RioCan cuts nearly 10 per cent of staff in efficiency push as condo market slows

TORONTO — RioCan Real Estate Investment Trust says it cut almost 10 per cent of its staff in October as it deals with a slowdown in the condo market and overall pushes for greater efficiency.

The company says the cuts, which amount to around 60 employees based on its last annual filing, 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 condo development plans as the market softens, but chief executive Jonathan Gitlin said Tuesday that the reductions were from a companywide efficiency effort.

“We really did restructure and reorganize a number of the groups within RioCan based on just attaining more efficiency and relying on technology,” he said on an earnings call.

“The trend in development certainly led to a restructuring of that group specifically, but I wouldn’t say that that was the only reason for this.”

The combination of high interest rates, a run-up in prices, a wave of condo completions and slower expected population growth have all weighed on the condo market and led RioCan to scale back plans.

“I’ll acknowledge that the condo market across Canada is under strain,” said Gitlin.

The company doesn’t plan to start any new construction of mixed-use properties this year and well into 2025 as it adjusts to the shifting market demand, he said.

“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 condo market is in a rough patch, the company’s core business of retail leasing is showing strong demand with RioCan reporting 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.

Pressure from the Competition Bureau on leasing restrictions around grocers could allow companies to open space for another food retailer nearby, but RioCan says it doesn’t expect to make any drastic moves.

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)

Ian Bickis, The Canadian Press