TORONTO – RioCan Real Estate Investment Trust says it’s cutting financial ties to five properties held in its joint venture with the now-defunct Hudson’s Bay as it works to move past the debacle as quickly as possible.
“We can report that RioCan has elected not to participate financially in 5 of 12 assets,” said chief financial officer Dennis Blasutti on a conference call Friday discussing the company’s second-quarter earnings.
“What it means is that we will not put any more money into the assets, in any form.”
RioCan was in a joint venture with Hudson’s Bay that held the properties of 12 Hudson’s Bay locations, but all stores closed at the start of June after liquidation sales.
After writing down $208.8 million in its value in the holdings last quarter, RioCan says the net value of its holdings in the joint venture was $40.2 million, or 0.5 per cent of RioCan’s total equity as of the end of June.
Chief executive Jonathan Gitlin said it didn’t make sense to keep investing in the properties, given the cost it would take to renew them and the debt outstanding.
“We’ve taken the, I would say more pragmatic route to just walk away from the properties financially,” said Gitlin in an interview.
The five locations include the Square One Shopping Centre in Mississauga, Ont., Scarborough Town Centre in Toronto, the downtown Calgary HBC store, and the Carrefour Laval and Promenades St-Bruno locations in Quebec.
The company continues to review the other locations in the joint venture, said Gitlin.
“There’s going to be different outcomes, some of which will be consistent with what’s already happened, some of which will be released, some of which will be sold,” he said.
“What we are clear on is that we will not put capital into assets where we don’t get an appropriate risk adjusted return.”
The company is cutting ties with the HBC leases while reporting that it’s own overall portfolio of properties continues to see strong gains in lease rates, despite the tepid economic growth.
RioCan said its blend of new leases and renewals shows a 20.6 per cent increase in new lease rates compared with old ones, including spreads on new leases of 51.5 per cent.
“Even if there is some softness around some of the segments in retail … we are confident that the conditions allow us to fill that space very easily with higher-grade tenants and higher-paying tenants,” said Gitlin.
Its retail occupancy rate was 98.2 per cent, compared with 98.3 per cent last year.
The company reported a net income of $145.6 million for the quarter that ran to June 30, up from $122.3 million in the quarter last year.
It said net income was 49 cents per unit for the period, compared with a profit of 41 cents per unit for the same quarter last year.
Revenue totalled $361.7 million, up from $292.2 million last year.
The company has significantly cut back on construction spending by completing big mixed-use developments and not starting any new ones, but does still plan infill construction on the retail side, said Gitlin.
The smaller-scale projects are much less capital intensive and have a much quicker turnaround, making for a good use of capital, he said.
“What we have now is sufficient tenant demand that you can get the appropriate rents to justify the expense.”
This report by The Canadian Press was first published Aug. 8, 2025.
Companies in this story: (TSX:REI.UN)
