Future Shop Closing Latest Hurdle for Canadian REITsKatia Dmitrieva
Two of Canada’s biggest real estate investment trusts are facing shuttered stores as the closing of Best Buy Co.’s Future Shop chain adds to the upheaval facing retail landlords.
RioCan REIT, the country’s No.1 REIT by market value, and Calloway REIT, No. 3, are the among Best Buy Canada’s biggest landlords. Richfield, Minnesota-based Best Buy said on Saturday it would close 66 Future Shops with the loss of 1,500 jobs. A further 65 stores will be kept open and rebranded as Best Buys.
“It shows there’s a tough retail market across Canada,” Farla Efros, chief operating officer of retail advisory firm HRC Advisory Inc., said by phone from Phoenix. “Since January the number of them going has exceeded anything we’ve seen in a very long time. There’s more to come.”
The closing of Future Shop stores, including the highest-grossing location at one of the country’s busiest intersections at Yonge and Dundas Square, is the latest crack in Canadian retail. Target Corp. said earlier this year it was pulling out of the country, closing 133 locations, clothing store Mexx said it would close 95 stores in the country and Reitmans Canada Ltd. is shuttering 107 Smart Set shops.
Calloway REIT dropped 2.2 percent to C$28.70, the worst performer in the 16-company Standard & Poor’s/TSX Capped REIT Index. RioCan REIT, slipped 0.9 percent to C$28.45 at 12:18 p.m. in Toronto.
RioCan leases 32 Future Shop and Best Buy stores combined, making up 1.5 percent of the rental revenue of the Toronto-based company, financial documents show. Calloway has 19 Future Shop leases, of which about 5 are closing permanently, Chief Executive Officer Huw Thomas said.
“It’s not minuscule but it is extremely small,” Thomas said by phone Monday. “We’re already getting calls from large retailers who are extremely interested in the space.”
The Future Shops that are closing make up less than 0.5 percent of Calloway’s gross leasable space, and Best Buy confirmed it will honor its lease agreements, Thomas said.
Future Shop was the largest Canadian electronics store chain when Best Buy bought it in 2001 for C$580 million ($456 million). At the time, Best Buy was just entering Canada with new stores and acquired competitor Future Shop, which had 88 locations.
Canada’s oil-heavy economy has been sideswiped by the more than the 50 percent drop in crude since June. Oil companies have announced thousands of job cuts while growth in gross domestic product is forecast to slow to 2.4 percent in January when figures are released Tuesday, compared with 2.8 percent in December.
Rags Davloor, RioCan’s chief operating officer, didn’t respond to phone calls seeking comment.