REI.UN RioCan Real Estate Investment Trust

• Solid Property Fundamentals with Retail Occupancy of 98.0% and New Leasing Spread of 11.3%
• Achieved zoning for 2.0 million square feet at RioCan Scarborough Centre in Toronto's Golden Mile

August 1, 2023--RioCan Real Estate Investment Trust (“RioCan" or the "Trust”) (TSX: REI.UN) announced today its financial results for the three and six months ended June 30, 2023 (the "Second Quarter").

“RioCan reported another quarter of operational excellence. Our quality portfolio maintained high occupancy and drove strong leasing spreads while our development completions continued to deliver new and diversified income,” said Jonathan Gitlin, President and CEO of RioCan. “The consistent strength of our operating results are evidence that our business is set up to succeed in any environment. The RioCan team remains focused on delivering growing and sustainable value for the long-term while we pro-actively manage risk and improve our balance sheet."

Financial Highlights

 

 

 

 

 

 

 

 

 

 

 

 

Three months ended June 30

 

Six months ended June 30

(in millions, except where otherwise noted, and per unit values)

 

2023

 

2022

 

2023

 

2022

 

 

 

 

 

 

 

 

 

 

 

 

FFO 1

 

$

131.6

 

 

$

131.7

 

 

$

263.0

 

 

$

262.2

FFO per unit - diluted 1

 

$

0.44

 

 

$

0.43

 

 

$

0.88

 

 

$

0.85

Net income

 

$

112.0

 

 

$

78.5

 

 

$

230.0

 

 

$

238.5

Weighted average Units outstanding - diluted (in thousands)

 

 

300,500

 

 

 

308,537

 

 

 

300,524

 

 

 

309,324

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As at

 

 

 

 

 

 

 

June 30, 2023

 

 

December 31, 2022

 

 

 

 

 

 

 

 

 

 

 

 

Net book value per unit

 

 

 

 

 

 

 

$

26.00

 

 

$

25.73

 

 

 

 

 

 

 

 

 

 

 

 

1.

A non-GAAP measurement. For definitions, reconciliations and the basis of presentation of RioCan's non-GAAP measures, refer to the Basis of Presentation and Non-GAAP Measures section in this News Release.

FFO per Unit and Net Income

• FFO per unit for the Second Quarter was $0.44, $0.01 per unit higher than the same period last year.
  • Same Property NOI1 growth of 5.2% contributed a $0.03 increase in FFO per unit.
  • FFO from completed developments and residential rental ramp up drove FFO per unit higher by $0.02.
  • Higher interest expense, net of higher interest income, decreased FFO per unit by $0.02.
  • The reduction in FFO per unit from properties sold was partially offset by accretion from prior year unit buybacks, resulting in a net reduction of $0.01 per unit.
  • A number of other items combined for a net reduction of $0.01 in FFO per unit, including lower residential inventory gains, due to timing, and lower lease cancellation fees, partially offset by lower restructuring expenses and higher income from equity-accounted investments.
• Net income for the Second Quarter of $112.0 million exceeded the comparable period last year by $33.5 million, an increase of 42.7%, mainly due to lower fair value losses on investment properties in the current quarter.
• Our FFO Payout Ratio1 of 59.7%, Liquidity1 of $1.7 billion, Unencumbered Asset1 pool of $8.6 billion, floating rate debt at 6.6%1 of total debt and staggered debt maturities, all contribute to our financial flexibility and balance sheet strength.
• For 2023, we anticipate FFO per unit to be within the range of $1.77 to $1.80, SPNOI growth of 3%, and an FFO Payout Ratio of between 55% to 65%. Development Spending1 is expected to be between $400 million to $450 million.

1.

A non-GAAP measurement. For definitions, reconciliations and the basis of presentation of RioCan's non-GAAP measures, refer to the Basis of Presentation and Non-GAAP Measures section in this News Release.

Operation Highlights

 

Three months ended June 30

 

Six months ended June 30

 

 

2023

 

 

2022

 

 

2023

 

 

2022

Operation Highlights (i)

 

 

 

 

 

 

 

 

 

 

 

Occupancy - committed (ii)

 

97.4

%

 

 

97.2

%

 

 

97.4

%

 

 

97.2

%

Retail occupancy - committed (ii)

 

98.0

%

 

 

97.6

%

 

 

98.0

%

 

 

97.6

%

Blended leasing spread

 

9.0

%

 

 

10.5

%

 

 

10.3

%

 

 

9.8

%

New leasing spread

 

11.3

%

 

 

6.8

%

 

 

12.5

%

 

 

11.1

%

Renewal leasing spread

 

8.2

%

 

 

11.2

%

 

 

9.6

%

 

 

9.3

%

 

 

 

 

 

 

 

 

 

 

 

 

(i)

Includes commercial portfolio only.

(ii)

Information presented as at respective periods then ended.

• In the context of strong fundamentals for our necessity-based retail portfolio, our team continued to deliver solid operating results in the Second Quarter. Same Property NOI grew by 5.2%, driven by increases in rent growth from contractual rent steps, rent upon renewal and a recovery of past pandemic-related provisions.
• A strong blended leasing spread of 9.0% resulted from new and renewal leasing spreads of 11.3% and 8.2%, respectively. Excluding fixed-rate renewals, the blended leasing spread would be 9.8% for the quarter and 11.1% for the year-to-date.
• Average net rent per occupied square foot of $21.34 improved 4.7% over the same period last year while new leasing in the Second Quarter generated average net rent per square foot of $26.90.
• Retail committed occupancy remained steady at 98.0%. In-place retail occupancy of 96.9% declined 40 basis points sequentially driven by temporary vacant units transitioning to new committed tenants taking physical occupancy in the coming quarters. We continue to improve quality of the tenant base with strong and stable tenants comprising 87.3% of annualized net rent, an increase of 50 basis points compared to the prior quarter.

RioCan Living Update 1

• As at August 1, 2023, 11 of the 12 RioCan LivingTM buildings in operation are stabilized and are 99.0% leased. Total NOI generated from our residential rental operations for the Second Quarter was $5.1 million, an increase of $1.7 million or 50.8% over the same period last year. An increase of approximately 9% in average monthly rent per occupied square foot on a same property basis contributed to the year-over-year improvement.
• Approximately 20% of the 592 rental residential units at FourFifty The WellTM are pre-leased as of August 1, 2023, at rates in-line with or above expectations. Pre-leasing commenced in March 2023 in anticipation of the phased completion beginning in August 2023 and continuing through to early 2024.
• As of June 30, 2023, 2,575 condominium and townhouse units are under construction and are expected to generate combined sales revenue of over $860.0 million between 2023 and 2026 that can be redeployed to fund our development pipeline. Of RioCan’s six active condominium construction projects, 86% of the total units have been pre-sold, representing 96% of pro-forma total revenues. There were no residential inventory gains recognized during the first half of the year due to the timing of condominium/townhouse sales. We expect residential inventory gains in the second half of the year.

1.

Units at 100% ownership interest.

Development Highlights

 

Three months ended June 30

 

Six months ended June 30

(in millions except square feet)

 

2023

 

 

2022

 

 

2023

 

 

2022

 

 

 

 

 

 

 

 

 

 

 

 

Development Highlights

 

 

 

 

 

 

 

 

 

 

 

Development Completions - sq. ft. in thousands (i)

 

 

110.0

 

 

 

69.0

 

 

 

176.0

 

 

 

214.0

Development Spending

 

$

103.0

 

 

$

139.6

 

 

$

191.3

 

 

$

231.5

Development Projects Under Construction - sq. ft. in thousands (ii)

 

 

1,850.0

 

 

 

2,320.0

 

 

 

1,850.0

 

 

 

2,320.0

 

 

 

 

 

 

 

 

 

 

 

 

(i)

At RioCan's ownership. Represents net leasable area (NLA) of property under development completions. Excludes NLA of residential inventory completions.

(ii)

Information presented as at the respective periods then ended, includes properties under development and residential inventory, equity-accounted joint ventures and represents gross floor area of the respective projects.

• In the quarter, 110,000 square feet of NLA was completed, comprised mainly of commercial space at The WellTM. For the full year, we expect to complete 640,900 square feet of development, which we expect to contribute $25.6 million of stabilized NOI that will ramp up over the course of 2023 and 2024.
• As at August 1, 2023, approximately 1,229,000 square feet (at 100% ownership interest) of commercial space at The Well is in tenant possession with approximately 95% of the total commercial space leased. The retail component is 87% leased, as compared with 82% as at our prior quarterly release, with another 7% in late stage negotiations. The retail at The Well has been physically opening in phases and the majority of tenants are expected to be open by November 2023.
• During the Second Quarter, zoning was achieved for 2.0 million square feet for the first two phases at RioCan Scarborough Centre (Golden Mile) in Toronto, a Focus Five site and one of the premier development corridors in Toronto. Later phases of this site, an additional 2.3 million square feet, are expected to be zoned in the future. Completion of zoning is a significant value creation step. We will continue to exercise discipline as it relates to the commencement of physical construction.
• RioCan continues to revisit zoning applications to optimize density and use in order to improve project economics. We successfully amended zoning for 11YV during the quarter, resulting in an incremental three floors and expanding density to a site already underway.
• The 15.9 million of zoned square footage includes 1.9 million square feet of projects under construction and 1.5 million square feet of shovel ready projects, which can be commenced or delayed at RioCan's discretion.

Investing and Capital Recycling

• As of August 1, 2023, closed, firm or conditional dispositions totalled $302.3 million.
• Firm dispositions include a non-grocery anchored Open Air Centre in Surrey, B.C., at a capitalization rate of 4.99%, which is expected to close in December 2023.
• Closed dispositions for the first half of 2023 were $67.2 million at a weighted average capitalization rate of 7.69%, including the sale of non-core assets located in Calgary, Alberta and Orillia, Ontario, consistent with our strategy to improve portfolio quality.
• Year to date, Total Acquisitions1 were $104.9 million.
• Total Acquisitions in the Second Quarter included three phases of Bellevue, a residential rental complex in Montreal, Quebec for a gross purchase price of $55.3 million. As part of this purchase, RioCan assumed $42.2 million of pre-existing contractual debt at a blended contractual interest rate of 2.64% and remaining weighted average term to maturity of 8.4 years. The acquisition included 124 income producing units and an adjacent parcel of vacant land for future development. We agreed to acquire an additional 60 units, which are under construction, upon satisfaction of certain conditions.
• The remaining acquisitions related to land assembly activity and retail pads at an existing property.

1.

A non-GAAP measurement. For definitions, reconciliations and the basis of presentation of RioCan's non-GAAP measures, refer to the Basis of Presentation and Non-GAAP Measures section in this News Release.

Capital Management Update

• On April 18, 2023, RioCan redeemed, in full, its $200.0 million, 3.725% Series T unsecured debentures upon maturity.
• On June 26, 2023, RioCan issued $300.0 million of Series AH senior unsecured debentures. These debentures were issued at a coupon rate of 5.962% per annum and will mature on October 1, 2029. Inclusive of the benefit of bond forward hedges, the all-in rate is 5.284%.
• Over the last 12 months, the Trust has settled a total of $1.0 billion of bond forward contracts, for total realized gains of $57.3 million, which resulted in a weighted average interest rate reduction of 84 basis points or a weighted average hedged interest rate of 4.45% for $1.0 billion of debt with a weighted average term of 6.3 years.
• On May 4, 2023, the Trust extended the maturity on its operating line of credit by a year to May 31, 2028. All other terms and conditions remain the same.
• Subsequent to quarter end, we closed a $15.0 million, at our share, CMHC mortgage with a 4.29% fixed rate and a 10- year term relating to our StradaTM residential rental property.
• In addition to the bond forward hedging, the Trust's limited exposure to floating rate debt at 6.6% of total debt, serves to mitigate short-term interest rate volatility. Floating rate exposure increased sequentially, from 5.4% at the end of the first quarter of 2023, due to draws on our corporate revolving line of credit, which will fluctuate based on cash needs and timing of other financing activities. Excluding the balance of the revolving unsecured operating line of credit as at June 30, 2023, the majority of which was paid down subsequent to quarter end using proceeds from the Series AH debentures, the Ratio of floating rate debt to total debt1 is 3.6%.

1.

A non-GAAP measurement. For definitions, reconciliations and the basis of presentation of RioCan's non-GAAP measures, refer to the Basis of Presentation and Non-GAAP Measures section in this News Release.

Balance Sheet Strength

(in millions except percentages)

As at

 

 

 

 

 

June 30, 2023

 

December 31, 2022

 

 

 

 

 

 

 

 

 

 

 

Balance Sheet Strength Highlights

 

 

 

 

 

 

 

 

 

 

Liquidity (i) 1

 

 

 

 

 

 

$

1,666

 

 

$

1,548

Adjusted Debt to Adjusted EBITDA (i) 1

 

 

 

 

 

 

9.49x

 

 

9.51x

Total Adjusted Debt to Total Adjusted Assets (i) 1

 

 

 

 

 

 

 

45.6%

 

 

 

45.2%

Unencumbered Assets (i) 1

 

 

 

 

 

 

$

8,631

 

 

$

8,257

Unencumbered Assets to Unsecured Debt (i) 1

 

 

 

 

 

 

 

207%

 

 

 

218%

 

 

 

 

 

 

 

 

 

 

 

(i)

At RioCan's proportionate share.

• As at June 30, 2023, the Trust had $1.7 billion of Liquidity in the form of a $1.0 billion undrawn revolving line of credit, $0.4 billion undrawn construction lines and other bank loans and $0.3 billion cash and cash equivalents.
• Pursuant to the terms of its credit agreement, the Trust has an option to increase the commitment under its revolving line of credit by $250 million.
• RioCan’s unencumbered asset pool of $8.6 billion, which can be used to obtain secured financing to provide additional liquidity at lower interest rates than unsecured debt, generated 58.1% of Annual Normalized NOI1 and provided 2.07x coverage over Unsecured Debt1. Subsequent to quarter end, the revolving line of credit was repaid with cash proceeds from the Series AH debenture, improving the coverage over Unsecured Debt to 2.18x. When compared to Q1 2023, Unencumbered Assets increased by $356.1 million mainly from the repayment of mortgages payable.
• Adjusted Debt to Adjusted EBITDA was 9.49x on a proportionate share basis, as at June 30, 2023, compared to 9.51x as at the end of 2022. The decrease was primarily due to higher Adjusted EBITDA, partially offset by higher Average Total Adjusted Debt balances.

1.

A non-GAAP measurement. For definitions, reconciliations and the basis of presentation of RioCan's non-GAAP measures, refer to the Basis of Presentation and Non-GAAP Measures section in this News Release.

Conference Call and Webcast

Interested parties are invited to participate in a conference call with management on Wednesday, August 2, 2023 at 10:00 a.m. (ET). Participants will be required to identify themselves and the organization on whose behalf they are participating.

To access the conference call, click on the following link to register at least 10 minutes prior to the scheduled start of the call: Pre-registration link. Participants who pre-register at any time prior to the call will receive an email with dial-in credentials including a login passcode and PIN to gain immediate access to the live call. Those that are unable to pre-register may dial-in for operator assistance by calling 1-833-950-0062 and entering the access code: 836769.

For those unable to participate in the live mode, a replay will be available at 1-866-813-9403 with access code: 976025.

To access the simultaneous webcast, visit RioCan’s website at Events and Presentations and click on the link for the webcast.

About RioCan

RioCan is one of Canada’s largest real estate investment trusts. RioCan owns, manages and develops retail-focused, increasingly mixed-use properties located in prime, high-density transit-oriented areas where Canadians want to shop, live and work. As at June 30, 2023, our portfolio is comprised of 193 properties with an aggregate net leasable area of approximately 33.5 million square feet (at RioCan's interest) including office, residential rental and 11 development properties. To learn more about us, please visit www.riocan.com.

Basis of Presentation and Non-GAAP Measures

All figures included in this News Release are expressed in Canadian dollars unless otherwise noted. RioCan’s unaudited interim condensed consolidated financial statements ("Condensed Consolidated Financial Statements") are prepared in accordance with International Financial Reporting Standards (IFRS). Financial information included within this News Release does not contain all disclosures required by IFRS, and accordingly should be read in conjunction with the Trust's Condensed Consolidated Financial Statements and MD&A for the three and six months ended June 30, 2023, which are available on RioCan's website at www.riocan.com and on SEDAR at www.sedar.com.

Consistent with RioCan’s management framework, management uses certain financial measures to assess RioCan’s financial performance, which are not in accordance with generally accepted accounting principles (GAAP) under IFRS. Funds From Operations (“FFO”), FFO per unit, Net Operating Income ("NOI"), Same Property NOI, Development Spending, Total Acquisitions, Ratio of floating rate debt to total debt, Liquidity, Adjusted Debt to Adjusted EBITDA, Total Adjusted Debt to Total Adjusted Assets, RioCan's Proportionate Share, Unencumbered Assets to Unsecured Debt and Percentage of Normalized NOI Generated from Unencumbered Assets, as well as other measures that may be discussed elsewhere in this News Release, do not have a standardized definition prescribed by IFRS and are, therefore, unlikely to be comparable to similar measures presented by other reporting issuers. RioCan supplements its IFRS measures with these Non-GAAP measures to aid in assessing the Trust’s underlying performance and reports these additional measures so that investors may do the same. Non-GAAP measures should not be considered as alternatives to net income or comparable metrics determined in accordance with IFRS as indicators of RioCan’s performance, liquidity, cash flow, and profitability. For full definitions of these measures, please refer to the "Non-GAAP Measures” section in RioCan’s MD&A for the three and six months ended June 30, 2023.

The reconciliations for non-GAAP measures included in this News Release are outlined as follows:

RioCan's Proportionate Share

The following table reconciles the consolidated balance sheets from IFRS to RioCan's proportionate share basis as at June 30, 2023 and December 31, 2022:

As at

June 30, 2023

 

December 31, 2022

 

(in thousands of dollars)

IFRS basis

 

Equity-

accounted investments

RioCan's proportionate share

 

IFRS basis

 

Equity-

accounted investments

RioCan's proportionate share

 

Assets

 

 

 

 

 

 

 

 

 

 

Investment properties

$

13,875,163

 

$

413,564

 

$

14,288,727

 

$

13,807,740

 

$

398,701

 

$

14,206,441

 

Equity-accounted investments

 

383,958

 

 

(383,958

)

 

—

 

 

364,892

 

 

(364,892

)

 

—

 

Mortgages and loans receivable

 

223,299

 

 

—

 

 

223,299

 

 

269,339

 

 

—

 

 

269,339

 

Residential inventory

 

327,596

 

 

238,732

 

 

566,328

 

 

272,005

 

 

214,536

 

 

486,541

 

Assets held for sale

 

155,000

 

 

—

 

 

155,000

 

 

42,140

 

 

—

 

 

42,140

 

Receivables and other assets

 

304,488

 

 

43,619

 

 

348,107

 

 

259,514

 

 

37,779

 

 

297,293

 

Cash and cash equivalents

 

253,944

 

 

13,324

 

 

267,268

 

 

86,229

 

 

8,001

 

 

94,230

 

Total assets

$

15,523,448

 

$

325,281

 

$

15,848,729

 

$

15,101,859

 

$

294,125

 

$

15,395,984

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

 

 

 

Debentures payable

$

3,241,201

 

$

—

 

$

3,241,201

 

$

2,942,051

 

$

—

 

$

2,942,051

 

Mortgages payable

 

2,643,007

 

 

182,941

 

 

2,825,948

 

 

2,659,180

 

 

172,100

 

 

2,831,280

 

Lines of credit and other bank loans

 

1,202,628

 

 

102,723

 

 

1,305,351

 

 

1,141,112

 

 

89,187

 

 

1,230,299

 

Accounts payable and other liabilities

 

626,624

 

 

38,814

 

 

665,438

 

 

630,624

 

 

32,838

 

 

663,462

 

Total liabilities

$

7,713,460

 

$

324,478

 

$

8,037,938

 

$

7,372,967

 

$

294,125

 

$

7,667,092

 

 

 

 

 

 

 

 

 

 

 

 

Equity

 

 

 

 

 

 

 

 

 

 

Unitholders’ equity

 

7,809,988

 

 

803

 

 

7,810,791

 

 

7,728,892

 

 

—

 

 

7,728,892

 

Total liabilities and equity

$

15,523,448

 

$

325,281

 

$

15,848,729

 

$

15,101,859

 

$

294,125

 

$

15,395,984

 

The following tables reconcile the consolidated statements of income from IFRS to RioCan's proportionate share basis for the three and six months ended June 30, 2023 and 2022:

 

Three months ended June 30, 2023

Three months ended June 30, 2022

(in thousands of dollars)

IFRS basis

Equity-

accounted investments

RioCan's proportionate share

IFRS basis

Equity-

accounted investments

RioCan's proportionate share

Revenue

 

 

 

 

 

 

Rental revenue

$

270,913

 

$

9,982

 

$

280,895

 

$

267,302

 

$

7,363

 

$

274,665

 

Residential inventory sales

 

—

 

 

517

 

 

517

 

 

35,005

 

 

—

 

 

35,005

 

Property management and other service fees

 

5,139

 

 

—

 

 

5,139

 

 

6,112

 

 

—

 

 

6,112

 

 

 

276,052

 

 

10,499

 

 

286,551

 

 

308,419

 

 

7,363

 

 

315,782

 

Operating costs

 

 

 

 

 

 

Rental operating costs

 

 

 

 

 

 

Recoverable under tenant leases

 

93,622

 

 

905

 

 

94,527

 

 

92,129

 

 

661

 

 

92,790

 

Non-recoverable costs

 

3,594

 

 

451

 

 

4,045

 

 

5,521

 

 

575

 

 

6,096

 

Residential inventory cost of sales

 

—

 

 

261

 

 

261

 

 

29,857

 

 

—

 

 

29,857

 

 

 

97,216

 

 

1,617

 

 

98,833

 

 

127,507

 

 

1,236

 

 

128,743

 

Operating income

 

178,836

 

 

8,882

 

 

187,718

 

 

180,912

 

 

6,127

 

 

187,039

 

Other income (loss)

 

 

 

 

 

 

Interest income

 

5,701

 

 

665

 

 

6,366

 

 

4,885

 

 

574

 

 

5,459

 

Income from equity-accounted investments

 

5,830

 

 

(5,830

)

 

—

 

 

1,165

 

 

(1,165

)

 

—

 

Fair value loss on investment properties, net

 

(10,594

)

 

(1,072

)

 

(11,666

)

 

(42,270

)

 

(3,476

)

 

(45,746

)

Investment and other income (loss)

 

1,657

 

 

123

 

 

1,780

 

 

(1,379

)

 

(149

)

 

(1,528

)

 

 

2,594

 

 

(6,114

)

 

(3,520

)

 

(37,599

)

 

(4,216

)

 

(41,815

)

Other expenses

 

 

 

 

 

 

Interest costs, net

 

49,974

 

 

2,724

 

 

52,698

 

 

43,659

 

 

1,807

 

 

45,466

 

General and administrative

 

14,846

 

 

20

 

 

14,866

 

 

16,400

 

 

16

 

 

16,416

 

Internal leasing costs

 

3,018

 

 

—

 

 

3,018

 

 

2,825

 

 

—

 

 

2,825

 

Transaction and other costs

 

1,594

 

 

24

 

 

1,618

 

 

1,517

 

 

88

 

 

1,605

 

 

 

69,432

 

 

2,768

 

 

72,200

 

 

64,401

 

 

1,911

 

 

66,312

 

Income before income taxes

$

111,998

 

$

—

 

$

111,998

 

$

78,912

 

$

—

 

$

78,912

 

Current income tax expense

 

31

 

 

—

 

 

31

 

 

452

 

 

—

 

 

452

 

Net income

$

111,967

 

$

—

 

$

111,967

 

$

78,460

 

$

—

 

$

78,460

 

 

Six months ended June 30, 2023

Six months ended June 30, 2022

(in thousands)

IFRS basis

Equity-

accounted investments

RioCan's proportionate share

IFRS basis

Equity-

accounted investments

RioCan's proportionate share

Revenue

 

 

 

 

 

 

Rental revenue

$

545,594

 

$

17,432

 

$

563,026

 

$

539,433

 

$

14,301

 

$

553,734

 

Residential inventory sales

 

—

 

 

2,880

 

 

2,880

 

 

50,974

 

 

936

 

 

51,910

 

Property management and other service fees

 

9,958

 

 

—

 

 

9,958

 

 

11,993

 

 

—

 

 

11,993

 

 

 

555,552

 

 

20,312

 

 

575,864

 

 

602,400

 

 

15,237

 

 

617,637

 

Operating costs

 

 

 

 

 

 

Rental operating costs

 

 

 

 

 

 

Recoverable under tenant leases

 

192,430

 

 

1,786

 

 

194,216

 

 

192,251

 

 

1,284

 

 

193,535

 

Non-recoverable costs

 

11,043

 

 

1,145

 

 

12,188

 

 

11,577

 

 

1,163

 

 

12,740

 

Residential inventory cost of sales

 

—

 

 

1,387

 

 

1,387

 

 

43,793

 

 

422

 

 

44,215

 

 

 

203,473

 

 

4,318

 

 

207,791

 

 

247,621

 

 

2,869

 

 

250,490

 

Operating income

 

352,079

 

 

15,994

 

 

368,073

 

 

354,779

 

 

12,368

 

 

367,147

 

Other income (loss)

 

 

 

 

 

 

Interest income

 

12,742

 

 

1,268

 

 

14,010

 

 

8,946

 

 

1,144

 

 

10,090

 

Income from equity-accounted investments

 

11,344

 

 

(11,344

)

 

—

 

 

5,255

 

 

(5,255

)

 

—

 

Fair value loss on investment properties, net

 

(27,959

)

 

(451

)

 

(28,410

)

 

(6,838

)

 

(4,266

)

 

(11,104

)

Investment and other income (loss)

 

4,544

 

 

(213

)

 

4,331

 

 

(1,563

)

 

(207

)

 

(1,770

)

 

 

671

 

 

(10,740

)

 

(10,069

)

 

5,800

 

 

(8,584

)

 

(2,784

)

Other expenses

 

 

 

 

 

 

Interest costs, net

 

97,957

 

 

5,218

 

 

103,175

 

 

85,425

 

 

3,648

 

 

89,073

 

General and administrative

 

30,464

 

 

31

 

 

30,495

 

 

27,863

 

 

31

 

 

27,894

 

Internal leasing costs

 

5,743

 

 

—

 

 

5,743

 

 

5,810

 

 

—

 

 

5,810

 

Transaction and other costs

 

1,982

 

 

5

 

 

1,987

 

 

2,692

 

 

105

 

 

2,797

 

 

 

136,146

 

 

5,254

 

 

141,400

 

 

121,790

 

 

3,784

 

 

125,574

 

Income before income taxes

$

216,604

 

$

—

 

$

216,604

 

$

238,789

 

$

—

 

$

238,789

 

Current income tax (recovery) expense

 

(13,367

)

 

—

 

 

(13,367

)

 

271

 

 

—

 

 

271

 

Net income

$

229,971

 

$

—

 

$

229,971

 

$

238,518

 

$

—

 

$

238,518

 

NOI and Same Property NOI

The following table reconciles operating income to NOI and Same Property NOI to NOI for the three and six months ended June 30, 2023 and 2022:

 

Three months ended June 30

Six months ended June 30

(thousands of dollars)

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Operating Income

$

178,836

 

$

180,912

 

$

352,079

 

$

354,779

 

Adjusted for the following:

 

 

 

 

Property management and other service fees

 

(5,139

)

 

(6,112

)

 

(9,958

)

 

(11,993

)

Residential inventory gains

 

—

 

 

(5,148

)

 

—

 

 

(7,181

)

Operational lease revenue from ROU assets

 

1,571

 

 

1,386

 

 

3,428

 

 

2,731

 

NOI

$

175,268

 

$

171,038

 

$

345,549

 

$

338,336

 

 

Three months ended June 30

Six months ended June 30

(thousands of dollars)

 

2023

 

2022

 

2023

 

2022

Same Property NOI

$

157,215

$

149,430

$

308,260

$

295,385

NOI from income producing properties:

 

 

 

 

Acquired (i)

 

170

 

80

 

366

 

226

Disposed (i)

 

597

 

8,228

 

1,562

 

18,373

 

 

767

 

8,308

 

1,928

 

18,599

NOI from completed properties under development

 

8,020

 

4,055

 

14,027

 

8,244

NOI from properties under de-leasing under development

 

2,931

 

2,813

 

5,600

 

5,531

Lease cancellation fees

 

179

 

2,671

 

4,741

 

3,554

Straight-line rent adjustment

 

1,027

 

359

 

1,600

 

1,274

NOI from residential rental

 

5,129

 

3,402

 

9,393

 

5,749

NOI

$

175,268

$

171,038

$

345,549

$

338,336

(i)

Includes properties acquired or disposed of during the periods being compared.

FFO

The following table reconciles net income attributable to Unitholders to FFO for the three and six months ended June 30, 2023 and 2022:

 

Three months ended June 30

Six months ended June 30

(thousands of dollars, except where otherwise noted)

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Net income attributable to Unitholders

$

111,967

 

$

78,460

 

$

229,971

 

$

238,518

 

Add back/(Deduct):

 

 

 

 

Fair value losses, net

 

10,594

 

 

42,270

 

 

27,959

 

 

6,838

 

Fair value losses included in equity-accounted investments

 

1,072

 

 

3,476

 

 

451

 

 

4,266

 

Internal leasing costs

 

3,018

 

 

2,825

 

 

5,743

 

 

5,810

 

Transaction losses on investment properties, net (i)

 

176

 

 

353

 

 

112

 

 

736

 

Transaction costs on sale of investment properties

 

344

 

 

713

 

 

511

 

 

1,314

 

ERP implementation costs

 

2,454

 

 

—

 

 

6,408

 

 

—

 

Change in unrealized fair value on marketable securities

 

(173

)

 

1,401

 

 

813

 

 

1,401

 

Current income tax expense (recovery)

 

31

 

 

452

 

 

(13,367

)

 

271

 

Operational lease revenue from ROU assets

 

1,196

 

 

985

 

 

2,550

 

 

1,930

 

Operational lease expenses from ROU assets in equity-accounted investments

 

(13

)

 

(11

)

 

(25

)

 

(23

)

Capitalized interest on equity-accounted investments (ii)

 

966

 

 

733

 

 

1,843

 

 

1,169

 

FFO

$

131,632

 

$

131,657

 

$

262,969

 

$

262,230

 

Add back:

 

 

 

 

Restructuring costs

 

11

 

 

3,170

 

 

624

 

 

3,780

 

FFO Adjusted

$

131,643

 

$

134,827

 

$

263,593

 

$

266,010

 

 

 

 

 

 

FFO per unit - basic

$

0.44

 

$

0.43

 

$

0.88

 

$

0.85

 

FFO per unit - diluted

$

0.44

 

$

0.43

 

$

0.88

 

$

0.85

 

FFO Adjusted per unit - diluted

$

0.44

 

$

0.44

 

$

0.88

 

$

0.86

 

Weighted average number of Units - basic (in thousands)

 

300,386

 

 

308,312

 

 

300,374

 

 

309,070

 

Weighted average number of Units - diluted (in thousands)

 

300,500

 

 

308,537

 

 

300,524

 

 

309,324

 

 

 

 

 

 

FFO for last 4 quarters

 

 

$

525,415

 

$

535,661

 

Distributions paid for last 4 quarters

 

 

$

313,887

 

$

306,986

 

FFO Payout Ratio

 

 

 

59.7

%

 

57.3

%

(i)

Represents net transaction gains or losses connected to certain investment properties during the period.

(ii)

This amount represents the interest capitalized to RioCan's equity-accounted investment in WhiteCastle New Urban Fund 2, LP, WhiteCastle New Urban Fund 3, LP, WhiteCastle New Urban Fund 4, LP, WhiteCastle New Urban Fund 5, LP, RioCan-Fieldgate JV, RC (Queensway) LP, RC (Leaside) LP- Class B and PR Bloor Street LP. This amount is not capitalized to properties under development under IFRS, but is allowed as an adjustment under REALPAC’s definition of FFO.

Development Spending

Total Development Spending for the three and six months ended June 30, 2023 and 2022 is as follows:

 

Three months ended June 30

Six months ended June 30

(thousands of dollars)

2023

2022

2023

2022

Development expenditures on balance sheet:

 

 

 

 

Properties under development

$

67,610

$

96,106

$

134,522

$

157,271

Residential inventory

 

31,640

 

35,363

 

49,191

 

63,708

RioCan's share of Development Spending from equity-accounted joint ventures

 

3,749

 

8,136

 

7,634

 

10,510

Total Development Spending

$

102,999

$

139,605

$

191,347

$

231,489

Total Acquisitions

Total Acquisitions for the three and six months ended June 30, 2023 and 2022 are as follows:

 

Three months ended June 30

Six months ended June 30

(thousands of dollars)

2023

2022

2023

2022

 

 

 

 

 

Income producing properties

$

70,271

$

—

$

70,271

$

89,948

Properties under development

 

5,736

 

—

 

34,583

 

11,946

Residential inventory

 

—

 

—

 

—

 

19,440

RioCan's share of acquisitions from equity-accounted joint ventures

 

—

 

—

 

—

 

66,497

Total Acquisitions

$

76,007

$

—

$

104,854

$

187,831

Total Adjusted Debt and Total Contractual Debt

The following tables reconcile total debt to Total Adjusted Debt, total assets to Total Adjusted Assets, and total debt to Total Contractual Debt as at June 30, 2023 and December 31, 2022:

As at

June 30, 2023

December 31, 2022

 

 

(thousands of dollars, except where otherwise noted)

IFRS basis

Equity-accounted investments

RioCan's

proportionate share

IFRS basis

Equity-accounted investments

RioCan's

proportionate share

Debentures payable

$

3,241,201

 

$

—

$

3,241,201

 

$

2,942,051

 

$

—

$

2,942,051

 

Mortgages payable

 

2,643,007

 

 

182,941

 

2,825,948

 

 

2,659,180

 

 

172,100

 

2,831,280

 

Lines of credit and other bank loans

 

1,202,628

 

 

102,723

 

1,305,351

 

 

1,141,112

 

 

89,187

 

1,230,299

 

Total debt

$

7,086,836

 

$

285,664

$

7,372,500

 

$

6,742,343

 

$

261,287

$

7,003,630

 

Cash and cash equivalents

 

253,944

 

 

13,324

 

267,268

 

 

86,229

 

 

8,001

 

94,230

 

Total Adjusted Debt

$

6,832,892

 

$

272,340

$

7,105,232

 

$

6,656,114

 

$

253,286

$

6,909,400

 

 

 

 

 

 

 

 

Total assets

$

15,523,448

 

$

325,281

$

15,848,729

 

$

15,101,859

 

$

294,125

$

15,395,984

 

Cash and cash equivalents

 

253,944

 

 

13,324

 

267,268

 

 

86,229

 

 

8,001

 

94,230

 

Total Adjusted Assets

$

15,269,504

 

$

311,957

$

15,581,461

 

$

15,015,630

 

$

286,124

$

15,301,754

 

 

 

 

 

 

 

 

Total Adjusted Debt to Total Adjusted Assets

 

44.7

%

 

 

45.6

%

 

44.3

%

 

 

45.2

%

As at

June 30, 2023

December 31, 2022

 

(thousands of dollars)

IFRS basis

Equity-

accounted investments

RioCan's proportionate share

IFRS basis

Equity-

accounted investments

RioCan's

proportionate share

Total debt

$

7,086,836

 

$

285,664

 

$

7,372,500

 

$

6,742,343

 

$

261,287

 

$

7,003,630

 

Less:

 

 

 

 

 

 

Unamortized debt financing costs, premiums and discounts on origination and debt assumed, and modifications

 

(23,343

)

 

(601

)

 

(23,944

)

 

(15,634

)

 

(690

)

 

(16,324

)

Total Contractual Debt

 

7,110,179

 

 

286,265

 

 

7,396,444

 

 

6,757,977

 

 

261,977

 

 

7,019,954

 

Floating Rate Debt and Fixed Rate Debt

As at

June 30, 2023

December 31, 2022

(thousands of dollars, except where otherwise noted)

IFRS basis

Equity-

accounted investments

RioCan's proportionate share

IFRS basis

Equity-

accounted investments

RioCan's proportionate share

Total fixed rate debt

$

6,683,145

 

$

200,612

$

6,883,757

 

$

6,301,054

 

$

141,720

$

6,442,774

 

Total floating rate debt

 

403,691

 

 

85,052

 

488,743

 

 

441,289

 

 

119,567

 

560,856

 

Total debt

$

7,086,836

 

$

285,664

$

7,372,500

 

$

6,742,343

 

$

261,287

$

7,003,630

 

Ratio of floating rate debt to total debt

 

5.7

%

 

 

6.6

%

 

6.5

%

 

 

8.0

%

 

 

 

 

 

 

 

Total floating rate debt

$

403,691

 

$

85,052

$

488,743

 

$

441,289

 

$

119,567

$

560,856

 

Less:

 

 

 

 

 

 

Revolving unsecured operating line of credit

 

224,770

 

 

—

 

224,770

 

 

131,601

 

 

—

 

131,601

 

Total floating rate debt

(excluding revolving unsecured operating line of credit)

$

178,921

 

$

85,052

$

263,973

 

$

309,688

 

$

119,567

$

429,255

 

Ratio of floating rate debt to total debt (excluding revolving unsecured operating line of credit)

 

2.5

%

 

 

3.6

%

 

4.6

%

 

 

6.1

%

Liquidity

As at June 30, 2023, RioCan had approximately $1.7 billion of Liquidity as summarized in the following table:

As at

June 30, 2023

 

December 31, 2022

 

(thousands of dollars)

IFRS basis

Equity-

accounted investments

RioCan's

proportionate share

 

IFRS basis

Equity-

accounted investments

RioCan's

proportionate share

Undrawn revolving unsecured operating line of credit

$

1,023,000

$

—

$

1,023,000

 

$

1,116,351

$

—

$

1,116,351

Undrawn construction lines and other bank loans

 

283,110

 

92,273

 

375,383

 

 

267,562

 

70,094

 

337,656

Cash and cash equivalents

 

253,944

 

13,324

 

267,268

 

 

86,229

 

8,001

 

94,230

Liquidity

$

1,560,054

$

105,597

$

1,665,651

 

$

1,470,142

$

78,095

$

1,548,237

Adjusted EBITDA

The following table reconciles consolidated net income attributable to Unitholders to Adjusted EBITDA:

Twelve months ended

June 30, 2023

December 31, 2022

(thousands of dollars)

IFRS basis

Equity-

accounted investments

RioCan's proportionate share

IFRS basis

Equity-

accounted investments

RioCan's proportionate share

Net income attributable to Unitholders

$

228,225

 

$

—

 

$

228,225

 

$

236,772

$

—

 

$

236,772

Add (deduct) the following items:

 

 

 

 

 

 

Income tax expense (recovery):

 

 

 

 

 

 

Current

 

(12,717

)

 

—

 

 

(12,717

)

 

921

 

—

 

 

921

Fair value losses on investment properties, net

 

262,249

 

 

12,393

 

 

274,642

 

 

241,128

 

16,208

 

 

257,336

Change in unrealized fair value on marketable securities (i)

 

3,195

 

 

—

 

 

3,195

 

 

3,783

 

—

 

 

3,783

Internal leasing costs

 

12,137

 

 

—

 

 

12,137

 

 

12,204

 

—

 

 

12,204

Non-cash unit-based compensation expense

 

9,766

 

 

—

 

 

9,766

 

 

9,056

 

—

 

 

9,056

Interest costs, net

 

192,897

 

 

9,812

 

 

202,709

 

 

180,365

 

8,242

 

 

188,607

Restructuring costs

 

1,134

 

 

—

 

 

1,134

 

 

4,289

 

—

 

 

4,289

ERP implementation costs

 

6,408

 

 

—

 

 

6,408

 

 

—

 

—

 

 

—

Depreciation and amortization

 

4,201

 

 

—

 

 

4,201

 

 

4,774

 

—

 

 

4,774

Transaction losses on the sale of investment properties, net (ii)

 

400

 

 

—

 

 

400

 

 

1,024

 

—

 

 

1,024

Transaction costs on investment properties

 

4,935

 

 

—

 

 

4,935

 

 

5,734

 

3

 

 

5,737

Operational lease revenue (expenses) from ROU assets

 

4,706

 

 

(48

)

 

4,658

 

 

4,086

 

(46

)

 

4,040

Adjusted EBITDA

$

717,536

 

$

22,157

 

$

739,693

 

$

704,136

$

24,407

 

$

728,543

(i)

The fair value gains and losses on marketable securities may include both the change in unrealized fair value and realized gains and losses on the sale of marketable securities. By adding back the change in unrealized fair value on marketable securities, RioCan effectively continues to include realized gains and losses on the sale of marketable securities in Adjusted EBITDA and excludes unrealized fair value gains and losses on marketable securities in Adjusted EBITDA.

(ii)

Includes transaction gains and losses realized on the disposition of investment properties.

Adjusted Debt to Adjusted EBITDA Ratio

Adjusted Debt to Adjusted EBITDA is calculated as follows:

Twelve months ended

June 30, 2023

December 31, 2022

(thousands of dollars, except where otherwise noted)

IFRS basis

Equity-

accounted investments

RioCan's

proportionate share

IFRS basis

Equity-

accounted investments

RioCan's

proportionate share

 

 

 

 

 

 

 

Adjusted Debt to Adjusted EBITDA

 

 

 

 

 

 

Average total debt outstanding

$

6,872,987

 

$

268,708

 

$

7,141,695

 

$

6,756,628

 

$

251,888

 

$

7,008,516

 

Less: average cash and cash equivalents

 

(112,497

)

 

(10,092

)

 

(122,589

)

 

(74,871

)

 

(8,791

)

 

(83,662

)

Average Total Adjusted Debt

$

6,760,490

 

$

258,616

 

$

7,019,106

 

$

6,681,757

 

$

243,097

 

$

6,924,854

 

Adjusted EBITDA (i)

$

717,536

 

$

22,157

 

$

739,693

 

$

704,136

 

$

24,407

 

$

728,543

 

Adjusted Debt to Adjusted EBITDA

 

9.42

 

 

 

9.49

 

 

9.49

 

 

 

9.51

 

(i)

Adjusted EBITDA is reconciled in the immediately preceding table above.

Unencumbered Assets

The tables below summarize RioCan's Unencumbered Assets to Unsecured Debt and Percentage of Normalized NOI Generated from Unencumbered Assets as at June 30, 2023 and December 31, 2022:

As at

 

June 30, 2023

December 31, 2022

(thousands of dollars, except where otherwise noted)

Targeted

Ratios

IFRS basis

Equity-

accounted investments

RioCan's proportionate share

IFRS basis

Equity-

accounted investments

RioCan's proportionate share

Unencumbered Assets

$

8,570,191

 

$

60,966

$

8,631,157

 

$

8,200,280

 

$

56,228

$

8,256,508

 

Total Unsecured Debt

 

$

4,177,000

 

$

—

$

4,177,000

 

$

3,783,649

 

$

—

$

3,783,649

 

Unencumbered Assets to Unsecured Debt

> 200%

 

205

%

 

 

207

%

 

217

%

 

 

218

%

 

 

 

 

 

 

 

 

Subsequent to quarter end:

 

 

 

 

 

 

 

Change in Unencumbered Assets

 

 

—

 

 

—

 

—

 

 

 

 

Repayment of Unsecured Debt on July 4, 2023

 

 

(210,000

)

 

—

 

(210,000

)

 

 

 

Proforma Unencumbered Assets

 

$

8,570,191

 

$

60,966

$

8,631,157

 

 

 

 

Proforma Unsecured Debt

 

$

3,967,000

 

$

—

$

3,967,000

 

 

 

 

Proforma Unencumbered Assets to Unsecured Debt

 

 

216

%

 

 

218

%

 

 

 

 

 

 

 

 

 

 

 

Annual Normalized NOI - total portfolio (i)

 

$

688,892

 

$

33,648

$

722,540

 

$

646,540

 

$

23,488

$

670,028

 

Annual Normalized NOI - Unencumbered Assets (i)

 

$

415,972

 

$

3,644

$

419,616

 

$

370,804

 

$

3,440

$

374,244

 

Percentage of Normalized NOI Generated from Unencumbered Assets

> 50.0%

 

60.4

%

 

 

58.1

%

 

57.4

%

 

 

55.9

%

(i) Annual Normalized NOI are reconciled in the table below.

 

Three months ended June 30, 2023

Three months ended December 31, 2022

(thousands of dollars)

IFRS basis

Equity-

accounted investments

RioCan's proportionate share

IFRS basis

Equity-

accounted investments

RioCan's proportionate share

NOI (i)

$

175,268

 

$

8,412

$

183,680

 

$

166,062

 

$

5,872

$

171,934

 

Adjust the following:

 

 

 

 

 

 

Miscellaneous revenue

 

(1,134

)

 

—

 

(1,134

)

 

(802

)

 

—

 

(802

)

Percentage rent

 

(1,732

)

 

—

 

(1,732

)

 

(3,234

)

 

—

 

(3,234

)

Lease cancellation fees

 

(179

)

 

—

 

(179

)

 

(391

)

 

—

 

(391

)

Normalized NOI - total portfolio

$

172,223

 

$

8,412

$

180,635

 

$

161,635

 

$

5,872

$

167,507

 

Annual Normalized NOI - total portfolio(ii)

$

688,892

 

$

33,648

$

722,540

 

$

646,540

 

$

23,488

$

670,028

 

 

 

 

 

 

 

 

NOI from unencumbered assets

$

105,983

 

$

911

$

106,894

 

$

94,957

 

$

860

$

95,817

 

Adjust the following for Unencumbered Assets:

 

 

 

 

 

 

Miscellaneous revenue

 

(629

)

 

—

 

(629

)

 

(518

)

 

—

 

(518

)

Percentage rent

 

(1,198

)

 

—

 

(1,198

)

 

(1,430

)

 

—

 

(1,430

)

Lease cancellation fees

 

(163

)

 

—

 

(163

)

 

(308

)

 

—

 

(308

)

Normalized NOI - Unencumbered Assets

$

103,993

 

$

911

$

104,904

 

$

92,701

 

$

860

$

93,561

 

Annual Normalized NOI - Unencumbered Assets (ii)

$

415,972

 

$

3,644

$

419,616

 

$

370,804

 

$

3,440

$

374,244

 

(i) Refer to the NOI and Same Property NOI table of this section for reconciliation from NOI to operating income.

(ii) Calculated by multiplying Normalized NOI by a factor of 4.

Forward-Looking Information

This News Release contains forward-looking information within the meaning of applicable Canadian securities laws. This information reflects RioCan’s objectives, our strategies to achieve those objectives, as well as statements with respect to management’s beliefs, estimates and intentions concerning anticipated future events, results, circumstances, performance or expectations that are not historical facts. Forward-looking information can generally be identified by the use of forward-looking terminology such as “outlook”, “objective”, “may”, “will”, “would”, “expect”, “intend”, “estimate”, “anticipate”, “believe”, “should”, “plan”, “continue”, or similar expressions suggesting future outcomes or events. Such forward-looking information reflects management’s current beliefs and is based on information currently available to management. All forward-looking information in this News Release is qualified by these cautionary statements. Forward-looking information is not a guarantee of future events or performance and, by its nature, is based on RioCan’s current estimates and assumptions, which are subject to numerous risks and uncertainties, including those described in the “Risks and Uncertainties” section in RioCan's MD&A for the three and six months ended June 30, 2023 and in our most recent Annual Information Form, which could cause actual events or results to differ materially from the forward-looking information contained in this News Release. Although the forward-looking information contained in this News Release is based upon what management believes are reasonable assumptions, there can be no assurance that actual results will be consistent with this forward-looking information.

The forward-looking statements contained in this News Release are made as of the date hereof, and should not be relied upon as representing RioCan’s views as of any date subsequent to the date of this News Release. Management undertakes no obligation, except as required by applicable law, to publicly update or revise any forward-looking information, whether as a result of new information, future events or otherwise.

View source version on businesswire.com: https://www.businesswire.com/news/home/20230801515143/en/

RioCan Real Estate Investment Trust Dennis Blasutti Chief Financial Officer 416-866-3033 | www.riocan.com