The Yonge Eglinton Centre in Toronto, owned and managed by Riocan, as seen on April 22, 2020.Melissa Tait/The Globe and Mail
One of Canada’s largest real estate investment trusts has named a successor to its longtime chief executive and founder, at a time when the commercial real estate market is adapting to seismic shifts in demand for bricks-and-mortar retail and offices.
Jonathan Gitlin, currently the president and chief operating officer at RioCan Real Estate Investment Trust, is to succeed Edward Sonshine as CEO effective April 1, a day after Sonshine retires from the top job.
The handoff comes after RioCan said in July its tenants were facing their “most challenging quarter ever.” The trust had a large loss amid rent deferrals resulting from COVID-19 lockdowns.
Gitlin said in July that the company, right through to the executive leadership, were going from tenant to tenant to assess which would survive and to negotiate rent.
Despite the circumstances, the company decided to move forward with the transition, which was preplanned. The company’s announcement Wednesday credited Gitlin’s role “mobilizing the RioCan team” as key part of the RioCan’s response to the COVID-19 pandemic.
The transition will mark the end of RioCan’s run as a founder-led company, although Sonshine will become non-executive chairman of RioCan’s board of trustees. Paul Godfrey, RioCan’s current chair, will step down and become lead trustee.
Sonshine, who started the business by joining a series of shopping centres in 1993, said he built the company on a few prescient assumptions. For one, the company has had a long-standing bet that malls would fall to the wayside, as big-box retailers like Walmart grew their presence in stand-alone strip malls.
Sonshine has also been outspoken about his bet that big cities would drive population growth in Canada. After years of trying, the company last year said 90 per cent of its real estate was located in the six Canadian powerhouse cities.
The internet was also a driving force in Sonshine’s real estate philosophy.
“We moved much more toward specialized retail that couldn’t be replaced on the internet, which would include value-oriented retail things like Winners, where you have a treasure-hunt philosophy,” said Sonshine.
“Other value oriented things like Dollarama, and Dollar Tree. And entertainment, which would include theatres, gyms, and salons and restaurants. Things that were not going to be replaced by Amazon.”
Over the past 15 years, Gitlin has had a starring role in several of RioCan’s marquee strategies: branching out into residential real estate, as well as focusing on properties in big cities, particularly Toronto.
Gitlin, a real estate lawyer by training, joined the trust in 2005 and held a series of key leadership roles before being appointed president and chief operating officer in March 2019. Sonshine said Gitlin’s “integrity, decisiveness, credibility and unwavering focus on sustainable growth” made him well-suited for the chief executive role.
By many measures, the COVID-19 pandemic’s “stay at home” mandates have sped up the trend away from retail and offices and toward “beds and sheds” — a shorthand in the tight-knight real estate community for residential and warehouse properties.
RioCan itself has said it has favoured grocery stores, pharmacies and e-commerce properties over fashion and apparel brands.
But Gitlin said he does not see the future of retail real estate as bleak.
“We’re also focused on diversifying our portfolio a little bit, and marrying really good retail with really good residential. Particularly when you could put that on transit,” said Gitlin.
"I don’t think it’s just one or the other — meaning that if industrial and fulfilment centers are successful, therefore bricks and mortar can’t exist. I think that retailers would much rather have a cheaper means of delivery, of getting items to consumers without having to deliver them to their front door. And what does that mean? It means that you can get a building or a space in the neighbourhood "
Sonshine added that the pandemic may have pushed up the timeline of large-scale remote working and the market share for e-commerce brands. But despite office vacancy trends, Sonshine also predicts that many people will find themselves shaking hands again soon — in an office building.
“I don’t believe that the office is obsolete,” said Sonshine.
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