Riocan Real Estate Investment Trust · TSX:REI.UN
Riocan Real Estate Investment Trust — Q4 2023 Earnings Presentation
48 slides from Riocan Real Estate Investment Trust's earnings presentation, Feb 14, 2024
Slide 1: Fourth Quarter 2023 Investor Presentation
FOURTH QUARTER 2023 I N V E S T O R P R E S E N TAT I O N FEBRUARY 13, 2024 IRREPLACEABLE I D E A L LY ENDURING RioCan Kanata PORTFOLIO L O C AT E D VA L U E Ottawa, ON
Slide 2: Contents
Contents • At a glance About RioCan • Operational Excellence • Strong competitive advantages • Population growth Strong Demand • Physical retail critical to omni-channel strategies • Favourable supply / demand dynamics RESILIENT INCOME • Portfolio evolution • Compelling attributes Quality • High per
Slide 3: RioCan at a glance
RioCan at a glance Committed 97.4% occupancy 188 properties (1) 33M Sq. Ft. aggregate net leasable area 17M Sq. Ft. VANCOUVER pipeline 4 assets 1.1M sq.ft.(2) 4.7% (3) zoned for development BBB CALGARY 15 assets MONTREAL 19 assets 1.9M sq.ft. (2) 3.5M sq.ft. (2) investment grade credit 11.9%(3) EDMO
Slide 4: 2023 Overview
2023 Overview WELL-POSITIONED PORTFOLIO DELIVERED OPERATIONAL EXCELLENCE AND ACHIEVED FINANCIAL OBJECTIVES $1.77 5.2% CAGR since 2021 driven by strong SPNOI 97.4% With record high occupancy for retail FUNDS FROM growth and development COMMITTED at 98.4%, 120bps over OPERATIONS OCCUPANCY (“FFO”) deli
Slide 5: Why RioCan
Why RioCan Well-positioned to drive growth and value creation Resilient, necessity-based retail De-risked development pipeline ◦ Located in Canada’s most in-demand ◦ Flexibility to time construction starts and growing markets with opportunities located on existing ◦ Diversified and defensive tenant
Slide 6: Favourable market dynamics
Favourable market dynamics LONG-TERM MACRO-TRENDS PRESENT MEANINGFUL DEMAND DRIVERS Growing Population / Demand Evolving Retail / Demand Shortage of Supply ◦ Population growth fuels demand for real ◦ Full omni-channel experience combines ◦ Housing demand outstripping supply in estate sector online a
Slide 7: Executing from a position of strength
Executing from a position of strength RIOCAN | INVESTOR PRESENTATION (Fourth Quarter 2023) |7
Slide 8: Major Market Advantage
Major Market Advantage RIOCAN'S MAJOR URBAN CENTRE PRESENCE OUTPACES PEER AVERAGE % of rent from Canada's six major markets 92% 93% 76% 69% 61% 66% N/A(1) 2017 Q4 2023 RioCan Peer Average (includes CRR, CRT, FCR and SRU) 1) Major market exposure not widely disclosed in 2017 Source: Company Q3 2023 d
Slide 9: Located in prime, in-demand and growing markets
Located in prime, in-demand and growing markets COMPELLING DEMOGRAPHIC PROFILE – WITHIN 5KM RADIUS Dense Population Strong Household Income 260,000 $140,000 $102,000 154,000 69% 37% 2017 2023 2017 2023 Note: Data updated once a year as annual statistics become available each spring. Source: DemoStat
Slide 10: Dominant Core Toronto position
Dominant Core Toronto position 7.0M SQ. FT. OF OPERATING ASSETS, WITH AN ADDITIONAL 6.5M SQ. FT (1) OF ZONED DENSITY NLA in Metropolitan Toronto (in millions of sq. ft.) (2) RioCan properties within Metropolitan Toronto RioCan First Capital Choice Properties SmartCentres CT Crombie — 5.0 10.0 1) Squ
Slide 11: High-quality, necessity-based retail revenue
High-quality, necessity-based retail revenue 97.4% 87.5% Property committed occupancy (2) strong and stable tenants (3) Type (1) z 55.6% 32.2% • Retail: 85.7% grocery anchored mixed-use / • Office: 10.3% centres (4) urban (4) (5) • Residential Rental: 4.0% 1) Percentage of annualized contractual gro
Slide 12: Necessity-based retail anchor tenants
Necessity-based retail anchor tenants A CURATED AND DIVERSIFIED TENANT BASE IN LOCKSTEP WITH CONSUMER SPENDING PATTERNS 20.1% 16.5% 12.1% 10.3% Grocery / Essential Value Experiential (1) Pharmacy / Personal Retailers Liquor Services 8.9% 7.8% 7.4% 6.0% 5.8% 5.1% Other Specialty Quick Furniture Other
Slide 13: Demand driven leasing activity and spreads
Demand driven leasing activity and spreads RESILIENT PORTFOLIO DRIVES HIGH PERFORMANCE (1) Retention Ratios Blended Leasing Spreads Average Net Rent PSF 89.4% 91.5% 86.7% 87.7% 83.8% 10.7% $20.98 $21.51 $19.75 $19.80 $20.16 9.4% 9.0% 6.3% 5.0% 2019 2020 2021 2022 2023 2019 2020 2021 2022 2023 2019 2
Slide 14: Development ready for future growth
Development ready for future growth RIOCAN | INVESTOR PRESENTATION (Fourth Quarter 2023) | 14
Slide 15: Development program has clear competitive advantages
DEVELOPMENT PROGRAM HAS CLEAR COMPETITIVE ADVANTAGES Significant landbank 1 embedded, high-quality development pipeline on existing IPP with low invested land cost provides ability to delay new project starts given holding income Established development expertise 2 in-house team with deep experience
Slide 16: Industry leading development pipeline
Industry leading development pipeline SURFACING VALUE IN PORTFOLIO’S EXCESS DENSITY IN A DISCIPLINED WAY Largest Development Pipeline Disciplined growth Development pipeline (in millions sq. ft.) Development as % of Total Assets (1) Peer Average: 19M sq.ft Peer Average: 7% 42 40 (1) (1) 15% 24 8% 19
Slide 17: Size and scale of modular pipeline provides flexibility
Size and scale of modular pipeline provides flexibility to time project starts ADDING VALUE THROUGH EVERY STEP OF THE DEVELOPMENT PROCESS 42.5M SQ FT DEVELOPMENT PIPELINE Zoning application Zoning Shovel Underway (1) submitted approved (1) ready (1) 4.0M SQ FT 14.5M SQ SQ FT Achieved 4.0M sq ft zoni
Slide 18: Development pipeline drives intelligent diversification
Development pipeline drives intelligent diversification DIVERSIFICATION OF CASH FLOWS AND ENHANCED INCOME GROWTH POTENTIAL Strong Development Pipeline 17.4M SQ (1) FT Residential Condominium / Retail Office Rental (2) Townhouse (2) Zoned 44% 40% 14% 2% 1) GFA at RioCan’s interest. 2) Percentage of r
Slide 19: Growing Residential Rental Portfolio
Growing Residential Rental Portfolio Additions to Residential Rental Portfolio To Date 2023 2022 2021 2020 2019 Number of 13 3 3 3 2 2 Buildings Number of 2,935 716 521 480 524 694 Units • 2,129 units stabilized and 96.5% leased MONTREAL • Units in operation represent 4.0% of annualized gross rent 3
Slide 20: Strong development track record of delivering above market returns
Strong development track record of delivering above market returns Case study: Five purpose-built residential buildings totaling 871 units Market Average Average capitalization joint venture RioCan Brio – Calgary, AB rate yield yield Frontier – Ottawa, ON Latitude – Ottawa, ON (1) (2) % 3.7 % 4.2 4.
Slide 21: Self-funding development growth
Self-funding development growth WITH OPTIONS TO REALLOCATE RETAINED CAPITAL AS APPROPRIATE ~$ Retained cash flow 150M per year Supplemented ~$ Project leverage 250M per year with partnerships to support funding and generate fees $ Capital recycling (1) 100-200M average run rate per year 1) Between 2
Slide 22: Accelerated capital recycling
Accelerated capital recycling CONDOMINIUM / TOWNHOME DEVELOPMENT EXPECTED TO PROVIDE OVER $780M IN SALES REVENUE BETWEEN 2024 AND 2026 Projects currently underway U.C. Towers Queen & VergeTM U.C. Towns 2 11YV Two & Three AshbridgeTM Sale Status SOLD OUT 78% Pre-sold in two towers (1) 99% Pre-sold (1
Slide 23: Financial flexibility – prudent capital allocation and balance sheet management
Financial flexibility – prudent capital allocation and balance sheet management RIOCAN | INVESTOR PRESENTATION (Fourth Quarter 2023) | 23
Slide 24: Disciplined capital allocation framework
Disciplined capital allocation framework SUPPORTS SELF-FUNDED DEVELOPMENT PIPELINE Year ended December 31, 2023 Other inflows (1), $54M Working capital,net & other, $55M Capital recycling, Acquisitions & $287M investments (3), $134M Development spend, Debt issuance (2), $395M $159M Change in WC (2),
Slide 25: Lowest payout ratio funds disciplined growth
Lowest payout ratio funds disciplined growth WHILE OFFERING ATTRACTIVE TOP TIER YIELDS 2024 FFO Payout Ratio (1) Distribution and AFFO yield (2) Peer Average: 74% Peer Average (AFFO Yield): 7.6% 8.5% 8.5% 8.6% 86% 7.8% 73% 74% 6.5% 6.7% 7.6% 70% 67% 6.6% 62% 6.1% 6.3% AFFO Yield 5.5% 5.2% Distributi
Slide 26: Capital Structure
Capital Structure Enterprise Value $14.3B Interest As at Q4 2023 Rate (1) 20% Mortgages Payable $2.8B 3.7% Secured Construction Lines $0.2B 6.5% Total Secured Debt (2) (3) $3.0B 3.7% Unsecured Debentures $3.3B 3.7% 28% Non-Revolving Unsecured Credit Facilities $0.7B 4.0% Total Unsecured Debt (2) (3)
Slide 27: Disciplined and prudent balance sheet management
Disciplined and prudent balance sheet management CAPITAL STRUCTURE METRICS TARGET December 31, 2023 Adjusted Debt to Adjusted EBITDA (1) (2) (3) 8.0x – 9.0x 9.28x Ratio of Unsecured vs. Secured Debt (2) (3) 70% / 30% 54% / 46% Weighted average to term maturity (3) 5.0 years 3.5 years (4) FFO Payout
Slide 28: Net Debt to EBITDA improves as developments generate income
Net Debt to EBITDA improves as developments generate income and residential portfolio stabilizes Q4 2023 Net Debt to EBITDA Breakdown(1) (3) ~0.5x ~9.3x (2) ~1.8x Internal target range 8-9x ~7.0x Q4 2023 Impact of Development Impact of Residential Rental Q4 2023 Net Debt to EBITDA (excl. Portfolio N
Slide 29: Ample liquidity and laddered debt maturity
Ample liquidity and laddered debt maturity 2,000 Debt maturity profile (i) as at December 31, 2023 1,800 1,600 Non-revolving credit facility with an option to extend the term loan to January 30, 2026 1,400 1,200 Option to redeem 3NC1 Bond (in $M) 200 102 at par by Sept 2024 1,000 1,964 500 143 800 6
Slide 30: Driving long-term value through a dedicated ESG program
Driving long-term value through a dedicated ESG program RIOCAN | INVESTOR PRESENTATION (Fourth Quarter 2023) | 30
Slide 31: Embedding best practices in everything we do
Embedding best practices in everything we do SELECT ACHIEVEMENTS ENVIRONMENT SOCIAL GOVERNANCE First place ranking Top 100 Employers 'A' Rating Top position among Canadian peers in Recognized as one of Greater Achieved 'A' rating for ESG by Morgan 2023 GRESB Real Estate Assessment - Toronto’s Top 10
Slide 32: RioCan's ESG Commitments
RioCan’s ESG Commitments Resilient Business Future proofing our business through best-in-class governance and climate-resilient assets Purposeful Impact Pursuing sustainable economic growth by purposefully creating value and impact for our environment, people and communities Strategic Partnerships C
Slide 33: Leading the way to a net-zero economy
Leading the way to a net-zero economy Committed to reach net-zero greenhouse gas emissions across the value chain by 2050 Near-term Targets With 2019 as the baseline year: RioCan used the SBTi Corporate Net-Zero • Reduce absolute scope 1 and 2 Standard as a framework to guide our • emissions by 46.2
Slide 34: Favourable market dynamics
APPENDIX Favourable market dynamics RIOCAN | INVESTOR PRESENTATION (March 2022) | 34 RIOCAN | INVESTOR PRESENTATION (Fourth Quarter 2023)
Slide 35: Physical stores - the hub of omni-channel
Physical stores - the hub of omni-channel BRICK & MORTAR IS CENTRAL TO SERVING CUSTOMERS HOW, WHERE AND WHEN THEY WANT Distribution Centre Brick & Mortar Store Home Occupancy costs trending higher Located in industrial park Located in heart of community In-store purchase Delivery from store BOPIS (1
Slide 36: Retailers continue to expand their physical footprint
Retailers continue to expand their physical footprint Galen Weston, Executive “You want to add square footage that's in line with accelerating population Chairman, President & CEO, growth...we are continuing to build our pipeline of new stores so that we Loblaw Companies Limited, can meet that deman
Slide 37: Canada – a place to grow
Canada – a place to grow Square Feet of Retail IMMIGRATION FUELS DEMAND FOR REAL ESTATE SECTOR per Capita(4) (‘000s) By 2025, Canada will admit 12.5 immigrants per 1,000 residents, 4x more than the 3.0 immigrants per 1,000 residents the United States plans to welcome(1) Number of immigrants to Canad
Slide 38: Canadian Retail Real Estate Supply Constrained
Canadian Retail Over the last five years newly Real Estate is constructed retail represents Supply only ~1% of existing supply Constrained 0.8% With replacement costs for well- 0.9% 0.6% ~17Sq. located retailFt. well over market 0.7% 0.9% values, supply constraints are In Millions of Sq. Ft. expecte
Slide 39: Focus Five - large scale projects
APPENDIX Focus Five - large scale projects Note: GFA is square footage at RioCan's interest and number of residential units are at 100% interest RIOCAN RIOCAN | INVESTOR | INVESTOR PRESENTATION PRESENTATION (Fourth (March Quarter 2022)2023) | 39
Slide 40: RioCan Hall
▪ Currently ~227k sq. ft. of income producing retail in the heart of Toronto’s downtown entertainment district ▪ ~900k sq. ft. of mixed-use density contemplated through two tower development comprising entertainment, retail and office uses as well as ~690 residential units ▪ Status: Zoning approved
Slide 41: RioCan Leaside Centre
▪ Development spanning 8.8 acres in Toronto’s upscale Leaside neighbourhood ▪ A new Eglinton Crosstown LRT station is nearing completion on the site ▪ Zoned for ~1 million sq. ft. of mixed- use density offering ~1,450 residential units, retail, and public spaces ▪ Status: Site Plan Application submi
Slide 42: RioCan Colossus Centre
▪ >60 acre site currently consisting of 571k sq. ft. of income producing retail strategically located at the intersection of HWY 400 and HWY 7 in the rapidly growing Toronto suburb of Vaughn ▪ ~10M sq. ft. of mixed-use density HWY 400 contemplated involving multi-phase HWY 407 development comprising
Slide 43: RioCan Scarborough Centre
▪ Located in The Golden Mile district of Toronto and directly adjacent to the newly constructed transit station of the Eglinton Crosstown LRT ▪ This transit-oriented site contemplates a mixed-use community of high-density residential combined with retail amenities totaling ~4.3M sq. ft. and ~4,900 r
Slide 44: Shoppers World Brampton
▪ Currently ~700k sq. ft. of income producing retail located in Brampton, a growing suburb of Toronto ▪ Site has been designated as the “Uptown Gateway” and is in close proximity to the proposed Hurontario LRT ▪ This will be a multi-phase mixed-use development totaling ~4.1M sq. ft. including ~4,700
Slide 45: Forward-Looking Information
FORWARD-LOOKING INFORMATION All information other than statements of current and historical fact included in this presentation is forward-looking information within the meaning of applicable securities laws. Forward-looking information can generally be identified by the use of forward-looking termin
Slide 46: Non-GAAP Measures
NON-GAAP MEASURES RioCan’s consolidated financial statements are prepared in accordance with IFRS. Consistent with RioCan’s management framework, management uses certain financial measures to assess RioCan’s financial performance, which are not generally accepted accounting principles (GAAP) under I
Slide 47: Quality. Growth.
Quality. Growth. RIOCAN | INVESTOR PRESENTATION (Fourth Quarter 2023) | 47
Slide 48: Head Office
Head Office | RioCan Yonge Eglinton Centre, 2300 Yonge Street, Suite 500, Box 2386, Toronto, Ontario M4P 1E4 • 1-800-465-2733 • riocan.com RIOCAN | INVESTOR PRESENTATION (Fourth Quarter 2023)
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