Riocan Reit (($TSE:REI.UN)) has held its Q4 earnings call. Read on for the main highlights of the call.
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RioCan REIT’s recent earnings call painted a picture of robust operational and financial performance for 2024. The company reported record-breaking results, displaying strategic growth and positive leasing spreads. Despite facing challenges in the condo market and interest expenses, the trust’s strong leasing activity and market positioning reflect a positive outlook for 2025.
Record-Breaking Operational Results
RioCan achieved record operational results in 2024, boasting a committed retail occupancy of 98.7% and a remarkable blended leasing spread of 18.7% for the year. The company finalized approximately 4.8 million square feet of leases, which included 1.5 million square feet of new leases.
Strong Financial Metrics
The financial metrics for RioCan were solid, with FFO adjusted per unit recorded at $1.81, even after accounting for $7.9 million in restructuring costs. They maintained a payout ratio of around 60% and increased annual distributions by 4.3%.
ESG and Employee Engagement
RioCan received an ESG rating upgrade to AA from MSCI, highlighting its commitment to sustainable practices. Additionally, the company recorded top decile performance for employee engagement for the third consecutive year.
RioCan Living Achievements
The value of RioCan Living assets soared over $930 million, with residential rental operations delivering a 5.1% same-property NOI growth in 2024, indicating robust performance in this segment.
Strong Leasing and Market Position
RioCan achieved impressive low to mid-teen blended leasing spreads, showcasing high confidence in maintaining strong SPNOI growth supported by contractual rent increases and full-year in-place occupancy effects in 2025.
Challenges in the Condo Market
The company expressed concerns about the strained condo market; however, 98% of the 372 expected fourth quarter interim occupancies were completed. RioCan anticipates $530 million in sales revenue from ongoing projects, with $430 million already presold.
Interest Expense Impact
Interest expense, net of interest income, impacted FFO per unit by $0.10 in 2024, with expected average interest rates for 2025 financing activities around 5%.
Tenant Churn
Commercial same-property NOI growth was temporarily lower than the long-term target of 3% due to tenant churn earlier in the year. However, this metric recovered to 3.5% in Q4 2024, indicating resilience.
Forward-Looking Guidance
During the earnings call, CEO Jonathan Gitlin outlined RioCan’s strong performance and strategic achievements. The Trust’s net debt to EBITDA was reduced to within the target range of 8 to 9x. With an ESG rating upgrade to AA and a 5.1% same-property NOI growth for residential rental operations, the Trust announced a 4.3% increase in distribution payout. For 2025, FFO is expected to range between $1.89 and $1.92, with commercial same-property NOI growth projected at approximately 3.5%, positioning RioCan for sustained growth despite potential economic uncertainties.
In summary, RioCan REIT’s earnings call reflected a strong operational and financial performance with strategic growth and positive leasing spreads. While challenges exist in the condo market and interest expenses, the company’s strong leasing activity and market position provide a positive outlook for 2025, ensuring confidence among investors.
