REITs double down on debt offerings
Publicly traded Canadian real estate investment trusts (REITs) ramped up debt financing by more than half in the second quarter, according to an S&P Global report.
Canadian REITs raised a total of $1.10 billion, up 52.5% compared to the same period last year but a slight 8.3% dip from the first quarter of 2024. All capital secured in the second quarter came exclusively from debt offerings.
The retail sector dominated capital raising. Retail-focused REITs, including shopping centres and other retail properties, accounted for $1.85 billion (80.4%) of the total $2.30 billion raised in the first half of the year. This was the largest share of all capital raised by REITs during this period.
The report showed that diversified and industrial REITs secured $250 million and $200 million, respectively.
Choice Properties REIT emerged as the top capital raiser in the second quarter, issuing C$500 million worth of 5.030% senior unsecured debentures maturing in February 2031.
The retail-focused company plans to use the net proceeds to repay its outstanding C$550 million aggregate principal amount of 3.556% series K senior unsecured debentures, maturing in September.
Other significant capital raises in Q2 included shopping centre REITs First Capital and RioCan, each raising $300 million.
First Capital REIT issued $300 million of 5.455% series C senior unsecured debentures due June 2032, while RioCan REIT offered $300 million of 5.455% series AK senior unsecured debentures due March 2031. Both companies intend to use the net proceeds to repay existing debt.
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Choice Properties' $500 million debt offering on May 23 stands as the largest single-debt offering in the first half of 2024. However, RioCan REIT has raised the most capital overall year-to-date at $750 million, followed closely by First Capital REIT at $600 million.
This surge in capital offerings, particularly in the retail sector, suggests a robust appetite for REIT debt among investors, despite the fluctuations in the real estate market.
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