Riocan Real Estate Investment Trust · TSX:REI.UN
Riocan Real Estate Investment Trust — Q1 2020 Earnings Presentation
37 slides from Riocan Real Estate Investment Trust's earnings presentation, May 5, 2020
Slide 1: Delivering Value Today, Building for Tomorrow
MAY 2020 DELIVERING VALUE TODAY, BUILDING FOR TOMORROW INVESTOR PRESENTATION | Q1 2020
Slide 2: 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 3: About RioCan
ABOUT RIOCAN Diversified mix of high quality assets in attractive growth markets 90.2% of Annualized Revenue from Canada’s Six Major Markets RioCan’s Reach: 12.4% 7.2% 4.5% Retail 4.9% Edmonton Vancouver Calgary Residential Ottawa Montreal Within 5 km of RioCan Properties1 2016 2019 Growth Toronto 5
Slide 4: RioCan's Strategic Priorities
RIOCAN’S STRATEGIC PRIORITIES Sustaining success and long term value Key Differentiators Leading Toronto and Downside protected Upside value creation Strong major market property and tenant mix with development balance sheet portfolio Drive organic Continue to focus growth with Mitigate risk Upside
Slide 5: Deep Executive Bench
DEEP EXECUTIVE BENCH Extensive industry knowledge and unparalleled experience Edward Sonshine O.Ont, Q.C Jonathan Gitlin Qi Tang John Ballantyne Chief Executive Officer President & Senior Vice President Senior Vice President, Chief Operating Officer & Chief Financial Officer Asset Management Andrew
Slide 6: Leading Portfolio in High Growth Urban Centres
LEADING PORTFOLIO IN HIGH GROWTH URBAN CENTRES Concentrate in Outperforming our peers1 Major Markets Leading Six Major Market Presence1 Leading Toronto Presence1 90.2% 91.0% 70.8% 51.0% 46.3% 37.0% 21.0% N/A N/A N/A N/A N/A Avg. Population within 5km2 Avg. Household Income within 5km2 ~322k +17% ~$1
Slide 7: High-Performance Growth-Oriented Portfolio
HIGH-PERFORMANCE GROWTH-ORIENTED PORTFOLIO Drive Organic Growth Average Net Rent PSF 3.5% CAGR $19.75 $19.77 $19.07 $17.59 $17.75 $17.11 1 2015 2016 2017 2018 2019 Q1/20 1. Canadian operations only Investor Presentation Q1 2020 | RioCan | 7
Slide 8: Diversified Portfolio Provides Sustainable Income
DIVERSIFIED PORTFOLIO PROVIDES SUSTAINABLE INCOME Primarily necessity-based and service-oriented property and tenant mix Drive Organic Growth Property Mix Tenant Mix 63.1% OF RENT FROM MIXED-USE / URBAN 75.0% OF RENT FROM NECESSITY- ASSETS AND GROCERY ANCHORED BASED AND SERVICE-ORIENTED CENTERS TENA
Slide 9: Our Quality of Income Has Never Been Stronger
OUR QUALITY OF INCOME HAS NEVER BEEN STRONGER Operating metrics are producing high quality income Drive Organic Growth Total Metric 2017 Q1 2020 Improvement Major Market Presence (% of Revenue) 76.1% 90.2% +14.1% GTA Presence (% of Revenue) 40.9% 51.0% +10.1% Same Property NOI growth1 2.1% 3.0%
Slide 10: Well-Positioned and Defensive Portfolio
WELL-POSITIONED AND DEFENSIVE PORTFOLIO Rent collection through pandemic supported by solid foundation of tenants Drive Organic Growth National Tenants, Strong Covenants, Solid Gross Rent, April 20201 Business Fundamentals and Primarily Necessity-Based Annualized % Credit/Issuer Rank Tenant name of
Slide 11: Strong Balance Sheet with Ample Liquidity
STRONG BALANCE SHEET WITH AMPLE LIQUIDITY PRUDENT CAPITAL MANAGEMENT & FLEXIBLE CAPITAL STRUCTURE Manage Risk Effectively Capital Structure Metrics Target Q1 20201 Debt to Adjusted EBITDA <8.0x 8.22x 2 Debt to Total Assets 38% - 42% 43.0% Interest Coverage >3.0x 3.48x Debt Service Coverage >2.25x 2.
Slide 12: Disciplined Capital Allocation Strategy
DISCIPLINED CAPITAL ALLOCATION STRATEGY Fortified balance sheet with ample liquidity Manage Risk Effectively • Solid balance sheet with strong Debt-to-Adjusted EBITDA and leverage ratios Low Leverage • Laddered debt maturity profile with mostly fixed- rate debt to manage interest rate risk • Access
Slide 13: Why Invest in Canada
WHY INVEST IN CANADA Concentrate in Canada outperforms G7 countries across key metrics – strong population and economic growth Major Markets Population Growth│G7 Countries │ 2019 - 2029 GDP Growth│G7 Countries │ 2019 - 2029 19.5% 17.1% 15.6% 10.7% 14.0% 6.9% 2.8% 2.7% 0.7% 9.4% 6.4% 5.7% -1.7% -4.3%
Slide 14: Canada vs. U.S.
CANADA vs. U.S. Key differences in REIT investment fundamentals Stronger Retail Operating Environment • Lower retail space per capita (CAN: 15.9 sf vs US: 23.9 sf)1 • Fewer competing tenants per category • Lower e-commerce penetration given higher distribution cost due to Canada’s geographic diversi
Slide 15: Toronto – An Evolving World Class City
TORONTO – AN EVOLVING WORLD CLASS CITY Concentrate in Recognized as one of the world’s most liveable cities with population growth far outpacing Major Markets key North American Cities LOW-COST, HIGH-QUALITY BUSINESS ENVIRONMENT Toronto offers the highest quality for the lowest cost, when compared t
Slide 16: Toronto Favorable to U.S. Gateway Markets
TORONTO FAVORABLE TO U.S. GATEWAY MARKETS Concentrate in RioCan well positioned with strong property and tenant mix in highly desirable locations Major Markets ♦Canada’s Toronto stats Highest population growth economic center for various industries Decreasing unemployment Tremendous growth prospects
Slide 17: Significant Value Upside Compared to Peers
SIGNIFICANT VALUE UPSIDE COMPARED TO PEERS Despite sharing a similar tenant mix, RioCan is trading at lower multiple than key peers Drive Organic Growth Price to FFO Multiple 22.5x 17.1x 13.5x 10.9x 11.6x 8.7x RioCan First Capital Federal Realty YE 2017 Q1 2020 Source: TD Securities and Company Repo
Slide 18: Value Creation Through Mixed-Use Development
VALUE CREATION THROUGH MIXED-USE DEVELOPMENT Highest percentage of development pipeline zoned amongst peers with a strong focus Upside Value in the Toronto market Creation ~100% located in Canada’s ~99% of projects are Completed / Under Construction1 six major markets; mixed-use residential • ~ 2,70
Slide 19: What Drives Toronto Residential Rental Market
WHAT DRIVES TORONTO RESIDENTIAL RENTAL MARKET Upside Value Creation POPULATION GROWTH RISING OWNERSHIP COSTS AND PRIMARILY DRIVEN MORTGAGE STRESS TESTS SUPPLY / DEMAND IMBALANCE BY IMMIGRATION PUSHING FAMILIES TO RENT RENT GROWTH % OF POPULATION USING TRANSIT TO GET TO WORK YoY Growth 60% 8.0% Annua
Slide 20: Unlocking Full Potential of High Density Transit-Oriented Locations in Toronto
UNLOCKING THE FULL POTENTIAL OF HIGH DENSITY TRANSIT-ORIENTED LOCATIONS IN TORONTO Upside Value Creation RioCan’s selected developments mapped to Toronto’s rapid transit system Demographics, 5km radius Toronto Pearson Average population1: ~322K International Airport Average household income1: ~$129K
Slide 21: What Drives Ottawa Residential Rental Market
WHAT DRIVES OTTAWA RESIDENTIAL RENTAL MARKET Upside Value Creation CANADA’S CAPITAL WITH GROWING TECHNOLOGY HUB LOW INVENTORY AND LAGGING GROWING POPULATION AND CIVIL (HOME OF SHOPIFY) SUPPLY SERVICE SECTOR LOW NEW RENTAL SUPPLY HIGH RENT GROWTH New Supply as Market New Supply Inventory % of Invento
Slide 22: Value Creation in Transit-Oriented Locations in Ottawa
VALUE CREATION IN TRANSIT-ORIENTED LOCATIONS IN OTTAWA RioCan’s selected developments mapped to Ottawa’s transit system Upside Value Creation Demographics, 5km radius Average population1: ~166K Average household income1: ~$99K Post-secondary education: ~65% Legend Under Construction: 0.4M sf Complet
Slide 23: Proven Mixed-Use Experience and Value Creation
PROVEN MIXED-USE EXPERIENCE AND VALUE CREATION Upside Value Creation Total estimates for five recently completed development projects: $574.9M $32.1M 5.6% $779.2M $230.4M Total Estimated Estimated Yield on Estimated Total Estimated Estimated Net Stabilized Total Costs Future Stabilized Incremental P
Slide 24: Proven Mixed-Use Experience and Value Creation
PROVEN MIXED-USE EXPERIENCE AND VALUE CREATION Strong leasing velocity for our first two rental towers Upside Value Creation Frontier, Ottawa, ON • 228 unit, 23-storey building • ~99% leased as of May 4, 2020 • Rents averaging $2.49 per sf • Phase One has achieved stabilization • Construction for 20
Slide 25: Condo/Townhouse Development and Value Creation
CONDO/TOWNHOUSE DEVELOPMENT AND VALUE CREATION Strong pre-sales for condominiums and townhouses Upside Value Creation 1. 3. 2. 1. Yorkville Condos (11YV) 98% of the 586 units sold as of May 4, 2020 with first possession anticipated in 2024. Estimated value creation range of 15%-17% 2. Windfield Cond
Slide 26: More Value Creation Underway
MORE VALUE CREATION UNDERWAY Staggered Development Delivery – Sample Projects Upside Value Creation Delivering best-in-class purpose-built rental units and condos along Canada’s most prominent transit corridors, RioCan LivingTM shapes the communities where Canadians shop, live and work 50 mixed-use
Slide 27: Prudent Approach to Development
PRUDENT APPROACH TO DEVELOPMENT Manage Risk Effectively RioCan plans to primarily self fund development through retained free cash flow, divestiture proceeds, strategic partnerships and faster capital recycle from condo/townhouse development As at Target March 31, 2020 Properties Under Development (
Slide 28: Committed to ESG
COMMITTED TO ESG Systematically embed environmental, social, and governance (ESG) considerations Manage Risk Effectively 2020 Sustainability Report to be Issued in July 2020 Environmental Tenant Engagement GRESB Score Management System 77% Improved Public Disclosure Score and achieved a 77% increase
Slide 29: Embedding Sustainability Day to Day
EMBEDDING SUSTAINABILITY DAY TO DAY Mitigating our environmental footprint across our business and in all new developments Manage Risk Effectively Our ESG commitment in action: • Named Canada’s 2020 Clean50 Top Project Award for Sustainable Commercial Real Estate Development • Integrated a low-carbo
Slide 30: Appendix Case Studies
APPENDIX CASE STUDIES Investor Presentation Q1 2020 | RioCan | 30
Slide 31: Case Study | Creating Compelling Mixed-Used Centres
CASE STUDY | CREATING COMPELLING MIXED-USED CENTRES Yonge Sheppard Centre & Pivot Upside Value Creation • Located at one of Toronto’s busiest intersections, with access to the Yonge and Sheppard subway lines • This mixed-use development will feature 399k sf of office space, 309k sf of retail space,
Slide 32: Case Study | ePlace (eCentral & eCondos)
CASE STUDY | ePLACE (eCENTRAL & eCONDOS) Upside Value Creation • eCentral is a 36 storey, 466-unit residential rental building in Toronto • ~90% leased as of May 4, 2020 • Rents averaging $3.93 per square foot (for market rent units) • Unparalleled access to the Yonge subway and the new Eglinton Cro
Slide 33: Case Study | Frontier (Gloucester Phase One)
CASE STUDY | FRONTIER (GLOUCESTER PHASE ONE) Upside Value Creation Frontier, Ottawa: Estimated $18.7M of value creation • 23 storey, 228-unit residential rental 50% JV with building Ownership Killam REIT • ~99% leased with rent per square foot averaging $2.49, as of May 4, Construction Start 2018 20
Slide 34: Case Study | King & Portland Centre & Kingly Condos
CASE STUDY | KING & PORTLAND CENTRE & KINGLY CONDOS Unlocking value through urban mixed-use development Upside Value Creation Newly constructed office space is fully Existing 55k sf of previously existing • Urban Toronto, transit-oriented location with leased to Shopify (183k sf) and Indigo adjacent
Slide 35: Case Study | Transforming Toronto's West Side
CASE STUDY | TRANSFORMING TORONTO’S WEST SIDE The Well Upside Value Creation Located in downtown Toronto’s west side, The Well is a ~3.1M sf of net leasable area (at 100%), first-of-its kind take on urban mixed-use in Canada. • 1.1M sf of office (84% pre-leased as of May 4, 2020 with tenant possessi
Slide 36: Case Study | Transforming an Iconic Location
CASE STUDY | TRANSFORMING AN ICONIC LOCATION RioCan Yonge Eglinton Centre Drive Organic Growth • Located at the intersection of the Yonge subway Driving value through demand in an iconic location: station and the Eglinton Crosstown LRT Toronto 67.4% increase in office rent since acquisition • In 201
Slide 37: 2300 Yonge Street, Toronto
2300 Yonge Street. P.O. Box 2386. Toronto, ON. M4P 1E4 | (T) 1-800-465-2733 or (416) 866-3033
RioCan Real Estate Investment Trust — Q1 2020 Earnings Presentation on 6ix