Although Blockbuster Inc. filed for bankruptcy south of the border to reduce its $1-billion (U.S.) indebtedness by about $900-million, its non-U.S. operations are not party to the Chapter 11 proceedings.
To calm Canadians, Blockbuster Canada came out Thursday morning and said its operations are still profitable while also reminding the public that it functions independently from the U.S. parent. That should provide some relief to the firms that own Blockbuster's retail locations.
But should anything go wrong in the future, RBC Dominion Securities analyst Neil Downey found that Canadian REITs have minimal exposure.
At the start of 2010, Blockbuster had 459 company-operated Canadian stores, but no Canadian REIT gets over 1 per cent of its gross rental revenue from the firm. First Capital Realty has the highest expoure, with $3.8-million paid by Blockbuster each year, but that amounts to only 0.8 per cent of the REITs total rental revenue. RioCan REIT was next highest with $3.3-million (or 0.4 per cent) coming from Blockbuster.
In the event that some Canadian locations no longer have Blockbuster as a tenant, Mr. Downey noted that most stores are in good areas, so there is a good chance another chain will want to occupy them.