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RioCan Real Estate Investment Trust is seeing tenants steadily signing leases now that Canadian businesses are reopening following COVID-19 lockdowns, but office rental activity is rebounding at a slower rate.

The Toronto-based trust said Thursday that it completed more than 130,000 square metres (1.4 million square feet) of new and renewed leases in its latest quarter and 232,200 square metres (2.5 million square feet) so far this year.

“A lot of our tenants, including the U.S.-based ones, are seeing opportunities to grow, particularly in the markets where RioCan resides,” said Jonathan Gitlin, the trust’s chief executive and president, on a call with analysts, where he noted he was speaking from a boardroom of fully-vaccinated executives.

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“We are seeing continued and sustainable leasing momentum in the vast majority of our environments…but there are certainly some areas that are still a little bit slow off the mark like office in Toronto.”

When it comes to office space, Gitlin said prospective tenants are currently in “discovery” mode as they explore what their post-pandemic needs and comfort levels may be, but he’s confident even those leases will pick up in time.

His remarks come as the country is staging a rebound from months of lockdowns triggered by the health crisis and as provinces like Alberta and Manitoba are lifting mask mandates and Canada is due to open its border to fully-vaccinated Americans on Friday.

While talk of the dangerous Delta variant of the virus and fourth-wave predictions are rife, RioCan is seeing both strength in its earnings and tenants.

The company’s net income reached $145.3 million in its second quarter, a turnaround from the same period last year when it reported a $350.8 million net loss.

“As vaccinations accelerate and restrictions start lifting across the country, it is clear that RioCan is emerging perfectly positioned to capitalize on pent up consumer activity that will benefit our tenants,” Gitlin said.

As of Thursday, all of its tenants have reopened and the vast majority are back to paying rent on time.

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The trust said only 3.2 per cent of its second-quarter rent remains unpaid and the company has collected 91.5 per cent of deferred rents billed to date.

The company collected 94.9 per cent of its billed gross rents in cash for the three months ended June 30, down from 95.1 per cent in the first quarter of the year.

When RioCan analyzes its tenants based on annualized net rent, 61.3 per cent were viewed as strong, 17.8 per cent as stable and 20.9 per cent as potentially vulnerable.

“Quite honestly, we are not working hard to retain some of the clients that we do believe are sort of a vulnerable subset,” Gitlin said.

But he said that doesn’t mean those vulnerable tenants will remain less attractive to the company forever.

“Do I think gyms will remain a very problematic use in the future? No, I don’t,” he said.

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“I think we are all very confident Canadian society will absorb the need for gyms again and there are certainly many restaurants in that category as well.”

RioCan is instead focused on grocery, mixed-use and open air tenants, which generate more than 91 per cent of the company’s revenues, and residential projects, which represent close to 83 per cent of its development pipeline.

When asked by analysts if it will turn some properties into logistics spaces as some rivals are planning to do, Gitlin said RioCan is seeing strong demand for its properties’ current uses, so “it is not like we have an abundance of opportunity”

“I would not want to forgo a great conventional use to put in a use that we don’t have a lot of understanding about like fulfilment,” he said.

“That being said, we are always looking for opportunities within our centres to drive traffic.”

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