Riocan Real Estate Investment Trust Aktie

Good day, ladies and gentlemen, and welcome to the RioCan Real Estate Investment Trust Third Quarter 2026 Conference Call and Webcast. As a reminder, this conference call is being recorded.

I would now like to turn the conference over to Ms. Jennifer Suess, Senior Vice President, General Counsel, ESG and Corporate Secretary. Ms. Suess, you may now begin.

Thank you, and good morning, everyone. I am Jennifer Suess, Senior Vice President, General Counsel, ESG and Corporate Secretary of RioCan. Before we begin, I am required to read the following cautionary statement. In talking about our financial and operating performance and in responding to your questions, we may make forward-looking statements, including statements concerning RioCan's objectives, its strategies to achieve those objectives as well as statements with respect to management's beliefs, plans, estimates and intentions and similar statements concerning anticipated future events, results, circumstances, performance or expectations that are not historical facts. These statements are based on our current estimates and assumptions and are subject to risks and uncertainties that could cause our actual results to differ materially from the conclusions in these forward-looking statements.

In discussing our financial and operating performance and in responding to your questions, we will also be referencing certain financial measures that are not Generally Accepted Accounting Principles measures, GAAP, under IFRS. These measures do not have any standardized definition prescribed by IFRS and are therefore unlikely to be comparable to similar measures presented by other reporting issuers. Non-GAAP measures should not be considered as alternatives to net earnings or comparable metrics determined in accordance with IFRS as indicators of RioCan's performance, liquidity, cash flows and profitability. RioCan's management uses these measures to aid in assessing the Trust's underlying core performance and provides these additional measures so that investors may do the same.

Additional information on the material risks that could impact our actual results and the estimates and assumptions we applied in making these forward-looking statements, together with details on our use of non-GAAP financial measures can be found in the financial statements filed yesterday and management's discussion and analysis related thereto, as applicable, together with RioCan's most recent Annual Information Form that are all available on our website and at www.sedarplus.com.

I will now turn the call over to RioCan's President and CEO, Jonathan Gitlin.

Thank you, Jennifer. Good morning, everyone, and thanks for joining us. We had another strong quarter. But before I get into the results, I'd like to take a step back. Almost a year ago at our 2025 Investor Day, we laid out a clear strategy for RioCan. We said we'd focus the business on what we do best, owning and operating high-quality necessity-based retail in Canada's major markets. We said we'd use our independent platform to drive more value from our portfolio. And we committed to disciplined capital allocation and maintaining balance sheet strength. We are doing exactly what we said we would do. The results we are reporting today continue to demonstrate the strength of that strategy.

Core FFO per unit increased by 5.1% this quarter. Same-property NOI grew by 4.2% and we've effectively completed our $1.3 billion residential capital recycling program. So the message today is pretty simple. The strategy is sound. We're executing on it and the results are clear. That progress is supported by our proven independent platform, a culture of excellence, continued innovation and prudent ESG practices. Successful delivery also requires strong governance and strategic oversight. With that in mind, I'd like to welcome David Schwartz, who was recently appointed to RioCan's Board of Trustees. David brings extensive financial leadership experience and deep expertise in capital markets, strategic transactions and business growth. His experience building and scaling technology-driven businesses will also bring a valuable perspective to the Board. We look forward to benefiting from his insight and experience for many years to come.

The fundamentals in Canadian retail real estate continue to be very favorable. Demand for high-quality space is strong. New supply remains limited and retailers continue to compete for well-located space in Canada's major markets. We believe these conditions are enduring. Our strategy was built to perform in any market condition. But when fundamentals are this strong, the opportunity is even greater. And we are perfectly positioned to capitalize on it through our operating independence, strong occupancy and the embedded growth within our portfolio. Retail committed occupancy reached a RioCan record of 98.9% this quarter. Our retention rate was almost 90% and we completed approximately 1.1 million square feet of leasing, including about 900,000 square feet of renewals. Good retail space is scarce and scarcity has value. We're capturing that value through our leasing program.

Our blended leasing spread was 17% this quarter and 22.7% over the last 12 months. The rents we're achieving on new leases continue to demonstrate the magnitude of the opportunity embedded within our existing assets. During the quarter, the average rent on new leases was $31.45 per square foot. That's 32% higher than the average rent on occupied space across the portfolio at quarter end. That gap matters. At Investor Day, we talked about the embedded growth within our existing portfolio and the opportunity to capture it as leases mature. That's exactly what's happening. And because our leases roll over gradually, that opportunity extends well beyond today. Approximately 15% of our leases roll every year and there remains a meaningful gap between in-place rents and market rents. Today's leasing spreads are tomorrow's same-property NOI growth. As those rents commence and annual escalations take effect, leasing will remain an important contributor to growth.

We can choose the right tenants on the right terms while minimizing downtime and capital outlay. Our decisions are driven by what creates the most value for our properties and our unitholders. The result is a more productive portfolio, more durable and predictable cash flow and attractive risk-adjusted returns. We're seeing good examples of that across the business. During the quarter, we completed deals with 2 national grocery tenants totaling approximately 63,000 square feet. One of these transactions, representing 35,000 square feet was completed at a 64% increase in rent. In the last 12 months, we've completed 11 grocery renewals totaling more than 400,000 square feet at an average blended leasing spread of approximately 35%. We've also added nearly 200,000 square feet of new grocery uses to our portfolio. These are necessity-based uses.

They're productive co-tenants for current and future retailers, important to the communities we serve and add value to our properties. And while grocery is an important part of our portfolio, the diversity of our tenant base provides important income protection. We're not overly dependent on any one tenant or retail category. And at the same time, our independence gives us the freedom to pursue growth wherever we see the best opportunity to create value. That combination matters. Diversity provides resilience, independence creates opportunity, and we have the locations where tenants want to be. That leasing strength is translating into earnings. We are reaffirming our core FFO per unit guidance of $1.60 to $1.62. We now expect to finish the year at the high end of that range. The underlying business continues to perform well. We increased our same-property NOI growth outlook to 4% to 4.5% last quarter and we are reaffirming that guidance today. We feel good about where the business is today and we feel even more positive about the opportunity ahead.

Another major commitment we made was to repatriate capital from the monetization of our residential portfolio. We've effectively achieved our $1.3 billion RioCan Living monetization target, delivering the commitment we made at Investor Day. This doesn't represent the full extent of the opportunity. We retain interests in 3 highly desirable residential assets, which provide additional opportunities for monetization and accretive capital allocation. We've simplified the business and created capacity to put capital back to work where we have an advantage, retail. This isn't just capital recycling, it's strategy in action. And as that program nears completion, our capital, which includes our growing free cash flow becomes even more concentrated in our core business.

At Investor Day, we also talked about our dynamic approach to capital allocation. The best use of capital can shift as market conditions change. Our job isn't to predict a return in the market. It's to have a clear strategy and the flexibility to direct capital to the opportunities where it can create the greatest long-term value. We're seeing more of these opportunities and we're putting that flexibility to work. One example from this quarter is our agreement to acquire our partner's 37.5% interest in East Hills in Calgary for approximately $55 million. Following closing, our ownership interest will increase to 77.5%. East Hills is a Costco anchor property in a densely populated affluent neighborhood with a strong demand for necessity-based retail. This is exactly the type of opportunity that we're looking for.

We don't need to chase growth. We can be patient and put capital to work where we know we have an advantage and where we believe it can deliver the strongest risk-adjusted returns. Sometimes that means acquiring an interest in an existing asset or a new property, but many of our highest return opportunities already exist within our portfolio. We have the people, data, relationships and operating capabilities to unlock that value efficiently. That can mean adding retail density, improving merchandising mix or repositioning underutilized space. These opportunities can generate highly attractive returns with a fraction of the capital required for ground-up development. We invested $77.5 million in retail infill and asset enhancement projects in the first 3 quarters of this year, and we remain on track to deploy approximately $100 million into the portfolio in 2026.

A component of that capital is being directed to asset enhancements like the reinvention of Yonge Eglinton Center, which includes the expansion of the metro, relocation of the LCBO and introduction of new tenants, RBC, jump+ and Kiokii. The remainder is being invested in high-return retail infill projects, including the addition of new retail GLA at 9 existing RioCan sites across the country as well as the new Costco of RioCan Burloak. In a market where capital remains expensive, this is a meaningful advantage. We can create growth from the real estate we already own while preserving financial flexibility. That flexibility gives us the ability to act when compelling opportunities emerge. The approach is straightforward: redeploy our free cash flow and source capital from lower growth or noncore assets into opportunities that increase value and maintain balance sheet strength.

Before I wrap up, I want to come back to where I started. Last November, we laid out a clear strategy, focus on retail, maximize the value of the portfolio we already own, simplify the business, maintain balance sheet strength and allocate capital where we see the best opportunities to create long-term value. Almost a year later, our confidence in that strategy has only grown. We are operating from a position of strength. Tenant demand remains strong. Market rents continue to run well ahead of rents in the portfolio and we're capturing that growth through our leasing program. We have a focused business with greater earnings visibility, increased financial flexibility and a clear path to durable cash flow growth. And our independent platform gives us the capabilities to keep finding and executing opportunities across the business.

The environment will continue to evolve. That's normal. Our strategy doesn't depend on everything around us staying the same. We have the flexibility to adjust the path without changing the destination. The strategy is sound, the opportunity is strong, and we're executing. We're confident in the business and focused on continuing to create and compound value for our unitholders over the long term.

With that, I'll turn it over to Dennis to take you through the financial results in more detail. Thank you very much.

Thank you, Jonathan, and good morning, everyone. I'll start by addressing the broader operating environment, where we continue to see contrasting dynamics. Retail fundamentals remain strong. Tenant demand is resilient and the supply of quality retail space is limited. At the same time, ongoing inflation concerns continue to drive volatility in interest rates and put pressure on financing costs. Against this backdrop, our focus remains consistent, executing our retail-focused strategy. In this environment, the ability to grow rents, capturing embedded mark-to-market opportunities is a competitive advantage. As an independent retail REIT, we have a long track record of doing just that, capturing inflation through rent growth. With that context, I'll turn to our financial results.

Core FFO in the third quarter was $0.41 per unit, up 5.1% from last year. There were 3 main drivers. First, commercial same-property NOI grew 4.2% and contributed approximately $0.02 per unit. Second, our capital allocation decisions contributed just over $0.01 per unit. This included the impact of acquisitions net of dispositions of commercial properties and accretion from unit repurchases under our NCIB program. Third, these benefits were partially offset by lower interest income and higher interest expense. Together, these items reduced core FFO by approximately $0.01 per unit. As outlined in our 2025 Investor Day, we expect interest income to continue to decline as our mezz loans are repaid and we redeploy that capital into our business and balance sheet. Year-to-date core FFO was $1.19 per unit, an increase of 2.6% from last year. Looking ahead, we expect 2026 core FFO per unit to be at the high end of our $1.60 to $1.62 guidance range, reflecting strong same-property NOI growth and $4 million higher lease cancellation fees compared to last year.

Our retail-focused strategy is also reflected in our capital allocation decisions. First, we closed on the sale of a Toronto apartment building Pivot during the quarter, bringing total proceeds from completed RioCan Living dispositions to approximately $1.2 billion. Including a $110 million conditional sale, we have effectively achieved our $1.3 billion RioCan Living capital repatriation target. With 3 RioCan Living assets remaining to be sold after this year, we expect the ultimate proceeds to exceed our $1.3 billion target. Second, we continue to invest in retail opportunities where we see attractive risk-adjusted returns. Our top capital allocation priority remains investing in our own portfolio. Beyond that, we consider other retail investment opportunities that meet our capital allocation framework.

Our decision to acquire additional ownership in East Hills is a good example of our disciplined approach. Importantly, this acquisition is expected to deliver strong risk-adjusted returns and exceed our 9% unlevered IRR hurdle rate. This transaction will result in a modest increase in debt-to-EBITDA initially. However, we expect the impact on this metric to be neutral once the full year of EBITDA is captured. Third, as our mixed-use development program nears completion, we have repositioned certain residential inventory lands for retail use. This repositioning is a natural extension of our retail focused strategy. As a result of this change in use, $235 million of residential inventory density was transferred to investment properties and properties under development. Over time, we expect these assets to generate more durable and recurring cash flows.

I will now turn to the balance sheet. While borrowing costs remain elevated relative to our Investor Day assumptions, we remain focused on factors that are within our control and continue to manage the balance sheet proactively. During the quarter, we entered into a new $400 million 7.3-year term loan and the net proceeds were applied against our line, improving liquidity. This new facility is priced inside our line, allowing us to extend our debt maturity profile while lowering our overall borrowing costs. Since Q2, we also extended $400 million of term loans from 2030 to 2032, further improving our debt maturity profile. At quarter end, we met our 70% target of unsecured debt to total debt and increased our unencumbered asset pool to $9.7 billion. We have more than $1.1 billion of liquidity, diversified funding sources, a sustainable payout ratio and credit metrics in line with our target ranges. Together, these improve our financial flexibility to manage our upcoming debt maturities.

As a reminder, our Investor Day projections assumed a 4.5% cost of debt and reflected the impact of refinancing lower-cost debt through 2028. Since then, the cost of unsecured debentures is approximately 40 to 50 basis points higher at the long end of the curve. At the same time, we have seen outperformance in our same-property NOI growth this year, demonstrating how stronger rent growth can help offset higher financing costs. Beyond 2028, the weighted average interest rate on debt coming due is in the high 4% range. Therefore, the incremental refinancing impact should moderate over time. We view this as a near-term impact within what is fundamentally a long-term business.

Our results demonstrated continued execution of our retail-focused strategy. Retail fundamentals remain strong and the quality of our portfolio is reflected in our results. Disciplined capital allocation has strengthened our balance sheet and improved our financial flexibility. And our independent retail platform positions us well to continue to capitalize on the strong leasing environment and unlock embedded growth within our portfolio long into the future. Taken together, these elements will enable us to compound value over the long term.

With that, I will turn the call back to the operator for questions.

[Operator Instructions] Your first question comes from the line of Sam Damiani from TD Cowen.

Just first off, with the move in interest rates over the last 3 months, even though they've retraced that a little bit. Just wondering what your outlook is for acquisitions and your target debt metrics today versus 3 months ago?

Sam, thanks for the question. So our target for -- our outlook on acquisitions is similar to where it was before. Our hurdle rate for any new investment, whether it's acquisitions, development, anything is a 9% unlevered IRR, which is always looking at our weighted average cost of capital. The cost of capital for RioCan has gone up as a result of interest rates, for sure, as well as our stock price, but we still are disciplined about achieving that hurdle rate. If acquisitions are available to us that offer that type of output, then we will look at them. But again, we're looking at them in comparison to some of the other options that we have to allocate capital, such as pad developments or paying down debt, which in this kind of environment have a good output as well.

With respect to our target debt metrics, again, we have stated before that we are comfortable operating within the envelope of 8 to 9x net debt to EBITDA. We are comfortably within that range. Our expectation is as more and more of our noncore asset dispositions take place, such as the RioCan Living dispositions, those metrics will continue to improve, but staying within that range.

That's helpful. And maybe last one for me. Just do you have a specific outlook for 2027 at this time in the context of your longer-term outlook provided last year?

We're going to provide guidance in Q1, for sure, as we always traditionally do. I would say, though, as I mentioned in my comments earlier, Sam, that the retail landscape looks very good. RioCan is set up to do well in that environment. And we feel very strong about our capabilities as an independent platform to extract a lot of value and a lot of income growth out of the portfolio. But in terms of specific guidance, we will provide that at a later time.

Your next question comes from the line of Pammi Bir from RBC Capital Markets.

I'm not sure if maybe I missed this in the disclosure, but just on the lease termination fees, it was a bit larger this quarter. Any color you can share on what they relate to? And maybe any updates on re-leasing that space? And then I guess the second part to that would be if there's any further lease termination fees anticipated in Q4?

Okay. I didn't pick up the last part of the question.

It was lease termination fee. Has the space been backfilled? And do you expect any more outsized over the balance of the year?

All right. Thank you, Oliver. Pammi, thank you for that. So the deal that was sort of outsized was relating to our property at 1860 Bayview where we had a Whole Foods in place. Whole Foods, I don't know what their long-term views on Canada are, but clearly, that asset was not in their future. So they did want to remove themselves from their obligations. We negotiated a very good deal with them that would effectively make the backfill, which is now completed with an excellent operator, neutral to us economically. So whatever the lease termination buyout received whatever we got from lease termination will cover any downtime, any TI and any landlord's work and then some. So we feel ultimately that it is a strong use of our platform to take a tenancy that wasn't working well and to replace it with a tenant that will be more suitable and more viable going forward at economic terms that are even more favorable than the prior tenancy. So for us, we're looking at this as a positive, but it was a fairly sizable number. So it is in -- it's $4 million higher than our average sort of than last year's lease buyout number.

And Pammi, just on this, it gets -- the lease buyout gets amortized across Q3 and Q4. So you saw part of it in this quarter and you'll see the other half of it in next quarter. And that will add up to that $4 million annual over -- increase year-on-year of $4 million.

And the catalyst to do the lease buyout was partially due to the fact that the tenant was underperforming, but they also had gone dark in August. So active asset management, we want to make sure that our spaces are tenanted and driving traffic. And clearly, that doesn't happen when a tenant isn't operating out of the space.

Okay. Got it. So that space was vacant, like it wasn't in your occupancy numbers or it was taken out of your occupancy in the quarter in Q3 on an in-place basis.

But they were paying rents and the tenancy was valid.

Sorry, Jonathan, you got cut off there. I'm not sure what happened.

Sorry. So the tenant was in place. The lease was valid and they were paying rents. So they weren't stripped out of occupancy.

Okay. Okay. Just coming back to the debt maturities, there's a fair bit rolling over the next couple of years. And with the backup in rates, can you maybe just talk about the refinancing plans, I guess, for at least next year and maybe where you're seeing rates today on both secured and unsecured?

So the refinancing plans for next year, I mean, we've got a lot of time, a lot of flexibility. We've got more funds coming in from the sale of RioCan Living assets. We've got $1.1 billion of liquidity. So we're not forced to go to the market now to raise funds if we need to. But we'll gauge the market between now and then to see if it is viable for us to go out and raise some further funds. But even in the absence of that, we will be set to pay off whatever obligations we have due next March.

With respect to the interest rate environment, right now, look, rates have gone up. The -- we look at the 7- or 10-year bond market and it has gone up probably in the range of 50 basis points, largely due to the underlying government of Canada bond rates. The spreads have actually been quite tight and I think that's a reflection of the strength of the industry. So it really is more a question of the underlying bond rates. And that's due to a lot of geopolitical matters that are beyond my pay grade to understand exactly how they're all going to correct themselves. But the last part of your question was around the difference between secured and unsecured. And right now, we're seeing no real difference in rates between secured and unsecured.

Okay. Got it. Maybe just last one for me. Just with your retail occupancy committed numbers, again, another record high and the spreads are still holding in. With the Canadian consumer just being relatively resilient, notwithstanding that we are still in a bit of a shaky economy, are you seeing any changes at all in terms of the tenant behavior yet? I know Q4 tends probably not to be that quarter where you see it. But I guess I'm just thinking about maybe 2027 and any scaling back of expansion plans or leasing velocity from tenants just given where we sit today?

Yes. I think the evolution of the Canadian tenants as well as the global tenants has been nothing short of remarkable in the sense that they have really sensed the Canadian consumers' needs and shifted to more of a discount focus. So if you look at the grocery chains and if you look at hard goods purveyors, they've really leaned into the notion of discount. And I think that served them very well. And I also think it's served the Canadian consumer very well in this environment that we're in. And so you're seeing still rapid expansion of those discount banners.

For grocery, for instance, there's a lot of new discount banners opening up, but there's also a lot of conversions from existing full-line stores into discount. And I think you're going to continue to see that because it actually is supported by the current economic backdrop. There will, of course, always be certain tenancies and businesses that in this type of environment will suffer. But we're in that type of super cycle, as I've mentioned before, that where we do have a struggling tenant, we've got an equal or greater number of viable tenants that want that space and typically at higher rents.

So we see still a significant amount of strength in the business operationally. And so it's not of a significant -- I mean, everything is a concern to us. I shouldn't be light about it, but we haven't really seen a change in tenant behavior other than them simply evolving to capture the moment. So that's from a macro perspective. From a micro perspective, I mean, as I said, there's always going to be tenants in this kind of environment that might struggle more so than typical.

Oliver, I don't know if there's any specific uses that you're seeing any weakness in at this point?

No, nothing that would be of a concern. Yes.

So our watch list is de minimis and we don't see that changing substantially into 2027.

Your next question comes from the line of Lorne Kalmar from Desjardins.

Maybe just quickly circling back on the Whole Foods space or former Whole Foods space. So based on the comments previously, it sounds like in-place occupancy, all else equal, would come down, but committed should stay relatively unchanged based on the backfill?

Correct.

Okay. Perfect. And then maybe just going back to the acquisition side of things. One of your partners is undergoing a pretty substantial disposition program. I was wondering if there is any potential interest in acquiring some of the assets that you hold jointly with them.

Do you care to mention the name? I'm not clear on who you mean, Lorne.

Sorry, Allied.

I know, I'm kidding with you. Look, I don't know exactly what their disposition plan entails. They've announced the sale of certain multi-res assets, but the assets we own with them are certainly core to their portfolio. And what's core to them might not necessarily be core to us in the sense that they own a lot of office and our core focus is retail. So it's not something that sort of screams opportunity for us. So at this point, there haven't been any real significant thoughts given to it.

Okay. And then just maybe lastly, sticking on the acquisition theme here. Obviously, FCR is going away at some point. Do you expect there to be any acquisition opportunities as a result of that deal closing, I guess, more likely from the KingSett side than the Choice side?

Yes. We've seen a fair bit of opportunity hit the market. There is definitely KingSett as a private equity organization, I can't speak for them, but typically, their MO would be to dispose of the assets over time that they've acquired. So that does present an opportunity. But truthfully, Lorne, we are seeing outside of that sizable one, certain assets hit the market. I mean, in the last year alone, you've seen that sizable asset in the northwestern part of Toronto, Heartland, and you've also seen shops at Don Mills and some others. So you are starting to see people try to take advantage of what is a very strong private market valuation environment. For us, as we've always said, we've got a suite of possibilities when it comes to capital allocation. Right now, there is a very good output for us from investing in our own portfolio and -- sorry, and building out strips and pads. But if acquisitions fulfill our objectives of growth, then we will look to those as well. And the good news is that they are available to us should we decide to allocate capital that way.

So I think there are some good opportunities and we'll -- we've got an excellent investments team led by Andrew Duncan and they will -- I mean, they've got their nose to the ground always. So if those opportunities arise, whether they're on market or off market, we will certainly have a look at them. And as we demonstrated, Lorne, just before I finish, on the East Hills transaction, we've also got certain partners that do own retail that might be looking to shift their focus and where those opportunities arise, we are in a very good position to take advantage of that and avail ourselves of those types of transactions. So we'll definitely be active when it comes to -- if those opportunities like East Hills arise again.

Your next question comes from the line of Matt Kornack from National Bank of Canada Capital Markets.

Just wanted to quickly go back to the $1.62 guidance on core FFO and being at the high end of the range. That would kind of imply $0.43 of core FFO in Q4, and I understand your comments around lease termination income, but there would also kind of be another $0.02 of pickup from what you did this quarter. Is there anything -- I mean, can you give us some direction as to where maybe that pickup would come from? Is it NOI? Is it other fees or something else?

I think it's just coming from the base business as the main driver. So as I did mention, there is an amortization of the lease buyout that we mentioned, so half this quarter, half next quarter. So that will repeat itself in the quarter. But otherwise, it's really just coming out of our portfolio.

Dennis, welcome back. Good to hear your voice. And then maybe next one, Lorne, I think, was trying to ask about The Well, understanding that may or may not be core to Allied. We'll see what ultimately happens there. But is that an asset that you'd want more exposure to or that you think there will be institutional interest in should Allied ultimately part ways with it?

So again, I'm not going to attempt to speak for Allied, but our view on The Well is that it's a very good asset. It's performing exceptionally well. And there has been good activity and momentum on the office side and then the retail side equal momentum. So we do like the asset. We think it's part of our portfolio that is performing very well. And I think that would be of interest. Again, I can't speak for institutional owners, but I do know that, that type of asset would logically fit within the profile of what institutional investors are looking to own given its core nature, given it's fairly young, so it's got no CapEx requirements for a very long time. And given the types of tenancies that we put in place that we and Allied have put in place. So I think it is very marketable. But again, the intentions of Allied, I cannot speak to. And for RioCan, it's a very good asset for us. It is -- we're benefiting from its growth and its consistent income.

Okay. Fair enough. And then maybe lastly, just in terms of tenant demand, are you seeing -- I mean, it's been a core kind of group of tenants that have been targeting your space. But are you seeing kind of new entrants to the market also building on kind of the strength of what you're seeing in the incumbents?

I really do think it's a story of the incumbents, Matt. There are always some new entrants into the market. I mean here at Yonge Eglinton Center, we're doing a Kiokii lease, which is something that we've never worked on before and I know they're expanding in Canada now. But I would say that's not the rule. The rule is that we're really seeing excellent growth from the existing retailers that are either global in nature like Walmart and Costco and Sephora or those that are local to Canada. I mean, like Loblaws has done a phenomenal job of growing out their various banners, Canadian Tire with their Sport Chek and Mark's Work Warehouse banners, the gyms that we have here in Canada, Dollarama, TJX, they're all doing remarkably well and they're expressing this performance by trying to grow their footprint, which is in this kind of environment, very difficult to do. So it sets us up well. But there's no fireworks here in this answer for you, Matt. It really is a lot of the same players. I can look to Oliver Harrison just to see if I've missed anything.

The only thing to add would be that based on the strength of the Canadian retailers, they are looking to introduce new brands into the market. So as an example, TJX for quite some time has been talking about bringing their Sierra brand to Canada. We met with GoodLife at the ICSC last week. They're looking at coming out with some new GoodLife brands to fill in, in markets where they want to grow. So retailers are definitely looking to continue to increase their footprint, not only through the expansion of their existing banners, but also new banners that they're going to introduce to the market, hopefully sooner than later.

And I guess, is it also a combo of expanding the footprint that they may already have on a site that you have in addition to maybe trying to target new sites within -- or add to new sites within your portfolio?

By any means possible.

Your next question comes from the line of Tom Callaghan from BMO Capital Markets.

Recognize official guidance will come early next year here. But obviously, leasing spreads and organic growth continue to run quite strongly against the assumptions you guys have laid out at the Investor Day last year. I guess, Jonathan, just given the fundamental backdrop you framed the mark-to-market opportunity on in-place rents, is there any reason to think that this won't again be the case into 2027 in terms of the outperformance on the leasing side?

So Tom, I don't see a catalyst that would derail the current strength of retail in Canada. I mean I'll go back to the fundamentals. There is no new supply, there is a significant desire or demand for space, not just in Canada. I want to break this down to where RioCan owns assets. Our demographic profile is now second to none within Canada and this is exactly where tenants want to be if they're opening up new stores. And said differently, they would be loath to give up those locations at any point in their trajectory. So with that fundamental set of circumstances ahead of us, we don't see a catalyst to derail the current state of the market, particularly for RioCan and its portfolio. So the short answer then would be there's like no, we don't see any real change in circumstances.

Perfect. And I guess last one here, but just a quick follow-up in terms of the acquisition commentary and the opportunities you mentioned, Jonathan. Just given the rise in volatility in yields, have you started to see any movement on pricing or not really just kind of given investor appetite for this type of product?

Yes, it's an interesting question, Tom, because I know in the U.S., there's been a lot of movement on cap rates to really keep in stride with the interest rate move. In Canada, we haven't yet seen it. Maybe the market isn't as fluid and there aren't as many data points, though. And so again, there's usually an inevitability of that conclusion. Interest rates go up, cap rates get impacted, but we certainly haven't seen it. And that might just be because there is such a significant demand for institutional and non-institutional ownership for retail assets that they're looking at the long-term view on the outputs of those properties. And so, so far, we haven't seen a real impact. I don't know, Andrew, if you have a different view?

No, Jon, that's right. I think the answer is, to put it surely is not yet. We haven't seen cap rates going up, but I anticipate we'll start to see it shortly.

Your next question comes from the line of Mario Saric from Scotiabank.

Just maybe following up on, Andrew, your last comment on cap rates not yet going up. That infers that you do think that they may start to go up. What do you think the catalyst is for private market cap rates to start moving higher?

Mario, it's a simple answer, it's interest rates, it's cost of debt. So that's what I see. And again, the Canadian market is not as prolific as the American market. So buyers can afford not to sell stuff they don't want to. But once they do put it on the market, all the math is being done with the spread, the debt and a longer-term return.

Got it. Okay. And so from a RioCan standpoint, I guess, patience -- you talked about patience on the acquisition side a couple of times during the call. Is that the right way to think about it in terms of target assets expecting cap rates to come up? Or how does the kind of opportunity set for acquisitions shift with the expectation of higher cap rates going forward?

So there's a couple of things that I'll add to that answer or put into that answer, Mario. First of all, I mean, I think patience or discipline are the appropriate words. We don't have a gun to our head to invest in assets because we do have a suite of opportunities to allocate capital towards such as our portfolio build-out program, even buying back shares, that's not something we're going to do at this point, but it's something we've participated in, in the past, paying down debt. So there are other ways for us to deploy capital that will be strong uses for us.

That being said, we have an excellent platform. We've got a platform that can see and then I think, unfold opportunities that perhaps others can't when we're faced with certain assets that might be viewed as challenging. And we feel that if those opportunities are in front of us, we will seek to take advantage of them. There aren't a lot of those opportunities in Canada, but we've certainly seen them before and we'll see them again. And those are the types of assets that we can certainly see ourselves acquiring in the future. And then things like ESLs, where we've got partners that just have a shifting view of what they want to own, if we can take advantage of those types of outcomes, we will in the future.

Just on the pad build-out, the returns on that are extremely good. How easy or difficult, I guess, is it to really kind of accelerate that pipeline in terms of capital deployment?

And nothing is easy. I mean it's -- look, when you're -- we make it sound easy and we have a team that makes it seem easy, but there's a lot of obstacles that are in front of you when you want to build out pads and strips. One, you need the tenant interest, which thankfully, with our portfolio, its locational attributes and the market we're in, that's not the hardest thing to garner. But then you also need to get things rezoned. You need to typically deal with other tenancies on the property that might have some rights. And these are things that we're quite good at. We've got a platform that has had years and years of experience of doing those things. So for us, they are obstacles, but they're not insurmountable obstacles. But yes, everything comes with its challenges. We're just very good at surmounting those challenges.

Okay. And just maybe 2 more quick ones on my end. Coming back to The Well, from a RioCan perspective, do you view The Well as being like 2 separate asset classes, i.e., office than the retail? Or do you view the site as homogenous office retail site?

Yes, it's a great question. I mean, truthfully, it could be either or like -- I mean, they do fit well together, the uses. It's always been viewed as a mixed-use property where you've got great retail, which feeds great residential, which feeds great office. But that being said, they can absolutely be viewed as different components where if you wanted to, you could -- as we've demonstrated with the residential, you can have the residential ownership be entirely different than the retail ownership and then the office ownership. So they have been set up such that they can all be viewed as separate components, but they all do operate in a nice ecosystem. Good word, Dennis. I was going to say synchronicity.

Yes, that's also a good word. Both are.

Okay. My last one, just more of a higher-level question. RioCan gone through successfully transition in the past couple of years with respect to selling majority of the residential. The condo inventory is a blip in terms of the NAV today. Occupancy is at a record high, blended lease spreads are at a record high. What -- when you look out over the next 12 months or 24 months, like what's the 1 or 2 things that really excites you from this point forward given what you've accomplished in the last few years with the portfolio?

Yes. So it's -- I mean, really, Mario, it's operating what we've created. So I think we have now taken care of a lot of the things that are, I would call, distractions to the capital markets. And so now we're -- we've got a path forward where we can take this very shiny clean object and operate the hell out of it. We've got an excellent team, as I've said, and our portfolio has never looked better. So my excitement is around seeing what that portfolio can produce when there are no other distractions or focus points and how the capital markets react to this exceptional operational platform and the environment that we see before us in the next year. So it's not -- again, it's not an answer full of fireworks. It's basically taking this unbelievable car that we just tuned up and driving down this highway at a really, really fast clip.

Your next question comes from the line of Dean Wilkinson from CIBC.

Welcome back, Dennis. Jon, my apologies for my long Vito Corleone like preamble to this question, but it's kind of what I do. The interest rate environment and that discussion kind of fascinates and perplexes me. Like let's call it, a little over 360-ish is a number that the 10-year has pierced 4, 5x in the past 2 years. We're like 17 basis points above that right now. During that ensuing period, credit spreads have come in. So like what's your view that this whole conversation and potentially my Op-Ed focus on it is more a headline than an actual headwind? And like just what are your views about -- you've seen a cycle or 2 on credit. I mean it doesn't seem as bad as perhaps it's being made out to be, but just interested on your thoughts there.

So I'm picturing you stroking a white cat sitting in a study and it's your daughter's wedding. So I'm thankful for this opportunity to speak to you, Vito. So -- and only those who love the Godfather will know what I'm talking about. Look, I think that interest rates -- they're, of course, a part of our business. And we have a balance sheet such that interest rate moves do have an impact. But what we've been saying for quite some time now is that our operational excellence and the output of our portfolio has been extraordinary and it's offset the amount of interest headwinds that we've had to face by and large. I mean just this quarter, if you look at the fact that our same-property NOI is about 70 basis points above our guidance level, that has almost offset the 50 basis point rise in interest rates.

So when you look at the big picture, Dean, you're quite right. It doesn't have nearly the impact on our business that the reaction to them would suggest they should. So I do think it is a headline, but I can't just miss it to say that it's not something that we're concerned about. It is, but I do think it gets a lot of play in the views of the investor public.

I'm going to double down on this one, Vito. This is real assets 101, as you very well know. We came out with guidance in our Investor Day of 3.5% same-property NOI growth and we assumed a 4.5% all-in interest rate. As of today, I mean, this thing can move around a bit, but including the compression in spreads, we would be high 4s on interest rate and we're into the -- as we disclosed, 4% to 4.5% range on same-property NOI. This is the natural hedge that exists in our business. We have a pricing power through the supply-demand dynamics that Jonathan mentioned, where we can capture inflation and offset the interest rate headwinds.

And I mean, these interest rates are simply higher than we assumed at our Investor Day, but they're not terrible to your point. They're not -- they're not a killer. We'd rather they didn't go up, but they're not a killer because we are outperforming on the other side. And we have a long history. We've gone back and looked over many years, 15 years plus of capturing inflation in our rents and we expect to be able to continue to do that.

Yes. I mean I just -- I looked at all of the unsecured real estate debentures issued in the past 4, 5 weeks, and it's well over $2 billion. Term might be a little shorter, 4-ish years, but the interest rate is in the mid-4s. So if you did go a little shorter, not suggesting you do that, I think you would land on the figures that you did present. But I guess like everything, it will get sorted out when people realize that.

I am showing no further questions at this time. I would now like to turn the conference back to President and CEO, Jonathan Gitlin.

Thank you very much. Just reiterating, our strategy is sound. The opportunity is strong, and we are executing. We're very confident in our business and continuing to create and compound value for our unitholders over the long term. Thank you, everyone, for listening in, and we will look forward to speaking to you all again next quarter, if not before.

This concludes today's call. Thank you for attending. You may now disconnect.

Good day, ladies and gentlemen, and welcome to the RioCan Real Estate Investment Trust Second Quarter 2026 Conference Call and Webcast.

As a reminder, this conference call is being recorded. I would now like to turn the conference over to Ms. Jennifer Suess, Senior Vice President, General Counsel, ESG and Corporate Secretary. Ms. Suess, you may begin.

Thank you, and good morning, everyone. I am Jennifer Suess, Senior Vice President, General Counsel, ESG and Corporate Secretary of RioCan.

Before we begin, I am required to read the following cautionary statement. In talking about our financial and operating performance and in responding to your questions, we may make forward-looking statements, including statements concerning RioCan's objectives, its strategies to achieve those objectives as well as statements with respect to management's beliefs, plans, estimates and intentions and similar statements concerning anticipated future events, results, circumstances, performance or expectations that are not historical facts. These statements are based on our current estimates and assumptions and are subject to risks and uncertainties that could cause our actual results to differ materially from the conclusions in these forward-looking statements.

In discussing our financial and operating performance and in responding to your questions, we will also be referencing certain financial measures that are not generally accepted accounting principle measures, GAAP, under IFRS. These measures do not have any standardized definition prescribed by IFRS and are therefore unlikely to be comparable to similar measures presented by other reporting issuers. Non-GAAP measures should not be considered as alternatives to net earnings or comparable metrics determined in accordance with IFRS as indicators of RioCan's performance, liquidity, cash flows and profitability.

RioCan's management uses these measures to aid in assessing the Trust's underlying core performance and provides these additional measures so that investors may do the same. Additional information on the material risks that could impact our actual results and the estimates and assumptions we applied in making these forward-looking statements, together with details on our use of non-GAAP financial measures can be found in the financial statements filed yesterday and management's discussion and analysis related thereto, as applicable, together with RioCan's most recent annual information form that are all available on our website and at www.sedarplus.com.

I will now turn the call over to RioCan's President and CEO, Jonathan Gitlin.

Thank you, Jennifer. Good morning, everyone, and thanks for joining us.

Our second quarter results reinforce the message we've been delivering since our November 2025 Investor Day. RioCan's strategy is working. We own an irreplaceable retail portfolio in Canada's most in-demand markets. We simplified the business. We're allocating capital with discipline, and we're translating those advantages into durable growth, increased financial flexibility and long-term value creation. Progress in the quarter was broad-based across operations, leasing, capital recycling and the balance sheet. This progress is supported by our proven independent future-focused platform, the culture of excellence, continued innovation, technology advancement and prudent ESG practices.

We believe RioCan is demonstrating exactly what our stakeholders are looking for, a simpler business model, greater earnings visibility and a clear path to sustained durable cash flow growth. Delivering on that path requires not only strong execution, but also strong governance and strategic oversight. And with that in mind, I'd like to extend a warm welcome to Susan McArthur, who has recently been appointed to RioCan's Board of Trustees. Susan brings deep public company governance and capital markets experience, and we look forward to benefiting from her insights as we continue executing on our strategy.

I'll start now with our operating results. Retail fundamentals remain exceptionally strong. Demand for high-quality retail space continues to exceed supply across our markets, supporting high occupancy, leasing spreads and same-property NOI growth. Retail occupancy is at a record high of 98.8%. Commercial SPNOI growth was 4.3% in the quarter, representing the fourth straight quarter of 4% or higher. This continued strength is reflected in our updated SPNOI guidance. Sustained organic growth reflects the success of our leasing strategy. Leasing spreads continue to underscore strong retailer demand for RioCan's well-located, high demographic necessity-based assets. The blended leasing spread of 23.1% in the quarter was supported by new and renewal leasing spreads of 40.8% and 20.7%, respectively. Average net rent for new leasing was CAD 37.73 per square foot. This is 60% above average net rent per occupied square foot.

For RioCan, the retail leasing super cycle is not a short-term phenomenon. With approximately 1 million square feet of lease maturities remaining for the balance of this year and an additional 3.7 million square feet of lease maturities in each of 2027 and 2028, we have significant mark-to-market opportunities. Approximately 30% of RioCan's portfolio leases roll through 2028, and there remains a meaningful gap between in-place rents and market rents. That embedded mark-to-market opportunity provides visibility into future growth. What makes RioCan's platform especially powerful is that we aren't simply capturing rent growth. We're also improving the quality of our income.

As an independent Canadian REIT, RioCan is directly accountable to unitholders and is not influenced by an external sponsor. That gives us the flexibility to make tenant and capital decisions based on what's best for each property and the portfolio overall. Citing only one example, we were able to double the renewal rent of a grocery store in the GTA during the quarter. The only influence on this outcome was market rents. There were no extraneous considerations other than what was best for our property and best for our unitholders. We can be selective, choose the right tenants on the right terms while minimizing downtime and capital outlay. The result is a more productive portfolio, more durable cash flow and attractive risk-adjusted returns.

Today's leasing spreads are tomorrow's SPNOI growth. Increasingly, they're also laying the foundation for stronger long-term cash flow generation. Leasing spreads are not simply an operating metric. They represent embedded future earnings growth that has already been substantially secured. As those rents commence and annual escalations take effect, leasing will remain an important contributor to durable ongoing growth.

Our operating performance demonstrates our ability to execute the commitments we made at Investor Day. This extends beyond operations to capital allocation, where we've made significant progress, including the near completion of the RioCan Living portfolio monetization. Including transactions completed over the last 18 months and assets currently under contract, we have sold CAD 1.26 billion of RioCan Living assets. As such, we've effectively reached our CAD 1.3 billion capital repatriation target. As we've said before, this is about more than dispositions. It's about simplifying the business, enhancing financial flexibility and directing capital to opportunities where it can create the greatest long-term value for our unitholders.

Capital allocation remains an important differentiator for RioCan. Our objective is straightforward: generate capital from lower growth or noncore assets, reallocate that capital toward opportunities that improve per unit value creation and do so while maintaining balance sheet strength. Whether we're repurchasing units, investing in retail intensification opportunities, enhancing existing assets or reducing leverage, the common thread is disciplined capital deployment. Many of our highest return opportunities already exist within our portfolio, and we have the talent, relationships and expertise to unlock that value efficiently. With the right team and disciplined execution, opportunities such as unlocking retail density, optimizing the merchandising mix and repositioning vacant space generate highly attractive returns with a fraction of the capital required for ground-up development.

We invested CAD 44 million in retail infill and asset enhancement projects in the first half of the year, and we remain on track to deploy approximately CAD 100 million into RioCan's portfolio in 2026. About half of that capital is being directed to asset enhancements, such as the metro expansion and LCBO relocation at Yonge Eglinton Centre. The remainder is being invested in high-return retail infill projects, including the new Costco at RioCan Burloak and additional retail at RioCan's East Hills, Windfields Farm and South Edmonton Common sites. In a market where capital remains expensive, this is a meaningful advantage. It allows us to drive growth, improve property performance and preserve financial flexibility while maintaining a disciplined approach to capital outlay.

Our credit metrics remain within our target ranges, and our balance sheet continues to be a source of strength. It provides optionality, resilience and the ability to act and create value when attractive opportunities become available. Looking ahead, based on the performance we've delivered so far this year, we now expect commercial same-property NOI growth to modestly exceed our original guidance range of 3.5% to 4%. As a result, we are raising our 2026 Commercial SPNOI guidance to 4% to 4.5%. Given the many factors that contribute to core FFO, we are maintaining our 2026 core FFO per unit guidance range of CAD 1.60 to CAD 1.62.

I'll close with 3 points. First, retail fundamentals continue to support growth. Demand remains strong, supply remains constrained, and we continue to see significant embedded leasing upside throughout the portfolio. Second, RioCan is a simpler and more focused business. We're enhancing earnings visibility and increasing financial flexibility. Third, we remain disciplined stewards of capital. Every major decision we make is evaluated through the lens of long-term value creation. As we increase the earnings power of our business, we create value within our portfolio. This quarter's NAV growth is evidence of that. It was driven primarily by organic growth and higher cash flows rather than cap rate compression. With meaningful embedded growth remaining, we believe RioCan is well positioned to continue creating and compounding value for unitholders over the long term. We have significant opportunities ahead, and we remain confident in our ability to continue delivering durable growth and value for our unitholders.

With that, I'll turn the call over to Franca.

Thank you, Jonathan, and good morning, everyone. Our second quarter results reflect the strength of our core retail, the near completion of our RioCan Living monetization strategy and disciplined capital allocation. Together, they are improving our financial flexibility and strengthening our balance sheet.

I'll walk through the quarter, starting with core FFO. Core FFO in the second quarter was CAD 0.40 per unit, up 5.3% year-over-year. There were four primary drivers of these results. Commercial same-property NOI increased 4.3% year-over-year, contributing CAD 0.02 per unit. The accretive impact of unit repurchases pursuant to our NCIB also contributed approximately CAD 0.01 per unit. These factors were partially offset by higher net interest expense and lower interest income, which had a combined impact of approximately CAD 0.01 per unit. Our core FFO payout ratio was 73.8% on a trailing 12-month basis, approximately 100 basis points lower than last quarter and trending towards our long-term target of 70%.

Looking at other financial results, adjusted G&A expense was 4.1% of rental revenue for the quarter and 3.7% year-to-date. We continue to expect full year adjusted G&A expense to be below 4% of rental revenue. Maintenance CapEx for the quarter was CAD 14 million and CAD 21 million year-to-date. We expect full year spend to be in line with our normalized CapEx level of CAD 55 million. The strength of our operating performance is also translating into value creation. During the second quarter, net asset value increased by CAD 0.23 per unit or CAD 68 million compared to the prior quarter. This was driven largely by CAD 52 million of net fair value gains on our investment properties, higher stabilized NOI from rent steps, rent increases on renewals and new deals and strong leasing activity across the portfolio supported the increase. This quarter's valuation gains highlight the power of compounding NOI growth from our retail core, driving higher property values and long-term NAV creation.

Turning to capital recycling. During the quarter, we closed on the sale of FourFifty The Well and Bellevue Phase 1 and 2 for total gross proceeds of CAD 234 million, bringing total RCL disposition gross proceeds to approximately CAD 280 million year-to-date. Subsequent to quarter-end, we entered into two conditional deals to sell our interest in two additional RioCan Living properties for total gross proceeds of CAD 206 million. With respect to residential inventory, we have repatriated CAD 143 million of proceeds year-to-date, primarily from the collection of accounts receivable in 2026 related to prior year sales. Since the start of 2025, we have repatriated CAD 365 million, largely in line with our stated target of CAD 370 million. As a result, the balance of unsold units has been reduced to CAD 86 million or approximately 1% of our NAV. With only a de minimis residual balance remaining, this component of the RCL monetization program is now substantially complete.

Our balance sheet remains strong, and our credit metrics are in line with the targets we provided at Investor Day. As we continue to execute our financing plan, we are reducing our secured debt obligations and broadening our unencumbered asset pool. Our mix of unsecured debt to total debt improved to approximately 70%, bringing this metric in line with our internal target range. As a result, our unencumbered asset pool increased to approximately CAD 9.7 billion on a proportionate share basis. During the quarter, we repaid the CAD 500 million Series A unsecured debentures and CAD 91 million of maturing mortgages using existing liquidity.

We also repaid construction loans related to condo projects of approximately CAD 114 million on a proportionate share basis, including the full repayment of the Queen & Ashbridge facility. Following these repayments, only CAD 30 million of debt maturities remain for the balance of the year. With approximately CAD 700 million of available liquidity, additional proceeds expected from capital recycling and access to diverse sources of funding, we are well positioned to proactively manage our 2027 debt maturities.

To conclude, the second quarter demonstrated strong operational execution, substantial completion of our RioCan Living monetization plan and disciplined approach to capital allocation. We remain focused on delivering against the strategy we outlined at Investor Day and creating long-term value for our unitholders.

With that, I will turn the call back to the operator to begin the question-and-answer session.

Thank you. We will now begin the question-and-answer session. [Operator Instructions] Your first question comes from the line of Sam Damiani from TD Cowen.

Just I want to congratulate everyone on a good quarter, good progress on several fronts, as you alluded to, Jonathan. I guess just on the guidance raise for this year, it seems to be a result of realized leasing spreads sort of tracking ahead of what you had assumed for the year. What spreads are assumed in your three-year guidance of 3.5% plus same property? Just curious how you view the upside potential to that guidance at this point given the trends you're seeing?

Thank you for the congratulatory wishes. We are proud of the quarter. The question is answered by -- if you look at the package that we had put up at the Investor Day, the list of assumptions show that we had a 15% leasing spread assumption for the three years. So we certainly outperformed in this first year of that three-year period.

And I guess just the rest of the question was really like how you're feeling about the likelihood of being able to increase that guidance. I know you're -- I guess you're just being cautious and maybe conservative. But if trends hold, is there anything out there that would hold you back from raising the guidance?

I mean, look, there's always risk in the retail business. We feel that we've done a good job of mitigating against those risks like large tenant failures. But again, if you look at our top 30 list of tenants, there are very few, if any, weak spots at this point. The economy is always a question mark. But then again, we've also taken big strides in ensuring that we've got necessity-based tenants that are quite resilient to any economic gyrations. So the short answer is, we feel very good about our path going forward. I would also say that the backdrop is very strong. I mean we've spoken about it a number of times, but there really is a significant supply constraint, high barriers to entry, and we feel that we are well positioned to absorb whatever demand there is, as is evidenced by the fact that we're 98.8% full.

So we feel very strong about the backdrop. We feel very good about our positioning within that backdrop. And so we feel that the trends right now are sustainable. But again, there will always be fluctuations. But yes, the 15% at this point is looking quite conservative.

And one more from me before I turn it back is just on the cap rates. We've seen cap rate surveys come out and call out grocery-anchored open-air shopping center cap rates coming down notably this year. And I noticed, RioCan, you haven't really changed your cap rates too, too much on a same-property basis. Just curious what's holding you back from adjusting your fair value cap rates lower at this time?

Well, we're seeing organic growth in our valuations coming largely from an increase in NOI, and that's a really good thing, just which is something that is more within our control. Cap rates, of course, are outside of our control. We are looking at some of the transactions that haven't yet closed like the First Capital transaction, which serve as indicators that the type of product we have is highly sought after and very valuable, and we'll continue to assess that and work those factors into our valuations. But for now, we're just again, waiting for some of those to finalize and close, and we'll keep on relying on the market and third-party appraisals as well as our own internal assessments as to where cap rates should be. But right now, we're comfortable with what we have in our portfolio.

Your next question comes from the line of Lorne Kalmar from Desjardins.

Congratulations on the progress made on the disposition side. It looks to be tracking pretty darn well. Just wondering on the three remaining RioCan Living assets, if you back into sort of the target and where you guys are pro forma these deals, I think you get about just over CAD 50 million of value. It seems a little light for three multi-res assets. So I just wanted to get an idea if you can give us maybe an idea of the value on those and perhaps a stabilized cap rate.

We don't have a specific valuation for those assets, but you're right to assume that they're higher than CAD 50 million. You may recall that our original range was CAD 1.3 billion to CAD 1.4 billion. We just sort of simplified that message to say CAD 1.3 billion, and we'll, of course, exceed that once the remainder of the assets are sold. But the cap rates, we've seen a very vibrant market for our RioCan Living assets based on the fact that they are new, they don't have rent control, there's limited CapEx. And so we expect that trend to continue regardless of what's going on in the broader multi-res market. And so I feel quite confident in our ability to sell those at our current IFRS valuations or hopefully in that range. But in terms of the overall number, you're right to assume that CAD 1.3 billion was our conservative estimate, and we will ultimately likely exceed that.

Keep in mind, Lorne, too that, that included condo dispositions as well. And we still have about CAD 85-ish million of condo inventory that we feel confident will be sold over the short to medium term as well. So that's why we express that confidence in our ability to exceed that CAD 1.3 billion number.

Okay. I was going to say switch to the other side of the coin on the acquisition side. I know I believe it's the Heartland Center that's been rumored to be out there, and I'm sure with the FCR deal closing, there will be some opportunities there. Just wondering how you're thinking about acquisitions, if you're seeing anything interesting at this time that you guys could action?

Yes. I mean, look, acquisitions was always one of the levers we have for capital allocation. When we did our Investor Day, obviously, our cost of capital was a lot higher and acquisitions were less logical than some of the other opportunities we had like NCIB, paying down debt and building out pads and strips. But as our cost of capital decreases and these opportunities come into view, RioCan feels well positioned to be able to take some of the assets that may become available, add the value that our platform can create to them and really see growth drivers going forward. But again, we always have to weigh that against our other -- the other possibilities for capital allocation, which thankfully, we have as well in our purview.

Okay. And then just one kind of ticky-tacky one here. I think there was some aborted deal costs in the quarter. Just wondering if you could shed some light on what that was related to.

Some normal course deals that we had started down the road and then for a few different reasons didn't work out for the benefit of our unitholders. So those deals didn't go through. But again, they were de minimis in the scheme of things. And I think as an active REIT, we're always pursuing very good and logical transactions. And as you know, Lorne, sometimes they just don't work out. But thankfully, most of the time they do.

Your next question comes from the line of Pammi Bir from RBC Capital Markets.

I just want to come back to the FFO guidance and increase in the same-property NOI guidance. So just can you maybe reconcile maybe the rationale for not increasing the FFO guidance range? Or maybe what were some of the offsetting factors that have impacted that?

Thanks, Pammi. So the outperformance in SPNOI is -- it's definitely showing up in core FFO, but our CAD 1.60 to CAD 1.62 core FFO guidance range, it was designed to accommodate a range of outcomes across the underlying drivers, including same-property NOI. The timing of capital recycling activities, interest expense and other items below NOI. So there's a lot of factors that go into core FFO. We remain confident that the existing core FFO guidance range remains appropriate. And we're going to wait and see what happens through the course of the year just to ensure that, that is the case. But we just felt that SPNOI, the increase in that guidance is only one factor of many. So we feel very confident in keeping the core FFO guidance intact.

Okay. Got it. Just maybe switching to just, again, the fundamentals. Just given the strength of the demand that you are seeing, has your thinking evolved at all in terms of pushing for some higher embedded annual rent steps in the leases or on new leasing? Or any color you can share there?

Well, it's really embedded within our leasing team and our operations team to always push for the highest possible going-in rents, the highest annual bumps as well as the best call them, nonfinancial terms. This leasing team is -- I will say it hyperbolically, but the best in Canada and possibly the best in North America. And they understand the environment and what we are offering and we will push for the best terms always. Now the backdrop obviously serves us well right now. And in recognition of that, we continue to see embedded growth in these leases increase over time, and I think that's a very good thing. But you can rest assured that our team is always looking at ways to improve the overall spectrum of matters that come out of a lease, including annual bumps.

Okay. Coming back to the unsold condo inventory, I think it was CAD 86 million that Franca cited. Any consideration at this point as to maybe selling some of that to bulk buyers that are out there? I think you mentioned you do expect to eventually move some of it, but curious if you can shed any light on the process there.

I would say the answer to that, Pammi, is that we're considering all options for that inventory. It's certainly something that would be better served in someone else's hands. And so we are looking at -- we are looking at bulk purchasers. We're looking at also just selling them individually with the current sales program. So there's a number of different outcomes possible, but bulk sellers or bulk buyers, I should say, is certainly one of those opportunities, and we have been in touch with some of those organizations. And thankfully, it's quite a vibrant business at this point. And again, just going back to the fact that it's CAD 86 million. And so it's really -- it's de minimis in the scheme of things. It is now effectively wound down. So the tail end of it, it would benefit us to sell. But either way, it doesn't have a significant impact on RioCan's performance going forward.

Okay. And then just last one. I think the total value for the proportionate residential inventory sits at about CAD 480 million. Has that value been marked down over time? And just curious if you're still comfortable with that figure at this point?

We are comfortable with the figure. I mean the valuations like all of our properties will fluctuate over time. And our valuations group does a very good job of keeping the ear close to the ground and ensuring that whatever market fluctuations occur, we reflect those in our IFRS values and the RioCan Living assets are no different.

[Operator Instructions] Your next question comes from the line of Matt Kornack from National Bank Capital Markets.

Just wanted to quickly walk through the occupancy change in the retail portfolio. You had some transitory vacancy into Q1, I think some lease-up in the HBC stuff, but it seems like that's leased at this point and it may be in straight-line rent. But is there something incremental on top of that straight-line rent that you expect from the occupancy gains? And then also, how should we think about converting over to cash from straight-line rent?

There's always going to be some movement between in-place occupancy and committed occupancy and then the transformation over to cash paying rent. I think this quarter, there is some of that. And the HBC space is currently leased, but they're not yet rent paying and that will be reflected going forward. Yes. So the amount is about CAD 10 million to CAD 12 million of straight-line rents in 2026.

Okay. And then 98% occupancy, I mean, you've been 20 basis points, I think, above that. But that's full for all intents and purposes. So is the primary driver other than kind of the quarterly uptick going to be leasing spreads going forward? And then maybe if you could quickly touch on what you're seeing in the tenant market. We had the benefit of meeting someone on your team that said you're in control, I think, in all circumstances, maybe minus 1 with tenants across the country. But is that continuing to be the case where landlords have the upper hand at this point?

So leasing spreads are definitely a significant driver of growth going forward, but there are other things as well. I mean FFO is influenced by so many different things, but leasing spreads is definitely one of them. Occupancy, look, we are, for all intents and purposes, full. We see this as a very good thing, but it does make us rely on things like renewal spreads a little bit more than we would have if we had a portfolio that was 5% vacant. We're not in that position. So we find our upside elsewhere, and we're very good at finding that upside. And it just speaks to the quality of our portfolio as well that we are so -- at such a full state.

With respect to tenants in the upper hand, we don't -- look, this is a relationship with many of these tenants that has been garnered over the last 31 years. And so we don't really view it as upper hand, lower hand. There's always going to be tension in any negotiating process no matter how well positioned we are. And we make sure that we treat our tenants very well while also keeping a view on getting the highest outcome as possible. We want to make sure that we are a favored nation amongst the retail landlords and that these tenants will always want to be in RioCan spaces. And so there's -- again, there is a good backdrop right now.

We are certainly availing ourselves of that backdrop to get a good outcome. But using the term upper hand, lower hand, those sorts of things, it's a little bit -- I want to be careful around those terminologies, but we feel very good about our positioning when it comes to any negotiations for new space or renewals at this point. And that's simply a reflection of the fact that there is very little retail supply, particularly in areas where RioCan currently owns with the demographic profile that we have. And this allows us to really get some very good leasing outcomes as evidenced by a lot of the KPIs that we put out this quarter.

Fair point on the terminology, market rent is market rent and you guys will negotiate accordingly. And then maybe lastly from me, just in terms of capital allocation at the stock traded relatively well, but still at a bit of a discount to your book value. And then you've identified kind of intensification opportunities where you're going to get an 8-plus percent return on cost. How are these buckets plus maybe the acquisition market if we see some assets come out of the First Capital portfolio should close?

Yes. So the good news for RioCan is that we've got a multitude of options when it comes to capital allocation. And depending on the circumstances at the time and depending on what serves as the best outcome for us, we will toggle amongst those opportunities. Right now, we're seeing acquisitions as sort of a rising prospect simply because our cost of capital has come down. And as you mentioned, there is looking to be some availability of very good assets or assets that might not be as good but RioCan can utilize its very excellent platform to enhance value. And so we will look at those as one of the potential levers for capital allocation.

That said, we also have other opportunities. NCIB, of course, is a little less prominent given where our share price is. But then there are things like building out pads and strips where we have allocated a fair bit of cash towards this year, about CAD 100 million, and we're seeing very good return profiles there, including enhanced NAV, enhanced same-property NOI and just a better cross-shopping experience. So that's something that we definitely favor from a capital allocation perspective. But of course, acquisitions does enter the frame given where we currently stand and the opportunity set out there.

Your next question comes from the line of Brad Sturges from Raymond James.

Just one real quick one from me. Jonathan, you talked in the recent past about the runway for market rent growth, and you talked a little bit about the dynamics on this call. Just how are -- I guess my question would be, have you seen any material change in trends on the quantum of market rent growth in the market today? And how would you frame, I guess, the potential for growth in the next 12 to 24 months relative to what the market has been experiencing in the last year or so?

Yes. So my view, and I'm going to turn it over to Oliver Harrison, who oversees leasing for RioCan. But my view is that there's nothing to me that serves as a catalyst to have the current conditions change significantly. There is a supply constraint. We see our Canadian retail or domestic retailers really growing in a meaningful way. And we also see international retailers look at Canada more prominently. And so all those things factor into a pretty good position for RioCan, particularly when you look at the demographics and some of the elements of our portfolio. So I don't see a catalyst to really change that, Brad, but I'm going to turn it over to again, someone who's a little closer to this matter. Oliver?

The only thing I would add to what you said, Jon, is if you look back over our last three quarters, we've been in the mid-20% on blended leasing spreads. So I would say that there is sort of your answer. We've kind of landed in this 25% range for almost the last year. And as long as occupancy remains where it's at, we're comfortable that, that is a range that will exist in for the near term.

Okay. I guess my other question would be just as you're starting to review acquisition opportunities, would that be more of a preference towards on your own? Or would you consider JV partnerships for something more strategic in nature?

I'd say that there's openness to all ways of owning property. We have certainly, in the past, demonstrated that we're a very good partner and a good manager for those who have capital, but no platform. And so that's something we'd certainly look at. But then again, we're also very good at owning assets by ourselves. And if the opportunity is more suited for that, and we don't need to spread risk where we have the capital for it, then that's certainly something we would pursue as well. So I know that's a bit of a wishy-washy answer, Brad, but the truth is we would look at either outcome.

Your final question comes from the line of Sam Damiani from TD Cowen.

Sorry, just a couple of quick follow-ups. I guess, firstly, maybe for Oliver, I guess, is on the line here. That grocery lease in the GTA where the rent doubled, just curious how -- what was the vintage of that lease? When was it last negotiated at market? Just to give a sense of kind of where it came from.

Yes, it was, I think, approximately 30 years ago, it was last negotiated at market.

Were there kind of renewal increases over the term? Or was it fairly flat?

It was relatively flat based on the structure of the original lease where the tenant had just come off of their fixed option structure.

Okay. That's awesome. Appreciate it. And last question for me is just on the market for density land. Are you seeing any green shoots in the market for liquidity for that asset on the balance sheet?

No. I mean I think that the land market is still very stagnant. I mean there might be the odd inquiry, but the truth is, Sam, that we don't rely on any land sales for any of our projections going forward. We've got limited value in our balance sheet for excess density. And look, I am very much an optimist when it comes to real estate, particularly in the GTA as well as other major cities in Canada. And I do view that this is a situation that has its end and everything cycles. So I think at some point, there will be value and hopefully high value in well-positioned density. But right now, we are not seeing green shoots. Andrew, am I wrong in that assessment?

You're not wrong. Yes, the short answer is no. There's not a lot of transactions, and there's not a lot of demand in the market for zone residential density.

At this time, there are no further questions. I would now like to turn the conference back to President and CEO, Jonathan Gitlin.

Thank you. I'll leave you with a couple of points. Our momentum is strong, continued retailer demand, meaningful embedded growth opportunities and disciplined capital allocation position RioCan to continue growing cash flow and creating value over the long term. Thanks so much for joining us today. Bye.

This concludes today's call. Thank you for attending. You may now disconnect.

Good morning, ladies and gentlemen. My name is Ed Sonshine. And as Chairman, I would like to welcome you to the 2026 Annual Meeting of Unitholders of RioCan Real Estate Investment Trust. This meeting is being held in a hybrid format with many of you joining us in person and others joining virtually throughout -- through our live webcast. We welcome everyone in attendance today. It's great to be able to see many of our unitholders in person again for our annual meeting. I'd like to thank those unitholders who have chosen to attend this meeting today and to all those who submitted their proxies in advance on a timely basis.

We're also pleased to have our trustees in attendance today. I note that a recording of this webcast will be posted to our website for a period of time after the meeting. It is now shortly after 10:00 a.m. I would ask that the Annual Meeting of Unitholders come to order. I will act as Chairman of the meeting. I would ask Jennifer Suess, Senior Vice President of General Counsel, ESG and Corporate Secretary, to act as Secretary of the meeting and representatives of our transfer agent, TSX Trust Company, to act as scrutineers.

Today, we intend to first proceed with the formal items on the agenda, following which Jonathan Gitlin, our President and Chief Executive Officer, will be making a presentation. Following Mr. Gitlin's presentation, we will answer questions from unitholders. The minutes of the last Annual Meeting of Unitholders held on June 10, 2025, are available upon request.

Before we begin, we have a few administrative matters to note, which are mainly designed to wear out my voice. If you are attending via webcast much like last year to submit a question, click on the Q&A messaging icon at the top of your screen. When submitting a question, please identify whether it relates to a motion being considered as part of the formal business of the meeting or whether it is general in nature. We will address questions directly related to a particular motion at the appropriate time of the meeting and save general questions until after the formal business has been completed.

If you have a question and are present in person here today, please raise your hand and at the appropriate time, we will address you. Questions with common themes may be grouped together for efficiency. Ms. Suess will read any questions submitted virtually, aloud when requested and either Mr. Gitlin or I will respond. We will make every effort to answer all your questions during today's Q&A period. However, in the interest of time, we will limit the Q&A period to 20 minutes, and we'll address any unanswered questions in a timely manner afterwards.

If your question is not answered during the meeting, a representative will follow up with you with a response. Each trust unit represented at this meeting is entitled to 1 vote. Anyone attending in person who is yet to cast their vote can do so by ballot. If you require a ballot or would like to submit your completed ballot, please raise your hand.

For those participating through the online platform, when we are ready to table an item of business for a vote, you will see voting options appear on your screen. If you have voted in advance of the meeting and do not wish to revoke your previously submitted proxies, you do not need to do anything. During the meeting, we may also pause from time to time to review the messages from Ms. Suess. Thank you for your patience as we do so. We will now -- I will now ask Ms. Suess to provide an advisory regarding forward-looking information that may be discussed in today's meeting.

Thank you, Mr. Chairman. Please note that I would like to draw your attention to the advisory posted on the slide regarding the use of non-GAAP measures and forward-looking information that may be discussed at today's meeting. Certain information to be discussed during the meeting or in the management presentation, which will follow the formal portion of the meeting, contains forward-looking information and forward-looking statements within the meaning of applicable Canadian securities laws.

All of the forward-looking information and statements that we may provide at this meeting, which includes all information other than statements of current and historical fact, is qualified by the cautionary statement posted on the screen, and additional information can also be found in the Trust's most recent management's discussion and analysis for the period ended March 31, 2026, and annual information form, copies of which are available on our website and on SEDAR+ at www.sedarplus.com.

Forward-looking statements are not assurances of future performance and are subject to risks and uncertainties that are difficult to control or predict. The actual results, performance or achievements of RioCan and its business may be materially different from the anticipated results, performance or achievements expressed or implied by forward-looking statements. Forward-looking statements are based on RioCan's officers and trustees' beliefs and opinions, and undue reliance should not be placed on any forward-looking statements.

I will now give the floor back to the Chairman to proceed with the Annual Meeting of Unitholders.

Thank you. In order to make the best use of our time today, certain unitholders have volunteered to move and second various resolutions where required. While this procedure will facilitate the efficiency for handling of the formal matters, this is not intended to limit in any way your right to participate in the meeting. Unitholders who wish to make comments relating to these motions may do so by raising your hand or through the online platform after the motion has been seconded in the manner previously noted.

As mentioned, there will also be an opportunity to ask general questions following the management presentation. As in prior years, the Trust used the notice and access mechanism to furnish proxy materials over the Internet to unitholders instead of mailing paper copies. Copies of these proxy materials are also available on the Trust's public profile at www.sedarplus.com and on its website. I've been informed by the scrutineer that prior to the meeting, proxies were received from the holders of approximately 54.99% of all units entitled to be voted. As a result, we have a quorum for this meeting, and the meeting is properly constituted for the transaction of business.

Before I begin the formal part of the meeting, I'd like to share a few thoughts. More than 30 years ago, when I founded this company, it wasn't based on a view of how the world would evolve. It was based on conviction about what would endure. What was predictable then as now was the enduring value of owning hard assets, particularly well-located, well-tenanted real estate. From the start, I also believed we are not simply in the real estate business. We're in the business of using real estate to generate reliable cash flow. Tax-efficient cash flow we distribute to our unitholders and cash flow we retain and reinvest for future growth.

Over the years, that philosophy has remained constant even as RioCan and the environment around us evolved. RioCan was built to perform in all conditions, grounded in the belief that the world would never be predictable. The Trust has remained disciplined, grounded in real assets and focused on long-term value creation for our unitholders. More recently, we have taken important steps to simplify our business model and how we create value. That clarity was on full display last fall at our 2025 Investor Day. Management laid out a simplified retail-focused strategy rooted in durable cash flows, portfolio quality and disciplined capital allocation driven by RioCan's independent, data-driven and future-focused platform. What matters just as much as setting a strategy is sticking to it.

I'm very proud of the management team under the exceptional leadership of Jonathan Gitlin for both the clarity they brought forward and the discipline with which they are executing the plan. And the results speak for themselves. We are demonstrating momentum across all our key priorities. We have now delivered several consecutive quarters of record-breaking operating results. These results are driven by strong leasing demand, commercial same property -- consistent commercial same-property NOI growth and a necessity-based portfolio that is concentrated in Canada's most in-demand markets.

Today, the Trust's income and cash flow are more durable than ever. Our assets and overall portfolio are the highest quality they've ever been. Our tenant base is stronger, more essential and more resilient than at any point in our history. I have absolute confidence in RioCan's strategy and continuing success. That conviction underpins the Trust's capital allocation decisions, including our normal course issuer bid. Over the last 18 months, we have repurchased and canceled almost 9.5 million units at a weighted average unit price well below our IFRS value. This reflects our view that now is a compelling time to invest in RioCan and the value we are creating for our unitholders.

Before closing, I would like to express my sincere appreciation to Richard Dansereau for his valued contributions to RioCan's Board. Richard stepped down last summer as he transitioned into a new role personally. We are grateful for the insight and perspective he brought during his tenure. We remain committed to maintaining a balanced, highly skilled Board and to thoughtful timely renewal that supports RioCan's long-term success.

Looking back, RioCan's success has always been rooted in real assets, disciplined execution and a long-term view. Looking forward, those same principles continue to guide us. The world may never be predictable, but with the right assets, the right strategy, the right tenants and the right management team, value creation can be. Thank you, our valued unitholders, for your continued support and confidence. And now we can move forward with the formal business of this meeting, followed by Jonathan's insights into RioCan's present and future. And after his presentation, we will be happy to address any questions that have been or will be submitted.

We'll now proceed with the first item of business for the meeting and present the financial statements for the year ended December 31, 2025. Copy of those -- the 2025 audited consolidated financial statements are available on the Trust's website at www.sedarplus.com and were previously made available to unitholders in addition to the proxy materials. Unitholders do not have to take any action regarding the financial statements. Ms. Suess, are there any questions or comments submitted with respect to the presentation of the financial statements that ought to be addressed at this time?

Mr. Chairman, there are no questions received related to this item of business.

Second item of business is the election of trustees. The Trust has advanced notice provisions in its declaration of trust, which allow nominations to be made by unitholders up to a certain date prior to the meeting, which this year was May 4, 2026. No nominations by the unitholders have been received. Consequently, there will be 9 nominees presented to the unitholders for election to the Board of Trustees at this meeting.

Management information circular provides detailed biographies setting out the valuable qualifications and diverse backgrounds of the 9 nominees proposed by management for whom proxies will be voted in favor of their election in the absence of instructions to the contrary. Ms. Suess will now read their names. We refer you to the appropriate slide on the webcast, and I declare the polls open on all resolutions.

Names of the nominees are as follows: Edward Sonshine, Jonathan Gitlin, Janice Fukakusa, Marie-Josee Lamothe, Dale Lastman, Jane Marshall, Guy Metcalfe, Siim Vanaselja and Charles Winograd.

Thank you. If elected, these nominees will hold office until the next Annual Meeting of Unitholders or until their successors are elected or appointed. I now recognize Melissa Bruzzese, AVP, Development for the purposes of a motion for the nomination of the 9 nominees named in the management information circular.

3

I nominate the 9 persons whose names have been read to this meeting for election as trustees of the Trust to serve until the next Annual Meeting of Unitholders or until their successor is duly elected or appointed or they otherwise cease to hold office.

My name is Josh Katz, AVP Leasing, and I hereby second the nominations.

Ms. Suess were there any questions or comments submitted in connection with the nomination and election of trustees?

No, Mr. Chairman, we have not received any questions related to this item.

Thank you. Nine persons have been nominated for election as trustees, and there are 9 trustees to be elected. Unitholders have been provided with the opportunity to vote for each trustee or withhold their vote on an individual basis in accordance with the rules of the TSX, TSX and RioCan's majority voting policy, details of which are provided in the management information circular for this meeting. Will the Secretary please confirm whether the number of units represented by proxies received that were in favor of each of the 9 nominees has reached the majority of those voted.

Mr. Chairman, I confirm that prior to the meeting, proxies were received in favor of the election of each of the 9 nominees as trustees from the holders of units representing more than the majority of all votes cast by proxy in accordance with the Trust's majority voting policy for the election of trustees.

Thank you. I will now ask for Melissa Bruzzese. I'm mangling it a bit, I apologize, to move and Josh Katz to second a formal motion for the election of each of the 9 persons nominated as trustees of the Trust to hold office until the next Annual Meeting of Unitholders or until they resign or their successors are elected or appointed.

Mr. Chairman, I so move.

Mr. Chairman, I hereby second the motion.

Thank you. The meeting will now vote on the motion. Unitholders and proxy appointees attending in person can cast their vote by filling out their ballot. I will now also ask unitholders or proxy appointees attending virtually to cast their votes through the online portal. As a reminder, if you have already voted or sent in your proxy, there is no need to do anything unless you wish to change your vote. Okay. Jennifer is looking at her phone. I assume we have no changes.

We have no changes.

Thank you for casting your votes. The scrutineers will tabulate the votes cast, and we will report on the results towards the end of the meeting. Final results will be provided on our website and at www.sedarplus.com later today.

Third item of business for which this meeting has been called is to consider and if thought appropriate, to approve the appointment of PricewaterhouseCoopers LLP as auditors of the Trust and authorizing the trustees to fix the remuneration of the auditors. May I have a motion for the approval of this resolution?

Mr. Chairman, I hereby move that PricewaterhouseCoopers LLP be appointed auditors of the Trust and that the Board of Trustees be authorized to fix their remuneration.

Mr. Chairman, I second the motion.

Thank you. Ms. Suess, were there any questions or comments submitted in connection with the appointment of the auditors?

No, Mr. Chairman, we have not received any questions related to this item.

The meeting will therefore now vote on the motion. Unitholders and proxy appointees attending in person can cast their ballot by filling -- cast their vote by filling out their ballot. I will also ask unitholders or their appointees participating virtually to cast their votes through the online portal.

[Voting]

Thank you for casting your votes. Scrutineers will tabulate the votes cast, and we will report on the results towards the end of the meeting.

Final item of business is the approval of a nonbinding say-on-pay advisory vote on executive compensation. This nonbinding advisory vote forms an important part of the ongoing process of engagement between unitholders and the Board on executive compensation. Full particulars of the Trust's approach to compensation and details of the say-on-pay vote and unitholder engagement are set out in the management information circular for this meeting. The say-on-pay advisory vote requires the approval of a majority of the votes cast by unitholders entitled to vote who are present or represented by proxy at this meeting.

Although the results will not be binding, the Board will take the results into account when considering its policies, procedures and decisions and in determining whether there is a need to increase engagement with unitholders. Also, the People, Culture and Compensation Committee will take the results into account when considering future executive compensation arrangements. May I have a motion to approve on a nonbinding basis the Board's approach to executive compensation by way of a say-on-pay vote?

Mr. Chairman, I hereby move that the Board's approach to executive compensation as set out in the Trust's management information circular dated April 17, 2026, be approved on a nonbinding advisory basis.

Mr. Chairman, I second the motion.

Thank you. Ms. Suess were there any questions or comments submitted in connection with this item?

No, Mr. Chairman, we have not received any questions related to this item.

Meeting will now vote on the motion. Unitholders and proxy appointees attending in person can cast their vote by filling out the ballot. If you have not already done so, I will ask unitholders or their appointees participating virtually to cast their votes through the online portal.

[Voting]

Thank you for casting your vote. The scrutineers will tabulate the votes cast, and we will report on the results towards the end of the meeting. Ms. Suess, is there any other business to come before the meeting?

No, Mr. Chairman.

Ladies and gentlemen, this brings us to the end of voting on the items of business for this meeting, and I therefore, declare the polls closed. Please put up your hand so that the scrutineer can pick up any ballots in the meeting room. Thank you for casting your votes. The scrutineers are in the process of completing their final tabulation of the votes cast. But based on preliminary voting results received, including proxies received prior to the meeting, we can confirm the results of each matter.

I'm pleased to report that on the election of trustees, preliminary voting results show that each trustee nominee received votes by more than the requisite majority required. Accordingly, I declare the proposed trustee nominees have been duly elected as trustees of the Trust, hold office until the next Annual Meeting of Unitholders or until they resign or their successors are duly elected or appointed.

On the appointment of auditors, preliminary voting results show the requisite majority of votes cast were in favor of the appointment of PricewaterhouseCoopers LLP as auditors of the Trust. I therefore declare that PricewaterhouseCoopers LLP are appointed auditors of the Trust and the trustees are authorized to fix the auditor's remuneration.

On the nonbinding advisory say-on-pay vote, preliminary voting results show that the requisite majority of the votes cast were voted in favor. I declare this motion carried.

Final voting results will be available after the meeting and posted to the Trust's SEDAR profile at www.sedarplus.com. If there is no further business, I will now ask Melissa to move and Josh Katz to second a formal motion to terminate the meeting.

Mr. Chairman, I so move.

Mr. Chairman, I second the motion.

Thank you. All in favor, please raise your hand.

[Voting]

Contrary, if any?

[Voting]

I hereby declare the motion carried and the meeting terminated.

Now that the formal part of the meeting has concluded, I would like to ask Jonathan Gitlin, our President and Chief Executive Officer, to make a presentation and then answer any questions you may have. Thank you.

Sorry, a couple of adjustments, [ 6.3 versus 5.10, 5.11 ].

Yes, maybe a little less [indiscernible].

[indiscernible], thank you for that, and thanks, Ed. Thanks, Jennifer, and good morning to everyone. It is an absolute pleasure to be here today and speak to you about our progress and where we're heading. At our 2025 Investor Day, we laid out a clear plan. We wanted to simplify the business, focus on our retail core, allocate capital with discipline and maintain a strong balance sheet, continue investing in our people, technology and responsible sustainability and deliver steady, durable growth.

Now this is an intentionally focused plan. In this business, clarity drives confidence and discipline drives results. Today, I'd like to show you that we're executing on that plan exactly as we said we would. That execution is translating into consistent performance, and we're confident it will continue to do so. RioCan owns an irreplaceable high-quality retail portfolio. It's positioned to be strong, stable and productive across all market cycles.

Our properties are concentrated in Canada's most in-demand markets where barriers to entry are high and new supply is very limited. These locations benefit from exceptional demographics and density. There are, on average, 277,000 people within 5 kilometers of RioCan's properties with an average household income of $155,000. This drives strong sustained demand from top-tier retailers, and that allows us to continuously enhance the quality of RioCan's already strong tenant base while simultaneously driving rent growth.

Our focus is on everyday needs. Today, 86% of our properties include a grocery component. Beyond grocery, we're deliberately curating an ideal mix of pharmacy, value and necessity-based retail that supports the communities that RioCan serves. The vast majority of our income is generated from leading national brands such as Loblaws, Metro, Sobeys, Shoppers Drug Mart and of course, Dollarama. These tenants drive frequent visits, deliver stable, growing cash flows and income and they enhance asset value. At the same time, we're realistic about the environment. Macro conditions remain uncertain and retail is not immune.

In any cycle, some tenants will be challenged while others outperform. That's the nature of this sector. What matters is how we have positioned the portfolio. We've deliberately increased our exposure to well-capitalized, resilient tenants. As a result, we're better positioned than at any point in our history to manage turnover and to create value through change. That gives us confidence in our ability to reposition and backfill space in an accretive way. A great example is RioCan Centre Burloak, which is in Oakville, Ontario. We transformed an underperforming portion of that site by securing Costco as a high-quality anchor and repositioning the center for long-term growth.

We unlocked approximately 16 acres of land by exiting lower-quality tenants and relocating stronger retailers. The result is meaningful value creation, approximately $3 million of incremental NOI and $21 million of NAV growth. It's also driving stronger traffic, materially higher rents and improved leasing quality with new deals from tenants such as TJX and Sephora. Georgian Mall in Barrie and Oakville Place are also strong examples of our ability to efficiently backfill large-format vacancies. In each case, legacy department store space is being repositioned into a higher-quality grocery anchor.

We secured Longo's for Georgian Mall and Nations for Oakville Place. These grocery banners will bring steady daily needs traffic to their respective sites. Both deals were structured with significant tenant investment and long-term leases further enhancing income strength. The result is a more productive use of space, higher quality rents and stronger long-term real estate fundamentals. This is what makes our strategy powerful. It's durable. It gives us resilience and it supports sustainable growth. We've made deliberate choices to get here, refining the portfolio, strengthening the tenant base, investing in data and technology and allocating capital where it generates the best returns.

We have the relationships and insight to maximize productivity of every single square foot of space in our portfolio. And we've simplified the business. We're monetizing RioCan Living, winding down mixed-use construction and sharpening our focus on our core retail platform. That simplicity matters. It improves visibility and predictability of cash flow. It strengthens our balance sheet, and it aligns everything we do with maximizing long-term value creation from our productive retail core. You can see the strength of the strategy in our results. We continue to deliver exceptional operating performance quarter after quarter.

Tenants simply want to be in our centers. It's also important to note that RioCan operates without an external sponsor, which means we are beholden only to you, our unitholders. That means our focus is singular, maximizing the productivity of our portfolio to drive unitholder value. The combination of market dynamics, our data-driven leasing approach and full operating independence supports durable, repeatable organic growth. We're in a retail leasing super cycle, driven by expiring legacy leases and constrained supply.

As leases roll, we're capturing meaningful rent growth while maintaining very high occupancy. This is not a one-time effect. It's a multiyear opportunity that continues to play out. What we're seeing is the compounding impact of years of disciplined portfolio management, where leasing strength, occupancy and mark-to-market gains reinforce one another. That demand translated into 98.5% committed retail occupancy at the end of 2025, and we sustained exceptionally high occupancy throughout the first quarter of 2026. Leasing productivity remains near historic highs with continued momentum reflected in 4 consecutive quarters of blended leasing spreads above 20%.

Today's leasing spreads are tomorrow's same-property NOI growth. We remain disciplined. We retain the right tenants. We upgrade where needed, and we continuously strengthen the mix of retail uses across our portfolio. A second pillar of our strategy is disciplined capital recycling, particularly through RioCan Living. Here again, the message is simple. We direct capital to the opportunities with the strongest risk-adjusted returns. We've made significant progress monetizing RioCan Living. As of the first quarter of 2026, we expect to repatriate approximately $1.04 billion through closed firm and conditional transactions. This represents roughly 80% of our $1.3 billion RioCan Living disposition target.

And exactly as we committed to at Investor Day, we're deploying that capital with discipline, strengthening our balance sheet, reinvesting selectively in our assets by responsibly and strategically enhancing properties. We do this by unlocking density within our existing footprint and driving long-term earnings growth and we're repurchasing units where we see a gap in intrinsic value.

Now as Ed had mentioned, over the last 18 months, we've repurchased and canceled close to 9.5 million units at a weighted average unit price of $18.49 per unit of bargain. This unit price is well below our IFRS value. Our NCIB activity reflects our conviction that the current price still does not reflect the value and earnings power of our business. There's been a steady stream of private and now public market transactions involving high-quality retail assets and portfolios that are similar to ours. These market reference points offer strong evidence of current valuations for assets exactly like ours, reinforcing that we're trading below NAV.

From a balance sheet perspective, we remain well positioned as assessed by a suite of metrics. We have liquidity, we have flexibility in a significant unencumbered asset base and a well-distributed debt maturity profile, and we maintain a disciplined approach to leverage. This provides meaningful financial flexibility, allowing us to act on opportunities while maintaining a prudent risk profile. It also supports the stability of our distributions, which remains a key priority for us and for our unitholders. In Q1 2026, Morningstar DBRS reaffirmed our BBB credit rating and revised the trend to positive, further validating the strength and the trajectory of our balance sheet and credit metrics.

Now if I step back, the most important point is this, we're executing our plan, not just a strong quarter or 2, but with sustained momentum. And that matters because our growth is supported by consistent recurring cash flows from our productive retail core. That's what gives us confidence in the sustainability of our results and our ability to compound them over time.

Looking ahead, we feel very good about where we are. Retail fundamentals remain strong, supply remains constrained and we have clear visibility into leasing-driven growth. Combined with a simpler business and disciplined capital allocation, we're exceptionally well positioned to continue delivering growth and creating value. So let me leave you with this. Why invest in RioCan? Well, we have a clear retail-focused strategy, a high-quality in-demand productive portfolio, a strong balance sheet and disciplined capital allocation and of course, an exceptional team supported by data and technology. And why now? We have durable and visible earnings growth. We have an influx of capital being deployed into accretive retail-focused investments and clear validation of our NAV through private and public market transactions.

Simply put, we know the value of what we own. We have the data to understand the opportunity within our portfolio, and we know how to extract it. We're creating value through focus, insight and disciplined execution quarter after quarter. That's what underpins our confidence. And that's what we believe will continue to deliver long-term value for you, our unitholders.

Now before I conclude, I want to thank Ed Sonshine and the dynamic Board of Trustees he leads. Their continued guidance, insight and support are invaluable to us, this management team. I also want to recognize RioCan's talented leaders and employees. Their commitment to excellence, operational strength and efficiency drives our performance every single day. And to you, our unitholders, thank you for your continued trust. We're excited about what's ahead. The path forward is clear. Retail dynamics favor us, and we believe our commitment to responsible growth ensures stability and prosperity.

Thank you all very much. And -- with that, I'll open it up to answer any questions that you may have.

Yes, sir. Nice to see you again.

[indiscernible]

I don't regret us saying we are focused on our core business, growing what we have internally. And I think there will be opportunities to grow through acquisition in the future. I don't think this is the one and only, not to suggest that we'll partake in anything recklessly. We're focused on growing our core business and focusing on growing organically. And if opportunities arise that fit within our capital plan and our strategy, we'll take advantage of that. I don't regret the -- not buying First Capital because it didn't do those things for us. It did not do those things for us, fit within our capital strategy.

I live in Burlington and there are -- at Burlington Centre, there are rumors floating around town on what the bay is going to turn into. And some people say it's going to be pickleball courts. Some people say it's going to be small retail. Some people will say it will turn into a fair downtown condo. So I can't believe all 3 are correct. And I'd like to hear your plans for as the bay is finished off, figuring out the merchandise in there, what have you in mind on that...

So Burlington is a great market. We love it. We own a lot of retail in Burlington, and it all performs exceptionally well, including Burlington Centre. The truth is that we don't own the Bay at Burlington Centre. It's owned by a disparate third party, and we have some control over what goes there through a joint operating agreement. But we will work with that party to ensure that whatever goes in there fits within the look and feel of the shopping center as it currently exists.

I can't imagine it will be condo because I don't think that market is viable. I also don't think they have the rights to necessarily build that, but I'm certain it will be good, strong, viable retail. It's a family that has owned it historically for many, many years prior to our purchase of the shopping center.

Thank you, and thank you for coming. Any other questions? Okay. Yes, sir.

[indiscernible]

So it has been part of our capital allocation strategy as demonstrated by our significant NCIB activity over the last 18 months. And it's something that we balance. We've got other uses of capital, paying down debt, building out some of our existing shopping centers, building pads and strips and acquiring other assets. We look at that in the context -- we look at NCIB in the context of those other opportunities and assess what's going to bring the best value to our unitholders. Of course, as our stock price rises, which is a good thing, it makes it less of a logical acquisition.

But we still, as I mentioned, think we think that we are trading well below where we should be and what our NAV is. And so it is still certainly something that we consider. But as again, the stock price goes higher, it becomes a little less compelling than it was when the stock price was in its 2025 averages.

[indiscernible]

Sorry, at $18.50 was the average of what we bought back in the last 18 months that was extremely good value or I should say, poor valuation of RioCan. And if the stock price got to get that level, it's a screaming buy, when it gets to the current levels, it has to be weighed against some of these other opportunities that we have and your management team continues to assess what's the best place to allocate that capital. NCIB is still a possibility. But as I said, when the share price rises, it becomes less advantageous than some of these other opportunities.

Okay. With that, Mr. Chairman, I'll turn it back to you.

Okay. The less tall guy is back, but we don't need an adjustment. Thank you very much for attending. And there being no further questions, I declare this meeting to be finished and terminated. Thank you very much.

Good day, ladies and gentlemen, and welcome to the RioCan Real Estate Investment Trust First Quarter 2026 Conference Call and Webcast. As a reminder, this conference call is being recorded.

I would now like to turn the conference over to Ms. Jennifer Suess, Senior Vice President, General Counsel, ESG, and Corporate Secretary. Ms. Suess, you may begin.

Thank you, and good morning, everyone. I am Jennifer Suess, Senior Vice President, General Counsel, ESG, and Corporate Secretary of RioCan. Before we begin, I am required to read the following cautionary statement.

In talking about our financial and operating performance and in responding to your questions, we may make forward-looking statements, including statements concerning RioCan's objectives, its strategies to achieve those objectives as well as statements with respect to management's beliefs, plans, estimates and intentions, and similar statements concerning anticipated future events, results, circumstances, performance, or expectations that are not historical facts. These statements are based on our current estimates and assumptions and are subject to risks and uncertainties that could cause our actual results to differ materially from the conclusions in these forward-looking statements.

In discussing our financial and operating performance and in responding to your questions, we will also be referencing certain financial measures that are not generally accepted accounting principle measures, GAAP, under IFRS. These measures do not have any standardized definition prescribed by IFRS and are therefore unlikely to be comparable to similar measures presented by other reporting issuers. Non-GAAP measures should not be considered as alternatives to net earnings or comparable metrics determined in accordance with IFRS as indicators of RioCan's performance, liquidity, cash flows, and profitability. RioCan's management uses these measures to aid in assessing the Trust's underlying core performance and provides these additional measures so that investors may do the same.

Additional information on the material risks that could impact our actual results and the estimates and assumptions we applied in making these forward-looking statements, together with details on our use of non-GAAP financial measures can be found in the financial statements filed yesterday and management's discussion and analysis related thereto, as applicable, together with RioCan's most recent annual information form that are all available on our website and at www.sedarplus.com.

I will now turn the call over to RioCan's President and CEO, Jonathan Gitlin.

Thank you, Jennifer. Good morning, everyone, and thanks so much for joining us today. Our first quarter results reinforce the message we've consistently delivered since our 2025 Investor Day. RioCan is executing a strategy anchored in our retail core. We're delivering durable organic growth, enhanced financial flexibility, and meaningful long-term value for unitholders. Our strategy is supported by our proven and future-focused platform. It's grounded in a culture of excellence, ongoing innovation, and advancement, and prudent ESG practices.

The quarter demonstrated momentum across all our key priorities including leasing performance, Same Property NOI growth, capital recycling, and disciplined balance sheet management and it did so in a manner that is consistent with the plan and targets we laid out at our Investor Day.

First off, I'd like to highlight operations. Record blended leasing spreads of 25.8% in the quarter was driven by new leasing spreads of 58.5%. This demonstrates once again the potent mark-to-market opportunity within our retail portfolio. And importantly these results are not one-offs. As we've discussed last quarter, we continue to benefit from a favorable retail leasing super cycle driven by a combination of expiring legacy leases and constraint new supply. They also reflect the structural advantages we highlighted at our Investor Day. These include high quality, necessity-based retail in densely populated supply constraint markets and strong longstanding tenant relationships fostered over the last 30 years.

We don't have an external sponsor that influences our decisions. That means we remain focused exclusively on maximizing the productivity of every square foot of our portfolio to drive unitholder value. The combination of our leasing strategy and full operating independence continues to translate into durable repeatable growth. Our sustained organic growth reflects disciplined execution of our retail focus strategy. Over the last 12 months that focus has delivered blended leasing spreads of 23.1%, which are now beginning to translate into Same Property NOI growth.

Our competitive advantages were on full display again this quarter. With Commercial Same Property NOI growth of 4.7% marking the third consecutive quarter at or above 4.5%. While we expect Commercial Same Property NOI growth to move modestly quarter-to-quarter this level of performance reinforces our confidence in the full year outlook of 3.5% to 4%. In the first quarter we achieved a 92.4% retention ratio and a 98.6% committed retail occupancy. This underscores the resilience of our cash flows and our ability to strike the appropriate balance between peer leading rent growth and extremely high occupancy. What we are seeing today is the compounding effect of years of disciplined portfolio positioning where leasing strength, occupancy, and mark-to-market gains reinforce one another.

A second major pillar of the strategy we presented at our Investor Day was strategic capital recycling particularly through RioCan Living. The progress this quarter was meaningful. As of May 4, 2026, we anticipate repatriating approximately $1.04 billion through close, firm, and conditional transactions. This represents approximately 80% of our $1.3 billion RioCan Living dispositioned target. We continue to see strong interest in the remaining 4 RioCan Living assets. We're monetizing residential rental buildings and residential inventory. In doing so we are simplifying our business and increasing clarity in our earnings profile. The proceeds are being redeployed equitably into portfolio investments, unit repurchases, and balance sheet flexibility, exactly as we outlined at Investor Day.

Our capital allocation decisions continue to be guided by a discipline hierarchy, always having a view on the most accretive outcome. During the quarter we reinvested $22 million into high return portfolio investments including retail infill and asset enhancements. This allows us to unlock embedded density within our existing footprint. At the same time we remained opportunistic in the public markets, repurchasing and cancelling 2.6 million units at an average price of $19.51 under our NCIB program. This reflects our view that the current unit price does not fully reflect the value and earnings power of our business. There has been a steady stream of private and now public market transactions involving high quality retail assets and portfolios that are similar to ours. These market reference point offers strong evidence of current valuation for assets like ours, reinforcing that we are trading at below NAV.

Our balance sheet remains well positioned as assessed by a suit of key credit metrics. RioCan adjusted spot debt to EBITDA is 8.94x. As we advance our capital recycling strategy through 2026, we fully anticipate net debt to EBITDA to settle into the midpoint of our stated guidance range. The strength and flexibility of our balance sheet were further recognized this quarter as Morningstar DBRS affirmed our BBB credit rating and revised the trend to positive.

Looking ahead, we reaffirmed our 2026 financial outlook including core FFO per unit of a $1.60 to $1.62. Additionally, we reaffirmed our guidance of Commercial Same Property NOI growth 3.5% to 4%. These targets are firmly supported by embedded leasing spreads already achieved, strong visibility on 2026 lease maturities, continued discipline, and capital deployment, and reduce capital intensity as we complete the wind down of mixed use construction.

In closing, Q1 was a strong start to the year and a clear reflection of our consistent execution of the commitments we outlined at Investor Day. RioCan has a focused strategy and is perfectly positioned to compound organic growth. The Trust has strong leasing fundamentals and a data platform that continues to provide multi-year growth visibility. We're also equipped with the balance sheet flexibility to act decisively. In this turbulent world, owning hard assets with reliable cash flow in prime markets is advantageous. To put it another way, it is a great time to invest in RioCan.

With that, I'll turn the call over to Franca Smith, RioCan's Interim Chief Financial Officer, and afterwards, we'll be happy to take your questions.

Thank you, Jonathan, and good morning, everyone. Our first quarter results were in line with our expectations and reflects continued progress on the priorities we set out at our Investor Day, driving organic growth from our retail core and maintaining a disciplined approach to capital allocation. Our balance sheet remains strong, supported by healthy credit metrics. Our financial flexibility continues to improve as we execute our capital recycling strategy.

I'll walk through the quarter, starting with Core FFO. As discussed at Investor Day last fall, we intentionally moved to Core FFO as a key performance metric because it better reflects the recurring earnings power of our core retail business. Core FFO also gives a more consistent basis to track and assess operating performance and cash flow generation over time. Mechanically, it starts with FFO and adjust for items that don't reflect our underlying run rate operations such as residential inventory gains, HBC-related income, and restructuring charges.

Core FFO in the first quarter was $0.39 per unit, in line with Q1 of last year. There were 4 primary drivers of our Core FFO results. Commercial Same Property NOI increased 4.7% year-over-year, contributing over $0.02 per unit. Our unit buybacks had a positive impact of approximately $0.01 per unit. These factors were offset primarily by higher interest expense and lower interest income, which had a combined impact of just over $0.02 per unit and lower NOI from the sale of residential rental assets had an impact of approximately $0.01 per unit. We anticipate Core FFO to ramp up over the balance of the year. And as Jonathan mentioned, we expect to deliver on our 2026 guidance.

Turning to other items in the quarter, we recorded approximately $2 million of onetime restructuring costs related to the reduction and consolidation of development and construction functions. Adjusted G&A expense as a percentage of rental revenue, which excludes the restructuring costs, is expected to remain below 4% on a full year basis.

We also recorded approximately $6 million of condo-related income in the quarter. Remaining residential inventory under construction is approximately $100 million at our proportionate share or roughly 1% of NAV. While this balance will be addressed responsibly over time, we do not expect condominium related items to make a material contribution to FFO for the remainder of the year. Together, these 2 items account for the majority of the difference between FFO and Core FFO.

Moving onto our balance sheet. Our adjusted spot debt to adjusted EBITDA ratio was 8.94x at quarter end. The increase versus year-end was primarily driven by acquisition timing related to Georgian Mall and Oakville Place where the associated EBITDA contribution built overtime while the associated debt was recognized immediately during the quarter. We expect these acquisitions to contribute positively to both Core FFO and our leverage profile overtime. Looking across our suit of metrics, our unsecured debt to total debt improved to 66%, and this mix will continue to improve as we execute on our financing plan.

We had approximately $9.4 billion of unencumbered assets and approximately $1.3 billion of available liquidity at quarter end, providing ample financial flexibility and capacity. As Jonathan also mentioned, during the first quarter, DBRS reaffirmed our BBB credit rating and revised the trend from stable to positive. We view this as an important endorsement of our balance sheet trajectory and the continued progress we are making on deleveraging. On financing activity during the quarter, we raised $200 million of senior unsecured debentures with a 4.308% coupon rate and a 7 year term. We also repaid $100 million of unsecured debentures upon maturity.

For the balance of the year, we expect that our capital recycling activities and capacity on our credit facility will be used to repay the vast majority of our remaining debt maturities. Additional debt issuances will be completed on an opportunistic basis.

To wrap up, our first quarter results represent a strong start to the year and align with the 3-year outlook we shared at Investor Day. Operating fundamentals across our portfolio remain exceptional, and we are delivering on our strategy and commitments. Both private and public market transactions continue to validate the inherent value of our business, and we remain focused on executing our plan to drive unitholder value.

With that, I will turn the call back to the operator to begin the question and answer session.

Ladies and gentlemen, we are currently experiencing technical difficulties. Please stand by as we resolve this issue before proceeding with our question and answer session.

[Technical Difficulty]

Ladies and gentlemen, we apologize once again for any technical difficulties. A full recording will be made available and sent out to you all. We are now ready for the Q&A portion of today.

[Operator Instructions] Our first question in queue, if you can please state your name and company, that would be greatly appreciated.

This is Lorne Kalmar from Desjardins. And apologies, I didn't know whose line was open. Just one more little technical difficulty, but let's put that behind us and get down to the good stuff. So on Same Property NOI, you guys had a continuation, I think, of some solid prints in 3Q and 4Q into 1Q. And I think you called out a part of that was the spaces that have gone dark in 2024, cash rents resuming. How do you expect Same Property NOI to trend over the balance of the year? Is kind of 2Q should be another one that's a little bit outsized and it moderates a bit over the back half?

Hello, Lorne, a couple of things to start. First of all, you, no need to apologize on your end. This is totally our service provider's issue. Second of all, I love the headline of your report. Waterson is always a good quote. Thirdly, with respect to SPNOI, we had a great quarter. The year is going very well. It's a little too premature to predict the entire remainder of the year, and we still remain very confident in our guidance. It will be between 3.5% to 4%. Things are all pointing to very favorable outcomes. And if the year continues to go the way it is going, we will provide updated guidance in the coming quarters. But right now, we are firmly confident behind the 3.5% to 4% number that we gave out in our guidance.

And then maybe just flipping to the RioCan Living side of things. It seems like you guys made some really, really good progress there. I was just wondering if you could give us a -- I know it's a sensitive one, but a rough idea perhaps of the yield on the assets that are either sold or under agreement to be sold. And then just maybe an idea of the buyer profile.

Sure, Lorne. So it's all in line with our IFRS values, and it's in the low 4 to mid-4 range across the board. Now that's a balance, some are lower, some are a bit higher. The buyer pool is consistent with the pool of buyers that we've had to date, which is a range. It's some private wealth and family -- sorry, family office buyers. It's some institutional buyers and it is some private equity buyers. So it really is a range.

And I guess as you kind of look ahead, I think you got 4 or so left to go. Has there been any change in the acquisition transaction environment since the aforementioned deals were consummated?

No. It still remains strong. There's -- these assets are new. They're transit oriented. They don't have rent control. And there's a high degree of demand for them. For us, it's just a question of getting all of them stabilized, getting the lease up as we intend to get it. And then I think there will be a fairly robust market for them.

And then I guess just to be clear, you still expect those remaining 4 to kind of hopefully transact on them by the end of the year?

So as I had indicated previously, it's our intention to get them done as quickly as possible just because of stabilization taking a little bit longer. There might be a couple of them that trickle into 2027. But our hope is that we have them contracted for by the end of the year, and we'll provide updates as the year progresses. But given the strength of the assets and given our desire to sell, we are confident that they will all be sold in short thrift.

Our next question comes from the line of Matt Kornack.

You had a strong quarter on Same Property NOI growth. And that's notwithstanding, it looks like recoveries were maybe 99% as opposed to 100% historically. Can you give us a sense as to if that's just a timing issue in this particular quarter? And then also percentage rent looked a little bit low relative to what we've expected in the past, but if there's anything color-wise there, that would be helpful.

Yes. So I think it's all just seasonality. I don't think there's anything to read into it. On the percentage rent, most certainly, it's seasonal, and that usually picks up as the year progresses. And on the recoveries, again, I think that is really just a byproduct of the fact that it was first quarter usually a little bit softer on the recoveries, but that usually stabilizes and ramps up by the end of the year.

Yes, Matt, the only thing I'd add -- this is John Ballantyne. Percentage rent, you will probably see that drop over time, not because tenant sales productivity is decreasing, but because we are converting some, I would say, historic or legacy percentage rent in lieu of net rents. So based on the hotness of this leasing market, we're able to get in front of these tenants and convert them to net deals, which will obviously benefit Same Property NOI.

Okay. No, that make sense. On the in-place occupancy front, committed remains essentially at an all-time fall, but there was a little bit of a dip in the in-place. Did you have some tenant turnover? And if we look at your new leasing spreads in the 50-plus percent range, is that the kind of rents you're getting on any sort of turnover you're seeing in tenants?

Yes. I think that the -- this is, I would say, an anomalous quarter with respect to that gap between committed and in-place occupancy. Based on the leasing that the team has done, you're already seeing that gap close quite dramatically, largely due to the HBC deals that we did in Oakville Place. And so I think you'll see it back to the normal range closer to 75 bps, which is our historic average. And the second part of the question, I can hand it over to John.

Yes. And look, Matt, the in-place occupancy did drop. We did buy a half interest in Oakville and Georgian Mall, which obviously had those 2 HBC boxes, which have been fully leased, but are not paying rent yet. That accounted for about 40 basis points. As Jonathan said, with Oakville taking possession in April, there's only about a 70 basis point gap now between committed and in-place.

Yes. And you had asked about the new leasing spreads. I mean, look, it's just a sign of the market, the sign of our portfolio and the sign of our team, strengthen them all. And we feel confident that while this is an outsized quarter for new leasing spreads, it is -- it sets a tone, and I think it underscores the strength of the markets out there.

On that front, maybe just a broader commentary. I mean, it seems -- we didn't think they could go higher, but you're setting all-time records. I guess is the market sequentially still improving? Or are we at a period of stability here now after getting some really good rent growth? It just -- it seems like you've got continued momentum and interested if you're seeing that in the marketplace now.

It's certainly been a great quarter, and we think it is quite durable. That said, all of our projections that we provided at Investor Day were predicated on a 15% leasing spread combined. These leasing spreads are obviously in excess of that. And we are certainly taking advantage of a very strong market, an ever-improving portfolio and a team that has very deep relationships to continue driving growth. The consistency of these spreads, they're going to ebb and flow. I mean they're very sensitive to specific deals, and you'll see a bit of fluctuation between quarters. But right now, based on all those strengths that I spoke about and the strength of the Canadian retail landscape, we feel confident that it's not -- there will be continued strength in that regard and operationally for RioCan. But as I said, you're not going to see that exact same level every single quarter going forward. But we're happy with where we currently stand, and we think it's reasonably sustainable, but there is going to be ebbing and flowing.

That make sense. Last one for me. Just obviously, you had a big M&A trade at a pretty low cap rate for some of the more core assets. Does that give you comfort around your IFRS value, maybe some optimism on the portfolio being more than what you thought it was worth or just any read-throughs from fairly sizable transaction in the negotiation?

I don't even know which transaction you're referring to, Matt. I just -- of course, for us, we've always been comfortable with our IFRS valuations. That's why we certify them and put them out there. That being said, I think that transaction stands as a great validation for the strength of retail in Canada and the desirability of it for both institutional owners and other REITs. So I think, again, it just draws us closer to what the private market has been seeing for quite some time. We've been seeing trades. I mean, they are quite disparate because there haven't been a lot of them, but we have been seeing trades that are also indicative of a very strong market for retail assets. So this didn't surprise us, but I think it just serves as broader validation behind the strength and desirability of great major market retail assets like those owned by RioCan.

[Operator Instructions] Our next question comes from the line of Sam Damiani with TD.

Maybe just on the leasing side here, obviously, a highlight for everyone seeing these spreads. Occupancy remains essentially full. You really can't accommodate new demand, except for any turnover that you have, which also remains low. So how is the leasing discussions changing? How maybe the mix of tenant categories that you're dealing with as you deal with this increasingly scarce amount of available space in your portfolio?

So first of all, thanks for your patience, Sam. And I understand that you might have missed the extremely eloquent opening remarks by Jennifer, myself, and Franca, and we'll get those to you.

No, no, I've heard it all. It's kind of...

But the backdrop -- oh, good. They were brilliant, right? The backdrop is very strong. And I think we're doing extraordinarily well with the necessity-based tenants. But keeping in mind that we do have this mark-to-market opportunity that we have been conveying for a very long time. Our average new rents in the quarter were now well over $30. Our average rents across the portfolio were just over $23. That leaves a sizable room to really extract what we feel are market rents out of our portfolio. And the team has done an extremely good job in taking tenants through this and making them understand what the true landscape is. And we are using data more so than we ever have to figure out exactly where market rates lie. But with respect to the tenants out there that are utilizing the space, it really is the list of the same incumbent tenants that you've seen that make up a part of our portfolio for quite some time. I'll turn it over to Oliver Harrison to give you a little more color on who they are, but I don't think you'll hear any surprises.

Correct. Yes, if you look at our quarter, the volume is really being driven by grocery, pharmacy, essential personal services. No change from what we've seen over the past few quarters. And back to your first question on how the negotiations have changed. I would say the only thing that is being done differently, and this isn't like a Q1 event, but this has been happening, let's say, over the last year to 18 months is that the negotiations are more holistic than just the economic outcome of the deal. We are using the current market environment to remove no builds. New leases do not have any fixed rent options. Annual growth is a concept that 2 years ago was challenging to get tenants to agree to, 98% of our deals now have some form of annual growth embedded in the negotiation. So we are leveraging all aspects of this market to produce not only the best economic outcome of these deals, but from a long-term kind of value creation and flexibility, I think we're doing extremely well.

And maybe just on the other side, are there any known larger or multi-space retailer tenants that you expect to be moving out or not renewing in the coming year or 2?

I think just there's certain tenants that we know might leave a space, but they're sporadic. There's no theme to it. And the good news is there's demand for whatever space we know might be coming back to us.

And just one last small one. It was a pretty tough winter. Just out of curiosity, was there snow removal costs meaningfully above normal in Q1?

Hello, Sam, yes, they were. There's probably 4 or 5 larger centers in the GTA area that we actually had to haul snow, which is expensive, which means you basically have to build the tenants. The tenants do pay for all of this. We had to send out some interim billings just to catch up on that and all good.

Yes. Snow removal is not included in the limited number of tenants that have caps on [ cam ]. So it's fully recoverable.

Our next caller comes from the line of Brad Sturges.

Just from a capital allocation perspective, just thinking about the NCIB, obviously, leverage ticked up over the quarter-over-quarter. And at the same time, I guess, your stock price improved. Like how do you think about capital allocation towards unit buybacks in the short-term as still an opportunity? Or should we see a little bit of a change in thinking at least in the short run on the NCIB?

Thanks, Brad. And again, thanks for your patience on the call today. The capital allocation decisions are really rooted in achieving our 9% unlevered IRR hurdle. When the stock price goes up or the unit price goes up, it obviously -- it makes it challenging to achieve that. The good news for us is that there are other opportunities to invest in, such as putting money into our own shopping centers, building out pads and strips, which in this environment certainly allows us to hurdle that 9% IRR number. But yes, if we are in the fortunate circumstance where the unit price continues to increase, then NCIB becomes less of a promising prospect for capital allocation, but we feel that there will be other opportunities that arise out there. And then the other thing I'll just remind you of is that the balance sheet and the strength of it is a core principle for RioCan. And so that will always be our principal focus. And as we've asserted before, as RioCan Living assets close as the year goes on, it will continue to strengthen that balance sheet, and we'll get closer to the mid part of that range for net debt to EBITDA.

And just on the intensification opportunity, I know you've highlighted a few times in terms of the potential across the portfolio. I guess, is there -- in the short-term, could we expect a couple more projects getting added into the active pipeline? Or how should we think about that over the -- for remainder of the year?

Yes. I think we've already put out guidance that we're going to spend about $100 million in 2026 on a combination of CapEx endeavors, one of which is, of course, putting money into pad build-outs and strip build-outs. And I think that's going to be fairly consistent. We're going to seek out as many opportunities as are logical on a year-by-year basis. But I think that's a logical run rate for years going forward, but we'll continue to update that guidance.

Our next question comes from the line of Dean Wilkinson.

Jonathan, look back over our illustrious careers, every time we've seen things get better, right? Occupancy tightens up and rents are going up, new supply tends to come into the picture. When you look at the landscape now, is it still a case that just new construction costs given land, all of those things associated with it, you just can't pencil that out. So the runway for existing assets is probably a little longer than maybe it has historically been?

I'm highly confident that there will be no material supply in the Canadian landscape anytime soon, Dean. And that's not just because of the economic context. It's not just because you need certain rents to justify new build. You also need to find land, unencumbered land of many acres that have rooftops and appropriate demographics surrounding it. That's very difficult to find. And then the attributes of that land have to be such that they're easily accessible, they've got great visibility and that you've got tenants that necessarily want to be in that specific area. These things take time to find, and they're very far and few between out there. I would also say that you also to get that land zone, which is another very high barrier. And for us, like this is a long time away. If RioCan can't find viable land and the viable opportunities to build de novo, so greenfield new sites, then I suspect many others in the field will also have such difficulty, which is, I mean, obviously, a 2-sided coin. On one hand, it really protects the landscape. There will be no material supply going forward.

But on the other hand, of course, it does limit our opportunities to build a new. The good news for us, as I alluded to before, is we have this excellent opportunity set, which is our own portfolio, and there's a lot of density to be had in that portfolio, which, as you can see from our -- from the activity in our portfolio this year, we are fully intent on extracting and building out.

That's the benefit of the cost basis. And I suppose this is why investors are willing to pay a premium to book value to acquire assets, not a discount.

Our next question comes from the line of Pammi Bir with RBC Capital Markets.

Just maybe coming back to the 4 RioCan Living rental residential properties that are left to sell. Where are they now in terms of that sale process? Like are they -- have they been listed or just not yet as you work to stabilize?

I would say there's no consistent theme, Pammi. They're in different stages. Some of them we are actively putting in the market in very short order and others were actually working on some off-market discussions and others are just not ready to do either. So they really do range. But as I said previously to one of your colleagues, we are confident that those assets will be sold. I mean, I will not say first with certainty that all 4 of them will be sold and finalized by the end of 2026. I have indicated that there might be a couple that literally just flow into next year simply because the assets aren't ready to be sold. They're not stabilized. But I don't think it will be a big delay beyond that.

And then I did want to come back to, I guess, maybe clarify some of the comments on the remaining condo inventory that's under construction. In your -- that $1.3 billion target in the capital repatriation, I think there's still about $120 million related to condo closings, if I read that table correctly, in order to hit that target. But then I think your commentary -- Franca's commentary suggested that there's no further condo income this year that you -- I guess, you anticipate. So just trying to reconcile those 2 comments. And should we essentially infer that there's no further proceeds coming back this year in order to hit that $1.3 billion? Or just it wasn't clear?

So I'll start and then hand it to Franca, but there's about $100 million of inventory remaining, about $14 million of those are under contract. We expect most of those to close. And then the remainder, we didn't have -- we didn't prognosticate closings for the remainder of 2026. But in terms of how it features in that $1.3 billion, I'm going to hand it over to Franca.

Yes, Pammi, there's also some -- if you look at the reconciliation in our materials, there's also some receivables that we're going to be collecting from one of the projects that are entering into final closing. So that's going to be added to the proceeds. Right now, as we sell them, we close on interim. When we get to final closing, we collect the cash. So you'll see that coming through the reconciliation as well.

So the $1.3 billion in total is still the right number.

Yes.

So it's still the right number. So the total condo, I guess, proceeds, Franca, to your comments on the receivables, the $370 million is the cash number that should come through -- like the $370 million is the aggregate number that should have been collected between 2025 and the end of this year?

Yes.

And then just in terms of the restructuring charges, I mean, is this -- do you feel at this point like there's no further, I guess, any additional anticipated changes coming or charges? Or are there perhaps some further efficiencies across the business that you're looking to, we may see?

No, I don't think there's anything material.

And then just lastly, I just want to come back to the comment around annual rent steps. Obviously, we saw this with -- we've seen this with industrial now for many years and certainly in retail, we've been talking about it and seeing it as well. But what range of spreads are you putting in -- sorry, annual steps are you putting in into some of the renewal leasing or the new leases?

Yes. The objective is always 3%. We are attempting to do the greater of 3% in CPI. But that's, of course, the objective. Sometimes we get a little more, sometimes we'll get a little less. Oliver, did I...

Yes, between 2% and 4%.

And I am showing no further questions at this time. I will now turn the conference back to President and CEO, Jonathan Gitlin.

Well, thank you very much. And again, for all those of you who have -- are still on the call, I really do appreciate your patience with the technical difficulties that we all experienced. I'll leave you with this. Our first quarter clearly demonstrates execution of the strategy that we presented at our Investor Day. We're delivering exactly what we said we would. We have absolute confidence in our people, our portfolio, and our strategy to drive long-term value. Thanks, everyone, and thank you again for your patience.

Good day, ladies and gentlemen, and welcome to the RioCan Real Estate Investment Trust Fourth Quarter 2025 Conference Call and Webcast. As a reminder, this conference call is being recorded. I would like to turn the conference over to Ms. Jennifer Suess, Senior Vice President, General Counsel, ESG and Corporate Secretary. Ms. Suess, you may begin.

Thank you, and good morning, everyone. I am Jennifer Suess, Senior Vice President, General Counsel, ESG and Corporate Secretary of RioCan. Before we begin, I am required to read the following cautionary statement. In talking about our financial and operating performance and in responding to your questions, we may make forward-looking statements, including statements concerning RioCan's objectives, its strategies to achieve those objectives as well as statements with respect to management's beliefs, plans, estimates and intentions and similar statements concerning anticipated future events, results, circumstances, performance or expectations that are not historical facts.

These statements are based on our current estimates and assumptions and are subject to risks and uncertainties that could cause our actual results to differ materially from the conclusions in these forward-looking statements. In discussing our financial and operating performance, and in responding to your questions, we will also be referencing certain financial measures that are not generally accepted accounting principle measures GAAP, under IFRS. These measures do not have any standardized definition prescribed by IFRS and are therefore unlikely to be comparable to similar measures presented by other reporting issuers.

Non-GAAP measures should not be considered as alternatives to net earnings or comparable metrics determined in accordance with IFRS as indicators of RioCan's performance, liquidity, cash flows and profitability. RioCan's management uses these measures to aid in assessing the trust's underlying core performance and provides these additional measures so that investors may do the same. Additional information on the material risks that could impact our actual results and the estimates and assumptions we applied in making these forward-looking statements, together with details on our use of non-GAAP financial measures can be found in the financial statements filed yesterday and management's discussion and analysis related thereto, as applicable, together with RioCan's most recent annual information form that are all available on our website and at www.sedarplus.com.

I will now turn the call over to RioCan's President and CEO, Jonathan Gitlin.

Thank you, Jennifer, and good morning to everyone joining us today. We're pleased to report RioCan's fourth quarter and full year results. At our 2025 Investor Day, we were clear about our priorities, driving growth through our productive retail core and supporting that growth through disciplined strategic capital allocation. We're delivering on those commitments.

In the fourth quarter, the strength of RioCan's portfolio and the effectiveness of our retail-focused strategy were once again demonstrated by 4.5% same-property NOI growth. This was propelled by the continued outperformance of our core retail assets. We delivered on our capital allocation priorities, repatriating $742 million of capital to strengthen the balance sheet and support NCIB activity.

Net debt to EBITDA was reduced to 8.6x, and we repurchased $179 million of units through 2025 and year-to-date 2026. Our NCIB activity reflects our conviction that the current unit price does not capture the value and earnings power of our business. We're investing in a portfolio with tremendous growth prospects. Our performance is underpinned by a proven future-focused platform.

We continue to strengthen our operational and technological capabilities while maintaining top-tier employee engagement results even as we further reduced G&A. RioCan's disciplined execution is complemented by strong ESG performance, including our #1 ranking among North American retail peers in the 2025 GRESB real estate assessment.

Taken together, our results reflect the power of our productive retail core, the quality of our assets and a platform that delivers consistent performance. In a market characterized by a shortage of well-located retail space, RioCan continues to deliver consistent and durable growth.

RioCan's operating momentum remained strong through the fourth quarter. Retail committed occupancy ended the year at 98.5%. Leasing performance continued to be exceptional with record full year blended leasing spreads of 21.1%. Our 2025 retention ratio of 93.1% underscores the value tenants place on RioCan's locations and its operating capabilities. It also enables us to enhance income quality, improve portfolio resilience while minimizing capital outlay.

Commercial same-property NOI growth accelerated to 4.5% in the fourth quarter and totaled 3.6% for the full year, highlighting the consistency and resilience of our cash flows. These results are not coincidental. They are the direct outcome of a portfolio concentrated in Canada's largest and most desirable markets anchored by necessity-based retailers and supported by structurally constrained new supply. We're seeing the benefits of what we believe is a leasing super cycle for our portfolio. This is a time when many long-term leases that were signed in the early 2000s are expiring.

Shorter-term leases negotiated during the pandemic are also maturing. This gives us flexibility and discretion to shape our tenant base. We are retaining and resetting rents for high-quality tenants. We're equally deliberate in replacing those tenants that no longer align with our strategic objectives. RioCan is an independent Canadian REIT. Our independence means we are accountable solely to our unitholders with no parent company or sponsoring owner influencing our leasing or operational decisions. This independence, combined with strong retailer demand and the depth and expertise of our leasing team puts us in the advantageous position of being highly selective.

We can choose the right tenants on the right terms. Premium retail space in Canada's major markets is scarce. And in my opinion, given the high barriers to entry in the Canadian market, this will be an enduring condition. Retailers are focused on well-located centers with strong demographic attributes and compelling co-tenancies. This precisely describes the centers in RioCan's portfolio.

In recent years, we introduced grocery to a significant number of assets. Today, 86% of our sites include a grocery component. This anchors daily traffic and supports consistent performance through all market cycles. Beyond grocery, we're deliberately curating the ideal tenant mix for the communities that we serve. We know these communities well, and we understand the daily needs of their residents. As a result, the vast majority of our portfolio is aligned with necessity-based daily uses, including retailers such as Loblaws, Metro, Sobeys, Shoppers Drug Mart and Dollarama. These are the retailers that fulfill essential everyday shopping needs and drive reliable repeat visits. These attributes create daily use destinations that generate consistent traffic, strong sales productivity and resilient income through all market cycles.

Our tenants are not simply maintaining their footprints, they're actively investing and expanding. This sustained demand continues to validate the long-term strength of our retail platform. Our leasing strategy continues to unlock meaningful mark-to-market opportunity throughout our portfolio. In 2025, we completed leases for 5 million square feet. The average net rent for new leases was about $29.65 per square foot, which is approximately 28% higher than our overall average rent. This highlights the mark-to-market growth potential embedded in RioCan's portfolio. This result isn't a one-off.

Rents on new leases since 2022 were on average about 27% above those of existing leases. We expect this trend to continue for at least the next 3 years. During this period, we have 10.1 million square feet of leases maturing, hence, my reference to a leasing super cycle. Combined with contractual rent steps and disciplined capital deployment, there is a clear and sustainable runway for continued core FFO growth.

As we move into 2026, our business is simpler, focused and exceptionally well positioned to capitalize on favorable retail fundamentals and the significant embedded mark-to-market opportunity within our portfolio. Our leasing momentum, together with long-term contractual rent steps and disciplined capital deployment into the high-return retail opportunities flows directly into the durability and predictability captured in our core FFO.

Core FFO provides a clear measure of the durable earnings power of our retail platform. It represents an important evolution in how we reflect the performance of our business. Core FFO captures the recurring earnings generated through leasing execution and disciplined capital deployment while removing items that are not representative of the underlying operating strength of the portfolio. Because it is driven primarily by occupied space, contractual rents and the intentional allocation of capital to high-return uses, core FFO provides a clear line of sight into the stability and predictability of our income.

As we look ahead to 2026, we're guiding to same-property NOI growth of 3.5% to 4% and core FFO of $1.60 to $1.62 per unit. This core FFO guidance is in line with the 3-year outlook we provided at Investor Day. In many ways, core FFO best captures what differentiates RioCan today, a high-quality, necessity-based retail portfolio operating in supply-constrained markets where leasing momentum and disciplined capital allocation work together to provide consistent, repeatable results and high risk-adjusted returns.

Our outlook reflects confidence in our ability to deliver resilient income, sustainable distributions and long-term value creation. This quarter's performance is not an outlier. It is another clear validation of the strength of our portfolio and our strategy. In closing, RioCan enters 2026 with considerable momentum, an exceptional portfolio and a disciplined strategy that consistently generates results.

We're in the midst of a multiyear value creation phase underpinned by visible and sustained growth that we believe is not fully reflected in RioCan's current unit price valuation. Our team remains highly focused. Our capital is positioned to drive ongoing growth and our portfolio is well aligned with the evolving needs of retailers and communities.

Thank you for your continued trust and support, and I will hand the call over to Dennis Blasutti, and then look forward to your questions.

Thank you, Jonathan, and good morning to everyone on the call. I'll start with some additional detail on our 2025 results, and then I'll walk through our 2026 outlook. Starting with FFO. We delivered $1.87 per unit in 2025, near the high end of our guidance range. This performance was underpinned by same-property NOI growth of 3.6%, slightly ahead of guidance, reflecting continued strength in our retail-focused strategy.

Record operating KPIs such as 21.1% blended leasing spreads were key drivers. This strong organic growth excludes onetime items such as lease termination fees and highlights the strength of our team and portfolio. Core FFO for the year was $1.55 per unit, in line with our Investor Day projections. We view core FFO as a durable earnings base that we will grow from compounding value as our income grows.

We have reached the natural conclusion of our development cycle with several key projects now complete, the capital intensity of our business is moderating. Total development spend in 2025 came in at $254 million, and we expect this to significantly decline next year, which I will touch on later.

During the year, we delivered 366,000 square feet of completed developments from PUD to IPP. This included 102,000 square feet of retail. These deliveries included finalization of The Well, parks and crossings new Winners and HomeSense [indiscernible] Dollarama and Service Canada as well as residential projects such as Fort Street Lofts and Queen & Ashbridge.

We also made strong progress on capital recycling. We sold $406.6 million of RioCan Living assets and closed $221.7 million of condos for a total of $628.3 million. Subsequent to year-end, we also went firm on the disposition of our Underwood residential building in Calgary for $46.5 million. Taken together, we are halfway towards our $1.3 billion to $1.4 billion target with a number of other assets in negotiations.

Through successful condo closings, we have reduced our residual condo balance to $130 million, which is immaterial in the context of RioCan's balance sheet. In addition, we sold $113.4 million of noncore and lower growth commercial assets, bringing the total capital repatriation to $788.2 million. Through this disciplined capital recycling program, we continue to improve our portfolio quality while funding growth and improving our balance sheet. We allocated much of this capital to debt reduction and unit repurchases. As a result, net debt to EBITDA improved to 8.6x, a half turn improvement from the 9.1x at the end of last year and well within our target range.

Our balance sheet is in a strong position, supported by a suite of improved credit metrics. We ended the year with $1.5 billion of liquidity. Our ratio of unsecured debt to total debt improved to 63% from 56% last year, which, as a result, increased our unencumbered asset pool by $1 billion to $9.2 billion. We continue to view unit repurchases as an attractive use of capital, particularly when our units traded at a significant discount to our historical norms. At current prices, our units imply a forward multiple of approximately 12x using 2026 core FFO, representing a 20% discount to our long-term historical average of 15x.

Our IFRS NAV, which is valued bottom up, also implies a multiple of 15x, consistent with our long-term average. Given the improvements we've made to our business and our positive outlook, we believe this dislocation in our valuation presents a highly attractive entry point for investors.

Since the beginning of 2025, we have allocated $179 million to unit repurchases. And since 2022, we have repurchased 19 million units or 6% of the company, reinforcing our focus on long-term value creation for unitholders. Subsequent to year-end, we closed on the previously announced acquisitions from the HPC JV. All backfill tenants at Georgian Mall and Oakville Place are now signed.

Total capital for these build-outs is less than previous projections at approximately $20 million or $100 per square foot with a stabilized NOI yield of 20% on cost with annual growth in the leases thereafter.

Turning now to our forward-looking targets. Our 2026 guidance is in line with the framework that we outlined at our Investor Day, striking the appropriate balance of opportunity and risk. We expect core FFO per unit of $1.60 to $1.62, representing a growth rate consistent with our Investor Day projections. This is supported by same-property NOI growth of 3.5% to 4%.

We have strong visibility into this target given that approximately 75% is contractually secured through rent steps and ramp-up of previously signed leases. With the strong operating backdrop, we expect to steadily grow this high-quality earnings stream. We also continue to see opportunities to invest within our existing portfolio.

In 2026, we expect to invest $95 million to $150 million into retail-focused projects, including Yonge Eglinton Center Improvement Plan, the new Costco at Burloak, Georgian Mall and Oakville Place backfills, including the addition of grocery to both those centers, Westgate Shopping Center de-malling in addition of a grocery store and additional infill pad density at Windfield Farms. Consistent with our Investor Day framework, we apply a 9% unlevered IRR hurdle rate for these types of projects.

For the projects included in our 2026 plan, we expect to outperform this target with a going-in yield averaging 8% to 9% plus future growth averaging approximately 3%. We expect mixed-use development expenditures of $45 million to $55 million in 2026, a significant decline from prior years. 2026 spending represents a small amount of cost to complete and pipeline advancement costs. Maintenance CapEx is expected to return to normalized levels of approximately $55 million, a decrease of $16 million from 2025.

Note that we report our AFFO using a normalized CapEx, so this decrease in spend will not impact our reported AFFO growth rate, which will approximate our FFO growth rate. However, for any of you who use actual CapEx when calculating AFFO results, this lower spend will lead to a higher year-on-year growth rate in this metric. We are reaffirming our target range for net debt to EBITDA of 8 to 9x, a range that when taken together with our suite of balance sheet metrics, results in low financial risk.

We continue to manage financial risk by growing our unencumbered asset pool with a percentage of unsecured debt to total debt expected to be in the high 60s by the end of 2026 as we progress toward our 70% target. We also remain focused on maintaining a well-balanced debt ladder and ensuring that we have strong liquidity. Lastly, we continue to advance our RioCan Living disposition program. While execution and timing remain market dependent, the quality of this portfolio gives us confidence to achieve our $1.3 billion to $1.4 billion target.

In closing, we have a highly productive retail portfolio that is positioned to deliver resilient durable cash flows. We have the capital to grow and a strong balance sheet that derisks our growth trajectory. As we execute our plan over time, we believe the value of our business will be appropriately reflected in our unit price.

With that, I'll turn the call back over to the operator for questions.

[Operator Instructions] Our first question comes from the line of Sam Damiani with TD Securities.

I just want to say it's great to see the results coming in with expectations and the predictability of the new core FFO metric. So it just makes following the company much easier. I guess, first off, just on the guidance for core FFO, it's a very tight range of $1.60 to $1.62. I'm just wondering if there's any reason why you didn't start with a wider range.

Thanks for your earlier comment. The reason is because core FFO is quite predictable. It's quite hard to come by additional core FFO, and it's quite hard, we hope to lose core FFO given that it's rooted in a lot of very predictable operational outcomes. And so we felt that it was prudent and also more accurate in giving that tighter guidance range. We felt this would help shape a lot of analyst views as well as investor views, and we have quite a bit of confidence in that tighter range. So that's the backdrop.

I appreciate that. And just, I guess, going back to Q4, the core FFO print came in sort of right at sort of the outlook, the guidance, but I think the guidance was technically for -- at a minimum of $1.55 for 2025. Is there any reason why the results didn't exceed the minimum of that guidance for 2025?

I think that ultimately, the guidance was in line with what we suggested at Investor Day. It might have been on the lower end of the guidance, but I think it was just a matter of timing on certain income that we had coming in. I don't think there's any technical reasons, Sam, that I can give you at this point. Dennis, I don't know if there's anything you can offer?

No, I wouldn't expand much on that. I think there's just maybe a bit of timing items on whether it's costs or other things as well. So it's just a few little small things like that. Just -- it was never expected to be that much different than $155 million anyway. So we're just, I think, pleased that it came in as expected.

Yes, for sure. And it was a small amount regardless. Last one for me, just on -- and you did address this, Dennis, in your comments, but any more specific commentary you can offer in terms of the quantity and cadence of RioCan Living dispositions in 2026 beyond the under wood, of course?

We're feeling good about it, Sam. There's a high quality of assets and therefore, a high degree of interest in those assets. The market will do what the market will do, but we've had a lot of preliminary -- actually, I'd say, advanced discussions on a number of the existing RioCan Living assets. And so we feel quite confident that there's going to be a nice consistent cadence throughout the course of the year. And as Dennis suggested in his remarks earlier, we feel confident that the ultimate target of approximately $1.3 billion is very much achievable whether that falls on either side of '26 or early '27, again, like I said, some of it is market dependent. But as a whole, we feel quite confident that we'll achieve that number.

Our next question comes from the line of Lorne Kalmar with Desjardins.

Maybe just sticking with the disposition side, but switching over to the commercial side because you guys have done some good work there. Wondering if you can give us an idea of the quantum of noncore commercial dispositions you expect to do in 2026.

We haven't put out guidance in that regard. We are obviously always in -- we're getting a lot of inbounds, Lorne, for what has become a highly sought after product type in necessity-based open-air shopping centers. And really, we've also pruned our portfolio such that we don't have a lot of noncore retail assets. That being said, if there are certain low-growth assets, then we would consider entering into either joint ventures or selling them on a wholesale basis. And -- but we did not provide any specific guidance along the lines of how much we would dispose of any commercial assets.

Okay. Fair enough. And then I guess with all this repatriation of capital, there are a few levers to pull here. Obviously, debt is a priority. But beyond that, you've been active on the NCIB. Just wondering how you make the capital allocation decision, whether to go on the NCIB or acquisitions or prioritize debt.

Well, the first priority is keeping the balance sheet in good shape, Lorne, as we suggested at our Investor Day in November, it's critical for us to have between 8 and 9x net debt-to-EBITDA, along with a whole suite of other debt metrics, including liquidity, including debt service coverage ratios, including unencumbered asset pool. And all of those things we feel are in good shape. And because of that, it permitted us to take some of our additional capital and put it towards NCIB which at this point is such a logical use of capital. It's really a way of giving back to our shareholders.

And I really do feel that we are -- and obviously, it's a biased view, but I do believe that RioCan's units are undervalued relative to the future performance perspective we have. And therefore, we thought that buying back units in that type of pricing range was a very prudent use of capital and in line with what we had suggested at our Investor Day. So that was really the decision-making process. There are other uses of capital that Dennis had alluded to in his remarks, such as putting money towards our property, building out pads and strips and also just reshuffling tenancies in certain properties like at Burloak where we've -- we're in the process of erecting a Costco. And I think those will also be part of the decision-making process. But in this type of market, it is definitely -- NCIB stands out as a very clear-cut accretive use of capital.

So the only thing I'd add there is that I think one thing to kind of think about in this environment is rates have come down with spreads tightening and the underlying is moving to a level where paying down debt is simply not accretive to FFO per unit or value. And so it's something to just sort of think about when we have so many other stronger opportunities from an accretion perspective, that we've kept our range intentionally a little wide to -- on net debt to EBITDA to allow for us to take advantage of opportunities to reinvest in our own portfolio, et cetera.

And then really thinking about the balance sheet from a financial risk perspective, anywhere inside that range in conjunction with our ladder and all the other suite of metrics that Jonathan mentioned is a low-risk balance sheet in our view. So we do -- we've intentionally left ourselves flexibility to take advantage of accretive opportunities. Things like acquiring Georgian and Oakville, those are accretive opportunities. We're going to add a ton of value through the re-leasing effort. But at day 1, it is a negative impact on net debt to EBITDA because you have to wait for the EBITDA to ramp up. But 4 quarters later, it's a positive impact, right? So there's -- you can get a timing lag in the metrics. But ultimately, we think buying those assets was -- is going to be a very good -- it's going to bear out to be a very good decision.

Okay. And then maybe just sticking with that one last one. Is there a reality where you guys go below the 8x net debt to EBITDA? Or you don't see much point in that?

Anything is possible. It really depends on what the other opportunities are. But when we have such accretive and logical uses of capital outside of just paying down debt, we are going to take advantage of those. And we see that we have a runway with respect to our stock price being where it is and the availability of capital because of the repatriation of RioCan Living assets.

So I think for the foreseeable future, that's where we'll focus our efforts along with some of the other property level improvements and build-outs that I was talking about before. But again, we're committed to that range of 8 to 9x going below that. it's not something in the short to medium term that we see happening.

Our next question comes from the line of Mike Markidis with BMO.

Just a quick question on the reinvestment CapEx of $95 million to $115 million of the existing portfolio. Is that sort of what we should be thinking about what you're capable of delivering? Or is there a potential for that to ramp higher in '27 and '28?

So I think it is a fairly good estimate for going forward. It will depend, Mike, on what the opportunity set is in '27 and '28. But right now, I think that as a run rate is a reasonable assessment.

Okay. Great. And then, Jonathan, you had mentioned some -- or you alluded to strong demand for the types of asset RioCan owns. What's the acquisition market like out there? I mean, obviously, the pricing is tight. Is there a lot of product available for sale? And if so, would RioCan potentially look at doing -- I mean, I think you mentioned JVs on some noncore assets, but what about on core assets in terms of trying to extend your platform?

Sorry, to buy or to sell, Mike?

Well, it could go both ways. You could see the JV and then continue to expand.

So yes, the market is tight at this point. There's a lot of very strong retail that's held by a lot of very well-heeled entities, whether they're REITs or pension funds. And there's just no push or need to sell them. So you're not seeing a lot of high-quality assets that would fit RioCan's existing high-quality retail profile available to acquire. And when they do become available, they're at cap rates that are extremely tight and they're generally getting those.

So that allows me to flip to the other perspective, which is the ability to sell certain interest in assets. And that's something we definitely are exploring where we take, let's say, lower growth assets that are of high quality, bringing in a partner, and we use our platform to create value through a fee stream, but also repatriate capital that we could put to work in a very accretive manner.

I think that's something we would avail ourselves of, and we alluded to it in our MD&A that there are certain discussions taking place at this point in time in that regard. And I think that's a model that is definitely -- again, it really -- it shows the strength of RioCan's platform, and I think a lot of partners would covet that type of management oversight. And then once you have that type of partnership, I'm going to use an old term here, but it gives you a bit of a hunting partner, especially if you have a well-heeled institutional partner who has equal sensibility around what is good to own.

So I do think if we are -- if we have capital available to us and we have the opportunity to utilize someone else's balance sheet, but we get a fee stream, it certainly makes acquisition a little more palatable. But in today's existing market for us just to go out and buy 100% of a high-quality retail asset, I think it would be very hard pressed to go over our 9% unlevered hurdle because you're just -- if you're finding an asset that has 3% growth, it's not going to be at a 6% cap, it's going to be something lower. So that's the quandary that we'd be in from just a straight-out acquisition perspective.

And quite frankly, Mike, just going back to the point I made earlier, I've got an awesome portfolio right in front of me that I know, that I love. And if I could buy a piece of that at what is a much higher yield than what the open market or the private market would permit, I would do that all day long, hence, the $175 million of NCIB that we participated in since early 2025.

Okay. Got it. And then last one before I turn it back. I know you said exploring in discussions, that's probably -- you may want to punt this question, but what would be the sort of potential range or quantum of assets that you would be looking to potentially sell to a JV partner?

I mean -- again, it's -- it really -- we don't have it in our business plan at this point. So there's no specific number. We would just balance as we always do, the considerations around what could we do with the capital and what the type of accretion would be from a fee stream perspective. And so there's no set quantum, Mike, but we would balance it with all the other considerations. I know it's a bit of a vague answer.

Our next question comes from the line of Mario Saric with Scotiabank.

Just sticking to the potential kind of dispositions that are not in the plan. Jonathan, you mentioned or referenced kind of low growth assets as being a possibility relative to your kind of 3-year, 3.5% kind of same Park NOI target, what would you kind of consider as being low growth? And what percentage of the portfolio could that comprise?

Yes. So we put out guidance, as you know, Mario, of between 3.5% to 4%. We said at our Investor Day that we -- for us, we expect to get at least 3.5% same-property NOI. And that came through -- those guidance numbers came through a very in-depth review of the entire portfolio, every single property, every single tenancy from bottom up. And it gives us in doing that exercise and in very intense asset management, gives us a good perspective of what assets are going to contribute over the next 3 years and what assets are going to take away from that objective.

And thankfully, the vast majority of our portfolio will contribute. There are some, however, that have larger anchor tenants that have, let's say, flat projections going forward. I'll give you, for instance, Walmart, we know that a lot of their historic leases have limited growth, if any. And -- but they're high quality. They're excellent and predictable creators of an income stream, which a lot of institutional investors, I think, would covet in this type of environment.

So for us, those don't necessarily contribute to the quantitative output of 3.5%. But from a qualitative perspective, they're good, they're predictable and they're very strong assets with limited risk. So for us, if we could keep a 50% interest, sell a 50% interest and get a fee stream, all of a sudden, it takes a lower growth asset and it makes it a little more aggressively growth oriented because of the fee stream that is attached to it.

So for us, that's -- there's a few of those assets in our portfolio, not, as I said, an overwhelming amount because of all the work we've done over the last few years to really curtail the portfolio through dispositions and the addition of excellent properties through developments or acquisitions.

Okay. And it may or may not be related, but you -- I was hoping you could expand on the commentary pertaining to RioCan's tenant independence. I think you also highlighted that in the letter to unitholders this quarter, perhaps maybe some examples where you think that benefit has been crystallized. Just curious on some expanded thoughts on...

Sure. Look, we have a landscape in Canada where we've got a lot of exceptional REITs, but there are some of them that are affiliated with other entities. And operationally, I would have to think that there are certain constraints and limitations around what the landlord could do based on what the interest of the tenants are. We, of course, have similar considerations. We always take into consideration the needs of our tenants long term, but we are the ultimate decision makers.

There is absolutely no influence from any other entity other than our own. And I think that does in a growth environment like we're in today, this super cycle that I think we're in, it allows us to really take the governors off and do what is best for our unitholders without having consideration to any other constituents. So it really -- I think it puts us in a very advantageous position going forward relative to some of those that might have to take a much deeper view and consideration of their anchor tenants wishes and desires. And it just means for things like if you have a vista, you can obstruct it a little bit even if -- I would say that if you have an anchor tenant who is a more influential party, they would tell you not to do that, we can go ahead and do that. So there's just -- there's little things like that. But of course, it also allows us to drive rents as aggressively as possible. And I think if you look at some of the sponsored REITs, there are lower rent lifts than we get. And I think that's now starting to be demonstrative of the fact pattern I just talked about.

Got it. Okay. My last question, more of a qualitative question. Your comment on expected strong blended lease spreads over the next 3 years. You talked about a bit at the Investor Day. How much of that confidence would you say is RioCan specific versus a call on broader market expectations? And kind of can you delve into a couple of the factors or top factors or trends that you think can sustain these types of blended lease spreads for that long, 3 years is not a short time frame?

So Mario, I missed the first part of your question. I think you just said general retail fundamentals? Or was there something more specific?

Sorry, no, I was just -- I was asking about your comment on the call earlier just talking about the expectation for strong blended lease spreads over...

Leasing spreads, sure.

How much of that is RioCan specific versus the broader market?

Sure. So I feel very -- I mean, the team feels very confident in our ability to continue to generate leasing spreads. I think it's a byproduct of the fact that, yes, it is a very strong retail market that will impact every on all retail landlords in a similar manner. We just think it will be more acute with RioCan because we do start from a bit of a -- the mark-to-market opportunities are quite evident with our average rents across the portfolio being about 28% lower than what we're getting now on new rents. And so I think that really helps us.

I also think we've got a very significant improvements to our portfolio over the last little while and a high demographic profile that tenants are really, really following and in favor of. And I think that allows us to really push rents and get them closer to where the overall market would permit. And I can't speak for our peers, but I certainly know that it gives us a great deal of confidence in capturing that mark-to-market, and that will drive growth for us going forward. We're -- as I said, we've gone through each one of our assets, each one of our tenancies, tenant by tenant, space by space to get a good sense of what we can extract from them. And that's what is rooted in that guidance or at least that's what the guidance is rooted in, and we feel very confident in our ability to capture that going forward.

Our next question comes from the line of Dean Wilkinson with CIBC.

Just want to hook back on the leverage, the share buyback and some of the other stuff around that. Would it be fair to say as you drift more towards 8x on net debt to EBITDA that we could see a ramp-up in that share buyback and the $50 million that we've seen so far this year, kind of perhaps that's what you're looking at on a quarterly basis, absent any other opportunities? And is that factored into that guidance number, Dennis?

Dennis, do you want to take that?

Sure. So I don't think we've really spelled out exactly how we would allocate capital. I think we are sort of leaving ourselves the flexibility to allocate capital as based on the opportunities in front of us. So we haven't put a specific number out on NCIB. We did put a number out in our Investor Day, just looking at our ability to allocate excess capital every year as well as we still would have another nearly $700 million of capital coming back from RioCan Living.

So certainly, share buybacks would be a priority, but it will be dependent on where the share price sits at a given point in time when the capital is available to us and of course, trading off against -- we're constantly trading off, as you'd imagine, against other opportunities. So that's how I would explain that. I think the volume of capital turn gives you a sense in terms of the sale -- of the asset sales.

Right, right. I guess the other one to look at then in just terms of retained capital is the distribution and increases. Now that we're looking at a core FFO or core AFFO number, do you have a target payout ratio in mind there on that metric? And how are you thinking about sort of the dividend or distribution as we go forward?

So the target payout ratio, we had projected that at Investor Day. And I think that is a number that we fully anticipate sticking with. We -- our dividend or distribution policy is something that is going to be a year-by-year consideration, and it really depends on what else we could do with those funds. For us, it's all about having a high amount of discipline. And we have such great opportunities for that capital at this point.

And we feel that the NCIB is just an alternative way of giving back to our unitholders. So it really is going to be a consideration of what other alternatives we have at that point as to whether or not the distribution gets raised. And at this point, we have a pretty robust distribution relative to our peers and given the strength of our portfolio. So we feel pretty confident about it. But it's going to be something that we will revisit next year for sure, and we will make the appropriate recommendation to our Board based on where things sit at that point in time.

Yes. So the target we put out is, just as a reminder, is approximately 70% core FFO and approximately 80% core AFFO. So I think that's just -- and we should be able to stick in around that range. And then as our income grows, potentially grow the distribution or as Jonathan said, there's other ways to return capital to shareholders and NCIB right now appears to be the more efficient and value-accretive method of doing that. And our yield, we do, as Jonathan said, believe our yield is quite attractive. And it's actually reasonably tax efficient as well. We're about 60% taxable, which matters to some certain unitholders out there.

For sure. It's a big consideration. Just then the last one for me, just looking at the RioCan Living and obviously, there's been a lot of talk in the condos, all the rest of that stuff. We don't need to go through that. You've got some operating weakness there, which would be expected given the environment that we're in. Are you looking at kind of building some vacancy in the portfolio to allow for potential purchasers to have a bit more of attractive upside there? Or just how are you thinking of managing that over the next 12 months or so given that it's something that you're looking to offload?

Sure. I'll start, and I can hand it over to John Ballantyne, if he has any further color. But we operate these assets as though we'll own them forever. We are not creating vacancy. Whatever vacancy you're seeing is a byproduct of a market that is tougher given the face of a lot of condo deliveries, which serve as a competition for some of the RioCan Living assets at this point. But no, we're not going about creating vacancy to create more upside for potential purchasers. Quite frankly, the market is sort of doing that for us. If you could see our occupancy, it has slipped over the last few quarters. And I think that's plenty. But John, do you have any further...

No, I would just add to what you said, Jonathan. We're managing these properties very carefully, both on the efficiency basis on the cost, but as well as working incentives and really keeping a close eye on market rates, particularly in the GTA, where it has been very volatile. So no, we're actually looking to maximize the revenues where we can on these properties and making them sale ready.

Our next question comes from the line of Fred Blondeau with Green Street.

On the Yorkdale HBC sublease matter, how do you see insolvency proceedings moving ahead now that the court has disallowed the receivers or proposed tenant Fairweather to take up the vacated space?

I think the court rendered its decisions. Now we're considering next steps, and we'll keep everyone apprised. But I think at this point, that's all I would comment about it. And again, as we've already suggested, Fred.

And from a financial perspective, we've already through a combination of offsets and write-downs, we think it has de minimis impact, if any, on RioCan financially going forward.

And just a really fast summary on that, Fred, sorry, just a quick summary on just the overall JV, not just the Yorkdale asset. Every other asset is either sold or for sale or we foreclosed on it. So out of the 13 assets, this Yorkdale one is the only one that's sort of left to be dealt with. And as Jonathan said, there is no expected financial impact from this JV going forward. So from our perspective, this chapter is behind us, and the assets have been dealt with or there's a couple that are still in the sale process with a broker. That's easy enough to deal with and really that's in the hands of the creditors. So from a RioCan perspective, this is a closed chapter.

Yes. Absolutely. But I guess my real question would was more like should a tenant not be found in time? Would there be any damages that the REIT could possibly face and it looks like from your previous answer, like it's pretty much dealt with at the moment.

That is correct. No damages that are of any materiality.

Okay. And one last for me, maybe a bit more -- a bit easier. Given that the Canadian tenant pool is not that deep, I was wondering which particular tenant types would allow for the growth in new lease rents over the next, call it, over the next 2, 3 years?

So the Canadian tenant pool, I mean, I think it is pretty deep relative to the amount of retail space we have, if you're comparing it to the United States. We have about 60% of the retail space that they have per capita. And I think I've given that, our tenant pool is pretty deep and growing. And so we think that there's a lot of very strong tenants that are expanding in scope, but also very -- I would say, very intelligently. If you look at a lot of the new stores that we're doing, they are grocery stores, but they're the discount banners for a lot of the existing incumbent grocery stores. So for instance, a lot of the new Loblaws deals we're doing, they're not full-line Loblaws. They are either No Frills or they're TNT.

For Sobeys, I'd say the same thing with FreshCo. And that's the theme across our portfolio. We're doing a lot of Dollarama deals, a lot of good life fitness deals or their discount banner. And we're seeing a lot of tenants like TJX thrive in this kind of environment because they do offer -- well, they do offer products that are going to be attainable in any type of economic backdrop. And that's really the type of tenant that we seek out to fill our centers. But Oliver Harrison, do you have any further commentary on some of the other retailers that are really providing strength to our growth profile?

No, it's more of a portfolio opportunity, which is just we also have, as Jonathan said earlier, the leasing super cycle, we do have a number of long-term leases that are now sort of coming to maturity. And as a result, we have a substantial opportunity to bring those up to market. A lot of them are grocers. A lot of them are value retailers that have performed extremely well over the period of time where they've been in this fixed rent structure, which creates a great opportunity for us to maximize the leasing opportunity while still ensuring that they are financially stable.

Our next question comes from the line of Pammi Bir with RBC.

I just want to come back to the comments around the lower CapEx at Georgian Mall and Oakville on some of those replacement tenants. What were some of the drivers there that drove some of the costs down?

Well, I think we ended up doing a single tenancy at Oakville, which really spares us of any demising costs. And it was really just some good work by our leasing team and ensuring that the commitment for landlords work and TIs was generally reduced. And I think that's a byproduct of the fact that the space was so desirable that we had a bit of leverage in those negotiations. But then also, it was our construction team who's done a good job of ensuring that we're getting the best possible pricing on any of the landlords work we have to do.

So it's a combination of factors. But ultimately, we're very pleased with the result because it attaches to a significant lift in both the tenant quality as well as the income coming in from that space now. So it's a really big win for RioCan, and it's just made bigger by the fact that the costs have been reduced. Did I miss anything, Oliver? Or is that...

Great. Okay. Sorry. And just maybe -- I just want to come back to The Well actually. In terms of the retail, it has been a few years. Can you maybe just talk about how the performance has sort of gone relative to maybe your underwriting? And I'm just curious if it might be approaching perhaps in terms of the retail at least that target organic growth guidance that you set for the overall portfolio in the 3.5%, 4% range? Or is it still early days there?

Sure. So as expected, the first-generation tenants, we knew there would be some volatility in it or at least some opportunity to play around with that mix to ensure that we ultimately get it right. When you're starting de novo and you're creating a unique space like that, you know that you're going to take some shots on tenancies that just don't work out, and we knew that going in. So our plan when going in had a fairly liberal view on what could happen in terms of certain tenants not working out.

And I think what we've seen is actually very much in line with that liberal view. And some of the good news is that it's created so much momentum and specifically over the last year, we've seen so much foot traffic increase that the second-generation tenants that we are bringing in or we expect to bring in over the short term are going to be of higher quality, far more durable and also, I think, more in fitting with that community.

So we feel very strongly that we're actually at a good point with the Well, where we're getting to a point where it is close to stabilization. And I think that the -- again, the continued traffic, the continued kind of like attention it gets in that downtown West neighborhood will continue to improve the visits there. And the last thing I'd say is that we've done a good job of filling up the office. We had it leased up, but now we've actually got it occupied. And I think that will also help move some of the retail a little bit more aggressively. But again, we've never relied on the office tenancies to make the retail work. But it's not the worst thing that we get people actually in the offices there. Oliver, do you have any further color on that?

Just that we've been doing this for a long time and having kind of experienced opening up new shopping centers. We were very intentional in terms of the structures that we put in place vis-a-vis a lot of these tenancies, whether it was rent structure, whether it was control options in the landlord's favor. So we've created a situation where we now have the ability to capitalize on the traffic that the site is driving, both from an upgrade from a tenancy perspective, but also significant lifts from a rent perspective. And as a result of that, we're very confident that in addition to improving the tenant mix in the retail at the Well over the short to medium term, it's also going to be a great performer from a same property NOI perspective.

Yes. And I would just add to that. In addition to the lifts we're seeing on the tenant side, we are seeing significant ups in both activations, digital signage and parking revenues as well. So as the site traffic -- trapped to the site continues to grow, those revenues are growing as well.

That's great. Just last one on -- are these next generation of tenants are more of them on net lease deals as opposed to points? Or are you seeing that at this point still kind of maybe leaning a bit more to percentage rents?

No, it would be a more conventional rent structure, i.e., minimum rent plus additionals, less reliant on percentage rent, save and except for them outperforming their natural breakpoints, but that's not going to happen for a little while.

Our next question is a follow-up from Sam Damiani with TD Securities.

Just had a quick follow-up. I think Dennis your comment that New Yorkdale is kind of the last location being dealt with. But wasn't the Ottawa property also you had some plans there. I'm just curious if those plans are still moving forward or if you've kind of walked away there.

So we, in fact, could not get to a position where we thought we could get a sufficient return on incremental capital that would be required to move that business plan forward. So it has actually been moved into a sale process.

I am showing no further questions at this time. I would now like to pass the conference back to President and CEO, Jonathan Gitlin.

Thanks very much, and thanks, everyone, for joining. I just wanted to end with saying that RioCan is entering its next chapter from a position of strength. We focused on our retail core, resilient assets, disciplined capital allocation and a platform that is built for the future. We believe the conditions are firmly in place to deliver steady, durable growth and lasting value. Thanks, everyone, and we'll speak to you next quarter.

That concludes today's call. Thank you for your participation, and have a wonderful rest of your day.

Good morning, everyone, and thank you for joining us today for RioCan Real Estate Investment Trust's 2025 Investor Day.

My name is Jennifer Suess. And for the last 8 years, I've had the privilege of working as RioCan's Senior Vice President, General Counsel, Head of ESG and Corporate Secretary. Every day in my position, I have the privilege of having a front row seat to the incredible results being achieved by each department and our organization. So I'm thrilled to be able to give you a behind-the-scenes look today at our industry-leading team and the strategy underlying all that we do at RioCan.

Before we get started, I note that we'll be making some forward-looking statements in today's presentation. You can see the full disclosure on the screens beside me, or if you like more details, please visit our website at www.riocan.com.

Investor Day gives us the chance to take you deeper into our strategy, performance and long-term value creation shaping our future. And on behalf of RioCan's senior leadership team, we are excited to give you a transparent and forward-looking view of the business today.

First, we'll hear from RioCan's President and Chief Executive Officer, Jonathan Gitlin, who will take the stage to provide the vision for our organization and an overview of today's discussion. After Jonathan, we'll hear from our Chief Financial Officer, Dennis Blasutti, who will demonstrate that the value of our business lies in our core retail portfolio and how we are driving growth from this strong core. He will also briefly take you through the financial framework surrounding the strategy being presented here today.

Next, John Ballantyne, our Chief Operating Officer; and Oliver Harrison, our Senior Vice President of Leasing and Tenant Experience, will together share how we have driven and will continue to drive growth through our high-performing retail portfolio.

Following that, Jonathan will moderate a tenant fireside chat featuring Greg Hicks, President and CEO of Canadian Tire; Michael Medline, former President and CEO of Empire Company Limited; and Todd Barclay, President of Casual Brands and Government Relations at Recipe Unlimited. They will discuss just a few examples of the many strategic collaborations between RioCan and Canada's top retailers, illustrating how these partnerships deliver sustained and mutual value to our unit holders.

Afterwards, our Chief Investment Officer, Andrew Duncan, will outline our plans to accelerate growth through accretive capital allocation. Dennis will then return to the stage to present key operational and performance metrics as well as our goals and targets for the future. Jonathan will then wrap up our prepared remarks and invite your questions to RioCan's senior leadership team, whether you're here in person or joining us online.

As a reminder, today's event is being webcast live and is also available through RioCan's website. A replay and related presentation materials will be available following today's event.

Now let's get started. It is my pleasure to introduce you to RioCan's Chief Executive Officer and President, Jonathan Gitlin.

Thank you, Jennifer. Thank you, everyone. I've been with RioCan for 20 years, I've seen a whole lot of cycles. I've had too many roles within RioCan to even actually remember at this point. So I'm going to tell you that I'm well positioned to say that never before have I had more conviction and belief behind the future of this business. And my hope is that by the end of the day, you will all agree with me.

So first, I want to thank all of you. I know that there are a lot of competing priorities. I know that you've got a lot on your plates, there's a lot of companies that you're following. And so we are grateful for your time today for coming down to this magnificent facility we call The Well and spending the day with us and our team. The fact that you're here is gratifying for us. What we intend to do today is not waste a moment of your time.

I also want to thank the RioCan team. It's an incredible team. You're going to see a lot of them today, both during the formal presentations and thereafter. I want to thank them for helping put this day together, which is no small feat. But I also want to thank them for the bigger matter, which is really fueling all the strategies that we talk about today. I'm very proud of this team. I'm very proud of RioCan and it is really an honor to be the captain of this wonderful ship.

I also want to thank our Board of Trustees led by our founder, Ed Sonshine. This is a tremendous Board, seasoned Board and it's a win-win. You see, we, as a management team, get wonderful guidance from this Board and you, as our unitholders get wonderful governance from this Board. So we're all thrilled to have them at our site.

So today, the message is simple. It's very clear. Our business is built for long-term core FFO growth of 5%. We've got the right portfolio and the necessary capital to achieve this goal. Backed by simple retail-focused strategies, we're entering our next phase of growth with confidence and with momentum. I'll break down how we get to 5%. It starts with same-property NOI growth of at least 3.5% going forward. My colleagues, John Ballantyne and Oliver Harrison are going to share details of how we'll achieve this. But the key takeaway is this: it's a secure source of growth for RioCan.

Capital recycling will generate an additional 1.5% core FFO growth. Andrew Duncan, our Chief Investment Officer, will share the details, but the key point is that we have a significant amount of capital coming into us, and we'll reinvest it into our core business to create durable cash flows with strong risk-adjusted returns. In the near term, refinancings will temporarily moderate this growth, so our outlook for 2026 through 2028 reflects core FFO growth of at least 3.5%. Dennis Blasutti will show you why this is a short-term adjustment, not a shift in our trajectory.

Our growth strategy is rooted in our competitive strengths. At the foundation is our productive retail core. This focus on retail gives us resilience and confidence in our growth plans. Next, our disciplined capital allocation framework ensures that every dollar is deployed to deliver high risk-adjusted -- sorry, highest risk-adjusted returns. And underpinning everything is our proven operating platform. With the strength of our core retail platform and more than 30 years of proven success, we're confident in our strategy to deliver sustained growth and long-term value for all of our unitholders.

So I talked about our strong retail productive core and it's generating 3.5% growth. So what does this mean exactly? Well, when I think about my conviction in our retail, I think about 3 things. I think about Canada as a place to do business. I think about retail as an asset class, and then I think about RioCan within this context.

So first, I want to talk about Canada for a moment, and it is often something that we take for granted. But this country is a remarkable place in which to do business. There are things that we benefit from as a proudly Canadian company that I want to highlight for a moment. Canada has strong demographics. It's got resilient consumer spending. It's got political stability, a secure investment environment. And we benefit from being proximate to the United States, which gives us incredible retail innovation and incredible retailers that come from the United States, set up in Canada and provide best practices for conducting retail in this country.

Now these conditions are structural, they're enduring, and they give me a great deal of faith in the future of retail within Canada.

Next, I'll talk about retail as an asset class. Why are we excited to be a part of this asset class? So I took Grade 11 economics, which qualifies me to make this statement. When supply is low and demand is high, conditions favor those who hold the product. I got to be in that class. So there's a great combination here. Available square footage continues to be low and barriers to entry are very high.

Let me talk to you about the supply constraints for a moment and why they're going to be enduring. First of all, I'm sure many of you are familiar with how difficult it is to get a permit to build anything in this country and particularly in Toronto. Secondly, it's very expensive to build new retail in the city or in this country. Thirdly, even if you were able to do so, to find a parcel of land that is suitable for good, productive retail is a very, very difficult thing.

So I think that the supply constraints are here to stay. I think that there are also demand elements that are also enduring. You see in Canada, we do have a clear reliance on brick-and-mortar retail. It's a vital part of the Canadian consumer experience. Our retailers firmly recognize that a good brick-and-mortar retail strategy complements an online strategy, and they work very well as components together, particularly for Canadians' daily needs.

Let me talk to you a little bit about Canadian retailers and why, again, I feel so strongly about the future of Canadian retail. Let's take you back 10, 15 years ago. And if we were having a conversation then about, let's say, grocery expansion in Canada, it would have been an entirely different conversation. Were I speaking with the head of, let's say, Sobeys, at that point in time, the conversation would have been simple and not so productive. They would have come to us and said, "We need space." We would have said fantastic. They would have said that space must be between 35,000 and 45,000 square feet. It has to have the dimensions of an iPad, a certain frontage-to-depth ratio, has to have a certain number of parking spots upfront, certain number of loading docks in the back, and it has to cater to our one banner, being Sobeys.

We'll now fast forward 15 years and I would say that this is an entirely different conversation, much more beneficial for us, the providers of space. Because now the conversation is one that is littered with flexibility. Retailers like Sobeys now have 4 or 5 or even 6 different banners, which means that they've got a lot more use for different kinds of retail space. Their space requirements have become far less rigid, far more flexible. And this means that the types of space within our portfolio that they would want has broadened out significantly.

A great example of this is at our RioCan center in Colossus up in Vaughan, where we had a -- I'll say the name, it's a 4-letter word in RioCan, but we had a Bed Bath & Beyond space that we've now repurposed into a Longo's. And that Longo's is thriving and the rents they pay are far superior. What they do for that center is much greater than what a Bed Bath would have done. But the importance is that they now will take a space that is in line and an old box space like that. This is great for the future of retail landlords.

Another great example is Jim's. And I don't have to remind you that, 15 years ago, that Jim's would have been a tenant of last resort for a portfolio of RioCan's stature. And now that is entirely different. You see LA Fitness, Good Life. These are tremendous occupiers of space. They do it right, they look good, they pay their rent, they've got great covenants.

So again, the retail paradigm continues to evolve. They continue to innovate. It continues to be better and better to be a retail landlord.

RioCan is ready to win. I talked about it before. I said, what about RioCan in this retail context within Canada? We're in a strong position. We're in a favorable market. We've got a high-quality portfolio. And dare I say, probably the highest quality that it has been in the history of RioCan.

We've done a lot of heavy lifting to get to this point. We've done this through selling weaker assets. We simplified and strengthened the portfolio by developing newer assets, by acquiring strong assets. And most importantly, by repositioning a lot of our existing assets, which John and Oliver and Andrew will speak to you about later. This sets us up to take advantage of an incredible set of circumstances in the retail space.

We fashioned our portfolio to meet market demands. We've got 173 properties, all of them productive. There are no weak links in our portfolio. Again, we benefit from a very strong demographic profile. And I will remind you that we have worked very hard to make 94% of our income come from the markets that matter, the major markets within Canada. We've got a strong, high-quality tenant mix. This is where Canadians want to shop.

And as a result, we are poised to continue this wonderful leasing momentum that you've seen over the last number of quarters. Bottom line, people, we've got the right tenants. They want to be in RioCan spaces. And they don't want to give up our spaces. Bringing this all together, we're in a very powerful position with the right backdrop and the right asset class in a terrific country.

And that is why my confidence, my conviction behind a 3.5% growth from our retail core is easy when it is fueled by these facts.

So now I want to dig into capital management. We've been selling off noncore parts of our business, which lead to an influx of capital. And what are we going to do with this capital? Well, as we've stated, our first priority is strengthening our balance sheet. And Dennis is going to walk you through what that means. But we are committing to a net debt-to-EBITDA of 8 to 9x going forward, among many other critical financial KPIs.

We've got a defined framework, a very disciplined dynamic where we are investing capital to achieve at least a 9% unlevered IRR. There are a host of options to achieve this, but the best are rooted in our existing portfolio.

So what does this mean? If we look to our portfolio, there are lots of opportunities to better the portfolio through infill developments in our existing centers. We also have the opportunity to buy back units. We've already done this. We'll continue to do this. And as our units currently trade below NAV, it is a very simple and obvious choice. Both of these initiatives help our net asset value per unit, they help SPNOI, and they create and contribute to the 5% core FFO growth per year target that we've spoken about today.

But a plan is only going to take us as far as the people and the platform supporting it. Platform is everything. Ours is powered by our people, our processes and the ability to leverage data. And I emphasize this point because it's a theme that you're going to hear consistently throughout the day from all of our team members.

Let me remind you, first and foremost, that we are independent, and we are large. These factors give us flexibility. We are not beholden to anyone other than you, our unitholders.

We've got a strong combination of both data and experience, 30 years of built-up data, 30 years of experience. And when you put these together, it allows us to make meaningful decisions in all aspects of our business, whether it's leasing, procurement, marketing strategies, portfolio management through acquisitions and dispositions. These are excellent sets of facts that make me very confident in our wonderful platform going forward.

So before I get off the stage, I want to leave you today feeling very confident that we can produce 5% core FFO growth, focusing on our strong productive retail, allocating ongoing capital effectively and leveraging our scale, our people, our processes, our technology, or said differently, our platform, so that we can execute on everything that we speak about today.

And I'm going to invite my colleague, Dennis, up to the stage, who's going to share a couple of points that will set the context and bring some clarity to the presentation. So without further ado, Dennis Blasutti.

Okay. Great. Well, thank you, Jonathan, and thanks to all of you for being with us here today. We really appreciate you taking the time. My name is Dennis Blasutti, and I've been the CFO of RioCan for the last 4 years.

Since I've joined, the market has been interesting to say the least. In the fall of 2021, when I started, we were nearing the end of a global pandemic. Then we had a glorious 6 weeks in early 2022. Pandemic was over, everything was looking up. Those are good times. But shortly thereafter, we saw record inflation and interest rate volatility that we hadn't seen in a generation. But also over that time, I've observed that RioCan has the portfolio and the platform to weather these storms and thrive. Going forward, I'm excited to share what this platform can really do.

Now as Jonathan mentioned, I'm going to take a couple of minutes to go through 2 concepts that are pervasive throughout the presentations: our core FFO and our capital allocation framework. Throughout the morning, you'll hear us reference core FFO. This is the high-quality durable income that our portfolio generates. This is a shift from our previous FFO, which included nonrecurring items such as [ condo gains ]. This won't be surprising to you as we've been talking about a simplified business model for quite some time. The core FFO baseline that we will grow from is at least $1.55 for 2025. Let me walk you through it.

What's included in this metric is the predictable and growing income from our commercial portfolio. What's excluded are condo gains in HBC. Over the last several years, we've generated a lot of FFO from our condo program. However, as we've discussed over the last few quarters, we've decided not to continue with this line of business and, hence, have removed it from the core. We've also excluded from core FFO the income related to the HBC-JV as these large single-tenant assets are not reflective of our core portfolio.

It is important to note that the items that we've excluded from core FFO are low-value cash flows. These make up an immaterial amount of our net asset value. We haven't valued these items in our NAV, and neither have you. As discussed in our Q3 conference call, there is no value related to HBC in our NAV and the condos represent only 1.8%. This condo value is nominal, and it won't be lost. This will be repatriated to the balance sheet over time.

We are selling our RioCan Living apartment portfolio, and that capital is also being repatriated the core net asset value. You'll notice that there is no impact from the sale of this portfolio on core FFO as cap rates on these assets are similar to our cost of debt.

What I'm saying is that our core business generates high-value, durable cash flows that represent the majority of our net asset value. This view on NAV reaffirms our strategy to simplify our business with a focus on a productive retail core. We will grow this NAV as we grow our income and improve our assets, compounding value for many years to come.

Next, I want to take you through our capital allocation framework. In the coming sections, you'll hear John and Oliver discuss case studies where we have invested in our portfolio. You'll hear Andrew speak about the number of opportunities we have to deploy capital accretively. All of these investment decisions are made using a consistent framework. The ultimate goal of this framework is to ensure that we're allocating capital to opportunities to earn the highest risk-adjusted return. This is a balanced framework that considers balance sheet priorities, financial returns and operational fit.

When it comes to capital allocation, it all starts with having a strong balance sheet. Our balance sheet ensures that we have the flexibility to manage risks and pursue opportunities. And we manage this across a number of metrics. We are committed to maintaining our investment-grade balance sheet, which ensures we have continued access to low-cost debt capital. We are reaffirming our target net debt-to-EBITDA range of 8 to 9x. This range strikes the right balance between managing risk while leaving room to pursue opportunities.

Our FFO payout ratio is targeted at approximately 70%. This ensures that we retain cash flow to reinvest in our business, as previously demonstrated, while providing a sustainable distribution. We expect this payout ratio to decline as our FFO grows.

The remaining [ 3 metrics ] on the page ensure that we are always able to meet our obligation and take advantage of opportunities.

Now our capital allocation framework is applied to all investment decisions, whether it be reinvesting in our portfolio or pursuing external opportunities. Our hurdle rate for these investments is 9% unlevered IRR. This target is based on a WACC calculation that takes into account our current unit price. This means that all investment opportunities have to compete with buying back our own stock.

As I previously mentioned, maintaining a strong balance sheet is a top priority for us. Once that's taken care of, we can allocate capital to other initiatives. Andrew will walk through examples of these options and demonstrate the application of this framework.

Okay. That's all for me at this point. Hopefully, this has given you some context around these 2 key elements as we go through the rest of the presentations. With that, I will hand the floor to John and Oliver, who will demonstrate why we have so much confidence in our same-property NOI growth.

Thank you, Dennis, and good morning, everyone. Just by way of quick introduction, I'm John Ballantyne. I actually worked at RioCan for the entire 31 years of the company's history. I'm joined here by Oliver Harrison, our Senior Vice President of Leasing and Tenant Experience. Oliver has been around for over 26 years now. Together we've been with RioCan for the ownership of every asset and literally the signing of every lease. It's been said, albeit mainly by our wives, that we actually know the portfolio better than we know our own kids. And while that's not technically true, we do put this experience to a good use, leading a team of 350 incredible people who manage our industry-leading properties every day.

So we're here today to talk about how we drive growth through our productive retail portfolio. We have a clear growth target. We are committed to achieving at least 3.5% same-property NOI growth over the next 3 years. This objective is grounded in discipline and a defined strategy. What you'll leave with here today is a clear understanding to exactly how we generate this growth.

Our confidence in this guidance is rooted in the quality of our portfolio and our team's commitment to extract and accelerate every opportunity for revenue growth. Both are amplified by today's supply-constrained retail environment that Jonathan highlighted earlier. This translates into durable protected income and sustainable growth.

RioCan's portfolio is designed to meet the everyday shopping needs of Canadians. Think about your regular errand run, groceries, drugstore, LCBO, grabbing a few quick items from Canadian Tire, a Costco visit. For those with young kids, Dollarama. For those with teenagers, of course, Sephora. We own and manage over 32 million square feet of perfectly located space. And this space is essentially full. 94% of our rent comes from communities with a demographic profile every necessity-based retailer is looking for. Within 5 kilometers of our properties, the average population is 277,000 people. The average household income is $155,000.

To say it simply, our properties are where tenants need to be. And this drives high retention, strong leasing spreads and consistent rent growth. Our success reflects deliberate choices. We are intentional about investing in prime locations and partnering with leading tenants.

I'm going to briefly expand upon a point that John just brought up, and that is our outstanding tenants. The foundation of our exceptional portfolio is built on the strength and composition of our tenant base. Grocery, pharmacy, liquor, fitness and value retailers are the tenants Canadians use every day. And it's that daily shopping traffic that drives tenant success, translating into rent growth and long-term value creation for RioCan.

Let me be clear, this doesn't happen by accident. We are meticulous in how we manage our tenant composition to produce exceptional shopping experiences. Our rent roll is well diversified with no tenant representing more than 5% of our overall portfolio. Additionally, we leverage our data to optimize our retail offering. What that means is every property is evaluated and receives a merchandising mix score. This score helps us determine the retail use or tenant that will best complement the other tenants in our shopping center. We believe this approach creates standout retail experiences, enhances foot traffic, maximizes tenant productivity and drives long-term value.

Our commitment to tenant quality provides the foundation for our merchandising strategy. By prioritizing the right tenant mix and leveraging data-driven insights, we ensure that each property reaches its full potential. Let's take a moment to see this approach in action with our grocery leasing efforts.

Our grocery leasing results show how intentional merchandising creates measurable value. Most people are familiar with the headlines: The grocery industry is expanding quickly because of rising population and changing consumer preferences. As a result, top grocery retailers are aggressively seeking new ways to expand their business. We recognize grocery as the main co-tenancy category and have expanded the grocery selection across our portfolio. Let's take a moment to look at this.

Over the past 2 years, we've completed 10 grocery deals, totaling 230,000 square feet at centers, which previously did not feature a grocery component. In addition to materially improving foot traffic, these transactions achieved an average premium of 24% over the prior rents on these spaces. Furthermore, over the past 5 years, we've grown the percentage of our portfolio with a grocery component by 10%. And we've achieved this by leveraging our strong partnerships with national Canadian grocers: Sobeys, Loblaws, Metro, and major retailers like Costco and Walmart, which allocate a significant portion of their space to grocery.

Converting these centers to grocery-anchored sites not only increases foot traffic and revenue, but also reduces implied cap rates by 25 to 50 basis points, directly and positively affecting NAV. Our objective over the next 3 years is to increase the percentage of our centers with a grocery store from 85% to at least 90%. This includes 2 upcoming deals with grocers at Oakville Place in Georgian Mall, which will fill spaces previously occupied by HBC. Adding a grocery anchor will not only boost daily foot traffic at these centers, but will also increase annual gross rent by $4 million compared to HBC, resulting in an invested return on capital of 14%.

To be clear, our grocery leasing program is more than a portfolio strategy. It is a catalyst for sustained growth, resilience and community connection.

The strength of our portfolio and quality of our tenants provides us with secure income and the ability to maximize growth through leasing activity and strategic asset management. Our portfolio continues to outperform every operational KPI that matters. The numbers on the screens speak for themselves. Setting new records in occupancy, retention and leasing spreads quarter after quarter is no longer an exception, it has become our standard. Today's stable, well-capitalized diversified tenant base is tomorrow's predictable income. And today's leasing spreads are tomorrow's same-property NOI growth.

I'll now spend some time to unpack the components of our same-property NOI growth. The foundation of the growth is in place. It's the quality of our portfolio, strong market fundamentals and strategic asset management. Approximately 65% of our same-property NOI growth target is locked in. It's contractual income embedded in our leases with no execution risk. This component of our growth is a result of a decade-long program to strengthen our tenant profile and incorporate annual increases into new and renewing leases. Roughly 30% of our same-property NOI growth is tied to incremental revenue from renewing 10.7 million square feet of expiring leases over the next 3 years.

Our confidence in achieving this target is grounded in our track record, namely the 15% average renewal spread achieved over the past 18 months. We view this aspect of our growth as not only highly reliable, but also a potential opportunity for overachievement.

The remaining 5% of our same-property NOI growth will be driven by strategies focused on increasing occupancy, adding retail GLA within our existing centers, unlocking fixed lease options and generating additional ancillary revenue across the portfolio. These initiatives not only secure the minimum required to achieve 3.5% annual same-property NOI growth but also create meaningful upside potential to outperform our guidance.

We have a data-driven approach to identify and achieve the revenue potential of every lease in RioCan's portfolio. We developed North Star, a proprietary analytics platform that gives us portfolio level visibility and insight. North Star empowers our asset-level strategies. It consolidates data across all of our 4,200 retail spaces and provides a clear assessment of the growth potential in each property.

It identifies any barriers to growth, but more importantly, it highlights the greatest opportunities. This allows us to get the biggest bang for our buck, prioritizing capital and resources on initiatives that were harnessed to accelerate growth, and maximize asset value.

The platform quantifies the gap between current and market rents, identifies contractual constraints and services opportunities to unlock embedded growth. For example, it quantified the mark-to-market gap across the 10.7 million square feet of lease expiries that I mentioned earlier. Eliminating this mark-to-market gap will yield an average annualized same-property NOI increase of $10 million. Based upon this aggressive but achievable renewal strategy, our average portfolio rent will increase by 10% over the next 3 years. This is meaningful progress on our ultimate target of realizing the 25% to 30% mark-to-market opportunity embedded within the portfolio.

In addition to providing target rents for new leases and market renewals, the platform identifies obstacles to future growth, such as fixed rate renewal options. But 25% of our income comes from tenants with fixed rate options. Solutions initiated by North Star in these cases key in on the immediate needs of retailers that could be leveraged to unlock market rents, including providing the tenant with additional locations or expanded footprints, granting additional lease options to tenants that have limited remaining lease term, unlocking prohibited uses like food uses for non-grocer tenants, contributing capital at an acceptable return to RioCan towards tenant renovations. And in some cases, it may even mean compensating tenants to terminate leases when the rent is significantly below market.

North Star also flags opportunities to leverage retailer demand, enhance our merchandising mix and grow ancillary revenues. We develop actions based on these insights, including converting gross and percentage rent leases to triple net structures, eliminating tenant restrictions to execute upon the 1 million square feet of retail expansion opportunities identified across 60 of our existing sites, and also identifying and ultimately disposing of assets that have unlockable growth or rents that already materially exceed market.

We use North Star to transform visibility into action. It helps us focus on the assets with the highest yield potential and the strategies that deliver the greatest impact today and long-term growth tomorrow. In short, we are translating future mark-to-market opportunities into growth today.

We'll now walk you through a few property-level examples of how this platform-driven insight translates into strategies and ultimately enhances growth. We picked a few case studies that highlight how we're leveraging retailer demand for space to transform and elevate our centers.

Yonge Eglinton Centre is an excellent example of our ability to leverage quality locations, strong retailer demand and strategic asset management to unlock embedded growth potential. The asset is located at the intersection of Yonge and Eglinton Avenue in Midtown Toronto. The center benefits from outstanding demographics with a population of 217,000 people and an average household income of 260,000 within a 3-kilometer radius. The demographic profile and daily traffic conditions will further improve with the opening of the Eglinton Crosstown LRT in late 2025. I'm not guaranteeing that, but that's [indiscernible].

I'll take you over.

The 19-kilometer line will connect the existing young line to the east and west ends of the city, making Yonge Eglinton a central transit hub in the heart of Toronto. The improved transit infrastructure has also spurred considerable residential development in the area. This perfect storm of infrastructure improvement and population growth has created considerable demand from retailers for space in the Yonge Eglinton Centre, the only full-service shopping center in the node.

Leveraging the power of North Star, Yonge Eglinton Centre was identified as a high-priority asset due to its substantial embedded growth potential, combined with near-term lease maturities. It was through this lens we determined that re-merchandising and renovating represented the optimal approach to capitalize on this potential and embarked on the following initiatives. Metro, our grocery anchor, was undersized and quickly running out of term. With only 7 years remaining on their current lease and no renewal options, there was a risk of them losing this high-performing location. We effectively address these requirements by negotiating a new lease that provided for a 50% expansion, a 150% increase in annual rent, annual escalations and an increased contribution to the center's common area costs. To accommodate the expansion, LCBO was relocated and rightsized into more efficient space, also at higher rents.

Building off of this momentum, we secured a 10,000 square foot RBC branch to replace an underperforming apparel retailer that occupied prime Yonge Street facing space at a rent increase of 400%. As part of this agreement, the bank also secured a lease for 30,000 square feet of office space in the Yonge Eglinton Centre.

An existing lease with Toys "R" Us was terminated to facilitate the relocation of GoodLife Fitness. This achieved their objective to double in size and renovate the site to their modern urban prototype. The Existing Winners was expanded into the former GoodLife space. This fulfilled TJX's desire to double the location size while providing them with an opportunity to modernize this already highly productive store.

Less productive space in the center's retail court is being consolidated to accommodate a new lease to Jump+. Jump+ is an Apple-licensed offering the full range of Apple products, accessories and technical support. And finally, the food hall, which will be directly connected to the new transit station, has been fully renovated and re-merchandised. The enhanced space and food offering is designed to meet the needs of increased visitors both at the center and the Yonge Eglinton area.

The reimagined Yonge Eglinton Centre is expected to deliver a 16% unlevered IRR on RioCan's $19 million investment and add approximately $23 million to NAV at the current IFRS cap rate. Upon completion, the renovated or re-merchandised Yonge Eglinton Centre exemplifies the growth potential embedded in RioCan's portfolio, as well as our team's capability to identify and capitalize on such opportunities.

Now let's take a look at RioCan Centre Burloak, another example of our team's ability to unlock growth, in this case, by successfully repositioning an underperforming asset. RioCan Burloak is an open-air center at Burloak Drive and the [ QEW ] in Oakville, Ontario. It's anchored by Longo's, Home Depot as well as various national food service and experiential brands.

Approximately 170,000 square feet of the site consisted of underperforming retail space. This portion of the site has historically underachieved and was a constant drag on same-property NOI growth. The merchandising mix and existing format of the site simply could not support market rents.

To drive sustained NOI growth and create long-term value, we executed a strategic repositioning of this underperforming portion of the site. This strategy can be summed up with one word: Costco. We have an extensive relationship with Costco, including 9 operating locations across our portfolio. Because of this, we knew they were looking to supplement an undersized store within the market with their largest size prototype. We also understood the immense value a Costco would bring to this site. Costco is an ideal tenant. Anyone who's been to a Costco on a Saturday and try to find parking, lined up at their gas bar understands the tremendous amount of traffic that Costco drives. The numbers are compelling. A typical Costco attracts over 3 million visitors each year and generates average annual sales of $450 million.

So we worked with Costco to free up the 14 acres of land required to accommodate their new 160,000 square-foot store. To unlock the land, they needed RioCan to terminate leases with less productive tenants. The more productive retailers were relocated elsewhere in the site and the underperforming component of the site was demolished. We also negotiated a waiver of a food restrictive held by the site's existing grocer, Longo's. We accomplished this by leveraging both our relationship with the retailers as well as their mutual demand for new locations. In exchange for gaining the ability to operate at Burloak, Costco relaxed a similar restriction to allow a new Longo's store at our Colossus Centre in Vaughn, truly a win-win for RioCan.

The new Costco store is currently in the early stages of construction and will be fully operational in the second half of 2026. Burloak's NOI will increase by $3 million annually, which translates to $21 million of NAV growth after factoring in the required capital investment and the cap rate premium associated with the Costco anchored site.

In addition to this immediate financial return, the dramatic daily increase of consumer traffic generated by Costco will drive growth over the entire site for years to come. This Costco halo effect has already resulted in 40,000 square feet of new leases with TJX and Sephora, both of which are replacing underperforming retailers at 180% higher average rents. Ultimately, this is another example of our team's ability to unlock, identify and accelerate embedded growth.

Here's what Oliver and I will leave you with today. We have a rock-solid foundation, and we're driving growth at a record-setting pace. We have the right locations, the strongest tenants, data-driven asset management, relentless execution. Yonge Eglinton Centre and RioCan Burloak are just 2 of countless examples in our portfolio that underscore why we stand here today confident in our ability to deliver at least 3.5% same-property NOI growth over the next 3 years and beyond.

Now we're going to kick it back to Jonathan to lead our tenant panel. Okay.

So good to be here with friends and partners. You might have overheard us, apparently, we were so exuberant to see one another that we were so loud that everyone in here could hear us while we were in the green room. I guess I now realize that curtains don't represent full walls. But I'm thrilled to be here with Greg Hicks, President and Chief Executive Officer of Canadian Tire; Michael Medline, the former President and CEO of Empire and now the new, to be, I guess, future President and CEO of Woodbridge. So congratulations on that. And Todd Barclay, the President of Casual Brands and Government Relations at Recipe Unlimited. The commonality here is that all 3 of the companies that these folks represent are very strong and enduring partners of RioCan.

So the concept here is just a number of different questions that cover a gamut of subject matter. But I'm going to start with you, Greg. So Canadian Tire operates a whole lot of banners, different formats. How are you guys adjusting your real estate approach to maintain scale where we're in a marketplace where, as I mentioned before, space is pretty scarce.

Well, thanks for having me. Nice to be here. I think the most important word in that question is scale. When we all look in our industry, globally, there's lots of disruption, call it, the last 5, 10 years, maybe. And most of the disruption being led by scale players, and winners and losers are emerging, and it's mostly the scale players that are on the winning end of that spectrum.

So we've developed a business strategy that attempts to combat that in the way in which we can. And that is an announcement of a new business strategy. We call it True North. It has us putting all of those banners and businesses that you mentioned into a system, a retail system, and changing the operating model of the business so that we move more from a holdco to an operating company, an operating company that really rallies around our privileged first-party data, our understanding of Canadians, life in Canada. Data is pretty important in retail today. I know my peers believe that too.

And so that business strategy is about aggregating the scale that we've created for ourselves. And we think that's really important from a real estate standpoint, from a partnership standpoint with RioCan for a couple of reasons. One would be we're giving some of our businesses, think Sport Chek, think [ Mark's ], important tenants of yours, scale that they couldn't otherwise create on their own, whether that be our ability to kind of use this capability around first-party data to engage members, to move them around our system and give them access to a loyalty program that has a household penetration rate that is quite large in the country, akin to Amazon Prime in the U.S.

We think that helps grow sales, the 4-wall kind of unit economics, which just allows us to be more successful given the -- in the properties that we have, given the scarcity in the market, hopefully, allows us to be a strong tenant going forward with stronger economics.

And then secondly, I think one of the things that we're very focused on is thinking about the role that each one of those banners place in that system. And if you take [ Check ] and [ Mark's ] as examples, these are businesses that we believe can play critical roles for us in customer acquisition and a younger demographic.

And so we've been -- we've long been great partners for big brands, #1 distributor in this country for big brands like Nike and North Face and Levi's and a few more. And I think as they've all started to dial back in D2C and come back to wholesale with innovation, they come back to a partner that can give them some growth and some strength.

And that also leads to the disrupting brands, brands -- we're HOKA's biggest distributor in this country, ON's biggest distributor. We have great relationships with Carhartt, Timberland. So they all bring in a different demographic. We think that's good not only for our business but for you in terms of bringing in a different demographic with some innovation to the power centers and developments you have.

So big believers in real estate, and we believe we've got 3 investable store formats now for the first time, I think, in my career. Generally speaking, we think bigger is better, but each one of these formats have an opportunity to kind of go back into the network given scarcity, and be a better retailer, be a better tenant.

Yes. That's a great answer. And win-win because my family has now fully latched on to this whole HOKA craze. So I think we're -- they're very ugly. Man are they comfortable. So I think we're in the midst of buying like 7 or 8 pairs at Sport Chek, of course. So there you have it.

So Michael, FreshCo has been on a tear. I mean everywhere I look, I see a new FreshCo opening up, whether it's taking over an older Sobeys store or just opening up a fresh FreshCo. You're one of the leading discount banners in Canada. First of all, share how successful that growth has been. And of course, I want to ask you, how has RioCan supported that growth strategy?

Yes. Again, like Greg said, thanks, Jonathan for having me here today. If everyone could not tell my great CEO, [ Mark Holly ], at my REIT, that I'm here today, that would probably be good. Because we need all sorts of partners. We have a great REIT that's well run, and RioCan has always been a great partner for me when I was at Canadian Tire and at Empire, and with -- Eddie is here, right? Eddie, and now Jonathan, so thank you. Yes.

So one of the biggest decisions, the hardest decisions I had to make when I first came into Empire and had to turn it around was to fix our banners in Western Canada. And we even have more banners than you do, Greg. And the hardest decision we had to make was to take our discount banner FreshCo and put it in a new market in Western Canada. And we had to do it really quickly because we had fallen behind in terms of discount. There was a real opportunity in Western Canada.

And so we did, I think in retrospect, it doesn't look like a hard decision, FreshCo has been knocking the cover off the ball in Ontario and -- but also growing fast in Western Canada, very, very strong. But we had to move very quickly. We had to convert some Safeway storage. We had to do a lot of greenfield. And RioCan was an unbelievable partner because they understood our business rationale and our strategy. They moved quickly. I mean you just -- I'll talk about that one later, but you can -- they can move incredibly quickly, and they are very customer centric. And so we were able to put up 50-something FreshCos in a record amount of time, many of them RioCan properties. And we're incredibly happy and we have a great relationship with RioCan.

And let me tell you I guess, 7 or 8 years ago, I'd be in a room like this, and I'd be asked about whether bricks-and-mortar was here to stay and it was all going to go online. I can tell you, bricks-and-mortar are here to stay. I'm more convinced of that than I even was at any time in my career. There's room for e-commerce, and Greg will tell you about that. And I can, too. But that ability to connect with your customers, especially in the grocery business, where location is so important, is key. And your company, Jonathan, has been a great partner in that, and that's been a huge success.

Yes. And I can tell you firsthand, just the conversions that we've done from Safeways to FreshCos, like we just did it [indiscernible] out in Calgary. It makes a huge difference to the center, but also to the shoppers going in there. It looks good, it's bright. You've done a tremendous job.

Yes. But you were smart, right? You just didn't say, okay, we want the full service. You were willing to look at whatever makes sense for that area for that demographic for the customer. And as long as you're following the customer, you're going to make good decisions. And I think that RioCan was ahead of the game on that.

Yes. No, we welcome it. I think it's a great evolution. So thank you.

Todd, restaurants. I mean, usually, one would say that they feel the impact of an economic slowdown first. Yet Canadians still love to dine. I mean I can't do without my Swiss Chalet for very long. So how is Recipe optimizing your offering in this topsy-turvy economic environment? And of course, I'll ask the question, how does RioCan's approach to tenant mix and having a national platform strengthen your ability to succeed despite some economic headwinds?

So similar comments to start. Thanks so much, Jonathan, for having me here, similar to my peers, so much appreciate the strategic relationship that we have with RioCan.

Thank you.

And it's great to be here today. I guess I'll start by acknowledging your comments. I mean, certainly, the restaurant industry is typically on the leading edge if there is something that's happening from an economic perspective. And no doubt, coming out of the pandemic, it certainly has been a very challenging economic situation for restaurants across the country. I also sit on the Board of Restaurants Canada and the Vice Chair, so very familiar with what's happening in the industry. And I would say that many are in a challenged situation.

But I would also acknowledge what you're talking about in that we are social creatures and we love to go out and celebrate and dine with our friends and family and celebrate occasions. And Recipe as an organization has definitely been able to take advantage through these changing times, actually be in a very, very good position. So as much as it is -- it has been a challenge for the industry overall, Recipe is in a very good place. And many of the brands that we represent, that we own are in a position of growth. And we have great relationships with RioCan as it relates to looking for opportunities for growth.

However, what I would say though is that growth, in some cases, looks a little bit different. I mean you talked about e-commerce, Michael. Certainly, through the pandemic, the way that folks trade into restaurants has changed. Prior to the pandemic, really, if you're looking for eating in your home and maybe pizza, perhaps Chinese food and Swiss Chalet, certainly, that changed with the development and the proliferation of various different aggregators. So it's changing how we're looking at real estate. We absolutely want to grow, we believe in bricks and mortar. We know that it's important for guests to be coming to our restaurants.

But typically, now what we're looking for are sites that provide great access, obviously, and in some cases, a little bit smaller. So Swiss Chalet as an example, many years ago, might have been a 6,000 or 8,000 square-foot restaurant. We're now looking at building 4,000 to 5,000 square foot restaurants, which certainly has changed the dynamic.

But you asked about how RioCan is helping with that. So in working with the group that I work with, the team, all of them constantly talk about how RioCan is so progressive and proactive. You are attended to our business, you understand our business. And not only are you helping us to solve and create solutions for our business and, I mean, effectively, our industry in many ways, but you also have great assets, right? So we appreciate the partnership that we have. And thank you very much.

Well, thank you for those comments, and I appreciate you just reinforcing the comments I made earlier about nothing happens without a strong platform, and I'm very proud of what we have at RioCan. So just talking about bricks and mortar, and I'll throw this out, Greg, to you. I mean the oldest saying in RioCan is location, location, location. And I think when it comes to store performance, location and the demographics surrounding that store are really meaningful things. Can you comment on that and like how much the demographics and the locations matter when you're choosing a growth plan?

Yes. I mean it's critical. I think you'll hear all of us talk about the fact that from a capability perspective, data in a retail -- modern retail organization is the currency. It's the lifeblood of what makes you successful or not. And we put a pile of energy, effort, capital resources behind developing a set of data. Predominantly, it's about a 360-view with a customer and all of the touch points that we have for life in Canada with our membership. But it's also about making much more intelligent decisions around our real estate.

We are 100% convicted, as per Michael's comments too, that in real estate, we're a landlord as well, obviously, with CT REIT. And I come back to that scale requirement again. CT REIT is very strong in secondary markets across Canada. They've got a really good understanding of the demography and all of those things around those markets, which is a big portion of our sales. And we complement that strength to give ourselves scale with a partner like RioCan, who has an unbelievable understanding of the demography and [indiscernible] markets across Canada.

And I think that -- that's the kind of the why we work together. And then once we have that why foundation, I think that the how is it's pretty simple. In order to understand, and for you to be able to flex your capability, we need to be communicating. And it's probably a simple statement, but I think it's profound, your team and you understand our business strategy. And by understanding our business strategy, you can plug your understanding of these markets into our business strategy, teams work really, really well together. They get creative. They can move with speed as was earlier mentioned.

And then I think that -- or not think, I know that that relationship extends to the CEO's offices. And he does a way better job than I do at this, but he will reach out. And probably 2 times a year, we'll get together. Our offices are right across the street. I'll go there, he'll come to our place. We'll have a coffee, we'll talk about what we're seeing with the customer, the markets, the data. And it just gives us a better understanding. And I think that tone from the top is really important. I know that the prosperity of both of our companies are important to each of us, but we're both proud Canadians, prosperity of this country is important. And we endeavor to work together to do our part on that front.

Sorry, go ahead, Todd.

Greg's comment as it relates to data and location, demographics, similar, we use a lot of data to make decisions. We have made the strategic decision at Recipe to actually employ an AI group specifically looking at locations for real estate. So feeding the data in, in terms of the locations, which ones have done well, using that data then to make determinations around where we should go moving forward, as well as looking at those sites that perhaps have underperformed and why. So rather than just looking at population, perhaps some other demographics in, outs, et cetera, we're looking at even more data and feeding into a system to help us to make those decisions.

Yes. I mean we're fixated on demography. And I mean we've taken our demographic profile up to a point where we now have 277,000 people living within a 5-kilometer radius of any one of our properties. Average household income of $155,000. And this is something, again, that we've worked towards. And the reason we do that is because we want sticky tenants.

And so Michael, we were talking earlier about FreshCo and how you've brought FreshCo to the customer in the appropriate markets. So I'm sure in the business of grocery, demographics really is everything where you do a lot of research behind what demographics exist and what kind of product type you want to place in that market.

Yes. I mean, obviously, I've always been keen on data, and now we have such access to -- we have one of the cleanest pools of data probably of any retailer in the country, at least. And so the ability -- and when I was a Canadian Tire, it was the same. They were very, very strong in terms, especially at real estate, in terms of understanding the customer and actually being able to predict what the sales are going to be. And you're not always right on, but it's pretty darn -- I'm sure you've even got better since then. And we're really good at it too. That use of data is key.

But I'm just thinking, Jonathan, that -- I was thinking that when everyone is talking, I like what Todd and Greg were saying in terms of doing business with you, because we have a lot of landlords, okay? We've got 1,700 sites across the country, we've got lots of landlords. We don't have a lot of partners. And I think there's a big difference between being a landlord -- I would never call RioCan a landlord, although I guess, legally, you are. But you're a partner. And what does that mean to be a good partner is understanding and being able to share the data that we have with the data that you have, is to understand what we're grappling with, understand that not only do we need good sites and location is so key, as we were saying. But which banner should we put in there? We got a lot of choices. We've got Farm Boy, we've got Sobeys, Safeway, Longo's, Foodland. And not -- and they each have their role to play.

And then communicating all the time. And Greg said it right, that RioCan is really good at talking to us all the time and trying to help us -- and while understanding the business, communicating, look, we got this site here, wouldn't this be good, because there's a [ Keg ] going in here or a Sport Chek going in there, wouldn't this augment it?

And then I think it's a speed. I think that Greg knows, I always talk about velocity, and speed to market is absolutely key. And recently, I couldn't believe it, we were looking for a Longo's, and RioCan came with the Colossus property, and how quickly that went from an idea to right now an operating store. I think it was one of the fastest I've seen in my career.

And so that understanding the business, communication and then moving quickly, I think that's the key to a good partnership. And trust, there's a huge trust between -- we obviously have trust between us and our great REITs. But the trust for -- with a third party, like RioCan would be right at the top of the list with partners. So that's really important.

I'm blushing. Those are wonderful comments, and I think they ring true for us as well because we also view you as partners. And you speak about having a [ Keg ] or a Sport Chek in a shopping center, and that's a meaningful thing. I mean in the restaurant industry, you want a certain type of cotenancy. You want a vibrant community to be a part of. So how vital is it? I mean I'll start with you, Todd, to have the right kind of tenant mix? And how is RioCan doing in that regard and kind of upping its game to make sure that you always are put with the right kinds of other businesses?

It's absolutely critical, the tenant mix. No doubt about it. And for various different reasons. Both in relation to anchor tenants, as I sit next to 2 gentlemen who obviously are behemoths in the world of retail Canada. Knowing that those tenants are going to be drawing various different individuals into these retail nodes for us is super critical.

I would say, though, that I think that maybe Swiss Chalet and Olive Garden are also anchor tenants in some ways, certainly, as we drive guests to our locations as well. But absolutely, it's super critical to the decisions that we make.

And also as it relates to working with your teams around strategically where we'll be placed within the specific developments. One of the key things that's really critical for us is parking as it is, I'm sure, probably for my colleagues here too. And typically, as people trade into restaurants, 70% of the trade is in the dinner hour, right? So the ability to access the locations and have co-tenants that perhaps maybe aren't using that same parking space or perhaps the same entrance and exit is absolutely critical to what we're looking for and what we're working towards.

And I mentioned it, but back to Michael's comments, I mean, we have a partnership with the organization where we strategically know what we're both ultimately trying to accomplish. And that strategic relationship helps us to move forward, to your point, very quickly. Velocity is so important.

And one thing I would also mention too that one of the amazing things I always feel about RioCan too is that when we call, you answer. This is something that's critically important, but it's the truth. And we appreciate that.

Well, I appreciate that. And our team has electric shock buttons that attach to them that if they don't pick up, they get electrocuted. So I'm glad that's working out. That's great.

And so you are the anchors. So it's a bit different than Todd's perspective, because you almost create that tenant mix. You are the key to that tenant mix. What do you look for in the smaller tenants that accompany your stores?

Yes. I think it gets back to that demography again. I think it's so easy now to rifle in, you rhymed off a bunch of stats in terms of household income and, not just for us, it's household income, it's how debt burden the household is will determine kind of the average spend, the age, the stage, et cetera. And so for us, the more the merrier. We don't, fortunately, suffer a lot of competition head on. It's not a kind of a frontal assault, it's on the flanks. And I think when you've got completed procurement and, I guess, a catalog that goes to market that fights on all fronts, we just encourage -- we encourage the data to tell us who would be great co-tenants.

We would love to always get that first Saturday morning trip. That's becoming more and more difficult. But we'll gladly take the second trip. And there's not a lot of restrictions that we think are important to us in terms of cohabitation. And I think that's maybe the beauty and the curse of the businesses in which we operate. But again, I think it just comes back to your data. I mean, RioCan knows retail. I think that's critically important. They know all facets of it. We're not educating them on our business strategy. So we're usually more educated around the development from RioCan than our own data has when we're looking for a lease space. And again, I think that just comes back to the complementing each other's strengths again.

Great. And Todd, you heard that instruction. We need to get Recipe to buy a breakfast place so that the first Saturday trip will happen at some of our shopping centers.

So I spoke about it, before I wrap this up, I want to dive into this. I spoke about it in my introduction. It's something we often take for granted. But that's doing business in Canada. And I think I could speak for all of us to say that we are a proud Canadian businesses. We're tied to the communities here and we all make significant investments to grow our business within this country. I've sort of shared with our audience why I think Canada is such a great place to operate. But I would love to get each of your thoughts, starting with you, Michael, and just why you think Canada is a great country. Again, this is -- it's important to point this out because we don't always get the best billing as a country in which to do business, but I actually think from our perspective, it's pretty remarkable. Do you agree?

Yes. I mean, oddly, I'm more optimistic now than I was 5 years ago. We had a lost decade of productivity. And I think that we needed a wake-up call in terms of getting down to business and making it easier for us to do business so that we can give great jobs and offer great jobs to people. And that's what happens. We talk about small business, these large businesses employ a lot of people. We employ -- at Empire, we employ 129,000 people across the country, second largest nongovernmental employer after Loblaws. And so it's really, really important.

And productivity is a huge issue in this country. I mean we're projected over the next 40 years to be the worst in terms of productivity. And so then why am I so excited? Because I think we have the capabilities, if government and business can get their act together, to be right up near the top. And I think we need that, what would you say, electric shock treatment. And so -- and we're doing our bids. I mean we are putting in -- we've put in $2 billion into construction over the last -- into real estate over the last 5 years. We put in 100 projects annually. And we've turned over 40% of our network, we've renovated or moved, in the last 5 years.

And I think that these 3 companies are into Canada, right? It's hard to think of other companies that are more Canadian than the companies we work with. But I think that it's not just going to come. This is a great country, but we have to be able to invest in it and believe in it and make it easier for people to get jobs and to do business. And I think we're going to do that. So I'm optimistic like you are, Jon, and we're always optimistic. And I was thinking when you're talking about co-tenancies, I'm all about brand, and that's all about who you want to be located with. And I'm sitting next to some great Canadian brands here. That's who I would like to be connected with. I don't need a marijuana store next to my stores all the time. So that's really important. But thanks for asking the question.

Greg, your thoughts? Very well said, Mike.

Yes. Similar to Michael, I mean, the productivity is, what was it, the break-the-glass situation, right? But what I -- I have the same level of optimism for the prosperity of the nation. And I think maybe it has been a wake-up call, maybe it's kind of been dormant or latent for quite some time. But I'm struck by the amount of peers that I meet, that I know, that I engage with, who really believe in this nation.

I think that's different. I think there's much more patriotism here in Canadian business. And I think Canadian business has, for the most part, started to wake up. And if you settle off the objective, which I think we have a Canadian Tire, that we do play a role in building a stronger nation. We have a purpose that says we're here to make life in Canada better, and you live by that purpose, you make tougher choices, you -- which we're doing at Canadian Tire. I'm sure we're all doing. And I see tough choices being made across all Canadian business.

And for us, at Canadian Tire, we truly -- I truly believe that Canadians would miss us if we're gone. One in 20 Canadians have worked at Canadian Tire. 4,000 local companies rely on us for business. For every dollar we make, Canadian businesses make $14. And so we need to play our part, making those tough choices to ensure our sustainability going forward as an organization. And then we need to make the investments that drive employment. We need to drive inefficiencies out of our back office so our frontline team members can continue to serve Canadians the way they deserve, and we can generate that kind of -- that ecosystem of employment. And I think if more and more Canadian businesses start to think about their role in driving the productivity of this nation, which I am seeing in spades, I think we're in a good place.

Well, and I will applaud you, as I've done in private, with your acquisition of, I would say, one of the most historic matters in Canadian history, which is The Stripes. And I think it's -- thank God, it has fallen into the responsible hands of a strong Canadian constituent like Canadian Tire. So again, for so many reasons, I applaud you for that acquisition.

And Todd, from your perspective, which is broader than just your role at Recipe because you are involved with Restaurant Canada, how do you feel from the restauranteurs' perspective about the prospects within Canada?

I too am incredibly encouraged. Tough to follow these 2 gentlemen. I totally agree with everything that they've said. As I reflect on the business that I'm blessed to work with, 140 years of tradition and business involvement in Canada. We're investing in our brands, to your point, Michael. We're employing young Canadians, to your point, Greg. One of my son's first jobs was at Canadian Tire. And I think a lot about that, my first job, I was a dishwasher and fry guy at Swiss Chalet, right? So it's amazing how your life can come full circle.

But I absolutely believe in this country. I believe in investing in this country. We are growing in this country. As I mentioned earlier, we just recently acquired the race to Olive Garden Canada. We're constantly looking at more opportunities. Who knows, maybe stay tuned on your breakfast idea. There is tremendous opportunity in this great land.

And I too am optimistic. I feel as though we're starting to head in the right direction. We have a lot of work to do in our industry as it relates to productivity. Certainly, I think probably if you take a look at the restaurant industry, we may, if not last, close to last, there's a lot that needs to happen in terms of investing in productivity within our industry. But I believe in Canada, there's lots of growth here and looking forward to a very bright future for all of us.

Well, that's awesome. And I love the statements, and I agree with them all. And in fact, it's in our name, RioCan stands for Canadian. So we are proudly Canadian. We love being up here with equally proudly Canadian businesses and business leaders. So I thought all those comments were exceptional. I do feel like I deserve a royalty if you end up creating a new breakfast banner.

No problem. We'll work it backstage.

Yes, we'll work on that. I'll draw up a contract. But I just wanted to thank you for taking time being here to speak to our investors. I think it is a wonderful partnership that we, RioCan, does not take for granted. Michael, you used the term customer-centric, and it's one of our fundamental principles at RioCan. It's the reason we do answer the phone when you call, it's the reason we do get out in front of new development opportunities. Because we are here for our unitholders and we are here for our tenants, to ensure that we are one step ahead and always providing you with the right route to success, because your success means our success. And I'm incredibly proud to see what each of you continue to accomplish. And again, thank you for your time for being here today.

Thanks for having us.

That's great. Thanks so much. And I would -- yes. I have to announce that we wanted to give you guys a 15-minute break and come back soon. We've got some great stuff lined up for the latter part of the day.

[Break]

Welcome back. I hope everyone had some time to grab something during the break. Great stuff so far. I hope everyone's excited. For those of you who don't know me, my name is Andrew Duncan, and I'm the Chief Investment Officer at RioCan. I've had the pleasure of being part of the RioCan team for the past 13 years.

I'm excited today because I get to talk to you about what I work on every day. That is how we are amplifying growth through disciplined capital allocation. That's Investor Day speak for how we spend our money to deliver growth.

As Jonathan mentioned earlier, an important part of meeting our goals over the next 3 years will be to deliver 1.5% FFO per unit growth through accretive capital allocation. I'm going to take the next 15 minutes to explain to you how we're going to do that.

Okay. So let's unpack how we're going to achieve that growth. I think about this as a simple equation. We take our capital management strategy, we add it to our investment framework, and that equals us using our capital to deliver the highest risk-adjusted returns. We make this simple by leveraging our people, our process and our technology, like North Star, which is not an old hockey team from Minnesota, but our incredible proprietary analytics platform.

Let's get started by talking about where the money is going to come from. As you heard earlier, we are bringing back $1.3 billion to $1.4 billion of capital in 2025 and 2026. Most of this cash is coming from the sale of our residential rental assets and proceeds from our condo program. This breaks down as $1 billion from RioCan Living assets and $400 million from condo proceeds.

We are very proud of the residential businesses we've built over the last 15 years. We have delivered healthy mid-teen levered returns on RioCan Living assets that we have sold so far in 2025. And our condo program has earned us an impressive $250 million of gains over the last 10 years. We used our land bank and our expertise in a low interest rate environment to take advantage of this past real estate cycle. We were bold and we made money. And now we're going to recycle that cash back into our core business and strengthen our balance sheet and invest in growth.

So now that you know where the $1.3 billion to $1.4 billion is coming from, your next question is likely how much progress we have made so far in 2025. As you may know, we have sold 6 of the 14 assets in the RioCan Living portfolio. What you don't know is that we have another 1 of our larger RioCan Living properties under conditional contract. I'm also pleased to update you that we are in advanced discussions with interested parties regarding 2 additional RioCan Living assets.

Bottom line, our RioCan Living sale program has great momentum. These are in-demand assets with a deep pool of bidders. As such, we remain confident in our ability to sell the remainder of the portfolio.

Now let's talk about the other piece of the puzzle, our condo proceeds. In the first 9 months of 2025, we have collected $256 million in revenue from our condo projects. We are confident that we will bring in the rest of the forecasted proceeds by the end of 2026. I also want to highlight, we significantly derisked 2 of our remaining condo investments as we fully repaid our construction loans at the 11 [ YV and UC Tower ] projects.

So the punchline here is, year-to-date, we have bought back $500 million of our $1.3 billion to $1.4 billion target. And keep in mind, the year is not over yet. That is great progress. It is clear we are paying down debt and have money to spend on growth in 2026. But what cash will we have to invest in growth in future years? Do we have any other sources of capital beyond the $1.3 billion to $1.4 billion?

The answer is yes. We have 2 other sustainable sources of cash that we can invest in our growth going forward. The first is our retained cash flow. Dennis is up next and he's going to break that down in a bit more detail. But sneak peek, we have $130 million to $150 million of levered cash that we can use to invest every year.

The second source is additional asset monetization. That's a mouthful. Again, this is Investor Day speak for selling assets to invest in growth.

Selling assets and investing the proceeds really help us with 2 of our large goals. First, it generates cash we can use in our various growth opportunities. Second, it helps us achieve our same-property NOI growth targets. As you recall, John and Oliver signed us up to deliver at least 3.5% same-property NOI growth over the next 3 years. I am very confident that we're going to get that done.

To do that, we need to be selective about what assets we're going to sell. This is where North Star provides us with a big competitive advantage. North Star is really good at identifying which assets are not helping us to deliver the growth we need. Some examples of the type of assets that North Star has identified for disposition are noncore assets such as smaller stand-alone office assets, fully optimized assets like an open-air retail properties where the income is not growing due to longer-term flat leases, or finally, low-yield assets like development lands that have little or no holding income.

If we can get the right price for these properties, it's a win-win. It allows us to reinvest the proceeds in growth and helps us to achieve our same-property NOI goals.

So that's where the money is coming from. To recap, here's the list: $1 billion from RioCan Living sales; $400 million from condo proceeds; $400 million from retained cash flows, that's the $130 million to $150 million every year for the next 3 years; and any additional cash from strategic dispositions.

Now the fun stuff. Let's talk about how we're going to spend that capital to achieve our growth targets. We spent some time earlier today talking about the capital management strategy. Let's dig into that a little bit deeper for a second. Dennis already walked you through balance sheet priorities, so my job is to focus on our strategic growth levers and our investment options.

We think about our investment options in 2 buckets: reinvesting in our business and investing in high-value market-driven opportunities. Ways we reinvested in our business is through initiatives such as retail infill projects, which I will discuss shortly, and leasing capital. These investments leverage our operational strength and is a sustainable source of growth. We can also reinvest in our business by buying back our units. What better way to invest but then by buying a piece of a preeminent retail REIT at a discount.

We also have the option to invest in retail acquisitions that complement our core portfolio. I will discuss our acquisition strategy in a bit more detail later on. We think about our investment options as a menu that we order from to deliver on our goals. It's important to reiterate that each opportunity is assessed through a disciplined capital allocation framework to ensure it meets our investment criteria.

Let's spend a couple of minutes to look at the best -- one of the best options we have in the menu: retail infill. Delivering retail infill projects make a ton of sense for us. We are building on land we already own in locations that are already proven retail nodes. We can pre-lease this space to mitigate risk, and these are typically quick builds.

This is not new to us. We've been executing retail infill projects for years. You might ask, great, how much can you do? Well, Ballantyne stole my thunder earlier and already told you that we've identified approximately 1 million square feet of future retail infill opportunities in our portfolio. Now, not all that square footage is feasible today. But we are confident this is a sustainable investment option that we can take advantage of for years to come.

We've talked about our framework a couple of times now. Let's look at how our retail infill project performs when we run it through the framework. A project with at least 9% unlevered IRR will achieve all the framework's financial goals. It will be both FFO and NAV accretive, and it will improve net debt to EBITDA once the income ramps up. Operationally, a retail infill will definitely improve the portfolio. It is quick to deliver, and as I mentioned earlier, we can pre-lease some or all the space to mitigate risk. As you can see, this type of project is very well when running through our framework.

A great example of where we're executing retail infill projects in the portfolio is at East Hills. East Hills is one of our newest unenclosed retail centers in Calgary. This asset is just under 1 million square feet and is anchored by a Costco and Walmart. It is located in one of the fastest-growing parts of Calgary and has a great existing tenant roster. We are delivering 38,000 square feet of new retail infill projects on this site in 2025 and '26 -- sorry, '26 and '27. We are excited to be building new retail space for some great tenants like Sephora, Bank of Montreal and Value Village.

On top of what we're delivering right now, there's an additional 250,000 square feet of retail infill opportunity available on lands we already own at East Hills. This is a perfect example of a low-risk investment option that we can invest in for years to come.

Let's switch gears a bit and talk about another one of our investment options: our retail acquisition strategy. We are always looking to acquire properties to add to our portfolio that have the following characteristics: attractive demographics that generally fit our portfolio, properties where we believe rents are under market so we can use our platform intelligence to drive rent growth and add value. This is an instance where using North Star really helps refine our underwriting. And finally, assets where we can apply our operational excellence to shrink the property's bottom line.

We know the market for enclosed retail assets is tight right now. Everybody wants to add grocery-anchored retail assets to their portfolio. We are thrilled that the market is finally seeing the value in an asset class that we believed in for the last 30-plus years. In summary, we will look for acquisitions that will have the right characteristics and meet our 9% unlevered IRR hurdle rate.

Before I finish talking about investment options, I want to spend some time talking about our development strategy going forward. As we've talked previously, our current projects are winding down. And we do not plan on commencing construction of any large mixed-use projects. But this doesn't mean we've forgotten about the immense potential of our pipeline. We are actively managing that pipeline and we'll continue to look for ways to unlock its potential value. This means looking at opportunities to zone and sell and advance approvals on sites that have near-term monetization potential. Our development sites are in Canada's most desired markets where demand will be strongest in a healthy development cycle. We are continuing to unlock this value by leveraging our in-house development team and are doing it without spending a lot of money.

Given the strength of our core retail portfolio, we are in a strong position to take a long view on development. Any near-term monetization potential is all upside as we have not assumed any development land sales in the projections that we're providing you with today. Simply put, when the land market turns, RioCan is in the best position to benefit.

So we are now back where we started. As I said before, an important part of meeting our goals over the next 3 years will be to deliver 1.5% FFO per unit growth through accretive capital allocation. To recap, we know where the money is coming from. We have a menu of incredible investment options to spend it on. And we have the right capital management strategy and a balanced investment framework to deliver the highest risk-adjusted returns. This is how we're going to deliver a 1.5% FFO per unit growth through accretive capital allocation.

Thanks very much for your time this morning. It is now my pleasure to hand it over to Dennis. He's going to pull all these numbers together and give you -- and talk to you about our financial objectives. But I'm betting he's also going to tell you we're undervalued.

Thank you very much, Andrew. So I'm back again. As Andrew said, I'm going to try to just wrap things up by pulling all the numbers together, looking at our financial targets and our net asset value. There's a lot of numbers in my section, no surprise. So what we've done is we're putting an appendix to this presentation on our website that's going to have all of the assumptions and targets that we go through today.

Our financial objectives are simple and straightforward. We're trying to deliver competitive risk-adjusted returns to our unitholders, and we will leverage our core competencies to drive income growth both organically and through accretive capital allocation. This income adds value to a portfolio that will continuously compound for many years. We will manage risk by maintaining a strong balance sheet.

But a strong balance sheet is more than just defensive. It gives us financial flexibility to take advantage of growth opportunities when they arise.

As our team has outlined, our growth in core FFO and AFFO is driven by a simple, straightforward plan. Our retail core will drive at least 3.5% same-property NOI growth in which we have high confidence. This will be supplemented by 1.5% growth from capital allocation as we redeploy our retained cash flows and some of the capital from asset sales to accretive uses.

We've acknowledged that there will be a headwind of 1.5% from interest expense over the next 3 years, which is expected to be alleviated thereafter. Overall this is an achievable plan, with most of the drivers in our control. We've also assumed that growth in core FFO and core AFFO will be equal for this model. But it's worth noting we have an opportunity to outperform by controlling our maintenance CapEx while our FFO grows.

Just a quick reminder of what went into -- what we went through earlier. Core FFO is forecasted to be at least $1.55 per unit for 2025, and it's from this base that we expect to grow over the next 3 years. Core FFO excludes the low-value cash flows from condos and the HBC-JV. The largest component of this growth is driven by same-property NOI. As John and Oliver discussed, our team is highly confident in this component. 65% of this is contractual, so it's locked in. The remaining 35% comes mostly from lease mark-to-market, with leasing spreads in the mid-teens.

Again, this is high confidence growth given this operating environment. There's a limited supply of quality retail space available and there is strong demand from tenants who are looking to grow their businesses.

Andrew went through the various options that we have to deliver an additional 1.5% growth from accretive capital allocation. A large component of this is simply from reinvesting in our own portfolio. Buying back our own units is also an attractive opportunity right now. And over the next couple of slides, I'm going to run through the sources of capital for this component.

Over the next 3 years, we expect to retain $70 million to $80 million of free cash flow per year. If we lever this at 45%, this results at $130 million to $150 million per year that we can invest on average on a leverage-neutral basis. Andrew spoke about the $1.3 billion to $1.4 billion of capital from the sale of RioCan Living and closing condos. About $1 billion of that will naturally reduce debt as mortgages are transferred to buyers and construction loans are repaid. This leaves $400 million that can be allocated to various options discussed.

When we pull all these pieces together, we have, on average, $200 million to $250 million per year to invest. Just to break that down one more time. We have $130 million to $150 million for retained cash flow. And we're assuming on average $70 million to $100 million per year to invest by allocating some of that $400 million mentioned on the previous slide. This capital is going to be deployed at or above our hurdle rate of a 9% unlevered IRR. For modeling purposes, we have assumed an achievable 7% going-in yield on these investments with the balance of the return coming from growth. This yield, after deducting interest expense and allowing for some time lag, will drive the 1.5% of incremental growth. Finally, we have opportunities for additional asset sales such as the potential sales of development lands, which will be upside to this plan.

Now the reality is that there will be a 1.5% headwind from interest expense over the next 3 years. The interest on existing debt over the next 3 years is 3.2%, which compares to the assumption on refinancing of 4.5%. The actual interest rates are market-driven, so we've provided a sensitivity in the appendix.

Now I've once heard it said that financing is temporary, but assets are forever. Starting in 2029, the weighted average interest rates are in line or slightly above today's rates. In addition, over the next 3 years, our plan has us reducing our debt by 10%. For this reason, we remain confident in our long-term trajectory.

As we near the end of our presentation, it is important to remember that our core income is what forms our net asset value. This core NAV reflects the resilient cash flows that are generated from our top-quality portfolio. We will grow our NAV as our -- as we grow our income and improve the assets, compounding value for many years to come.

As we discussed, the FFO that's excluded from the core is low-value cash flow that represents a very small proportion of our NAV. There is no value reflective for HBC in our NAV, and condos represent only 1.8%. We will be generating significant capital by selling our RioCan Living apartment portfolio and repatriating that capital to the core.

Our core business is highly valuable, delivering durable and growing cash flows. We value our business at $24 per unit. This is determined bottom-up with value supported by over $1 billion of asset sales over the last 3 years. This value implies a multiple of 15x using core FFO per unit. And this is very reasonable in a historical context. Our multiple average 15x for the decade ending March 2020.

Now of course, there are differences between that time period and today. For example, the cost of debt was lower at that time, but not that much lower. Rates have recently stabilized and credit spreads tightened. However, the most important differences are the differences in our portfolio. RioCan's portfolio today is significantly higher quality on every metric. We've shifted our focus to major markets with improved demographics. We've improved our asset and tenant mix. This deliberate shift has driven the strong operating KPIs we discussed today, and we're achieving higher organic growth from our portfolio.

All of these items typically imply a higher multiple [ on ] historical. Our net asset value today is 25% higher than our unit price. This is an opportunity to buy a best-in-class portfolio for value.

Now of course, a multiple is simply a reflection of future prospects, and we have demonstrated many of those today. Our business is set up to deliver growth and compound value for many years to come. We have a strong retail core portfolio that is the foundation of this growth. We have significant capital that will strengthen our balance sheet and finance growth opportunities. And we have the platform, the people, the processes and the technology to execute this plan with excellence.

With that, I'll wrap up and pass the floor back to Jonathan for closing remarks.

I love this mouthpiece, this microphone thing. I think I want to get one full time. I can either instruct a spin class, tell you what the weather is going to be. It's a good look.

So I want to thank Jennifer, I want to thank Dennis, I want to thank John, Oliver, Andrew, for their valuable insights today. And before we invite my fellow RioCan leaders on to the stage to do a bit of a Q&A, both in person and online, I wanted to close our formal remarks with a few key thoughts.

Today's theme is "Strength in retail, durable growth." That's exactly what RioCan is poised to achieve. We've got the right portfolio, the necessary capital and a focused strategy anchored in our competitive advantages. We have a proven track record spanning more than 30 years. We are well positioned to deliver.

The market environment, as I said before, is very favorable. Our team is ready and the stage is set. RioCan has all the tools to drive sustained growth.

So I wanted to thank you all again for your time for being here today. We're going to take a very brief break just to set up the stage for a Q&A session with myself and the rest of the senior team. So thanks, everyone, just a few minutes, if you will, while we set things up. Thank you.

[Break]

So up until this point, we've done all the talking today. But now it's your turn. So if you're here in person, and you'd like to ask a question, please raise your hand and someone with a microphone will come right to where you are. If you're online, please submit your question as indicated on the screen. And I and the rest of the senior leadership team at RioCan will be happy to answer you.

And before we get started on the questions, I also wanted to -- I mean, you've seen most of us up here today, but I also wanted to introduce you to a couple of key members of our senior leadership team that you haven't been introduced to, Terri Andrianopoulos, our Senior Vice President of People and Brand; and Franca Smith, our Senior Vice President of Finance.

Now open to questions.

Mike, nice to see you.

Nice to see you, Jonathan. I just want to, first off, congratulate the team on an excellent presentation. I thought it was very well done. So congrats. As always, an analyst is going to ask financial questions. So Dennis, over to you.

I guess 2 things. Can you help me understand 3.5% SPNOI growth and why that only drops down to 3.5% core retail FFO growth, would be number one. And then number two, how much of the 1-point -- I guess, $1 billion that's left of capital recycling from the $1.3 billion $1.4 billion? What's the assumption on allocation of that capital over the next couple of years?

So yes, I think it's really kind of a levered, unlevered kind of question on that dropping down. I think we've just sort of for this kind of a model, taking a relatively simplified assumption. I think it's -- we've put out at least 3.5% kind of performance coming from our core business. So I think there's various opportunities to outperform there, whether it's actual operating performance and outperforming on our operating metrics, and also just managing our cash flow and our costs.

In terms of the allocation of the remaining asset sales, as I mentioned in the presentation, we're naturally putting a good chunk of that to debt paydown. And we want to take care of those balance sheet metrics as a first priority. Once those are taken care of, the residual, and we've assumed -- I mean we've kind of added up over 3 years, it's in the neighborhood of $300 million being allocated to other opportunities. But we'll evaluate that as we go through time. So if there's a really great opportunity, we may decide to go a little up on the leverage, not outside the range, in the short term, to invest. And typically, what we see is that the credit metrics sort of catch up as the income ramps.

Just echoing Mike's comments, congratulating the team on a great presentation. On the 1.5% from capital allocation, I think you made it pretty clear on how you expect to do that in '26 through '28. Beyond that, obviously, you have the retained capital. But I was just wondering, you talked about not assuming any land dispositions in the -- beyond 2028. Where does the additional capital come from in order to get to that $200 million to $250 million of capital to deploy in 2028 and beyond?

So I'll start by saying that -- and thanks, Lorne, for your comments. We do have retained earnings every year that will form part of that. We also have been quite active in recycling assets that are not residential. So when we have lower growth retail assets, we sell those and we can reinvest that capital. And then we said we took a conservative approach to the density that we've created and continue to fortify through some of the initiatives that Andrew and his team have taken to get what was once zone property to be better zone in today's environment. We have not relied on any of that having significant value going forward. But our view is over time, and specifically in places as vibrant as Toronto or Vancouver or Montreal, there will eventually be value in that density. And we plan on fully taking advantage of that value when it arises.

It doesn't form part of our plan, as I said, but you asked beyond 2028. And so the truth is who knows what will be the situation beyond that period of time. But I wouldn't be shocked given the way real estate has historically cycled in the Canadian markets that there won't be inherent value and significant value in that type of holding going forward. Andrew, anything to add?

No, I think you nailed it, Jon. I think it's, to Lorne's question, we've got the retained earnings, we do some capital recycling, we'll continue to do that and we'll be open to opportunities to recycle the capital into higher growth -- higher risk-adjusted returns.

Okay. And one other quick one just to show you guys that the analysts can think of other things other than financials, Mike. Just on the -- you guys talked about the gyms, right? And I feel like that became a bit of a non-sequitur in COVID. And I guess that seems to have changed. Can you maybe just help us understand why now that has become such a highly desirable tenant for RioCan and maybe for Canadian retail landlords more broadly?

Sure. I'm going to hand that one over to Oliver who is so much closer to these tenants than I am and makes a lot of property-level decisions. So go ahead, Oliver.

Thanks, Jon. I thought you were going to say that because I've been working out. I appreciate it. Look, I think fundamentally, what it comes down to is how people have, from a lifestyle perspective, change the priority that they put on fitness as part of their daily habits. We see it across all of the different fitness, gym, clubs that exist in our portfolio, from GoodLife, LA Fitness to even [ Sweat & Tonic ] here at The Well where demand continues to grow at an all-time high.

The other thing I think that's very unique about fitness clubs, which make them very desirable for tenants -- from a tenancy perspective is the amount of traffic that they drive. Like a typical GoodLife will bring in 800,000 -- will have 800,000 visits a year to 1 club. So when you think about the power and the compounding effect of all of those people coming 4 times a week to your center, the amount of traffic that drives, which other tenants feed off of, they really become a very compelling offering and certainly one that we've been prioritizing over for the last while.

I think they've also done a great job of broadening their offering. The gyms aren't what they were once, right? They're social clubs now. You've got approachable price points, you've got more luxury price point. So I think it's way more approachable to the vast majority of Canadians. They can find something or a gym that's going to suit what they need.

Yes, I think it's a great point, Terri. When I think of Altea Active, which we opened up at an old Canadian Tire on Carling Avenue in Ottawa, I visited it a couple of months ago, and this is not your parents' gym. This is literally a country club. And they've got so many different offerings, and they bring in such a varying demographic into 1 building. And I think that's totally different than it would have been 10 years ago or 15 years ago where the only audience that they were focused on where people like Oliver who just continues to work out as opposed to those seeking other lifestyle attributes.

Thanks again for the presentation. It was extremely well done, very informative. I wanted to ask about just on the same-property NOI growth target. I think it was a 3-year target of 3.5%. How would that change over the long term? And is there anything unusual that you're building into your 3-year outlook that might not be recurring beyond 2028?

So it was at least 3.5%, Sam. And I'm going to hand that one over to John Ballantyne.

Yes. I would say what it doesn't include is actually some of the upside potential, quite frankly, that we're going to see over the next 3 years and beyond. When we built out the North Star platform, we took it as to what can we unlock now, what growth can we start working on in the future. And it really identified, as I said in the prepared statements, 75% of our portfolio is unlocked, and we can drive as much growth as we can through it. And I say this without the participants of the tenant panel here anymore, I don't think they are, we are now in a landlord's market. There is serious thirst for space from retailers in the supply-constrained environment.

So we've taken a hard look at exactly what we can free up now, but it's the future opportunity, what we can unlock through leveraging this demand, we feel like, is where we're going to overachieve. And quite frankly, that's going to go well beyond the 3 years.

You certainly uncovered some gold mine at Danforth and Yonge Eglinton Centre and a couple of others. Are there some other examples that you see contributing maybe beyond the next couple of years, some other areas of where you can unearth, unlock some mark-to-market that might be otherwise trapped?

Well, as I said earlier, it's -- posting these spreads is no longer anomalous. It's becoming our norm. And even in the larger rent spreads that we posted in the last bunch of quarters, like last quarter we did renewal spreads of 15% plus, we actually did have some anomalous fixed rents in there as well, which pulled that growth down.

So these opportunities are going to come up. The team has done a really great job of just deep-diving into the portfolio to again understand how they can leverage that growth that seemingly was unlocked at one point in time, to provide retailers with what they need today. The Metro deal that Oliver spoke about at Yonge Eglinton Centre, what kind of got lost a little bit was that they still had 7 years left in their lease term. And in order to keep that location now, they knew they were running out of term, they had to lock in now. So that got accelerated through. We're going to see a bunch more examples like that.

We're going to see a couple on the [ bus store ] as well. Those are going to come.

Maybe one more for me. Just on the debt targets of 8 to 9x, so what would determine whether or not you're at the top end or the bottom end of that range in any given quarter or year and sort of what's your real target more specifically? But also bigger picture, why did you choose 8x as a minimum as opposed to something lower?

Dennis?

Yes, sure. So I think we really tried to -- and we did some soul-searching on this, is like what's the right balance to be able to have the capital to invest and have credit metrics that we felt were solid? At below 9x, we're starting to get into that -- towards that, call it, BBB high kind of range, which seems to be a good place to be in the Canadian market, combined with a number of other metrics we have, like our mix of unsecured and secured debt. So we really kind of went through this.

And part of it was when we did a lot of the analysis and we looked at the opportunity set, we have opportunities to put capital to work that is, frankly, much more accretive than just paying down debt. So we've got to try and find that right balance between growth opportunities and managing our credit metrics. We feel very comfortable with this kind of suite of credit metrics that we have that we'll be able to access quite attractive debt capital.

We've got a question over there.

I think you put emphasis on the at least a few times throughout this presentation with regards to the same-property NOI growth. It sounds like maybe there's some upside on the rental spreads side. But can you give us a sense as to where you're forecasting occupancy to be, and if there's any additions through recoveries and maybe if kind of you could give an upside potential to that at least?

Sure. John?

Yes. Again, I think it's -- occupancy seems full now, but every week, we're leasing up a space that may have been structurally vacant 3 years ago. I think where there's going to be significant upside over the next few years is where we play around with some of those metrics. Our retention ratio right now is between 92%, 93%. Tenants don't want to leave, but we may want some tenants to leave and we may want to take back space.

And we spoke earlier that it's a fairly easy proposition if we can buy back a lease at very low rents to then turn it around and lease it at market. Sam just mentioned Danforth, where we were actually fortunate to get a Lowe's back, which was on an old [ Target/Zellers ] lease at extremely under-market rents. We literally tripled the rents there. So that's where I see having flexibility in dealing with both our merchandising mix and the contracts in place is where we're going to realize that growth.

And then I would also add to that, Matt, that we're working hard to make it cheaper for our tenants to occupy our space. And we feel that that creates a translation from what would have otherwise gone to [ CAM ] and taxes right into growth potential for net rents. As you know, tenants, retailers, they look at their gross occupancy cost. They don't differentiate between gross rents and net rents.

And so we're running the business as efficiently as ever. We're always looking for opportunities to run it more efficiently. And so as we find that balance and make it a finer balance, we feel that some of the gross occupancy costs will start to fuel higher net rent, savings and gross occupancy cost flow into net rents. And that will, of course, dictate higher same-property NOI.

And then, of course, we have a very vibrant program of finding other ways to make money outside of rents. And I think Oliver will talk to those on the bus later about ancillary revenue, and using properties like this as literal billboards, which just create enhanced revenue, and that's around the edges, but it adds up on a portfolio as vast and well positioned as ours.

Maybe a quick follow-up. The value of land underneath your centers is both a blessing and a curse. If you're trying to expand, it becomes very low yield to purchase. But are you seeing with kind of some dislocations in the Toronto land market or maybe Canadian land market that you can get assets for the value of the retail today with maybe getting long-term upside on land? Or are vendors just sticking to what they thought the prior valuations were?

I'm going to hand this one over to Andrew.

Thanks, John, and thanks for the question. I think your first premise is more correct, is the fact that landowners that hone maybe covered land plays are holding on to previous value still based on what they thought it was worse than land market maybe 2 or 3 years ago. We'll see if that continues. We're very close to the market on the retail side. We watch every transaction. We want to make sure we're close to market and can take advantage of opportunities when they come up. But I'm not yet seeing people trade retail assets with zone density on it for exactly the value of the retail, to your point.

I want to pull a question on 2023, there would be a whole panel on ESG. And now that's been, let's say, call it rightsized, yet there's still -- we have to report it. You guys do and so do we. So we appreciate Jennifer's work on your ESG report and in sustainability. How do you, going forward, continue to report and line things up so you can improve on your carbon scores while maintaining your financial targets of -- and I assume it's reducing energy or water usage, but how -- what operations can you put into place to continue to get the data you need in this reporting that's required nowadays?

Yes, finding -- I'm going to hand this one over to Jennifer who lives and breathes this, but it is really finding that nexus between initiatives that are both good for the environment and also good for our business. And I think we've done a very good job of curtailing our activities to do that. But I want to hand it over to Jennifer who's closer to this than I am.

Thank you. So exactly correct, we embed ESG and our strategy right across the organization, and we apply the same rigor to any ESG initiative that we would to any capital allocation activity. It has to drive value for our unitholders. It's not enough simply to reduce emissions, although that is critical. And you'll continue to see year-over-year improvement and progress in our reduction of emissions. You can read all about it in our latest report, which we're very proud of. We were placed first in North America among all of our North American retail peers in the retail sector of the Americas because of our energy reduction.

But as importantly, you can also continue to see it being implemented in ways that do generate value and property enhancements. So a great example of that is our implementation of over 300 EV charging stations in our properties. Those drive income. They're located at over 40 of our properties right across the country. And you'll hear more about that on our bus tour.

Looking at groundbreaking community partnerships with our national tenants that are focused on the exact same metrics that we are and, again, are there to drive value for them and for the REIT and for all of our unitholders. So happy to go into lots of detail. I could probably sit here for an hour and fill your ears with it. But we can connect afterwards, and I'm happy to send you our report as well.

You started off talking about increased focus, less residential. And also a key point of discussion was the strong leasing spreads. Can you maybe expand on how the leasing spreads vary by the different retail property types you're in? And with the increased focus, is there an area, whether it's outlets, centers or on closed malls that maybe would be less of an area of growth or even an area to exit for RioCan?

I think -- thanks for the question, Mark. I think really we're seeing leasing spreads being strong really across the entire portfolio. I don't think there's any province, region, city that is outclassing another. I think when you have a portfolio as vast as RioCan, those opportunities for growing lease rates pop up all over the portfolio.

And in terms of, look, enclosed malls, it's a very small part of our portfolio. But even there, we're seeing very good leasing spreads. But largely, we're just seeing it out of the very strong, well-positioned, open-air and necessity-based retail assets that fuel our portfolio. John, anything to add?

No. The only thing I would add is enclosed centers, historically have had lower growth. But I would say, again, with tenant demand for space, you're seeing a lot of kind of non-enclosed mall tenants now incorporating themselves into malls. Oliver spoke earlier, we're putting a couple of grocery stores into Oakville and Georgian malls into the old HBC space. We're seeing a lot more of that.

So essentially, enclosed centers are becoming enclosed essential-based grocery strip centers that are just inside, and we're driving huge rents out of that as well.

I'll add too, Mark, we're setting ourselves up for future success too. And some of the initiatives we're taking now, the negotiations we're having with tenants on renewals or when we do new leases, are not just economic, they're also -- the nature of their renewals have changed. And so we've really made it part of our business to make fixed renewals of 4-letter word at RioCan. In fact, we'd like to avoid renewals at all.

And so as the portfolio -- as we move on year-over-year, you're going to see a number of these fixed-rate renewals start to fall off, and as a percentage of our overall portfolio start to diminish, which gives us the opportunity to just drive more mark-to-market opportunities and create in the future even higher leasing spreads because we can get rents in a representative of today's market.

Maybe just a follow-up on that as far as growth. Residential development, obviously, right now is not an area that many people are looking to undertake. But that will come back at some point and RioCan has a lot of sites that would allow for that. Is that something RioCan will be open to in the future? Or will it just be sold off to maybe other more focused residential developers?

We've got some very key ingredients that make us a logical participant. We've got great land and we've got a great team. What we don't want to do is draw down on our balance sheet too dramatically. And so I think if opportunities arise where we can utilize our great land, utilize our great team and not have any significant implications on our balance sheet, we would be participants. But again, nonfinancial or lower financial aspect of that sort of initiative going forward.

And I also think, as you had mentioned, there's great opportunity simply to sell that land or those landholdings and take that money and utilize it for some of the initiatives we're talking about today.

Thank you for hosting us. More of a, I guess, a philosophical question maybe for Jonathan. In terms of corporate initiatives, that may be kind of flying under the radar today that you're working on, spending a lot of time on that may not necessarily impact results over the next 2 to 3 years but could have a profound impact on the company and results '28 onwards, is there anything that's worth highlighting?

That's an awesome question. And I think I've got an awesome answer for you, and that really is driving forward our culture and the people at RioCan. I don't think enough attention is paid on -- I talked about the strength of the platform, and that really is driven by people. And the initiatives that we've taken over the last sort of 4 or 5 years to ensure that our people are compensated properly, are treated well, it's been profound and has made a huge difference in just the way we operate and the results that we achieve.

I'm really, really proud of the fact that -- we do an employee engagement survey every year, and not only do we get high scores, that goes without saying, but we get 99% participation, 98%, 99% participation, which means that whether they hate it or love it, people are really willing to express their thoughts about working at RioCan. And that's the kind of accountable culture that I really had thought about and dreamt about when I got to take on this position. And I think it really does add a huge amount of value.

There's the economic value because turnover sucks, right? And you have to retrain people and you got to go out and hire people, and that takes a lot of time, effort and money. But there's also the intrinsic value of just keeping that same corporate knowledge intact and keeping people that know the business and love the business focused on that business. And so I think that advancement in our culture and just the employee base being as motivated and engaged as they are has made and will continue to make a profound difference at RioCan.

Can I make a plug for technology since you're talking about platform?

Yes, you can.

Because no one ever gets to plug technology and reports to me. So the team's mentioned data. And again, if we're talking platform, leveraging our data is incredibly powerful. And one of the things we've been really focused on, we've implemented a new ERP system, we've moved everything to the cloud, we've done all the things that you need to do to make sure that everyone has access to data. So if the team is going out and negotiating a lease, they've got access. If Andrew's team is going out to buy a property, they've got all that access.

And then implementing those tools to make it just faster, more seamless, better forecasting, et cetera, again, I think this is another piece that we're putting a lot of effort in, we've put a lot of money in as well. You've seen in our reports in terms of implementing these technologies. And we're seeing that pay off. We get better insights when we're going into these negotiations. So I think that is probably another kind of, again, it's under the radar, it doesn't pop up in the KPIs per se, but it's something that we're really focused on.

And I applaud you for linking technology and philosophy.

And maybe just as a follow-up, when you collectively got together to put out kind of the '26 to '28 forecast, is there an item within the forecast where you sat back and thought, okay, this is going to be a challenge to achieve? And if so, kind of what was it? And kind of what are the controls in place in order to really kind of mitigate the risk of not achieving the goal?

Yes. So I can start on that one, Mario. But when we started this conversation probably about a year ago, what are some of the key themes, and we spoke about same-property NOI. And we said we wanted to set a lofty target. And first, it was, okay, we said 3%, maybe we'd just stick to 3%. And then we said 3.5%. And I would say that there was, at first, a bit of hesitation around that. But then the more we dug into it and the more we started looking at our own data and using the tools, like John and Oliver had spoken about, Project North Star, to really dig into it, the conviction around that number and also continuously saying at least 3.5% was well founded, and I think fueled a really good conversation and a really good process that allowed us to put that number out without any hesitation.

But I would say that when we started this process, there was probably a little bit of hesitation. But it was a wonderful act of self-discovery when we really dug into our portfolio, we really dug into our data, and now it allows us to sit up here and say with conviction, we believe in that number hands down.

Just on the tenant growth, I mean lots of retailers have expanded at a pretty good clip in recent years, taking advantage of the availability of space in the market. Now RioCan's portfolio is essentially full. Many other retail portfolios are essentially full. Are you seeing tenant expansion plans slow down because of capacity limits? Or are retailers out there looking to continue a similar pace that would need an acceleration of new development? And can RioCan participate in that new greenfield development opportunity?

Oliver, I'll let you start with this one.

So the first answer to your second question is, yes, we can absolutely participate in it. We still see extraordinary demand across all categories in all regions that we are looking to grow. We just wrapped up, it wasn't that recently, but a few weeks ago, we wrapped up the ICSC conference in Toronto, where we sat down with all of our current tenants, prospective tenants, and they are still extremely interested and motivated to grow their footprint. They are getting more creative in terms of how they're doing in that. It's not only, "Hey, guys show me what you have currently available." It's, "What about this space? I know this tenant is leaving 3 years from now. Can we get an opportunity to sit down to talk to you guys about buying an option on that space?" which John joked earlier that we've been involved in every single lease transaction that this company has done.

The environment right now continues to be the best that we've seen it. And when you've got retailers proactively sort of investigating opportunities of occupied space that they want to be in multiple years from now, I mean it does really speak to the strength of the operating environment that we're dealing with.

Yes. The one thing I would add, Sam, is that it does serve -- the limited amount of space right now does serve as a barrier to entry from retailers that don't operate in Canada yet. We heard rumors a couple of years ago that ALDI was really kicking the tire seriously. And I think, A, there wasn't an opportunity for them to grow and scale quickly; but B, I think the other grocers within Canada responded to those rumors and started taking difficult urban space, smaller footprints that they typically wouldn't take. So that is definitely -- again, it's -- we do want to welcome as many retailers as we can, but I think that has limited the amount of new retailers to the country.

Okay. Well, I think that concludes the Q&A segment, but it shouldn't conclude this dialogue. And what I mean by that is like one of the hallmarks of this management team in RioCan, I hope you know, is that we are always available. We recognize the importance of having open dialogue with the analyst community and, of course, with our investor community. And so the people up on the stage, the [ VAS ] team, who many of you will meet later today or you may have already met, are available to you. Because this business is dynamic. It changes all the time. Our tenants' needs change all the time. Our focus is, while again fairly consistent, the interior focuses of RioCan do evolve.

And so we are always open for conversations around that business, one of which we're very proud of. And I think we speak from a great deal of experience and knowledge. So please do feel free to always reach out to our open channels at RioCan. It would be our pleasure to speak to you.

Now to conclude. No one can leave yet because we're in an awesome place, The Well. And I would say one of the best things about The Well is Wellington market. And what we've done is lined up effectively a satellite Wellington market on this floor where we brought up some of the best offerings of some of the best little restaurants down in the Wellington market so that we can all enjoy some lunch together. We've got a lot of great members of the RioCan team here. So please, as I said, the dialogue remains open. They're all subject matter experts and they'll all be happy to chat with you while you eat that awesome lunch.

And then for those of you who are participating in our bus tour, again, we promised to keep it informative, we promised to keep it lively. And of course, it will be highlighted with some pretty awesome properties. So we hope that as many of you as possible can participate in that.

But I will be, again, repetitive in saying, I am grateful, we are grateful for your time today for being here with us, for learning a little bit more about RioCan and its people. And so thank you very, very much, and have a great day.

Good day, ladies and gentlemen, and welcome to the RioCan Real Estate Investment Trust Third Quarter 2025 Conference Call and Webcast. As a reminder, this conference call is being recorded.

I would now like to turn the conference over to Ms. Jennifer Suess, Senior Vice President, General Counsel, ESG and Corporate Secretary. Ms. Suess, you may begin.

Thank you, and good morning, everyone. I am Jennifer Suess, Senior Vice President, General Counsel, ESG and Corporate Secretary of RioCan.

Before we begin, I am required to read the following cautionary statement. In talking about our financial and operating performance and in responding to your questions, we may make forward-looking statements, including statements concerning RioCan's objectives, its strategies to achieve those objectives as well as statements with respect to management's beliefs, plans, estimates and intentions and similar statements concerning anticipated future events, results, circumstances, performance or expectations that are not historical facts. These statements are based on our current estimates and assumptions and are subject to risks and uncertainties that could cause our actual results to differ materially from the conclusions in these forward-looking statements.

In discussing our financial and operating performance, and in responding to your questions, we will also be referencing certain financial measures that are not generally accepted accounting principle measures, GAAP under IFRS. These measures do not have any standardized definition prescribed by IFRS and are therefore unlikely to be comparable to similar measures presented by other reporting issuers. Non-GAAP measures should not be considered as alternatives to net earnings or comparable metrics determined in accordance with IFRS as indicators of RioCan's performance, liquidity, cash flows and profitability.

RioCan's management uses these measures to aid in assessing the trust's underlying core performance and provides these additional measures so that investors may do the same.

Additional information on the material risks that could impact our actual results and the estimates and assumptions we apply in making these forward-looking statements, together with details on our use of non-GAAP financial measures, can be found in the financial statements filed yesterday and management's discussion and analysis related thereto as applicable, together with RioCan's most recent annual information form that are all available on our website and at www.sedarplus.com.

I will now turn the call over to RioCan's President and CEO, Jonathan Gitlin.

Thank you, Jennifer, and good morning to everyone joining us today. We're pleased to share our Q3 2025 results. RioCan's operating momentum accelerated this quarter. Our trio of high retention rates, strong leasing spreads and quality tenants represent the sustainable long-term outcome we've strategically built toward.

Key performance indicators reflect consistent sustainable growth, underscoring the strength and resilience of our platform. Committed occupancy of 97.8%, retail occupancy of 98.4% and our Q3 retention ratio of 92.7% highlights the value tenants place on space in RioCan assets. This demand translated into strong performance with commercial same-property NOI, up 4.6%.

RioCan is operating from a position of strength. Our performance is driven by a number of factors, but relies heavily on our focus on tenant quality and disciplined asset management. Premium retail space remains scarce and exceptionally high barriers to entry make meaningful new supply unlikely. At the same time, demand continues to be strong from top-tier necessity-based retailers. These retailers are not just getting by. They're focusing on growth. They're proving out their strength and ability to thrive in any economic backdrop. These tenants exemplify the caliber of retailers that comprise RioCan's portfolio. This supply-demand imbalance is most acute where RioCan's assets are concentrated.

Our properties are in Canada's major markets with an average of 277,000 people and a $155,000 household income within 5 kilometers. Our strategy is straightforward. We optimize our portfolio by selling assets that don't align with our strategic vision. On the flip side, we invest in those that do. Over the past decade, we've diligently executed this approach and it's yielding measurable success. We are keeping our centers full and generating strong leasing spreads, and we're doing so with high-quality tenants.

We're in a third quarter of operating under the current tariff environment, and we're pleased though not at all surprised to see our portfolio and tenants performing exceptionally well. This is the benefit of a tenant mix that features necessity-based retailers with strong balance sheets that provide everyday needs. Canada remains an attractive market for our tenants and our centers are ideally located to support their growth. RioCan's leasing spreads remain at record highs. We captured market rent growth across the portfolio, achieving blended leasing spreads of 20.8% this quarter, including 44.1% on new leases. Year-to-date, the average net rent for new leases was $29.58 per square foot, nearly 30% above the average for occupied space.

Renewal spreads were also strong at 15.2%. This is especially noteworthy given that an outsized proportion, 48% were fixed at lower growth rates this quarter. Same-property NOI will continue to benefit from this mark-to-market gap. Specifically, there are 10.7 million square feet of leases coming up for renewal at a relatively consistent pace over the next 3 years. Combined with our success in embedding annual growth in new leases and unlocking fixed options in existing leases, this trajectory is sustainable.

We are striking an extremely healthy balance between replacement and retention. We're enhancing tenant quality and rental rates by replacing certain transitional tenants. At the same time, we are retaining strong established tenants to reduce downtime and capital requirements.

When opportunities emerge, we secure high-quality tenants for our properties. Alternatively, we also like to help our reliable established tenants expand their existing footprints within our assets. We put our platform to work and we help those tenants by seeking out opportunities in adjacent and surrounding space and help them execute on the enhancement and expansion of existing space. We're excited to share a number of examples to demonstrate this strategy at work later this month at our Investor Day.

Our strong quarterly performance goes beyond the numbers. It reflects the quality of our portfolio and the discipline behind our strategy. We previously indicated our plan to repatriate $1.3 billion to $1.4 billion of capital which will be infused back into the business over 2025 and 2026, and we remain firmly on track.

Progress continues on monetizing our residential rental portfolio. We've sold our interest in 6 RioCan Living properties, 5 of which closed in 2025. These 5 transactions have contributed to the almost $500 million of capital repatriated since the start of this year. Based on the quality and desirability of our RioCan Living assets, we're highly confident in our ability to continue to monetize these assets and to put the capital to work accretively in the numerous capital allocation opportunities we have at our disposal.

Our business is rooted in a strong portfolio, a favorable retail environment and strong operators. This lends itself to the simplification of our business around our retail core, leveraging our decades of experience to deliver reliable, durable income and growth, focusing our resources, human and capital on this core is a logical conclusion that will serve our unitholders well into the future.

I'll wrap up in a moment, but before I do, I'd be remiss if I didn't mention that our commitment to excellence was further validated by our impressive performance in the 2025 GRESB assessment. Among other recognitions, we maintain regional sector leader status in the Americas under the retail sector and the first rank among North American retail peers in the standing investment assessment. So as we look ahead, our outlook remains aligned with the guidance we provided in the first quarter. FFO per unit of $1.85 to $1.88. FFO payout ratio of approximately 62%, and commercial same-property NOI growth of approximately 3.5%. We continue to see strong demand for high-quality, necessity-based retail space in Canada's major markets.

Our leasing strategies are fueling organic growth and our disciplined capital management is amplifying that growth now and for the future. We are excited to share more at our Investor Day on November 18. Our team is energized, our strategy is clear and our portfolio is positioned for continued success.

Thank you for your time today. I look forward to your questions and to sharing more about our progress in the coming weeks.

Thank you, Jonathan, and good morning to everyone on the call. Our core real estate portfolio continues to deliver strong results, and we continue to simplify our business to focus on this core. FFO excluding condo gains and excluding HPC-related income, was $0.39 per unit, compared with $0.38 in the prior year. This increase was driven by a 4.6% growth in same-property income in our core commercial portfolio and the benefit of unit buybacks, partially offset by higher interest expense.

Total FFO was also impacted by the following items that are noncore to our business. FFO for the quarter contained $17.5 million of gains related to residential inventory, an increase of $4.8 million or approximately $0.02 per unit compared with Q3 2024. Lower fee and interest income due to residential inventory completions had an impact of $0.01, reduced NOI and fee income related to the former HPC locations had a combined FFO impact of $0.02 per unit when compared with Q3 2024.

Net income for the quarter was impacted by valuation losses of $242.8 million, driven by factors that are not reflective of our core retail portfolio. This amount includes $148 million of net fair value losses on investment properties comprised predominantly of 3 categories. The largest component was $95 million related to excess density driven by properties that have been reprioritized. We have a significant amount of long-term density potential in our portfolio. However, given the stagnant land and development market, it is important to ensure that we are maximizing income from the existing retail on our properties.

As such, we determined that the redevelopment of properties such as Colossus, Scarborough Center and RioCan Hall will not proceed for a number of years. This determination and commitment to focus on the core retail aspect of these properties removes any ambiguity related to these sites freeing up our leasing team to maximize retail rents by offering longer lease terms to our tenants.

The second category totaling $25 million relates to assets that are high quality but with lower growth potential attributable to a significant proportion of fixed renewals associated with anchor tenants such as Walmart. These are similar to assets that we have sold over the last couple of years and represent a minimal proportion of our portfolio. The final category totaling $28 million relates to 3 large Toronto-based residential rental buildings. We have seen weakness in rent growth and occupancy in submarkets where there is high competition from condo delivery. So we have reduced the stabilized NOI assumption for these buildings.

As noted, the valuation losses relate to 3 categories that are not reflective of our core commercial real estate portfolio. Our NAV per unit at the end of the quarter was $24.9 which is approximately 29% above the current unit price. Going forward, we will focus on compounding NAV by growing income from our core portfolio, along with the accretive allocation of the substantial capital we expect to repatriate over the next couple of years. We are rapidly advancing toward a conclusion for the forward HBC locations with asset plans for 12 of the 13 locations.

As previously stated, we will only participate in assets where we would expect strong return on capital, and we will not participate in mixed-use redevelopments. The impairment in the quarter writes off our remaining equity in the HBC-JV. We have also taken provisions related to our loan and guarantee exposures. We have taken a conservative approach to the accounting of these assets while continuing to pursue all avenues to recover value. With the asset plans in place and the financial provisions recorded, this chapter is substantially behind us.

As we focus on our core business, we are winding down our mixed-use construction. Year-to-date, the spending on mixed-use IPP construction was $40 million with 186,000 square feet delivered. With approximately $70 million remaining to be spent for the balance of the year and our committed capital for development construction in 2026 of only $15 million we will have significant flexibility going forward to invest capital where it's most accretive.

In addition, we have delivered 61,000 square feet of retail infill development. This is an area where we invest in our core portfolio to drive attractive returns through growth in NOI and NAV growth and will be a continued area of focus. We are repatriating a significant amount of capital to our balance sheet. We expect approximately $1.3 billion to $1.4 billion of capital from the sales of residential rental buildings and pre-sold condos over the course of 2025 and 2026.

So far this year, we have brought in nearly $500 million of capital. $314 million in total asset sales, of which $250 million has been from the sale of 5 residential assets sold so far this year, bringing the total sold to 6 buildings with the sale of a number of others in process. $163 million is from condo closings, resulting in a repayment of $128 million of construction loans and the removal of $323 million of guarantees.

We expect the remaining condo units at the end of the year to be valued at approximately $130 million, which is an insignificant amount in the context of RioCan's balance sheet, putting this program materially behind us. As a result of this and other initiatives, our credit metrics have continued to improve. Our adjusted spot debt to adjusted EBITDA improved to 8.8x solidly within our target range of 8x to 9x. Our unencumbered asset pool grew to $9.3 billion. Our ratio of unsecured debt to total debt was 64%, and our liquidity was $1.1 billion. Our balance sheet provides us with financial flexibility to take advantage of opportunities as they arise.

As I conclude my remarks, it is important to mention that our results are driven by our best-in-class platform. This includes our team of very talented and hard-working people. Our team has always utilized data that we collect from our vast portfolio to make decisions. Over the past few years, we have been upgrading our ability to leverage this data through the implementation of a new ERP system, migrating our systems to the cloud and employing analytical reporting and tools. This ensures that our teams have the best information and analysis available as they execute our strategy, whether it be negotiating a lease, investing in a retail infill project, or buying and selling assets, we ensure that the relevant data is available and the collective knowledge of our organization is brought to bear.

We apply a continuous improvement mindset to ensure that we optimize the tools available to our people driving efficient processes and effective decision-making. With that, I will turn the call over to the moderator for questions.

[Operator Instructions] Our first question comes from the line of Sam Damiani with TD Securities.

Lots going on here at RioCan, and it's exciting to see in the next couple of years. I just wanted to start off. I think Jonathan or Dennis, one of you mentioned sort of numerous capital allocation opportunities in front of you right now. I wonder if you could be a little bit more specific in terms of what you're seeing and I guess, how much capital could be allocated?

Thanks, Sam. Good morning to you and thanks for joining the call. We are going to elaborate quite a bit more on that at our Investor Day. So I don't want to put too much emphasis on it today, just leaving something to talk about when we see you next -- in 2 weeks from now. But I'll give you the most obvious ones.

Right now, the opportunities that are highly accretive and also beneficial, our infill development in our retail scope. So really looking at properties that we own where there is existing retail and we can make it better through the creation of additional retail pads and strips, and we're now in a position where the rents justify the expense of building out those additional square footage.

And then the other is obviously NCIB, which we participated in the past. Given where our stock or where our units are trading relative to NAV and what we feel is an immediate FFO, return on FFO, we feel it's a pretty obvious place to place money.

In addition, of course, there's paying down debt. Those are the 3 pillars, I'd say that we're focused on most, but there are many ancillary ones that we're also focused on, and we're going to elaborate on at the Investor Day. Dennis, do you have anything to add to that?

No, I think that's right. And I think what's also important is to just note what Jonathan didn't mention, which is we're winding up our mixed-use development program. That's just not a priority for us right now in terms of any large construction at scale. So yes, I would agree, putting money back into our own portfolio, retail portfolio is a great use of capital right now, and it's hard to ignore the stock price.

Okay. Great. And I look forward to November 18. Next -- my second question is on, I guess, the fair valuing -- the fair value changes you detailed on the quarter. I just want to be clear, the $90-odd million taken on the density assets, like what does that leave on the balance sheet for sort of excess density value recognized in your fair value?

Yes. So I'm just trying to look at the number here. There is still value on a -- for some of the zoned square footage. I'm just kind of go into it here. We have -- our value in [indiscernible] is about $700 million, about $180 million of that is under construction site. So if I kind of do the math quick here, it's just, call it, a little over $500 million of total density value still on the balance sheet. When you kind of put that against almost 20 million square feet of zone density, it's a pretty low value on a per square foot basis.

Our next question comes from the line of Brad Sturges with Raymond James.

Just focused on the core commercial portfolio, obviously, pretty strong results you continue to see there. Just curious, the renewal rent spreads continue to improve even with a higher proportion of fixed rate options. Do you think you've kind of hit a peak at that point? Or how do you expect your rent spreads to trend over the next few quarters?

We preached in the prepared remarks about the sustainability of the conditions. I can't predict precisely where our renewal spreads will be, but we do think it's going to be a strong market for landlords like RioCan, given the strength of our portfolio going forward. I don't see a catalyst to change these conditions in the near or medium term simply because there is no new supply, and we recognize that the tenancies that we're dealing with are typically very much in growth mode. So we really do see the ability to continue achieving solid rent spreads. We're not providing specific guidance at this point, but we have said in the past mid-teens, and that's, again, a pretty comfortable spot.

And so I think it's -- if you look at also the opportunity set, as I mentioned in my prepared remarks, we've got over 10 million square feet that will be up for renewal over the next 3 years on a pretty consistent basis. And there's a significant mark-to-market. I mean if you look at the rents that we wrote in Q3, they were over $29 and that compares favorably to the average rents we have across our portfolio, which is in the $22.50 range. So that's about a 30% range that we feel very capable of bringing in through a strong renewal process.

Sounds good. And just a follow-up to that. Just with respect to next year's expiries, is there anything that stands out in terms of anomalous or would be unique or would be pretty similar to what you experienced in 2025 and you kind of see that consistent results going forward for next year?

Yes. I mean the beauty of scale, Brad, is that we really -- we have so many properties with so many tenancies. And even if there is 1 or 2 larger renewals coming up that might be like a Walmart renewal with a flat provision, it's offset by so many other renewals that don't have flat provisions or they go to market.

So there might be 1 or 2 larger or 3 or 4 larger tenants that will come up for renewal that might be a little bit flat. But again, in the scheme of things, they won't change our guidance or outlook. I'll look to John Ballantyne just to see if I've missed anything there.

No, you haven't, Jonathan. And I would also add, again, we're going to sound like a broken record, but we are going to unpack this a little more in our Investor Day in 2 weeks, namely where we think the market -- what the actual mark-to-market spread is in our existing leases and how that's going to unfold in the same-property revenue over the next 3 years.

Our next question comes from the line of Mario Saric with Scotiabank.

Just a really quick one on HBC and specifically the Ottawa location. It seems like it's the one asset where plans are still forthcoming. Do you have a sense of the timing of clarity on that asset?

Thanks, Mario. There is no defined time line at this point. We've got a few different options that we are exploring, and we endeavor to keep everyone apprised of how those unfold. But again, as we've always committed, we're not going to put any significant capital into these assets unless there is a logical return that competes with our other capital allocation opportunities.

Okay. And then shifting gears just again, real quickly to RioCan Living. Any notable quarter-over-quarter change in terms of asset buyer sentiment? We've heard from some peers in terms of the beginning of some institutional interest coming into the multifamily space. So as it pertains to RioCan Living, are you sensing any incremental demand? And how does that change the time line in terms of selling off the asset?

Time line is still intact. I would say that the demand for our new builds, no rent control, limited CapEx residential portfolio has been consistent throughout. I don't think there's been significant ebbs and flows in the demand for them.

In terms of the profile of buyers, again, we haven't really seen much of a change. We've had a pretty wide spectrum of buyers or interested parties thus far, and that hasn't changed. So the time line hasn't changed nor has the outlook, which is favorable and positive for the disposition of the remaining assets. Andrew, anything to add there?

No, John, I think you captured it. As you said, we've got bid depth in both institutional and private and we remain confident in our goal.

And just last question. As it pertains to the Investor Day, I'm not asking what you may disclose, but is the retail environment today and your confidence level in the portfolio today such that you feel comfortable disclosing 1-year, 3-year targets on some of the key metrics such as FFO, same-store NOI, et cetera?

Yes. We're going to give some pretty thorough outlooks. I think it would be a letdown at Investor Day if we didn't. So we will certainly leave you with a good outlook on the next few years.

Our next question comes from the line of Michael Markidis with BMO.

Congrats on the strong core portfolio results. Just wondering if you'd help us think about property management and other service fees and interest income have been a fairly significant contributor to your business on the earnings side over the last couple of years, and it is starting to moderate. How should we think about the trajectory of those 2 line items going forward? Will it continue to moderate as development winds down, the interest income, I imagine there's a bit of a rate component there, probably a little bit less capital invested. Just anything you can do to help us with those line items would be helpful.

Sure. I'll start, and I'll turn it over to maybe Dennis. . I think they will continue to moderate just in the sense that we have slowed down development and a large component of those fees came from development and management on behalf of others. In terms of property management fees, we have a set of properties that are co-owned and we are always the manager for those. Whether the number of co-owned properties increases or decreases, I think it will be a marginal component of those fees going up or down. So I don't think there will be much to add there. But we are an entrepreneurial organization. We are always looking at ways to continue to use the strength that we have one of those strengths is a very strong platform at RioCan.

And so we look to -- at opportunities to utilize that to create fee income. But it's hard to predict at this point what exactly those will be and how much they will be for. So I think you would be appropriately suited just to keep things sort of on a level trajectory going forward. Dennis, I don't know if you have any further comments on that?

Yes. No, I would agree with that. I think -- and I mentioned, I think, in my prepared remarks, there was a decline related to development management fees and interest income associated with some VTBs on condo properties. So I think that is going to moderate and sort of level out. The property management fee should be pretty level on that one.

Okay. And one of the other fee components, I guess, has been a strong contributor over the past couple of years has been the financing arrangement fees. Like how do we think about that going forward? Is that similar to the development pipeline? Or is that related to other activities?

I would say it would level off a little bit as well because it was related somewhat to development. We do occasionally do mortgages on behalf of properties that are co-owned, which will add a bit of fees here and there, but not -- I don't see that as a meaningful contributor going forward.

Our next question comes from the line of Matt Kornack with National Bank of Canada.

I was wondering if you could just help a little bit on bridging kind of the current quarter to future quarters in terms of HBC more in line with kind of any incremental capital deployment related to the, I guess, 3 assets that you own and the NOI generation. What would maybe be in this quarter versus what will be in future quarters considering more of those income-producing assets?

Dennis?

Yes, sure. So on the 3 assets that we're backfilling, we had given a guidance range of about $100 to $125 per square foot, equates to approximately $25 million in total for capital outlay on those. So that's the number there. We had messaged that we would see -- we had about $0.08 of FFO coming in from HBC -- in total, that was going to go away. We'll claw back some of that with the acquisition of Georgian and Oakville and the backfills, probably about $0.01 in 2026 and then about $0.02 in 2027 as the tenancies ramp up.

Okay. That's helpful. And then just on the nonrecoverable operating costs, they've been a little elevated this year starting in, I guess, Q4 of '24. Is that onetime in nature? Or is that a change in kind of the portfolio composition? Just trying to understand where those should head over the next year.

John, do you have a thought on that?

Yes, I actually don't, Matt. We'll take a better look at that and get back to you with an answer.

There are no questions registered at this time. [Operator Instructions] All right, I am showing no further questions at this time. I would now like to pass the conference back to President and CEO, Jonathan Gitlin.

Thank you, everyone, for dialing in. We will look forward to seeing you at our Investor Day coming up in 2 weeks.

Thank you for your participation. You may now disconnect your lines.