RioCan Real Estate Investment Downgraded to Hold Amid Hudson’s Bay Co. Financial Struggles and Revised Forecasts

In a report released today, Mark Rothschild from Canaccord Genuity downgraded RioCan Real Estate Investment (RIOCF – Research Report) to a Hold, with a price target of C$19.50.

Mark Rothschild’s rating is based on several factors affecting RioCan Real Estate Investment. The recent financial struggles of Hudson’s Bay Co. (HBC), which has entered creditor protection, have significant implications for RioCan due to their joint venture. This partnership, which once contributed notably to RioCan’s net operating income (NOI), has seen a decline, and the bankruptcy court’s decision has allowed HBC to halt rent payments to RioCan, impacting its cash flow.
While there is potential for long-term benefits as RioCan repurposes and re-leases the affected properties, the process is expected to be both costly and time-consuming. Consequently, Rothschild has revised the financial forecasts, slightly lowering the funds from operations (FFO) per unit for the upcoming years. Additionally, the net asset value (NAV) estimate has been adjusted downward, leading to a reduced target price for the stock. Given these factors, Rothschild has shifted the rating from Buy to Hold, reflecting a more cautious outlook on the stock’s near-term performance.