RioCan has dropped five former Hudson’s Bay Company stores from its investment portfolio, say the REIT’s leaders.

“We can report that RioCan has elected not to participate financially in five of 12 assets,” said CFO Dennis Blasutti on a second-quarter earnings conference call Friday.

“What it means is that we will not put any more money into the assets, in any form.”

RioCan held the assets in a 12-property joint-venture with the Bay, which is winding down its 355-year-old business through a creditor-protection process overseen by an Ontario court. The REIT petitioned the JV into receivership in June.

The former Bay locations include the company’s downtown Calgary store and leased spaces in the Square One Shopping Centre in Mississauga, Ont., Scarborough Town Centre in Toronto, and the Carrefour Laval and Promenades St-Bruno malls in the Montreal region.

RioCan President and CEO Jonathan Gitlin told The Canadian Press that it is no longer sensible to keep investing in the properties due to renewal costs and outstanding debt associated with them.

“We’ve taken the, I would say, more pragmatic route to just walk away from the properties financially,” he told The Canadian Press.

RioCan is assessing how it will proceed with the other seven Bay properties in the joint-venture. The REIT continues to meet its financial obligations associated with those assets.

The expenses are part of debtor-in-place financing that RioCan provided under the creditor-protection process, said Blasutti on the earnings call.

“So it lands ahead of all the other debt in the assets, and we’re very comfortable with our ability to recover those [expenses],” he said. “Even if there’s no equity value remaining in the asset, there will be a sufficient value to recover our DIP loan, which is about $3 million today.”

He said JV’s debt is on a nonrecourse basis to RioCan, meaning that the REIT is not obligated to inject capital unless it generates a return that is competitive with other uses. Gitlin said on the call that RioCan chose not to walk away from the other seven Bay properties because they may still hold value.

He told The Canadian Press that the fate of each asset will be determined on a case-by-case basis as the Bay’s future plays out.

“What we are clear on is that we will not put capital into assets where we don’t get an appropriate risk-adjusted return,” he told his interviewer.

RioCan said in its second-quarter earnings report that its Bay holdings are now worth $40.2 million, or 0.5% of the REIT’s net asset value.

The REIT previously took a $208.8-million loss on its Bay holdings in the JV.

All Bay and Saks-branded stores located across Canada closed on June 1.

Pictured: Permanently closed Hudson’s Bay Company store in downtown Calgary.

Photo: Shutterstock