Hudson Pacific Properties (NYSE:HPP) held its second-quarter earnings conference call on Wednesday. Below is the complete transcript from the call.
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Summary
Hudson Pacific Properties reported strong second quarter results, highlighting a retail occupancy rate of 98.8% and a commercial SPNOI growth of 4.3%, marking the fourth consecutive quarter above 4%.
The company is nearing the completion of its RioCan Living portfolio monetization, having sold $1.26 billion of assets, effectively reaching its $1.3 billion capital repatriation target.
Hudson Pacific Properties raised its 2026 commercial SPNOI guidance to 4% to 4.5% due to sustained leasing demand, while maintaining core FFO per unit guidance at $1.60 to $1.62.
Capital allocation efforts include a focus on retail infill and asset enhancement projects, with $44 million invested in the first half of the year and plans to deploy $100 million in 2026.
Management expressed confidence in their strategic direction, emphasizing simplified business operations, strong governance, and a disciplined capital deployment approach.
Full Transcript
OPERATOR
Good day, ladies and gentlemen, and welcome to the RioCan Real Estate Investment Trust first quarter 2026 conference call and webcast. Apologies. Welcome to the RioCan Real Estate Investment Trust second quarter 2026 conference call and webcast. As a reminder, this conference call is being recorded. I would now like to turn the conference over to Ms. Jennifer Seuss, Senior Vice President, General Counsel, ESG and Corporate Secretary. Ms. Seuss, you may begin.
Jennifer Seuss, Senior Vice President, General Counsel, ESG and Corporate Secretary
Thank you and good morning everyone. I am Jennifer Seuss, Senior Vice President, General Counsel, ESG and Corporate Secretary of RioCan. Before we begin, I am required to read the following cautionary statement. In talking about our financial and operating performance and in responding to your questions, we may make forward-looking statements, including statements concerning RioCan's objectives, its strategies to achieve those objectives, as well as statements with respect to management's beliefs, plans, estimates and intentions, and similar statements concerning anticipated future events, results, circumstances, performance or expectations that are not historical facts. These statements are based on our current estimates and assumptions and are subject to risks and uncertainties that could cause our actual results to differ materially from the conclusions in these forward-looking statements. In discussing our financial and operating performance and in responding to your questions, we will also be referencing certain financial measures that are not generally accepted accounting principle measures (GAAP) under IFRS.
These measures do not have any standardized definition prescribed by IFRS and are therefore unlikely to be comparable to similar measures presented by other reporting issuers. Non-GAAP measures should not be considered as alternatives to net earnings or comparable metrics determined in accordance with IFRS as indicators of RioCan's performance, liquidity, cash flows and profitability. RioCan's management uses these measures to aid in assessing the Trust's underlying core performance and provides these additional measures so that investors may do the same.
Additional information on the material risks that could impact our actual results and the estimates and assumptions we applied in making these forward-looking statements, together with details on our use of non-GAAP financial measures, can be found in the financial statements filed yesterday and management's discussion and analysis related thereto, as applicable, together with RioCan's most recent annual information form that are all available on our website and at www.sedarplus.com.
I will now turn the call over to RioCan's President and CEO, Jonathan Gitlin.
Jonathan Gitlin, President and CEO
Thank you, Jennifer. Good morning everyone and thanks for joining us. Our second quarter results reinforce the message we've been delivering since our November 2025 Investor Day: RioCan's strategy is working. We own an irreplaceable retail portfolio in Canada's most in-demand markets. We've simplified the business, we're allocating capital with discipline, and we're translating those advantages into durable growth, increased financial flexibility and long-term value creation.
Progress in the quarter was broad based across operations, leasing, capital recycling and the balance sheet. This progress is supported by our proven, independent, future-focused platform, a culture of excellence, continued innovation, technology advancement and prudent ESG practices. We believe RioCan is demonstrating exactly what our stakeholders are looking for: a simpler business model, greater earnings visibility and a clear path to sustained, durable cash flow growth.
Delivering on that path requires not only strong execution but also strong governance and strategic oversight. And with that in mind, I'd like to extend a warm welcome to Susan MacArthur who has recently been appointed to RioCan's Board of Trustees. Susan brings deep public company governance and capital markets experience and we look forward to benefiting from her insight as we continue executing on our strategy. I'll start now with our operating results.
Retail fundamentals remain exceptionally strong. Demand for high-quality retail space continues to exceed supply across our markets, supporting high occupancy, leasing spreads and same property NOI growth. Retail occupancy is at a record high of 98.8%. Commercial SPNOI growth was 4.3% in the quarter, representing the fourth straight quarter of 4% or higher. This continued strength is reflected in our updated SPNOI guidance. Sustained organic growth reflects the success of our leasing strategy.
Leasing spreads continue to underscore strong retailer demand for RioCan's well-located, high-demographic, necessity-based assets. The blended leasing spread of 23.1% in the quarter was supported by new and renewal leasing spreads of 40.8% and 20.7% respectively. Average net rent for new leasing was $37.73 per square foot. This is 60% above average net rent per occupied square foot. For RioCan, the retail leasing super cycle is not a short-term phenomenon.
With approximately 1 million square feet of lease maturities remaining for the balance of this year and an additional 3.7 million square feet of lease maturities in each of 2027 and 2028, we have significant mark-to-market opportunities. Approximately 30% of RioCan's portfolio leases roll through 2028 and there remains a meaningful gap between in-place rents and market rents. That embedded mark-to-market opportunity provides visibility into future growth.
What makes RioCan's platform especially powerful is that we aren't simply capturing rent growth, we're also improving the quality of our income. As an independent Canadian REIT, RioCan is directly accountable to unitholders and is not influenced by an external sponsor. That gives us the flexibility to make tenant and capital decisions based on what's best for each property and the portfolio overall. Citing only one example, we were able to double the renewal rent of a grocery store in the GTA during the quarter.
The only influence on this outcome was market rents. There were no extraneous considerations other than what was best for our property and best for our unitholders. We can be selective, choose the right tenants on the right terms while minimizing downtime and capital outlay. The result is a more productive portfolio, more durable cash flow and attractive risk-adjusted returns. Today's leasing spreads are tomorrow's SPNOI growth. Increasingly, they're also laying the foundation for stronger long-term cash flow generation.
Leasing spreads are not simply an operating metric. They represent embedded future earnings growth that has already been substantially secured. As those rents commence and annual escalations take effect, leasing will remain an important contributor to durable, ongoing growth. Our operating performance demonstrates our ability to execute the commitments we made at Investor Day. This extends beyond operations to capital allocation, where we've made significant progress, including the near completion of the RioCan Living portfolio monetization, including transactions completed over the last 18 months and assets currently under contract.
We have sold $1.26 billion of RioCan Living assets. As such, we've effectively reached our $1.3 billion capital repatriation target. As we've said before, this is about more than dispositions. It's about simplifying the business, enhancing financial flexibility, and directing capital to opportunities where it can create the greatest long-term value for our unitholders. Capital allocation remains an important differentiator for RioCan. Our objective is straightforward: generate capital from lower growth or non-core assets, reallocate that capital toward opportunities that improve per unit value creation, and do so while maintaining balance sheet strength. Whether we're repurchasing units, investing in retail intensification opportunities, enhancing existing assets or reducing leverage, the common thread is disciplined capital deployment. Many of our highest return opportunities already exist within our portfolio, and we have the talent, relationships and expertise to unlock that value efficiently. With the right team and disciplined execution, opportunities such as unlocking retail density, optimizing the merchandising mix and repositioning vacant space generate highly attractive returns with a fraction of the capital required for ground-up development.
We invested $44 million in retail infill and asset enhancement projects in the first half of the year, and we remain on track to deploy approximately $100 million into RioCan's portfolio in 2026. About half of that capital is being directed to asset enhancements such as the Metro expansion and LCBO relocation at Yonge Eglinton Centre. The remainder is being invested in high-return retail infill projects including the new Costco at RioCan Burloak and additional retail at RioCan's East Hills, Windfields Farm and South Edmonton Common sites.
In a market where capital remains expensive, this is a meaningful advantage. It allows us to drive growth, improve property performance and preserve financial flexibility, while maintaining a disciplined approach to capital outlay. Our credit metrics remain within our target ranges and our balance sheet continues to be a source of strength. It provides optionality, resilience and the ability to act and create value when attractive opportunities become available.
Looking ahead, based on the performance we've delivered so far this year, we now expect commercial same property NOI growth to modestly exceed our original guidance range of 3.5% to 4%. As a result, we are raising our 2026 commercial SPNOI guidance to 4% to 4.5%. Given the many factors that contribute to core FFO, we are maintaining our 2026 core FFO per unit guidance range of $1.60 to $1.62. I'll close with three points. First, retail fundamentals continue to support growth: demand remains strong, supply remains constrained and we continue to see significant embedded leasing upside throughout the portfolio.
Second, RioCan is a simpler and more focused business. We're enhancing earnings visibility and increasing financial flexibility. Third, we remain disciplined stewards of capital. Every major decision we make is evaluated through the lens of long-term value creation. As we increase the earnings power of our business, we create value within our portfolio. This quarter's NAV growth is evidence of that. It was driven primarily by organic growth and higher cash flows rather than cap rate compression.
With meaningful embedded growth remaining, we believe RioCan is well positioned to continue creating and compounding value for unitholders over the long term. We have significant opportunities ahead and we remain confident in our ability to continue delivering durable growth and value for our unitholders. With that, I'll turn the call over to Franco.
UNKNOWN, Chief Financial Officer
Thank you, Jonathan, and good morning, everyone. Our second quarter results reflect the strength of our core retail, the near completion of our RioCan Living monetization strategy, and disciplined capital allocation. Together they are improving our financial flexibility and strengthening our balance sheet. I'll walk through the quarter starting with Core FFO. Core FFO in the second quarter was $0.40 per unit, up 5.3% year over year. There were four primary drivers of these results.
Commercial same property NOI increased 4.3% year over year, contributing $0.02 per unit. The accretive impact of unit repurchases pursuant to our NCIB also contributed approximately $0.01 per unit. These factors were partially offset by higher net interest expense and lower interest income, which had a combined impact of approximately $0.01 per unit. Our Core FFO payout ratio was 73.8% on a trailing twelve months basis, approximately 100 basis points lower than last quarter and trending towards our long-term target of 70%.
Looking at other financial results, adjusted G&A expense was 4.1% of rental revenue for the quarter and 3.7% year to date. We continue to expect full-year adjusted G&A expense to be below 4% of rental revenue. Maintenance CapEx for the quarter was $14 million and $21 million year to date. We expect full-year spend to be in line with our normalized CapEx level of $55 million. The strength of our operating performance is also translating into value creation.
During the second quarter, net asset value increased by $0.23 per unit, or $68 million, compared to the prior quarter. This was driven largely by $52 million of net fair value gains on our investment properties. Higher stabilized NOI from rent steps, rent increases on renewals and new deals, and strong leasing activity across the portfolio supported the increase. This quarter's valuation gains highlight the power of compounding NOI growth from our retail core driving higher property values and long-term NAV creation.
Turning to capital recycling, during the quarter we closed on the sale of 450 The Well and Bellevue Phase 1 and 2 for total gross proceeds of $234 million, bringing total RioCan Living disposition gross proceeds to approximately $280 million year to date. Subsequent to quarter end, we entered into two conditional deals to sell our interest in two additional RioCan Living properties for total gross proceeds of $206 million. With respect to residential inventory, we have repatriated $143 million of proceeds year to date primarily from the collection of accounts receivable in 2026 related to prior year sales.
Since the start of 2025, we have repatriated $365 million, largely in line with our stated target of $370 million. As a result, the balance of unsold units has been reduced to $86 million, or approximately 1% of our NAV, with only a de minimis residual balance remaining. This component of the RioCan Living monetization program is now substantially complete. Our balance sheet remains strong, and our credit metrics are in line with the targets we provided at Investor Day.
As we continue to execute our financing plan, we are reducing our secured debt obligations and broadening our unencumbered asset pool. Our mix of unsecured debt to total debt improved to approximately 70%, bringing this metric in line with our internal target range. As a result, our unencumbered asset pool increased to approximately $9.7 billion on a proportionate share basis during the quarter. We repaid the $500 million Series AD unsecured debentures and $91 million of maturing mortgages using existing liquidity.
We also repaid construction loans related to condo projects of approximately $114 million on a proportionate share basis, including the full repayment of the Queen and Ashbridge facility. Following these repayments, only $30 million of debt maturities remain for the balance of the year. With approximately $700 million of available liquidity, additional proceeds expected from capital recycling, and access to diverse sources of funding, we are well positioned to proactively manage our 2027 debt maturities.
To conclude, the second quarter demonstrated strong operational execution, substantial completion of our RioCan Living monetization plan, and disciplined approach to capital allocation. We remain focused on delivering against the strategy we outlined at Investor Day and creating long-term value for our unitholders. With that, I will turn the call back to the operator to begin the question and answer session.
OPERATOR
Thank you. We will now begin the question-and-answer session. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. We ask that you pick up your handset when asking a question, and if you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question comes from the line of Sam Damiani from TD Cowen. Please go ahead.
Sam Damiani, Analyst at TD Cowen
Thanks, and good morning everyone. Just want to congratulate everyone on the good quarter. Good progress on several fronts as you alluded to, Jonathan. I guess just look on the guidance raised for this year. It seems to be a result of realized leasing spreads sort of tracking ahead of what you had assumed for the year. What spreads are assumed in your three-year guidance of 3.5% plus same property? Just curious how you view the upside potential to that guidance at this point given the trends you're seeing.
Jonathan Gitlin, President and CEO
Good morning, Sam. Thank you for the congratulatory wishes. We are proud of the quarter. If you look at the package that we had put up at the Investor Day, the list of assumptions showed that we had a 15% leasing spread assumption for the three years. So we've certainly outperformed in this first year of that three-year period.
Sam Damiani, Analyst at TD Cowen
I guess, you know, just the question was really, how are you feeling about the likelihood of being able to increase that guidance? I know you're, I guess you're just being cautious and maybe conservative, but if trends hold, is there anything out there that would hold you back from raising the guidance?
Jonathan Gitlin, President and CEO
I mean, look, there's always risks in the retail business. We feel that we've done a good job of mitigating against those risks, like, you know, large tenant failures. But again, if you look at our top 30 list of tenants, there are very few if any weak spots at this point. The economy is always a question mark. But then again, we've also taken big strides in ensuring that we've got necessity-based tenants that are quite resilient to any economic gyrations.
So the short answer is we feel very good about our path going forward. I would also say that the backdrop is very strong. I mean, we've spoken about it a number of times, but there really is a significant supply constraint, high barriers to entry, and we feel that we are well positioned to absorb whatever demand there is, as is evidenced by the fact that we're 98.8% full. So we feel very strong about the backdrop, we feel very good about our positioning within that backdrop.
And so we feel that the trends right now are sustainable. But again, there'll always be fluctuations. But yeah, the 15% at this point is looking quite conservative.
Sam Damiani, Analyst at TD Cowen
Thank you. And one more for me before I turn it back is just on the cap rates. You know, we've seen cap rate surveys come out and call out grocery-anchored, open-air, shopping center cap rates coming down notably this year. And I notice RioCan, you haven't really changed your cap rates too, too much on a same property basis. Just curious, what's holding you back from adjusting your fair value cap rates lower at this time?
Jonathan Gitlin, President and CEO
Well, we're seeing organic growth in our valuations coming largely from an increase in NOI, and that's a really good thing, which is something that is more within control. Cap rates, of course, are outside of our control. We are looking at some of the transactions that haven't yet closed, like the First Capital transaction, which serve as indicators that the type of product we have is highly sought after and very valuable. And we'll continue to assess that and work those factors into our valuations.
But for now we're just, again, waiting for some of those to finalize and close. And we'll keep on relying on the market and third-party appraisals as well as our own internal assessments as to where cap rates should be. But right now we're comfortable with what we have in our portfolio.
Sam Damiani, Analyst at TD Cowen
Okay, great. Thank you. And I'll turn it back.
Jonathan Gitlin, President and CEO
Thanks, Sam.
OPERATOR
Your next question comes from the line of Lauren Calmer from Desjardins. Please go ahead.
Lauren Calmer, Analyst at Desjardins
Thanks. Good morning, everyone. Congratulations on the progress made on the disposition side. It looks to be tracking pretty darn well. Just wondering, on the three remaining RioCan Living assets, if you back into sort of the target and where you guys are performing these deals, I think you get about just over $50 million. Value seems a little light for three multi-res assets. So just wanted to get an idea—if you can give us maybe an idea of the value on those and perhaps a stabilized cap rate.
Jonathan Gitlin, President and CEO
We don't have a specific valuation for those assets, but you're right to assume that they're higher than $50 million. You may recall that our original range was $1.3 to $1.4 billion. We just sort of simplified that message to say $1.3 billion, and we'll of course exceed that once the remainder of the assets are sold. But, you know, the cap rates—we've seen a very vibrant market for our RioCan Living assets based on the fact that they are new, they don't have rent control, there's limited CapEx, and so we expect that trend to continue regardless of what's going on in the broader multi-res market.
And so I feel quite confident in our ability to sell those at our current IFRS valuations or hopefully in that range. But in terms of the overall number, you're right to assume that $1.3 was our conservative estimate and we will ultimately likely exceed that.
Lauren Calmer, Analyst at Desjardins
Okay, that's very helpful, thank you.
Jonathan Gitlin, President and CEO
And keep in mind, Lauren, too, that that included condo dispositions as well. And we still have about $85-ish million of condo inventory that we feel confident will be sold over the, you know, the short to medium term as well. So that's why we express that confidence in our ability to exceed that $1.3 billion number.
Lauren Calmer, Analyst at Desjardins
Okay, thank you very much for that. I was going to say, switching to the other side of the coin on the acquisition side. I know—I believe it's the Heartland Centre that's been rumored to be out there. And I'm sure with the FCR deal closing, there will be some opportunities there. Just wondering how you're thinking about acquisitions, if you're seeing anything interesting at this time that you guys could action.
Jonathan Gitlin, President and CEO
Yeah, I mean, look, acquisitions were always one of the levers we had for capital allocation. When we did our Investor Day, obviously our cost of capital was a lot higher and acquisitions were less logical than some of the other opportunities we had, like NCIB, paying down debt, and building up pads and strips. But as our cost of capital decreases and these opportunities come into view, RioCan feels well positioned to be able to take some of these assets that may become available, add the value that our platform can create to them, and really see growth drivers going forward.
But again, we always have to weigh that against the other possibilities for capital allocation, which thankfully we have as well in our purview.
Lauren Calmer, Analyst at Desjardins
Okay, and then just one kind of ticky-tacky one here. I think there were some aborted deal costs in the quarter. Just wondering if you could shed some light on what that was related to.
Jonathan Gitlin, President and CEO
Some normal-course deals that we had started down the road and then, for a few different reasons, didn't work out for the benefit of our unitholders. So those deals didn't go through, but again, they were de minimis in the scheme of things. And I think as an active REIT, we're always pursuing very good and logical transactions. And as you know, Lauren, sometimes they just don't work out, but thankfully most of the time they do.
Lauren Calmer, Analyst at Desjardins
Fair enough. Okay, thanks so much. I'll turn it back. Take care.
Jonathan Gitlin, President and CEO
No problem, Lauren.
OPERATOR
Your next question comes from the line of Pammy Burr from RBC Capital Markets. Please go ahead.
Pammy Burr, Analyst at RBC Capital Markets
Thanks. Good morning. I just want to come back to the FFO guidance and the same-property NOI increase in the same-property NOI guidance. So just can you maybe reconcile the rationale for not increasing the FFO guidance range, or maybe what were some of the offsetting factors that have impacted that?
UNKNOWN, Chief Financial Officer
Thanks, Pammy. The outperformance in SPNOI is definitely showing up in core FFO. But our $60 to $62 core FFO guidance range was designed to accommodate a range of outcomes across the underlying drivers, including same-property NOI, the timing of capital recycling activities, interest expense, and other items below NOI. So there's a lot of factors that go into core FFO. We remain confident that the existing core FFO guidance range remains appropriate, and we're going to wait and see what happens throughout the course of the year just to ensure that that is the case.
But we just felt that SPNOI—the increase in that guidance—was only one factor of many. So we feel very confident in keeping the core FFO guidance intact.
Pammy Burr, Analyst at RBC Capital Markets
Okay, got it. Just maybe switching to the fundamentals: given the strength in demand that you are seeing, has your thinking evolved at all in terms of pushing for some higher embedded annual rent steps in the leases or on new leasing? Any color you can share on that?
Jonathan Gitlin, President and CEO
Well, it's really embedded within our leasing team and our operations team to always push for the highest possible going-in rents, the highest annual bumps, as well as the best—call them non-financial—terms. This leasing team is, I will say it hyperbolically, the best in Canada and possibly the best in North America. And they understand the environment and what we are offering and will push for the best terms always. Now, the backdrop obviously serves us well right now, and in recognition of that, we continue to see embedded growth in these leases increase over time.
And I think that's a very good thing. But you can rest assured that our team is always looking at ways to improve the overall spectrum of matters that come out of a lease, including annual bumps.
Pammy Burr, Analyst at RBC Capital Markets
Okay, coming back to the unsold condo inventory, I think it was $86 million that Franco cited. Any consideration at this point to maybe selling some of that to bulk buyers that are out there? I think you mentioned you do expect to eventually move some of it, but curious if you can shed any light on the process there.
Jonathan Gitlin, President and CEO
The answer to that, Pammy, is that we're considering all options for that inventory. It's certainly something that would be better served in someone else's hands. And so we are looking at bulk purchasers. We're looking at also just selling them individually with the current sales program. So there's a number of different outcomes possible. But bulk buyers, I should say, are certainly one of those opportunities. And we have been in touch with some of those organizations and, thankfully, it's quite a vibrant business at this point.
But again, just going back to the fact that it's $86 million, it's de minimis in the scheme of things. It is now effectively wound down, so the tail end would benefit us to sell. But either way it doesn't have a significant impact on RioCan's performance going forward.
Pammy Burr, Analyst at RBC Capital Markets
Okay, and then just last one: I think the total value for the proportionate residential inventory sits at about $480 million. Has that value been marked down over time? And just curious if you're still comfortable with that figure at this point.
UNKNOWN, Chief Financial Officer
We are comfortable with the figure. I mean, the valuations—like all of our properties—will fluctuate over time, and our valuations group does a very good job of keeping their ear close to the ground and ensuring that whatever market fluctuations occur, we reflect those in our IFRS values. And the RioCan Living assets are no different.
Pammy Burr, Analyst at RBC Capital Markets
Great. Okay, thanks very much. I'll turn it back.
Jonathan Gitlin, President and CEO
Thanks, Pammy.
OPERATOR
A reminder, if you would like to ask a question, please press star-1 on your telephone keypad. Your next question comes from the line of Matt Kornack from National Bank Capital Markets. Please go ahead.
Matt Kornack, Analyst at National Bank Capital Markets
Just wanted to quickly walk through the occupancy change in the retail portfolio. You had some transitory vacancy into Q1 and I think some lease-up in the HBC stuff, but it seems like that's leased at this point and it may be in straight-line rent. But is there something incremental on top of that straight-line rent that you expect from the occupancy gains? And then also, how should we think of it converting over to cash from straight-line rent?
UNKNOWN, Chief Financial Officer
There's always going to be some movement between in-place occupancy and committed occupancy, and then the transformation over to cash-paying rent. I think this quarter there is some of that. And the HBC space is currently leased, but they're not yet rent-paying, and that will be reflected going forward. Yeah. So the amount is about $10 to $12 million of straight-line rents in 2026.
Matt Kornack, Analyst at National Bank Capital Markets
And then 98% occupancy—I mean, even 20 basis points above that—but that's full for all intents and purposes. So is the primary driver, other than kind of the quarterly uptick, going to be leasing spreads going forward? And then maybe if you could quickly touch on what you're seeing in the tenant market. We had the benefit of meeting someone on your team that said you're in control, I think, in all circumstances—maybe minus one—with ten across the country.
But is that continuing to be the case where landlords have the upper hand at this point?
Jonathan Gitlin, President and CEO
So leasing spreads are definitely a significant driver of growth going forward, but there are other things as well. I mean, FFO is influenced by so many different things, but leasing spreads is definitely one of them. Occupancy—look, we are, for all intents and purposes, full. We see this as a very good thing, but it does make us rely on things like renewal spreads a little bit more than we would have if we had a portfolio that was 5% vacant. We're not in that position, so we find our upside elsewhere.
And we're very good at finding that upside. It just speaks to the quality of our portfolio as well that we are at such a full state. With respect to tenants and the upper hand—we don't. Look, this is a relationship with many of these tenants that has been garnered over the last 31 years, and so we don't really view it as upper hand, lower hand. There's always going to be tension in any negotiating process, no matter how well positioned we are. And we make sure that we treat our tenants very well while also keeping a view on getting the highest outcome as possible.
We want to make sure that we are a favored nation amongst the retail landlords and that these tenants will always want to be in RioCan spaces. So, again, while there is a good backdrop right now, we are certainly availing ourselves of that backdrop to get a good outcome. But using the term upper hand, lower hand—those sorts of things—it's a little bit... I want to be careful around those terminologies. We feel very good about our positioning when it comes to any negotiations for new space or renewals at this point.
And that's simply a reflection of the fact that there is very little retail supply, particularly in areas where RioCan currently owns with the demographic profile that we have. And this allows us to really get some very good leasing outcomes, as evidenced by a lot of the KPIs that we put out this quarter.
Matt Kornack, Analyst at National Bank Capital Markets
Fair point on the terminology—market rent is market rent and you guys negotiate accordingly. And then maybe lastly for me, just in terms of capital allocation: the stock's traded relatively well but still at a bit of a discount to your book value. And then you've identified intensification opportunities where you're going to get an 8-plus percent return on cost. How are these buckets—plus maybe the acquisition market if we see some assets come out of the First Capital portfolio, should it close—shaping up?
Jonathan Gitlin, President and CEO
Yeah. So the good news for RioCan is that we've got a multitude of options when it comes to capital allocation. And depending on the circumstances at the time, and depending on what serves as the best outcome for us, we will toggle amongst those opportunities. Right now we're seeing acquisitions as sort of a rising prospect simply because our cost of capital has come down and, as you mentioned, there is looking to be some availability of very good assets—or assets that might not be as good—but RioCan can utilize its very excellent platform to enhance value.
And so we will look at those as one of the potential levers for capital allocation. That said, we also have other opportunities. NCIB, of course, is a little less prominent given where our share price is. But then there are things like building out pads and strips, where we have allocated a fair bit of cash towards this year—about $100 million—and we're seeing very good return profiles there, including enhanced NAV, enhanced same-property NOI, and just a better cross-shopping experience.
So that's something that we definitely favor from a capital allocation perspective. But, of course, acquisitions do enter the frame given where we currently stand in the opportunity set out there.
Matt Kornack, Analyst at National Bank Capital Markets
Okay, perfect. Thanks for the detailed answers.
Jonathan Gitlin, President and CEO
No problem, Matt. Thank you.
OPERATOR
Your next question comes from the line of Brad Sturgis from Raymond James. Please go ahead.
Brad Sturgis, Analyst at Raymond James
Hey, good morning. Just one real quick one for me. You've talked in the recent past about the runway for market rent growth, and you talked a little bit about the dynamics on this call. Have you seen any material change in trend on the quantum of market rent growth in the market today? And how would you frame the potential for growth in the next 12 to 24 months relative to what the market's been experiencing the last year or so?
Jonathan Gitlin, President and CEO
Yeah, so my view—and then I'm going to turn it over to Oliver Harrison, who oversees leasing for RioCan—is that there's nothing to me that serves as a catalyst to have the current conditions change significantly. There is a supply constraint. We see our Canadian retail—or domestic—retailers really growing in a meaningful way. And we also see international retailers look at Canada more prominently. And so all those things factor into a pretty good position for RioCan, particularly when you look at the demographics and some of the elements of our portfolio.
So I don't see a catalyst to really change that, Brad, but I'm going to turn it over to, again, someone who's a little closer to this matter. Oliver.
Oliver Harrison, Head of Leasing
The only thing I would add to what you said, John, is if you look back over our last three quarters, we've been in the mid‑20% on blended leasing spreads. So I would say that there's your answer. We've kind of landed in this 25% range for almost the last year, and as long as occupancy remains where it's at, we're comfortable that that is a range that we'll exist in for the near term.
Brad Sturgis, Analyst at Raymond James
Okay. I guess my other question would be, just as you're starting to review acquisition opportunities, would that be more of a preference towards on your own, or would you consider JV partnerships for something more strategic in nature?
Jonathan Gitlin, President and CEO
I'd say that there's openness to all ways of owning property. We have certainly in the past demonstrated that we're a very good partner and a good manager for those who have capital but no platform, and so that's something we'd certainly look at. But then again, we're also very good at owning assets by ourselves, and if the opportunity is more suited for that and we don't need to, you know, spread risk or we have the capital for it, then that's certainly something we would pursue as well.
So I know that's a bit of a wishy-washy answer, Brad, but the truth is we would look at either outcome.
Brad Sturgis, Analyst at Raymond James
Okay, sounds good. I'll turn it back.
OPERATOR
Your final question comes from the line of Sam Damiani from TD Cowen. Please go ahead. You're back.
Sam Damiani, Analyst at TD Cowen
Yeah, thanks. Sorry, just a couple quick follow-ups. I guess, firstly, maybe for Oliver—I guess he's on the line here. That gross release in the GTA where the rent doubled, just curious, what was the vintage of that lease? When was it last negotiated at market? Just give a sense of where it came from.
Oliver Harrison, Head of Leasing
Yeah, it was, I think, approximately 30 years ago. It was last negotiated at market.
Sam Damiani, Analyst at TD Cowen
Not—this is kind of renewal increases over the term, or was it fairly flat?
Oliver Harrison, Head of Leasing
It was relatively flat based on, you know, the structure of the original lease, where the tenant had just come off of their fixed option structure.
Sam Damiani, Analyst at TD Cowen
Okay, that's awesome. Appreciate it. The last question for me is just on the market for density land. Are you seeing any green shoots in the market for that—for liquidity for that asset on the balance sheet?
Jonathan Gitlin, President and CEO
No, I mean, I think that the land market is still very stagnant. I mean, there might be the odd inquiry, but the truth is, Sam, that we don't rely on any land sales for any of our projections going forward. We've got limited value in our balance sheet for excess density. And look, I am very much an optimist when it comes to real estate, particularly in the GTA as well as other major cities in Canada, and I do view that this is a situation that has its end and everything cycles.
So I think at some point there will be value, and hopefully high value, in well-positioned density, but right now we are not seeing green shoots. Andrew, am I wrong in that assessment?
UNKNOWN, Chief Financial Officer
You're not wrong. Yeah. The short answer is no. There's not a lot of transactions, and there's not a lot of demand in the market for zoned residential density.
Sam Damiani, Analyst at TD Cowen
That's great. Thank you very much. I'll turn it back.
OPERATOR
Thanks, Sam. At this time there are no further questions. I would now like to turn the conference back to President and CEO Jonathan Gitlin.
Jonathan Gitlin, President and CEO
Thank you. I'll leave you with a couple of points. Our momentum is strong. Continued retailer demand, meaningful embedded growth opportunities, and disciplined capital allocation position RioCan to continue growing cash flow and creating value over the long term. Thanks so much for joining us today. Bye.
OPERATOR
This concludes today's call. Thank you for attending. You may now disconnect.
Disclaimer: This transcript is provided for informational purposes only. While we strive for accuracy, there may be errors or omissions in this automated transcription. For official company statements and financial information, please refer to the company's SEC filings and official press releases. Corporate participants' and analysts' statements reflect their views as of the date of this call and are subject to change without notice.
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