RioCan execs confident firm can navigate inflation despite losses

TORONTO — RioCan Real Estate Investment Trust executives say the business can weather economic headwinds even after reporting its second-quarter net income was almost halved since last year.

While a near-40-year-high inflation level is boosting construction costs and hampering consumer spending, the Torontobased landlord said Tuesday that it is confident it can navigate such conditions because most of its projects in the works have fixed contracts, there’s a lack of new retail spaces built over the last five years and RioCan tenants largely deal in products “that consumers need in any economic cycle.”

“Some of our prominent retailers, including Walmart, have indicated that inflation drives shoppers to avoid highmargin, discretionary items in favour of lower margin necessity items,” said Jonathan Gitlin,

RioCan’s chief executive, on a call with analysts.

“This is a concern but will not, in our view, impact the longterm viability of our largest tenants as they have a long and strong track record.”

RioCan’s 202 properties are strongly tilted toward “necessitybased anchor retail tenants,” including grocers, pharmacies and liquor stores, which make up 20 per cent of its portfolio.

These tenants were mostly immune to pandemic shutdowns and in many cases, even managed to grow their profits and sales as other businesses declared bankruptcy, reduced their footprints and struggled to shift online.

These tenants, which RioCan classifies as “strong and stable,” make up almost 86 per cent of its portfolio measured as a percentage of annualized net rent.

They’re also generating “tremendous” levels of interest in RioCan properties to the point where the company is seeing competition for spaces and price surges.