RioCan’s 5th & Third East Village development in Calgary. (Courtesy RioCan REIT)

When RioCan REIT participated recently in the “Lunchbox Challenge” to show appreciation to construction crews building its projects during the pandemic, the event was on a scale seldom seen among Canadian developers.

The REIT (REI-UN-T) oversaw delivery of 1,200 lunches, from 13 restaurants, to nine development sites across Canada on July 15.

“We’ve got 2,700 residential rental units completed or under construction,” said Andrew Duncan, RioCan’s senior vice-president of development, in an interview with RENX. “We’ve got 900 townhomes completed and just over 2,100 condos or townhomes at various stages of development.”

The challenge itself was a way of saying thanks to construction workers who have largely continued working during the COVID-19 pandemic, while other sectors of the economy shut down to prevent the spread of the virus.

“They’re working in an environment where it’s very difficult to maintain social distancing, but they’re doing it while having to learn new ways to work,” Duncan said. “We also have a number of restaurant tenants who’ve been struggling during these times.

“So for us there was so much synergy to provide an opportunity to provide some of those current tenants and potential future tenants with an opportunity to gain some business and also say thanks to our construction managers and sub-trades.”

Determining what to develop

When RioCan set out several years ago to sell $2 billion in non-core assets and use the proceeds, in part, to diversify its largely retail portfolio, no one could have foreseen the pandemic. However, it has provided another solid case for the diversification, which is focused largely on residential and mixed-use construction.

Retail, RioCan’s specialty, has been one of the CRE sectors hardest hit by the pandemic.

Much of RioCan’s diversification is intended to add additional value and density at existing properties, where the trust has done extensive market studies for each residential project to determine the optimal suite mix.

“Most of it’s market-driven, but sometimes it’s municipality-driven too,” said Duncan. “There is a move to smaller units. But a lot of the stuff we’re doing is rental, so we’re very careful about not driving the unit size too small because we do have to ‘sell’ these things more than once, because we’re renting them.”

While RioCan’s preference for “a great residential site” is to go the rental route, it looks at competition in the market to see if there’s an active condo market with buyers willing to pay top dollar. There’s also the issue of absorption.

“If you have a site that already has a lot of density on it, it’s very difficult to do all residential rental because it’s going to take you too long to lease it up,” Duncan said. “Sometimes a balancing act between condo and rental helps with the financial return.”

No major construction delays for RioCan

Andrew Duncan, the senior vice-president of development at RioCan REIT. (Courtesy RioCan REIT)

None of RioCan’s construction sites were shut down for any significant time due to COVID-19 restrictions. However, rules to promote safety and physical distancing have affected efficiency and some completion delays are likely.

“We’re in a fortunate spot because we have a number of things under construction and we’re not in the approvals phase, which has been delayed by cities due to staffing concerns and things like that,” said Duncan.

RioCan Living is the residential brand that includes purpose-built rental buildings the trust develops near or on prominent transit corridors.

“We still believe significantly in retail, but we’ve also got an opportunity at a lot of our sites, where they’re located around transit or areas where there’s a lot of population growth producing a lot of demand, to incorporate residential rental or condos or whatever it might be, to provide our shareholders with more income and maximize the value of the site,” he said.

The Well

RioCan has commercial, retail and residential ownership stakes with partners Allied Properties REIT, Tridel and Woodbourne in The Well, a massive mixed-used development covering 7.8 acres in the west part of downtown Toronto that will comprise more than three million square feet of office, retail, condominium and rental living spaces and amenities.

Construction is up to the 20th floor of the office tower RioCan is involved with, and work on the multifamily rental components above its retail elements will start shortly.

RioCan is in discussions with potential retail tenants and expects a couple of bank branches to be included as it targets a late 2022 opening for its 415,000 square feet of retail space.

“Up to now it’s been difficult to finalize any deals because the retailers haven’t been able to see what they’re potentially going to be going into,” said Duncan. “And two years is a long time for a retail tenant to contemplate in advance.”

Shopify has committed to 475,000 square feet of office space at The Well, with Index Exchange committed to 200,000 square feet, Spaces to 127,000 square feet, and Quadrangle to 50,000 square feet. Konrad Group and Intuit will also occupy The Well.

Other RioCan developments in Toronto

RioCan and Woodbourne are 50-50 partners on Litho, a mixed-use development at 740 Dupont St. that will have eight storeys featuring 210 rental apartments and 30,500 square feet of retail at street level.

Leases have been signed with grocer Farm Boy and the LCBO. Construction is scheduled for completion in spring of 2021.

Pivot is a mixed-use project with a 36-storey, 361-unit apartment building near Yonge Street and Sheppard Avenue at 35 Greenfield Avenue. It has direct access to RioCan’s Yonge Sheppard Centre. The tower is nearing completion and leasing is expected to start this year.

Construction is underway at Strada, a 50-50 partnership with Allied which has 61 rental apartments over seven floors and 5,600 square feet of retail at street level at 555 College St. Completion is scheduled for spring 2021.

ePlace is comprised of: the 58-storey, 623-unit eCondos residential condominium tower; a 36-storey, 466-unit eCentral apartment building; a 20,000-square-foot commercial condo; and 22,000 square feet of retail space near Yonge Street and Eglinton Avenue.

Construction is complete and residential condo sales have closed, while 89.5 per cent of eCentral’s units had been leased as of May 4. All of the retail space is leased, with three restaurants operating and a TD Bank branch expected to open this year.

RioCan is in a 50-25-25 partnership with Metropia and Capital Developments on 11YV, a proposed 62-storey development with 586 condo units and more than 34,000 square feet of retail space at 11 Yorkville Ave.

Queen Ashbridge is a proposed mixed-use community with rental and condo residences and more than 16,000 square feet of retail on a 3.3-acre site at the corner of Queen Street East and Coxwell Avenue.

RioCan’s Ottawa developments

Lincoln Fields is the 16-acre site of an underperforming enclosed shopping centre at 2525 Carling Ave. in Ottawa. The Metro grocery store will move to another part of the property, freeing up room for a mixed-use development. About 40 per cent of the existing mall has been demolished.

RioCan has site plan approval to move the Metro and build smaller retail spaces around it as it works to rezone the rest of the property for multiple residential towers. Duncan hopes that process will be completed early in 2021. He expects the site to include a bank branch and daycare facility.

“Given the proximity of a new LRT and a lot of old-stock residential rental in the area that’s been quite successful, we determined that a mall wasn’t the highest-and-best use for that site any longer,” said Duncan.

Construction is complete for Phase 1 of Frontier, a 23-storey, 228-unit apartment building at RioCan’s Silver City Gloucester shopping centre. The apartment, a joint venture with Killam Apartment REIT, was 98.7 per cent leased as of May 4.

Latitude, the second phase of the Frontier project, is a 20-storey, 209-unit apartment building in which RioCan is equal partners with Killam. Construction is expected to be finished in 2021.

Construction is underway at Luma, which will have 168 rental apartment units and 11,000 square feet of retail over nine storeys on 3.7 acres on St. Laurent Boulevard. Completion is expected in 2022.

Construction has started at Rhythm, a mixed-use development with a 24-storey, 216-unit rental apartment building and 20,000 square feet of retail next to RioCan’s Westgate Shopping Centre on Carling Avenue. Completion is anticipated for late 2022 or early 2023.

Calgary’s 5th & 3rd East Village and Brio

5th & Third East Village is an urban mixed-use development featuring a two-storey, 159,000-square-foot retail podium below 42- and 25-storey residential towers.

More than 80 per cent of the retail space has been leased. Real Canadian Superstore opened on the second floor in May, while TD, ScotiaBank, Winners and Freshslice Pizza are expected to open this quarter.

Brio is a mixed-use development with a 12-storey, 163-unit apartment building atop a 10,000-square-foot retail podium located on a portion of RioCan’s Brentwood Village shopping centre.

“We’re trying to find a use there that’s synergistic with the rest of the project,” said Duncan, who expects a restaurant to be among the retail tenants.

Boardwalk REIT is RioCan’s 50/50 partner in Brio and is responsible for the apartment lease-up, which began in March just before COVID-19 shutdowns. Duncan is “quite happy” 43 units were leased by mid-July and that leasing velocity has been picking up.

Windfield Farms in Oshawa

Windfield Farms is a site at 20 Simcoe St. N. in Oshawa, Ont. with plans for 513 townhomes, 503 high-rise rental apartment units and 819,000 square feet of retail. RioCan has owned the property for a long time and originally pictured it as a retail centre, but is now partnering with Tribute Communities to build the housing component, which is underway.

A FreshCo grocery store will be a retail anchor and is expected to open this year. RioCan will apply for permission to build a Costco on the other side of the street for the next phase of development.