The chief executive officer of RioCan Real Estate Investment Trust has inked deals to sell 19 assets in the past four months, part of his drive to unload about US$2-billion worth of properties. At the same time, he’s tearing up some of his malls to develop apartments, trying to capitalize on the rental boom and insulate RioCan from the rise of e-commerce. By 2020, he wants more than 90 per cent of rental revenue to come from Canada’s six major urban markets, up from about 75 per cent now.
Retail REITs have lagged Canada’s S&P / TSX Capped REIT Index over the past two years amid a decline in mall traffic and companies are pushing into other sectors including apartments and offices.
A major migration to metropolitan areas is underway globally, Mr. Sonshine [RioCan founder] said. “So that’s where we’ve got to start focusing our assets because that’s where you’re going to get rent growth, more demand for space and that will be where you get population growth. There’s less demand for retail space, but there’s a lot of demand for great residential apartments. So I said, well, let’s just rip down all, or part of, our shopping centres and replace it with medium-rise or, depending on location, event high-rise apartments and then just put new retail on the ground floors of those buildings because here still is retail demand, it’s just very different.”