RioCan - CEO, Edward Sonshine
CEO, Edward Sonshine
Source: Globe and Mail
  • Real estate investment giant RioCan (REI.UN) is cutting its distribution, as the COVID-19 pandemic continues to weather the Canadian housing market
  • The company has brought its monthly distribution down to C$0.08 per share, compared to its previous 12 cents per share
  • The trust cited an “ undeniably challenging environment” under the pandemic as reason for the cuts
  • The cuts will save the trust around $152 million annually, which will be used “to fund initiatives that drive long-term net asset value growth for RioCan’s unitholders”
  • RioCan is 5.1 per cent down and is trading at $17.15 per share

Real estate investment giant RioCan (REI.UN) is cutting its distribution, as the COVID-19 pandemic continues to weather the Canadian housing market.

The company has brought its monthly distribution down to C$0.08 per share, compared to its previous 12 cents per share.

This adds up to a cumulative yearly total of 96 cents, a substantial drop compared to the previous $1.44. The new distribution kicks off in January.

Edward Sonshine, CEO of RioCan, believes the cuts are necessary as the company continues to navigate through the uncertain retail landscape created by the COVID-19 pandemic.

“The Board has taken the prudent action of reducing our distribution. A more conservative payout ratio is important in this undeniably challenging environment despite our well positioned portfolio, solid base of tenants and deep liquidity,” he said.

While believing the move prudent, Edward went on to say that the current circumstances also present an opportunity for the trust to optimize its capital allocation towards new initiatives.

With that in mind, the cuts will save the trust around $152 million annually, which will be used to fund initiatives that drive long-term net asset value growth for RioCan’s unitholders.

The proposed new investments include mixed-use residential developments, unit buybacks through its normal course issuer bid program, and debt repayment.

As for bringing the distribution back up, the trust said it remains open to revaluating the distribution on a regular basis, based on factors like market stabilization as the pandemic crisis dissipates, as well as cash flow and leverage.

RioCan is 5.1 per cent down and is trading at $17.15 per share at 9:50am EST.

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