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On Wednesday, Canaccord Genuity analysts adjusted their outlook on RioCan REIT (REI-U:CN) (OTC: RIOCF (OTC:RIOCF)), downgrading the stock from Buy to Hold and reducing the price target from Cdn$19.50 from the previous Cdn$21.00. This decision reflects concerns over the impact of Hudson (NYSE:HUD)’s Bay Co. (HBC) entering creditor protection and its subsequent liquidation process.
Hudson’s Bay, a major tenant in RioCan’s real estate portfolio, was granted creditor protection on March 8, 2025, due to ongoing financial challenges. The retailer’s struggles with decreased consumer spending and lower foot traffic in downtown stores since the pandemic have led to this outcome. Initially, Hudson’s Bay aimed to restructure its finances and planned to close about 40 of its 80 department stores across Canada. However, the company has only managed to secure limited financing, forcing it to proceed with a complete liquidation.
RioCan, as the REIT with the most significant exposure to Hudson’s Bay, is anticipated to experience negative short-term effects due to this development. Although there might be a potential long-term benefit to RioCan’s portfolio and cash flow, Canaccord Genuity analysts believe that any positive impact will likely take several years to materialize.
The full liquidation of Hudson’s Bay is a considerable event for RioCan, considering the size and prominence of the department store chain within the Canadian retail landscape. The REIT’s financial performance and strategic direction could be influenced by the loss of a key tenant and the need to repurpose or re-lease the affected properties.
In conclusion, Canaccord Genuity’s revised stance on RioCan stock reflects the immediate challenges posed by Hudson’s Bay’s liquidation. Investors will be watching closely to see how the REIT navigates this period of transition and what strategies it will employ to mitigate the impact on its operations and financial health.
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