RioCan Real Estate Investment Trust (TSX: RIF.UN) reported second quarter fiscal year 2026 results on Wednesday, with core funds from operations rising 5.3% year over year to $0.40 per unit. The Canadian retail REIT also raised its commercial same property net operating income guidance for the full year, citing sustained leasing demand and record occupancy levels.

The company’s commercial same property net operating income grew 4.3% in the quarter, marking the fourth consecutive period with growth above 4%. This performance led management to increase the 2026 commercial SPNOI guidance range to 4% to 4.5%, up from the previous range of 3.5% to 4%. Despite the operational strength, RioCan maintained its core FFO per unit guidance at $1.60 to $1.62, noting that factors such as interest expense and capital recycling timing offset some NOI gains.

Leasing Spreads and Occupancy Strength

Retail fundamentals remained robust, with portfolio occupancy reaching a record high of 98.8%. Blended leasing spreads stood at 23.1%, driven by new leasing spreads of 40.8% and renewal spreads of 20.7%. Average net rent for new leases was $37.73 per square foot, which is 60% above the average net rent per occupied square foot.

Management highlighted significant mark-to-market opportunities, with approximately 1 million square feet of lease maturities remaining in 2026 and 3.7 million square feet in each of 2027 and 2028. Approximately 30% of the portfolio’s leases roll through 2028, providing visibility into future earnings growth as rents adjust to market levels.

Capital Recycling and Balance Sheet

RioCan is nearing completion of its RioCan Living portfolio monetization strategy. The company has sold $1.26 billion of assets, effectively reaching its $1.3 billion capital repatriation target. During the quarter, it closed sales of 450 The Well and Bellevue Phase 1 and 2 for gross proceeds of $234 million. Subsequent to quarter end, RioCan entered into two conditional deals to sell interests in two additional Riocan Living properties for total gross proceeds of $206 million.

The balance sheet remains strong, with credit metrics within target ranges. The mix of unsecured debt to total debt improved to approximately 70%, and the unencumbered asset pool increased to approximately $9.7 billion on a proportionate share basis. RioCan repaid $500 million in Series AD unsecured debentures and $91 million in maturing mortgages using existing liquidity. Additionally, construction loans related to condo projects of approximately $114 million were repaid, leaving only $30 million of debt maturities for the balance of the year.

What the Numbers Show

A divergence exists between the raised SPNOI guidance and the unchanged FFO guidance. While commercial SPNOI growth of 4.3% contributed $0.02 per unit to Core FFO, higher net interest expense and lower interest income combined to reduce FFO by approximately $0.01 per unit. Additionally, unit repurchases contributed $0.01 per unit. This indicates that while operational performance is accelerating, financing costs are partially absorbing the incremental operating profit, keeping bottom-line FFO growth more moderate than top-line NOI expansion.

Capital allocation efforts continue to focus on retail infill and asset enhancements. RioCan invested $44 million in these projects in the first half of the year and plans to deploy approximately $100 million in 2026. The company’s net asset value increased by $0.23 per unit during the quarter, driven largely by $52 million in net fair value gains on investment properties. Management noted that these valuation gains were driven primarily by organic growth and higher cash flows rather than cap rate compression.

RioCan Real Estate Investment Trust (TSX: REI) announced that Dennis Blasutti will resume his duties as Chief Financial Officer, effective October 1, 2026. This leadership transition marks the conclusion of the interim tenure held by Franca Smith.

Franca Smith has concluded her appointment as Interim Chief Financial Officer and will continue in her role as Senior Vice President, Finance. She served in the interim capacity from March 23, 2026, through September 2026, providing leadership of the finance function during this period. The Trust acknowledged Smith's contributions during her interim service.

Portfolio overview

As of June 30, 2026, RioCan's portfolio comprises 164 properties with an aggregate net leasable area of approximately 31 million square feet at the Trust's interest. The company focuses on necessity-based retail properties located in densely populated communities across Canada.

The return of Blasutti to the CFO role follows a defined interim period managed by Smith, ensuring continuity in financial oversight for the retail real estate investment trust.