Negative Points

• Core FFO guidance for 2026 was maintained at $1.60 to $1.62 per unit, despite the SPNOI guidance raise, due to offsetting factors like higher net interest expense and lower interest income.

• The residential density land market remains stagnant, with no green shoots in demand or transactions, limiting potential value from excess density on the balance sheet.

• The company incurred aborted deal costs in the quarter, indicating some transactions did not close, though they were described as de minimis.

• There is a residual balance of $86 million in unsold condo inventory, which, while small, still requires monetization and could be subject to market conditions.

• Cap rates on the portfolio were not adjusted lower despite market surveys showing compression, as management awaits more transaction data, potentially delaying recognition of value gains.

• The company faces potential risks from economic fluctuations and tenant failures, though management noted the portfolio's necessity-based tenants mitigate this risk.

Q & A Highlights

Q: Given the strong leasing spreads and raised same-property NOI guidance, what leasing spread assumption is embedded in your three-year guidance, and how do you view the upside potential? A: Jonathan Gitlin, President and CEO, stated that the three-year guidance assumed a 15% leasing spread, which the company has significantly outperformed in the first year. He noted that while there are always risks, the strong backdrop of supply constraints and high barriers to entry makes the 15% assumption look quite conservative, and the company feels very good about its path forward.

Q: Why did you raise the same-property NOI guidance but maintain the core FFO per unit guidance range of $1.60 to $1.62? A: Jonathan Gitlin explained that while the SPNOI outperformance is showing up in core FFO, the guidance range was designed to accommodate a range of outcomes across various drivers, including the timing of capital recycling, interest expense, and other items below NOI. The company remains confident that the existing core FFO guidance range is appropriate and will reassess as the year progresses.

Q: Can you provide an update on the RioCan Living monetization and the value of the remaining assets? A: Jonathan Gitlin confirmed that the $1.3 billion target was a conservative estimate and the company will likely exceed it once the remaining assets are sold. He noted that the RioCan Living assets are seeing a vibrant market due to being new, not subject to rent control, and requiring limited CapEx. He also mentioned that the remaining condo inventory of approximately $86 million is expected to be sold over the short to medium term.

Q: With the potential for assets to come to market, how are you thinking about acquisitions as a capital allocation lever? A: Jonathan Gitlin stated that acquisitions are becoming a more prominent option as the company's cost of capital has decreased. RioCan is well-positioned to acquire assets and add value through its platform. However, he emphasized that the company will weigh acquisitions against other opportunities like NCIB and retail infill projects, which are currently generating very attractive returns.

Q: Given the strong demand, are you pushing for higher embedded annual rent steps in new leases? A: Jonathan Gitlin affirmed that the leasing team always pushes for the highest possible going-in rents, annual bumps, and best non-financial terms. He noted that the strong backdrop supports these efforts, and the company continues to see embedded growth in leases increase over time.

Q: What is the plan for the remaining unsold condo inventory, and are you considering bulk sales? A: Jonathan Gitlin confirmed that the company is considering all options, including bulk purchasers and individual sales. He noted that the inventory is now de minimis at $86 million and effectively wound down, so its disposition will not have a significant impact on performance.

Q: Can you provide an example of the mark-to-market opportunity, such as the grocery store renewal in the GTA where rent doubled? A: Oliver Harrison, SVP of Leasing and Tenant Experience, explained that the grocery store lease was last negotiated at market approximately 30 years ago and had remained relatively flat due to its fixed option structure. This example highlights the significant embedded mark-to-market opportunities in the portfolio.

Q: Have you seen any material change in the trend of market rent growth, and what is the potential for growth in the next 12 to 24 months? A: Oliver Harrison noted that blended leasing spreads have been in the mid-20s% range for the last three quarters, indicating a stable and strong market. As long as occupancy remains high, the company is comfortable that this range will persist in the near term.

Q: Are you seeing any green shoots in the market for density land liquidity? A: Jonathan Gitlin and Andrew Duncan, Chief Investment Officer, both stated that the land market remains stagnant with little demand for residential density. The company does not rely on land sales for any projections and views the current situation as cyclical, with potential for value in the future.

Q: Would you consider joint venture partnerships for acquisitions, or do you prefer to own assets outright? A: Jonathan Gitlin stated that the company is open to all ways of owning property. RioCan has demonstrated its ability to be a good partner and manager for capital providers, but is also capable of owning assets independently. The decision would depend on the specific opportunity and what serves the best outcome for unitholders.

For the complete transcript of the earnings call, please refer to the full earnings call transcript .