Glenmore Landing currently encompasses 10.4 acres and approximately 147,000 square feet of retail and office space in an unenclosed shopping centre and a three-storey office building in southwest Calgary. Its major retail tenants include Safeway, TD Canada Trust and McDonald's.
“The densification plans will further contribute to the growth and development of this vibrant commercial and retail hub in Calgary, benefiting the local community and businesses,” RioCan chief investment officer Andrew Duncan told RENX in an email.
“The addition of residential development on the purchased parcels is anticipated to bolster the economic viability of the existing and future retail mix at Glenmore Landing.”
Project is in very early planning stages
The Glenmore Landing proposed development is in the very early planning stages and Duncan said all aspects of the process “will be subject to ongoing assessments of various factors including the evolving needs of the Glenmore community, our tenants and the prevailing market conditions.”
RioCan is in the land use amendment process to determine the appropriate level of density for the site from civil, transportation and planning perspectives.
RioCan applied for a land use amendment in May. The next steps involve responding to the city's comments regarding it, which RioCan received last week.
The proposed development will take a three-phased approach to ensure it supports the evolving needs of the existing Glenmore Landing property and community.
The start date for the project still hasn’t been determined. The build-out timeline for the densification of the land acquired from the city is estimated at 15 to 20 years, according to Duncan.
Glenmore Landing has deep roots in community
Glenmore Landing, one of the original properties in the RioCan portfolio, is a well-established shopping centre that was developed in the early 1980s in Calgary’s Bayview community.
“Glenmore Landing has deep roots in the surrounding community and has proven itself as a destination node in southwest Calgary,” Duncan said.
“The strong tenant mix, including grocery stores, pharmacies, banks, personal services, restaurants and other traditional retail, provides visitors with extensive shopping opportunities.”
An agreement was reached last year for RioCan to acquire land surrounding the existing Glenmore Landing property along 90th Avenue SW and 14th Street SW from the city.
There’s a Bus Rapid Transit line adjacent to the site, another factor in its appropriateness for adding high-rise housing above podiums and creating a pedestrian-friendly mixed-use community.
It will also offer above- and below-ground parking.
Additional non-residential uses will be incorporated into the development, including an amenity building and an enhanced public realm.
The site will also connect to the Glenmore Reservoir, a popular recreation area for warm weather non-motorized boating and fishing as well as year-round walking and cycling.
There’s an opportunity for the densification to include non-market housing for people who qualify based on their household income to ensure Glenmore Landing can provide living options for a variety of income levels, family compositions and demographics.
RioCan’s Alberta portfolio
RioCan’s Calgary portfolio is comprised of 15 assets covering 3.5 million square feet. The REIT also owns nine properties encompassing 1.8 million square feet in Edmonton to round out its Alberta holdings.
Zoning has been approved for 810,000 square feet of residential development at RioCan Brentwood in Calgary and for 912,000 square feet of residential space and 243,000 square feet of commercial space at Jasper Gates Shopping Centre in Edmonton.
A zoning application has been submitted for 996,000 square feet of residential space at East Hills South Block in Calgary. RioCan owns 40 per cent of that project.
Second-quarter conference call
Development talk played a prominent role in RioCan’s Aug. 2 conference call to discuss its Q2 performance.
“RioCan’s organic growth is complemented by intelligent diversification, largely driven by this (development) program, which in our view has been a significant competitive advantage,” RioCan president and chief executive officer Jonathan Gitlin said during the call.
“Our approach to self-funded development is also a key differentiator. We self-fund projects through retained earnings, project financing and capital recycling.”
RioCan is one of Canada’s largest real estate investment trusts. It owns, manages and develops retail-focused, and increasingly mixed-use, properties.
Its portfolio as of June 30 was comprised of 193 properties with an aggregate net leasable area of approximately 33.5 million square feet (at RioCan's interest), including office, residential rental and development properties.
Acquisitions and lending
RioCan acquired three phases of Bellevue, a residential rental complex in Montreal, for $55.3 million in Q2. The deal included 124 income-producing units and an adjacent parcel of vacant land for future development.
RioCan agreed to acquire an additional 60 units, which are under construction, upon satisfaction of certain conditions.
The REIT is also looking at lending as a means of becoming involved in future projects.
“We see it as a very strong market to be a lender and if there are opportunities where we can invest money in financing propositions where we like the underlying assets and we can get some rights out of the borrower — meaning we have some sort of right of first refusal, a right of first opportunity or, in the best case, an option to acquire at the end of the loan — that certainly serves our unit-holders well and we think it's a very good and safe way to position our capital,” Gitlin said.
Gitlin said most capital, however, will be used to pay down debt and improve the balance sheet.
Earnings and operations
RioCan’s net income was $112 million in the three months ending June 30, compared to $78.5 million for the same period a year earlier.
Same-property net operating income (NOI) grew by 5.2 per cent, driven by increases in rent growth from contractual rent steps, rent upon renewal and a recovery of past pandemic-related provisions.
RioCan recorded a blended leasing spread of nine per cent from respective new and renewal leasing spreads of 11.3 and 8.2 per cent.
Average net rent per occupied square foot of $21.34 was 4.7 per cent higher than in the same period a year earlier while new leasing in Q2 generated average net rent per square foot of $26.90.
Committed retail occupancy remained steady at 98 per cent. Strong and stable tenants comprised 87.3 per cent of annualized net rent, up 50 basis points compared to the previous quarter.
“Our portfolio continues to demonstrate stability and productivity,” Gitlin said. “Our management team will continue to operate with that focus and find strategies to mitigate the impact of heightened interest rates.
“Our consistency, foundation, breadth of vision and demonstrated commitment to responsible growth will continue to serve our unit-holders well and, at the same time, position this trust for continued stability.”
RioCan development activity
RioCan has 11 mixed-use and five retail developments under active construction. Upon completion, it expects to deliver 643,150 square feet of commercial space and 3,493 residential units, including 2,510 condominium units and 65 townhouses.
RioCan expects to complete 640,900 square feet of development this year, which it expects to contribute $25.6 million of stabilized NOI that will ramp up over the course of 2023 and 2024.
It completed 110,000 square feet of net leasable area, comprised mainly of commercial space at The Well in downtown Toronto, in Q2.
Approximately 1.23 million square feet of commercial space at The Well is in tenant possession, with approximately 95 per cent of the total commercial space leased.
The retail component has been opening in phases and the majority of tenants are expected to be open by November.
Zoning was achieved in Q2 for two million square feet for the first two phases at RioCan Scarborough Centre in Toronto.
Later phases for this site, totalling an additional 2.3 million square feet, are expected to be zoned in the future.
RioCan continues to revisit zoning applications to optimize density and use in order to improve project economics.
An additional three floors can now be added to the building, which is already underway.
Eleven of the 12 RioCan Living buildings in operation are stabilized and 99 per cent leased.
Approximately 20 per cent of the 592 rental residential units at FourFifty The Well were pre-leased as of Aug. 1 at rates in line with or above expectations.
Pre-leasing began in March in anticipation of a phased completion beginning this month and continuing through to early 2024.
RioCan’s 2,575 condo and townhouse units under construction are expected to generate combined sales revenue of more than $860 million between 2023 and 2026 that can be redeployed to fund the development pipeline.
Of RioCan’s six active condo construction projects, 86 per cent of the total units have been pre-sold, representing 96 per cent of pro-forma total revenues.
RioCan’s 15.9 million square feet of zoned property includes 1.9 million square feet of projects under construction and 1.5 million square feet of shovel-ready projects that can be started or delayed at RioCan's discretion.
“I think any new construction starts are going to be under a significant amount of scrutiny,” Gitlin said.
“If conditions remain the same, it's unlikely that we will be aggressively allocating capital for new construction starts.”