TORONTO — Lifting COVID-19 restrictions helped one of Canada's most prominent commercial landlords collect more rent in its most recent quarter than at any other point during the pandemic.
RioCan Real Estate Investment Trust said Wednesday that it had collected 98.1 per cent of its billed gross cash rents in its third quarter, up from 90.8 per cent at the same time last year.
Chief executive Jonathan Gitlin attributed the high level of rent collection to RioCan's "necessity-based retailers," which he called the "bedrock" of the trust because they make up the bulk of its tenants and were resilient throughout the last 20 months.
He attributed the rest of the rent collection gains to a growing number of tenants able to reopen their doors and increase consumer capacity in recent months as COVID-19 restrictions were loosened.
"Experiential uses like gyms and restaurants limped through the pandemic, but they're finding their legs," Gitlin said, on a call with analysts. "They're becoming viable again."
That rebound translated to RioCan reporting a $137.6 million net income in its third quarter, up from $117.6 million in the same quarter last year.
Gitlin believes that number will only grow as restrictions continue to lift and traffic returns to properties, boosting ancillary revenues RioCan generates from parking, digital advertising and events.
As more people return to RioCan properties, Gitlin thinks they will also realize some of the bold assumptions people made about the pandemic triggering the death of brick-and-mortar stores are wrong.
"There were early conclusions about retail struggles, and I think they've given way to the recognition that people want engagement and control in their shopping experience," Gitlin said.
"Bricks-and-mortar retail isn't an alternative to e-commerce. It's not that binary."
Retailers seem to be buying into this theory too by snatching up leases even as the health crisis continues.
The trust completed more than 31,958 square metres of new leases and 58,157 square metres of renewed leases during the quarter ended Sept. 30.
Jeff Ross, RioCan's vice-president of leasing and tenant construction, said a lot of those leases are coming from national and ethnic grocers and quick- and full-service restaurants.
"Any time we have a blip, there's somebody right in behind them to pick it up," he said on the same call as Gitlin.
Ross has also noticed "proprietary retailers" like Under Armour, Levi's, Nike, Adidas and Sketchers pick up leases, generating foot traffic and credibility, especially at enclosed malls, which are "dragging a little bit."
"They're just slower to come back," Ross said. "Tenants are just stepping back a little bit. They want to see footfall continue to come back to it."
Ross thinks those enclosed mall spaces could be ideal for the influx in requests for proposals and government queries he is seeing because the spots can be converted inexpensively and effectively.
Plenty of attention is being paid to who could fit the vacancies and carry them through any further pandemic woes.
"Across the board, no matter who it is, we're spending a lot more time scrutinizing who the new tenancy is to ensure that they've got some skin in the game and they've got the strength to carry on," he said.
"But right now, the velocity and the interest from the leasing side has been pretty strong."
This report by The Canadian Press was first published Nov. 10, 2021.
Companies in this story: (TSX:REI.UN)
Tara Deschamps, The Canadian Press