can share there?

Speaker #4: Well, it's really embedded within our leasing team and our operations team to always push for the highest possible. Going in rents, the highest annual bumps as well as the best, call them, non-financial terms this leasing team is I will say it hyperbolically, but the best in Canada and possibly the best in North America.

Jonathan Gitlin: Well, it's really embedded within our leasing team and our operations team to always push for the highest possible going-in rents, the highest annual bumps, as well as the best, call them non-financial terms. This leasing team is, I will say it hyperbolically, but the best in Canada and possibly the best in North America, and they understand the environment and what we are offering and will push for the best terms always. Now, the backdrop obviously serves us well right now, and in recognition of that, we continue to see embedded growth in these leases increase over time, and I think that's a very good thing. You can rest assured that our team is always looking at ways to improve the overall spectrum of matters that come out of a lease, including annual bumps.

Speaker #4: And they understand the environment and what we are offering and will push for the best terms always. Now, the backdrop obviously serves us well right now.

Speaker #4: And in recognition of that, we continue to see embedded growth in these leases, increase over time. And I think that's a very good thing.

Speaker #4: But you can rest assured that our team is always looking at ways to improve the overall spectrum of matters that come out of a lease, including annual bumps.

Speaker #6: Okay. Coming back to the unsold condo inventory, I think it was 86 million that Franco cited. Any consideration at this point as to maybe selling some of that to bulk buyers that are out there?

Pammi Bir: Okay. Coming back to the unsold condo inventory, I think it was CAD 86 million that Franca cited. Any consideration at this point as to maybe selling some of that to bulk buyers that are out there? I think you mentioned you do expect to eventually move some of it, but curious if you can shed any light on the process there.

Speaker #6: I think you mentioned you do expect eventually move some of it, but curious if you can shed any light on the process there.

Speaker #4: I would say the answer to that, Pammy, is that we're considering all options for that inventory. It's certainly something that would be better served in someone else's hands.

Jonathan Gitlin: I would say the answer to that, Pammi, is that we're considering all options for that inventory. It's certainly something that would be better served in someone else's hands, and so we are looking at bulk purchasers. We're looking at also just selling them individually with the current sales program. There's a number of different outcomes possible, but bulk buyers, I should say, is certainly one of those opportunities, and we have been in touch with some of those organizations. Thankfully, it's quite a vibrant business at this point.

Speaker #4: And so we are looking at we are looking at bulk purchasers. We're looking at also just selling them individually with the current sales program.

Speaker #4: So there's a number of different outcomes possible, but bulk sellers or bulk buyers, I should say, is certainly one of those opportunities. And we have been in touch with some of those organizations.

Speaker #4: And thankfully, it's quite a vibrant business at this point. But again, just going back to the fact that it's $86 million. And so, it's really de minimis in the scheme of things.

Pammi Bir: Okay.

Jonathan Gitlin: Again, just going back to the fact that it's CAD 86 million, it's de minimis in the scheme of things. It is now effectively wound down. The tail end of it would benefit us to sell, but either way, it doesn't have a significant impact on RioCan's performance going forward.

Speaker #4: It is now effectively wound down. So the tail end of it, it would benefit us to sell. But either way, it doesn't have a significant impact on RioCan's performance going forward.

Speaker #6: Okay. And then just last one. I think the total value for the proportionate residential inventory sits at about 480 million. Has that value been marked down over time?

Pammi Bir: Okay. Just last one. I think the total value for the proportionate residential inventory sits at about CAD 480 million. Has that value been marked down over time? Just curious if you're still comfortable with that figure at this point.

Speaker #6: And just curious if you're still comfortable with that figure at this point.

Speaker #4: We are comfortable with the figure. I mean, the valuations like all of our properties will fluctuate over time. And our valuations group does a very good job of keeping the ear close to the ground and ensuring that whatever market fluctuations occur, we reflect those in our IFRS values.

Jonathan Gitlin: We are comfortable with the figure. The valuations, like all of our properties, will fluctuate over time, our valuations group does a very good job of keeping their ear close to the ground and ensuring that whatever market fluctuations occur, we reflect those in our IFRS values, the RioCan Living assets are no different.

Speaker #4: And the RioCan Living Assets are no different.

Speaker #6: Great. Okay. Thanks very much, I'll turn it back.

Pammi Bir: Great. Okay. Thanks very much. I'll turn it back.

Speaker #4: Thanks, Pammy.

Jonathan Gitlin: Thanks, Pammi.

Speaker #2: A reminder, if you would like to ask a question, please press star one on your telephone keypad. Your next question comes from the line of Matt Kornak from National Bank Capital Markets.

Operator 2: A reminder, if you would like to ask a question, please press star one on your telephone keypad. Your next question comes from the line of Matt Kornack from National Bank Capital Markets. Please go ahead.

Operator: A reminder, if you would like to ask a question, please press star one on your telephone keypad. Your next question comes from the line of Matt Kornack from National Bank Capital Markets. Please go ahead.

Speaker #2: Please go ahead.

Speaker #7: Morning, guys. Just wanted to quickly walk through the occupancy change in the retail portfolio. You had some transitory vacancy into Q1, and I think some lease-up in the HBC stuff.

Matt Kornack: Morning, guys. Just wanted to quickly walk through the occupancy change in the retail portfolio. You had some transitory vacancy into Q1 and I think some lease up in the HBC stuff, but it seems like that's leased at this point and it may be in straight line rent. Is there something incremental on top of that straight line rent that you expect from the occupancy gains? Also, how should we think of it converting over to cash from straight line rent?

Speaker #7: But it seems like that's leased at this point. And it may be in straight-line rent, but is there something incremental on top of that straight-line rent that you expect from the occupancy gains?

Speaker #7: And then also, how should we think of it converting over to cash from straight-line rent?

Speaker #4: There's always going to be some movement between in place occupancy and committed occupancy. And then the transformation over to cash-paying rent. I think this quarter there is some of that.

Jonathan Gitlin: There's always going to be some movement between in-place occupancy and committed occupancy, and then the transformation over to cash paying rent. I think this quarter, there is some of that, and the HBC space is currently leased, but they're not yet rent paying, and that will be reflected going forward. Sorry. Yeah. The amount is about CAD 10 to 12 million of straight line rents in 2026.

Speaker #4: And the HBC space is currently leased, but they're not yet rent-paying, and that will be reflected going forward. Sorry. Yeah. So the amount is about $10 to $12 million of straight-line rents in 2026.

Speaker #7: Okay. And then 98% occupancy—I mean, you've been 20 basis points, I think, above that, but that's full for all intents and purposes. So, is the primary driver, other than the kind of quarterly uptick, going to be leasing spreads going forward?

Matt Kornack: This 98% occupancy, you've been 20 basis points, I think, above that, but that's full for all intents and purposes. Is the primary driver other than kind of the quarterly uptick going to be leasing spreads going forward? Maybe if you could quickly touch on what you're seeing in the tenant market. We had the benefit of meeting someone on your team that said you're in control, I think, in all circumstances, maybe minus one with tenants across the country. Is that continuing to be the case where landlords have the upper hand at this point?

Speaker #7: And then maybe if you could quickly touch on what you're seeing in the tenant market. We had the benefit of meeting someone on your team who said you're in control.

Speaker #7: I think in all circumstances, maybe minus one with tenants across the country, but is that continuing to be the case where landlords have the upper hand at this point?

Speaker #4: So leasing spreads are definitely a significant driver of growth going forward. But there are other things as well. I mean, FFO is influenced by so many different things.

Jonathan Gitlin: Leasing spreads are definitely a significant driver of growth going forward. There are other things as well. FFO is influenced by so many different things. Leasing spreads is definitely one of them. Occupancy, look, we are, for all intents and purposes, full. We see this as a very good thing, but it does make us rely on things like renewal spreads a little bit more than we would have if we had a portfolio that was 5% vacant. We're not in that position, so we find our upside elsewhere, and we're very good at finding that upside. It just speaks to the quality of our portfolio as well, that we are at such a full state. With respect to tenants in the upper hand.

Speaker #4: But leasing spreads is definitely one of them. Occupancy look, we are for all intents and purposes full. We see this as a very good thing.

Speaker #4: But it does make us rely on things like renewal spreads a little bit more than we would have if we had a portfolio that was 5% vacant.

Speaker #4: We're not in that position. So we find our upside elsewhere. And we're very good at finding that upside. And it just speaks to the quality of our portfolio as well that we are so at such a full state.

Speaker #4: With respect to tenants having the upper hand, we don't—look, this is a relationship with many of these tenants that has been garnered over the last 31 years.

Jonathan Gitlin: Look, this is a relationship with many of these tenants that has been garnered over the last 31 years, so we don't really view it as upper hand, lower hand. There's always going to be tension in any negotiating process, no matter how well positioned we are, and we make sure that we treat our tenants very well while also keeping a view on getting the highest outcome as possible. We want to make sure that we are a favored nation amongst the retail landlords, and that these tenants will always want to be in RioCan spaces. There is a good backdrop right now. We are certainly availing ourselves of that backdrop to get a good outcome. Using the term upper hand, lower hand, those sorts of things, I want to be careful around those terminologies.

Speaker #4: And so we don't really view it as upper hand, lower hand. There's always going to be tension in any negotiating process, no matter how well positioned we are.

Speaker #4: And we make sure that we treat our tenants very well, while also keeping a view on getting the highest outcome possible. We want to make sure that we are a favored nation among retail landlords and that these tenants will always want to be in RioCan spaces.

Speaker #4: And so there's again, there is a good backdrop right now. We are certainly availing ourselves of that backdrop to get a good outcome. But using the term upper hand, lower hand, those sorts of things, it's a little bit I want to be careful around those terminologies, but we feel very good about our positioning when it comes to any negotiations for new space or renewals at this point.

Jonathan Gitlin: We feel very good about our positioning when it comes to any negotiations for new space or renewals at this point. That's simply a reflection of the fact that there is very little retail supply, particularly in areas where RioCan currently owns, with the demographic profile that we have. This allows us to really get some very good leasing outcomes, as evidenced by a lot of the KPIs that we put out this quarter.

Speaker #4: And that's simply a reflection of the fact that there is very little retail supply, particularly in areas where RioCan currently owns with the demographic profile that we have.

Speaker #4: And this allows us to really get some very good leasing outcomes as evidenced by a lot of the KPIs that we've put out this quarter.

Matt Kornack: Fair point on the terminology. Market rent is market rent.

Speaker #7: Fair point on the terminology. Market rent is market rent. And you guys will negotiate accordingly. And then maybe lastly, for me, just in terms of capital allocation at this point, this talk's traded relatively well, but still at a bit of a discount.

Jonathan Gitlin: Right

Matt Kornack: You guys will negotiate accordingly. Maybe lastly for me, just in terms of capital allocation. The stock's traded relatively well, but still at a bit of a discount to your book value. You've identified kind of intensification opportunities where you're going to get an 8%+ return on cost. How are these buckets, plus maybe the acquisition market, if we see some assets come out of the First Capital portfolio, should it close?

Speaker #7: To your book value. And then you've identified kind of intensification opportunities where you're going to get an A-plus percent return on cost. How are these buckets plus maybe the acquisition market if we see some massive come out of the first capital portfolio should it close?

Speaker #4: Yeah, so the good news for RioCan is that we've got a multitude of options when it comes to capital allocation. And, depending on the circumstances at the time and depending on what serves as the best outcome for us, we will toggle amongst those opportunities.

Jonathan Gitlin: The good news for RioCan is that we've got a multitude of options when it comes to capital allocation. Depending on the circumstances at the time, depending on what serves as the best outcome for us, we will toggle amongst those opportunities. Right now, we're seeing acquisitions as sort of a rising prospect simply because our cost of capital has come down. As you mentioned, there is looking to be some availability of very good assets or assets that might not be as good, but RioCan can utilize its very excellent platform to enhance value. We will look at those as one of the potential levers for capital allocation. That said, we also have other opportunities. NCIB, of course, is a little less prominent given where our share price is.

Speaker #4: Right now, we're seeing acquisitions as sort of a rising prospect simply because our cost of capital has come down. And as you mentioned, there is looking to be some availability of very good assets or assets that might not be as good, but RioCan can utilize its very excellent platform to enhance value.

Speaker #4: And so we will look at those as one of the potential levers for capital allocation. That said, we also have other opportunities. NCIB, of course, is a little less prominent given where our share price is.

Speaker #4: But then there are things like building out pads and strips where we have allocated a fair bit of cash towards this year, about $100 million.

Jonathan Gitlin: There are things like building out pads and strips where we have allocated a fair bit of cash towards this year, about CAD 100 million, and we're seeing very good return profiles there, including enhanced NAV, enhanced same property NOI, and just a better cross shopping experience. That's something that we definitely favor from a capital allocation perspective. Of course, acquisitions does enter the frame given where we currently stand and the opportunity set out there.

Speaker #4: And we're seeing very good return profiles there, including enhanced NAV, enhanced same property NOI, and just a better cross-shopping experience. So that's something that we definitely favor from a capital allocation perspective.

Speaker #4: But of course, acquisitions does enter the frame given where we currently stand and the opportunity set out there.

Speaker #7: Okay. Perfect. Thanks for the detailed answers.

Matt Kornack: Okay, perfect. Thanks for the detailed answers.

Speaker #4: No problem, Matt. Thank you.

Jonathan Gitlin: No problem, Matt. Thank you.

Speaker #1: Your next question comes from the line of Brad Sturgess from Raymond James. Please go ahead.

Operator 2: Your next question comes from the line of Brad Sturges from Raymond James. Please go ahead.

Operator: Your next question comes from the line of Brad Sturges from Raymond James. Please go ahead.

Speaker #8: Hey. Good morning. Just one real quick one for me. You've talked to Jonathan. You've talked to in the recent past about the runway for market rent growth.

Brad Sturges: Hey, good morning. Just one real quick one for me. Jonathan, you talked in the recent past about the runway for market rent growth, and you talked a little bit about the dynamics on this call. I guess my question would be, have you seen any material change in trend on the quantum of market rent growth in the market today? How would you frame, I guess, the potential for growth the next 12 to 24 months relative to what the market's been experiencing in the last year or so?

Speaker #8: And you talked a little bit about the dynamics on this call. Just how are I guess my question would be have you seen any material change in trend on the quantum of market rent growth in the market today?

Speaker #8: And how would you frame, I guess, the potential for growth in the next 12 to 24 months, relative to what the market's been experiencing in the last year or so?

Speaker #4: Yeah. So my view, and then I'm going to turn it over to Oliver Harrison. He oversees leasing for RioCan. But my view is that there's nothing to me that serves as a catalyst to have the current conditions change significantly.

Jonathan Gitlin: My view, and then I'm going to turn it over to Oliver Harrison, who oversees leasing for RioCan, but my view is that there's nothing to me that serves as a catalyst to have the current conditions change significantly. There is a supply constraint. We see our Canadian retail or domestic retailers really growing in a meaningful way. We also see international retailers look at Canada more prominently. All those things factor into a pretty good position for RioCan, particularly when you look at the demographics and some of the elements of our portfolio. I don't see a catalyst to really change that, Brad, but I'm going to turn it over to, again, someone who's a little closer to this matter. Oliver.

Speaker #4: There is a supply constraint. We see our Canadian retail or domestic retailers really growing in a meaningful way. And we also see international retailers look at Canada more prominently.

Speaker #4: And so all those things factor into a pretty good position for RioCan, particularly when you look at the demographics and some of the elements of our portfolio.

Speaker #4: So I don't see a catalyst to really change that, Brad. But I'm going to turn it over to again, someone who's a little closer to this matter, Oliver.

Speaker #2: Yeah. The only thing I would add to what you said, John, is if you look back over our last three quarters, we've been in the mid-20% on blended leasing spreads.

Oliver Harrison: The only thing I would add to what you said, John, is if you look back over our last three quarters, we've been in the mid-20% on blended leasing spreads. I would say that there is sort of your answer. We've kind of landed in this 25% range for almost the last year. As long as occupancy remains where it's at, we're comfortable that that is a range that will exist in for the near term.

Speaker #2: So I would say that there is sort of your answer. We've kind of landed in this 25% range. For almost the last year. And as long as occupancy remains where it's at, we're comfortable that that is a range that will exist in for the near term.

Speaker #8: Okay. I guess my other question would be just as you're starting to review acquisition opportunities, would that be more of a preference towards on your own?

Brad Sturges: Okay. I guess my other question would be just as you're starting to review acquisition opportunities, would that be more of a preference towards on your own, or would you consider JV partnerships for something more strategic in nature?

Speaker #8: Or would you consider JV partnerships for something more strategic in nature?

Speaker #4: I'd say that there's openness to all. To all ways of owning property. We have certainly in the past demonstrated that we're a very good partner and a good manager for those who have capital but no platform.

Jonathan Gitlin: I'd say that there's openness to all ways of owning property. We have certainly in the past demonstrated that we're a very good partner and a good manager for those who have capital but no platform. That's something we'd certainly look at. Again, we're also very good at owning assets by ourselves, and if the opportunity is more suited for that and we don't need to spread risk or we have the capital for it, then that's certainly something we would pursue as well. I know that's a bit of a wishy-washy answer, Brad, but the truth is, we would look at either outcome.

Speaker #4: And so that's something we'd certainly look at. But then again, we're also very good at owning assets by ourselves. And if the opportunity is more suited for that and we don't need to spread risk or where we have the capital for it, then that's certainly something we would pursue as well.

Speaker #4: So I know that's a bit of a wishy-washy answer, Brad, but the truth is we would look at either outcome.

Speaker #8: Okay. Sounds good. I'll turn it back.

Brad Sturges: Okay, sounds good. I'll turn it back.

Speaker #1: Your final question comes from the line of Sam Damiani from TD Cohen. Please go ahead.

Operator 2: Your final question comes from the line of Sam Damiani from TD Cowen. Please go ahead.

Operator: Your final question comes from the line of Sam Damiani from TD Cowen. Please go ahead.

Speaker #4: You're back.

Jonathan Gitlin: You are back.

Speaker #3: Yeah. Thanks. Sorry. Just a couple quick follow-ups. I guess firstly, maybe for Oliver I guess he's on the line here. That gross release in the GTA where the rent doubled, I'm just curious what was the vintage of that lease?

Sam Damiani: Yeah, thanks. Sorry, just a couple quick follow-ups. I guess firstly, maybe for Oliver, I guess, who is on the line here. That gross release in the GTA where the rent doubled, just curious, what was the vintage of that lease? When was it last negotiated at market? Just give a sense of kind of where it came from.

Speaker #3: When was it last negotiated at market? Just give a sense of where it came from.

Speaker #2: Yeah, I think approximately 30 years ago. It was last negotiated at market.

Oliver Harrison: Yeah, it was, I think, approximately 30 years ago, it was last negotiated at market.

Speaker #4: Not where.

Sam Damiani: Were there kind of renewal increases over the term, or was it fairly flat?

Speaker #3: Kind of renewal increases over the term? Or was it fairly flat?

Speaker #2: It was relatively flat based on the structure of the original lease where the tenant had just come off of their fixed option structure.

Oliver Harrison: It was relatively flat based on the structure of the original lease where the tenant had just come off of their fixed option structure.

Speaker #3: Oh, okay. That's awesome. Appreciate it. And the last question for me is just on the market for density land. Are you seeing any green shoots in the market for that for liquidity for that asset on the balance sheet?

Sam Damiani: Okay, that's awesome. Appreciate it. The last question from me is just on the market for density land. Are you seeing any green shoots in the market for liquidity for that asset on the balance sheet?

Speaker #4: No. I mean, I think that the land market is still very stagnant. I mean, there might be the odd inquiry, but the truth is, Sam, that we don't rely on any land sales for any of our projections going forward.

Jonathan Gitlin: No. I think that the land market is still very stagnant. There might be the odd inquiry, but the truth is, Sam, that we don't rely on any land sales for any of our projections going forward. We've got limited value in our balance sheet for excess density. Look, I am very much an optimist when it comes to real estate, particularly in the GTA as well as other major cities in Canada. I do view that this is a situation that has its end, and everything cycles. I think at some point there will be value and hopefully high value in well-positioned density. Right now, we are not seeing green shoots. Andrew, am I wrong in that assessment?

Speaker #4: We've got limited value on our balance sheet for excess density, and look, I am very much an optimist when it comes to real estate, particularly in the GTA as well as other major cities in Canada.

Speaker #4: And I do view that this is a situation that has its end. Everything cycles, so I think at some point, there will be value.

Speaker #4: And hopefully, high value in well-positioned density. But right now, we are not seeing green shoots. Andrew, any am I wrong in that assessment?

Speaker #2: You're not wrong. Yeah. The short answer is no. There's not a lot of transactions, and there's not a lot of demand in the market for selling residential density.

Andrew Duncan: You're not wrong. Yeah, the short answer is no. There's not a lot of transactions, and there's not a lot of demand in the market for zone residential density.

Speaker #3: That's great. Thank you very much. I'll turn it back.

Sam Damiani: That's great. Thank you very much. I'll turn it back.

Speaker #4: Thanks, Sam.

Jonathan Gitlin: Thanks, Sam.

Speaker #1: At this time, there are no further questions. I would now like to turn the conference back to President and CEO, Jonathan Gitlin.

Operator 2: At this time, there are no further questions. I would now like to turn the conference back to President and CEO, Jonathan Gitlin.

Operator: At this time, there are no further questions. I would now like to turn the conference back to President and CEO, Jonathan Gitlin.

Speaker #4: Thank you. I'll leave you with a couple of points. Our momentum is strong. Continued retailer demand, meaningful embedded growth opportunities, and disciplined capital allocation position RioCan to continue growing cash flow and creating value over the long term.

Jonathan Gitlin: Thank you. I'll leave you with a couple of points. Our momentum is strong. Continued retailer demand, meaningful embedded growth opportunities, and disciplined capital allocation position RioCan to continue growing cash flow and creating value over the long term. Thanks so much for joining us today. Bye.

Speaker #4: Thanks so much for joining us today. Bye.

Operator 2: This concludes today's call. Thank you for attending. You may now disconnect.

Operator: This concludes today's call. Thank you for attending. You may now disconnect.

Q2 2026 RioCan Real Estate Investment Trust Earnings Call

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