RioCan's Retail Resilience Shines, But Valuation Woes Tell a Deeper Story

TORONTO, ON – February 17, 2026 – RioCan Real Estate Investment Trust posted a robust set of year-end results for 2025, showcasing the strength of its necessity-based retail portfolio with near-full occupancy and soaring leasing spreads. The performance signals a company capitalizing on a shortage of prime retail space, even as it navigates the financial headwinds of higher interest rates and significant write-downs on property values.

In a year marked by economic uncertainty, RioCan reported a 3.6% growth in its commercial same-property net operating income (NOI), accelerating to 4.5% in the final quarter. Its retail spaces are in high demand, with occupancy hitting an impressive 98.5%. These strong operational figures allowed the Trust to increase its full-year Funds From Operations (FFO) per unit by 5.1% to $1.87. However, this operational success was juxtaposed with a starkly lower net income per unit, which fell to $0.23 from $1.58 in 2024, largely due to a $443.1 million net valuation loss on its properties.

“RioCan delivered another strong year, highlighted by exceptional operating results and disciplined execution of our capital recycling strategy,” said Jonathan Gitlin, President and CEO of RioCan, in the company’s press release. “We enter 2026 with momentum fueled by intensifying demand from leading retailers amid a broader market shortage of well-located retail space.”

Operational Muscle in a Crowded Field

RioCan’s 2025 performance underscores the resilience of its grocery-anchored and essential retail strategy. Its 98.5% retail occupancy rate stands shoulder-to-shoulder with top competitors like SmartCentres REIT (98.6%), demonstrating the sector-wide strength of landlords focused on non-discretionary shopping.

Where RioCan appears to have pulled ahead is in its ability to translate this high demand into significant rent growth. The Trust reported a record blended leasing spread of 21.1% for the year, a figure propelled by an extraordinary 37.3% spread on new leases. This suggests RioCan is effectively capturing the full value of its prime locations as old leases expire and new tenants compete for space. In comparison, competitors reported more modest, though still healthy, rent growth on renewals, with First Capital REIT at 15.8% and SmartCentres at 6.3% on extensions.

This leasing momentum provides a powerful engine for organic growth, allowing the company to weather broader economic pressures. The high tenant retention ratio of 93.1% further indicates that existing retailers see sustained value in their locations, renewing leases at higher rates with minimal capital outlay required from the landlord.

A Strategic Pivot: Capital Recycling and Shareholder Returns

A key theme of RioCan’s 2025 narrative was its disciplined capital recycling program, which repatriated $741.7 million. This wasn't a fire sale, but a strategic shedding of assets to fortify the balance sheet and reinvest in more promising areas. The bulk of the proceeds, $628.3 million, came from the sale of interests in its "RioCan Living" residential properties and condominium closings.

Another $113.4 million was generated from selling what the Trust deemed "lower-growth assets," including two cinema-anchored properties and office buildings in secondary markets. This move aligns with a broader trend of landlords re-evaluating their exposure to non-essential or experiential tenants whose business models face greater volatility.

The proceeds were put to two primary uses. First, the Trust aggressively paid down debt, improving its adjusted debt-to-EBITDA ratio from 9.12x to a more comfortable 8.64x, squarely within its target range. Second, RioCan directed a significant portion of the cash—$178.6 million in 2025 and early 2026—toward repurchasing its own units. Management has been clear in its belief that the market undervalues the Trust's portfolio, making its own stock an accretive investment. This dual strategy of deleveraging and repurchasing units is designed to directly enhance value for unitholders.

The Ghost of Ventures Past: Unpacking Valuation Losses

While the operational metrics paint a picture of health, the income statement reveals a significant drag: a $443.1 million net valuation loss. This write-down was the primary reason net income per unit plummeted despite strong FFO growth.

A substantial portion of this loss is tied to the final unwinding of the RC-HBC LP, RioCan’s ill-fated joint venture with Hudson's Bay Company. The department store giant's bankruptcy filing in March 2025 triggered major fair value losses for its real estate partners. In the third quarter alone, RioCan absorbed a $94.6 million write-down related to the HBC venture. While the company has now dealt with most of the properties from that portfolio, the financial hangover serves as a cautionary tale about the risks of exposure to struggling department store anchors.

The valuation losses also reflect the broader impact of higher interest rates on commercial real estate valuations across the board. As borrowing costs rise, the capitalization rates used to value properties expand, putting downward pressure on asset values even if their income streams remain strong. This creates a disconnect between the company's strong operational performance and its accounting-based net income.

A New Development Blueprint for 2026

Looking ahead, RioCan is forecasting continued strength with projected Commercial Same Property NOI growth of 3.5% to 4.0% for 2026. However, the Trust is also signaling a significant strategic shift in its development pipeline. After years of focusing on large, capital-intensive mixed-use projects under its RioCan Living banner, the company initiated no new large-scale construction in 2025 and has none planned for 2026.

Instead, the focus will be on less capital-intensive infill construction and asset enhancements, driven by existing tenant demand. This pivot reflects a more cautious approach in a high-interest-rate environment and a desire to maximize the value of its current land bank, which includes 19.4 million square feet of zoned development sites.

This pause on major development allows the company to conserve capital and focus on its core retail operations, which are currently its strongest performing segment. With a stable interest rate outlook from the Bank of Canada and consumer spending expected to drive modest economic growth, RioCan is positioning itself to thrive by focusing on what it does best: managing and leasing essential retail in Canada's most densely populated areas. The challenge will be balancing this near-term operational focus with the long-term growth that large-scale development can provide.