TORONTO — RioCan Real Estate Investment Trust says it cut almost 10 per cent of its staff in October in a restructuring push for greater efficiency as the company also holds back on new construction.
The company says the cuts, amounting to approximately 50 employees, will mean about $9 million in restructuring charges and should translate to about $8 million in annualized cash savings.
The job cuts come as RioCan and others scale back residential construction plans, but chief executive Jonathan Gitlin said Tuesday that the cuts weren’t in reaction to the real estate market or economic conditions.
“The restructuring that RioCan went through was really just a result of the changing business environment ... and our broader cost-saving strategy, which includes a bunch of things like construction spending slow down.”
The slowdown in spending does come as RioCan doesn’t plan to start any new construction in the near-term, said Gitlin on an earnings call.
“We’ve halted the start of new construction and we don’t intend to commence physical construction on mixed-use properties any time soon.”
While the company has halted new builds, it continues to work to add value to its existing land through up-zoning and other efforts, he said.
The same high construction costs that have helped push RioCan to pull back on build plans have, however, helped its retail leasing segment that makes up the bulk of its business.
“You don’t see a lot of retail being constructed,” said Gitlin.
“You haven’t seen that over the last decade, and I really don’t think those conditions will change very much going forward, simply because the cost to construct is very high and the rent that you’d need to justify building new retail is far higher than what is currently market.”
RioCan reported a record-breaking 97.8 per cent occupancy rate in the quarter including retail committed occupancy of 98.6 per cent.
The increase in occupancy came after it leased out the last of the 10 locations that Bad Boy Furniture and Rooms + Spaces left vacant.
The gaps in occupancy have weighed on same-store income this year, but new leases on those locations were 23.9 per cent higher so RioCan expects the financial indicator to rise next year.
The increase in new leases at the sites were consistent with a wider new leasing spread of 24.2 per cent in the quarter, while the lease renewal spread was 12.6 per cent.
RioCan’s residential rental business had a 96.3 per cent occupancy rate in the quarter.
The federal government’s plans to significantly reduce immigration targets shouldn’t affect RioCan’s residential rental business, said Gitlin, because the policy change shouldn’t typically be affected the type of tenants it’s attracting.
“It does cast a bit of a pall over the entire residential space or the multi-res space,” said Gitlin.
“But I think again, the types of units that we were curating, and the type of experience we were curating wasn’t significantly geared toward the same people who would be impacted by that legislation.”
The company reported a net income of $96.9 million in the third quarter, up from a loss of $73.5 million last year, as it saw a $159 million boost from a favourable change in the fair value of investment properties.
Revenue totalled $286.3 million, up from $271.4 million during the same quarter last year.
This report by The Canadian Press was first published Nov. 12, 2024.
Companies in this story: (TSX:REI.UN)
An earlier version of this story indicated that based on its most recent annual filing, a 10-per-cent cut in staff would be about 60 people. The company has since clarified the number is closer to 50.