Riocan Real Estate Investment Trust · TSX:REI.UN
Riocan Real Estate Investment Trust — Q2 2022 Earnings Presentation
62 slides from Riocan Real Estate Investment Trust's earnings presentation, Aug 9, 2022
Slide 1: Quality and Growth - Second Quarter 2022 Investor Presentation
QUALITY AND GROWTH AUGUST 8, 2022 SECOND QUARTER 2022 INVESTOR PRESENTATION
Slide 2: Executing from a position of strength
Executing from a position of strength RIOCAN | INVESTOR PRESENTATION ( Second Quarter 2022) |2
Slide 3: RioCan by the numbers
RIOCAN BY THE NUMBERS 202 properties (1) ~36M SQ FT aggregate net leasable area ~16M zoning approved, surfacing SQ FT value from advanced development pipeline $ ~ 13B total enterprise value *As at June 30, 2022 1 - Includes 190 income producing properties and 12 properties under development RIOCAN |
Slide 4: Successful major market strategy
Successful major market strategy Resulting in a portfolio with improved demographics and growth prospects Sold U.S. Sold properties Focused in Invested in property in Canadian Canada’s six development portfolio secondary major 2015/16 markets markets RIOCAN | INVESTOR PRESENTATION ( Second Quarter 2
Slide 5: Located in prime, in-demand and growing markets
Located in prime, in-demand and growing markets Dense 154,000 (1) +34% 206,000 (1) population people in 2017 people in 2022 Strong $102,000 +26% $129,000 (1) (1) household average household incomes income in 2017 average household income in 2022 1 - Population and average household income within 5km
Slide 6: Annualized rent from six major markets
92.5% annualized rent from six major markets (1) VANCOUVER 6 assets 1.7M sq.ft.(2) 4.5% (3) UP FROM CALGARY MONTREAL % 76.0 16 assets 18 assets 3.6M sq.ft. (2) 2.2M sq.ft. (2) 11.9% (3) GREATER EDMONTON 4.1% (3) TORONTO AREA 11 assets 87 assets 2.2M sq.ft. (2) 16.5M sq.ft. (2) in 2017 6.4% (3) 52.2%
Slide 7: High quality, necessity-based retail revenue
High quality, necessity-based retail revenue 97.2% 85.7% Property committed occupancy (2) strong and stable tenants (3) Type (1) z 54.0% 27.4% • Retail: 89.7% • Office: 7.7% grocery anchored mixed-use / • Residential Rental: 2.6% centres (5) urban (4) (5) 1 - Percentage of annualized contractual gro
Slide 8: Necessity-based retail anchor tenants
Necessity-based retail anchor tenants A curated and diversified tenant base in lockstep with consumer spending patterns 19.7% 14.7% 14.1% 10.8% Grocery / Specialty Essential Value Pharmacy / Retailers(1) Personal Retailers Liquor Services 9.1% 8.1% 7.2% 6.2% 6.0% 3.9% 0.2% Furniture Other Quick Appa
Slide 9: Industry Leading ESG
Industry Leading ESG We will lead in ESG by becoming a net positive business We will give back more than we take from the community We will generate long-term value by adopting sustainable strategies Environment Social Governance • Reduce carbon footprint • Develop sustainable • Further strengthen r
Slide 10: Embedding best practices in everything we do
Embedding best practices in everything we do Select Achievements ENVIRONMENT SOCIAL GOVERNANCE 5 Star Rating Top 100 Employers ESG rating upgrade (MSCI(2)) 2021 GRESB Real Estate Greater Toronto’s Top Employers Improving employee management programs and Assessment - runner-up ranking Competition gre
Slide 11: Our Position on Climate
Our Position on Climate Integrate resilience and net-zero criteria into asset management, operations, developments, investments, procurement and leasing processes, tools, accountabilities and decision-making to enhance governance and disclosures, meet evolving stakeholder expectations and protect as
Slide 12: Our objective: Deliver long-term Unitholder value
Our objective: Deliver long-term Unitholder value 5-Year Targets (YE 2021- YE 2026) Reimagine 1 retail 4 - 5% (1) 5 - 7% (2) 10 - 12% (3) Intelligently 2 FFO Total diversify Distribution yield growth Unitholder 3 Enhance customer centrism RESILIENT INCOME SPNOI GROWTH return DEVELOPMENT 4 Grow respo
Slide 13: Poised to benefit from evolving retail dynamics
Poised to benefit from evolving retail dynamics RIOCAN | INVESTOR PRESENTATION ( Second Quarter 2022) | 13
Slide 14: Strong demand drivers for our properties
Strong demand drivers for our properties Increasing Evolving retail Tight retail & population in experience residential key markets supply RIOCAN | INVESTOR PRESENTATION ( Second Quarter 2022) | 14
Slide 15: 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 & Cu
Slide 16: Evolving retail experience
Evolving retail experience Retailers continue to invest in hyper-local placement of store network and proximity to consumers “…when it comes to driving incremental performance. Network optimization Galen Weston, Chairman and is certainly one of them. We're spending more money on new stores and Presi
Slide 17: Canadian retail real estate supply constrained
Canadian Retail New retail only represents Real Estate is ~1% of existing supply over Supply the last five years Constrained 0.9% 0.3% 400 1.2% 0.6% 0.9% 1.3% ~17 Sq. Ft. ~17Sq. Ft. of retail GLA per capital vs 360 ~25 Sq. Ft. in the U.S. (1) 320 In Millions of Sq. Ft. 280 Tight zoning by-laws 240 r
Slide 18: Q2 2022 Highlights
Q2 2022 Highlights $78.5M $180.9M NET INCOME OPERATING INCOME $0.43 6.2% FUNDS FROM SAME PROPERTY NET OPERATIONS OPERATING INCOME PER UNIT (1) (2) GROWTH (1) $140M $20.39 DEVELOPMENT AVERAGE NET SPENDING (1) RENT (3) $1.4B $9.2B IN AVAILABLE UNENCUMBERED LIQUIDITY (1) (4) ASSETS (1) (4) 1 – Represen
Slide 19: Robust portfolio fundamentals
Robust portfolio fundamentals Deliver strong financial performance FFO per Unit SPNOI Growth (2) Q2 2021 Q2 2022 $0.43 $0.44 $0.40 $0.40 7.8% 6.2% (1) (1) $0.39 $0.42 Q2 2021 Q2 2022 (1) (1) FFO/unit FFO Adjusted/unit Core FFO/unit 1 - Represents a non-GAAP measure. 2 - SPNOI - Same Property Net Ope
Slide 20: Positive trends in occupancy
Positive trends in occupancy Breadth and quality of tenants support return to pre-pandemic occupancy levels Committed and In-Place Occupancy Total Commercial Portfolio 97.2% 97.2% 97.0% Spread 96.8% 96.8% represents ~$9.3M of 96.4% 96.4% annualized net incremental rent 96.1% 96.0% 96.3% 96.3% 96.3%
Slide 21: Operations Highlights
Operations Highlights 1.5 million square feet of new and renewed leases executed at robust leasing spreads Retention Ratios Blended Leasing Spreads Re-opening Re-opening 93.3% 89.9% 89.4% 90.9% 89.2% 88.4% 88.0% 10.5% 85.8% 83.1% 8.2% 8.9% 81.8% 8.1% 7.5% 5.6% 5.8% 5.5% 5.4% 72.6% 4.6% 3.8% Q4/19 Q1
Slide 22: High performance growth-oriented portfolio
High performance growth-oriented portfolio Building on a strong and stable foundation Average Net Rent Per Sq.Ft. $30.45 PSF average net rent of new leases ~3.0% CAGR (1) $20.39 $20.16 $19.75 $19.80 $19.07 $17.75 2017 2018 2019 2020 2021 Q2 2022 1 - Compound Annual Growth Rate RIOCAN | INVESTOR PRES
Slide 23: Financial and operational metrics tracking to 2022 targets
Financial and operational metrics tracking to 2022 targets Demonstrates strength and continued resiliency of property portfolio, tenant base and development pipeline 2022 TARGETS YTD Q2 2022 Status SPNOI growth (1) 3% - 4% 5.0% FFO per unit (1) $1.68 - $1.71(2) $0.85 FFO payout ratio (1) 55% - 65% 5
Slide 24: Uniquely positioned to deliver compelling Total Unitholder Returns
Uniquely positioned to deliver compelling Total Unitholder Returns RIOCAN | INVESTOR PRESENTATION ( Second Quarter 2022) | 24
Slide 25: Our strategic pillars
OUR STRATEGIC PILLARS 1 Reimagine retail 2 Intelligently diversify Enhance 3 customer centrism 4 Grow responsibly RIOCAN | INVESTOR PRESENTATION ( Second Quarter 2022) | 25
Slide 26: Reimagining our retail core
Reimagining our retail core BUILDING ON STRATEGICALLY INVESTING IN our strong, transit-oriented select properties to enhance their locations in Canada’s SPNOI potential six major markets KEEPING PACE WITH EVOLVING emerging success our retail tenant mix to make factors in retail it more essential, re
Slide 27: Diversify asset base, income streams, and tenant mix
Diversify asset base, income streams, and tenant mix Asset base Income streams Tenant mix Grow in residential through: Expand income streams beyond Introduction of non-traditional • mixed-use development rental income to: complementary uses: • acquisition of multi-unit • Leverage management • Medica
Slide 28: Deepen our emphasis on customer centricity
Deepen our emphasis on customer centricity Enhancing the distinctiveness of our value proposition to tenants, joint venture partners and limited partnership investors Evolve the appearance and Leverage technology to improve tenant condition of retail assets experience and increase efficiency Drive g
Slide 29: Grow responsibly
Grow responsibly Focus on ESG - Environment, Social and Governance A culture of excellence Prudent balance sheet management RIOCAN | INVESTOR PRESENTATION ( Second Quarter 2022) | 29
Slide 30: At the heart of our strategy is a clear ambition
At the heart of our strategy is a clear ambition RIOCAN | INVESTOR PRESENTATION ( Second Quarter 2022) | 30
Slide 31: A clear path to compelling Total Unitholder Returns
A clear path to compelling Total Unitholder Returns 5-Year Objective (YE 2021- YE 2026) 1-2% 2-4% 3% 10-12% NAV accretion at % constant FFO multiple and capitalization rates 4-5 Distribution Yield (1) SPNOI Development + Investments (2) Annualized TUR (3) 1 - Based on December 31, 2021, price of $22
Slide 32: Driving SPNOI growth
Driving SPNOI growth TWO KEY FACTORS 1 Normalized occupancy 2 Strong growth in commercial rents RIOCAN | INVESTOR PRESENTATION ( Second Quarter 2022) | 32
Slide 33: Positive trends in occupancy
Positive trends in occupancy Our breadth and quality of commercial tenants support growth and resilience COMMITTED COMMERCIAL OCCUPANCY RATES % 97.2% 95.7% 96.8% 97.2% 97-98 5-year plan target 2019 2020 2021 YTD 2022 RIOCAN | INVESTOR PRESENTATION ( Second Quarter 2022) | 33
Slide 34: Well-positioned portfolio retains and attracts tenants
Well-positioned portfolio retains and attracts tenants BLENDED LEASING SPREADS HIGH blended leasing spread SINGLE 5-year plan target 9.4% 9.8% 5.0% 6.3% DIGITS 2019 2020 2021 YTD 2022 (1) AVERAGE NET RENT PER SQUARE FOOT ~$ 22.50 average rent per square foot $20.39 $19.75 $19.80 $20.16 5-year plan t
Slide 35: Compelling development opportunities
Compelling Development relevant image development opportunities % ~ % 100 78 located in located in Canada’s six major markets the GTA ~ % ~ % 83 70 are residential located on developments transit route *% of total NLA at RioCan’s interest RIOCAN | INVESTOR PRESENTATION ( Second Quarter 2022) | 35
Slide 36: Driving NAV through development
Driving NAV through development In collaboration with trusted partners, RioCan is building dynamic and iconic developments that enhance communities in Canada’s major markets 42.4M SQ FT DEVELOPMENT PIPELINE Zoning Active Shovel Underway 16.0M SQ FT (1) pre-development ready 2.3M 2.2M SQ zoning appro
Slide 37: Competitive advantages in development
COMPETITIVE ADVANTAGES Significant landbank 1 embedded, high-quality development pipeline on existing IPP with low invested land cost Established development expertise 2 in-house team with deep experience spanning entire development process from entitlement to product delivery Dedicated RioCan Livin
Slide 38: 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 % 3.7 % 4.2 4.9% Strad
Slide 39: Development deliveries fueling our five-year plan
Development deliveries fueling our five-year plan 2022 DELIVERY 2023 DELIVERY Total NLA New NLA ~627,000 sq. ft.(3) ~797,000 sq. ft. Incremental cash NOI delivery (stabilized) (2) $21.6M $34.5M 2022 & 2023 1.7M SQ FT (1) * At RioCan’s interest 1 - Includes ~315,000 sq. ft. of condominium and townhou
Slide 40: Self-funding development growth
Self-funding development growth ~$ Retained cash flow 150M per year Supplemented ~$ Project leverage 250M per year with partnerships to support funding and generate fees $ Capital recycling 100-200M average run rate per year RIOCAN | INVESTOR PRESENTATION ( Second Quarter 2022) | 40
Slide 41: Capital Structure
Capital Structure Enterprise Value $13.2B Interest (in billions) Q2 2022 Rate (1) Mortgages Payable $2.6B 3.2% 22% Secured Construction Lines $0.4B 3.2% Total Secured Debt (2) (3) $3.0B 3.2% Unsecured Debentures $3.3B 2.9% Non-Revolving Unsecured Credit Facilities $0.7B 3.6% 32% Revolving Unsecured
Slide 42: Disciplined and prudent balance sheet management
Disciplined and prudent balance sheet management CAPITAL STRUCTURE METRICS 5-YEAR TARGET June 30, 2022 Adjusted Debt to Adjusted EBITDA (1) (4) 8.0x – 9.0x 9.4x (2) Ratio of Unsecured vs. Secured Debt (1) (4) 70% / 30% 59% / 41% Weighted average to term maturity (3) 5 years 4 years Total Development
Slide 43: Ample liquidity and laddered debt maturity
Ample liquidity and laddered debt maturity 1,750 Factors in the $250.0M increase in credit limit on the operating line of credit in February 2022 Extended the maturity date of 1,500 the revolving credit facility from & $250.0M Series AF debenture issuance in April 2022 (1) 2026 to 2027 in May 2022 1
Slide 44: Debt maturities laddered through 2023
Debt maturities laddered through 2023 Q1 Q2 Q3 Q4 YTD 2023 Principal (in $ millions) Non-revolving Credit Facility $ 200.0 $ — $ — $ — $ 200.0 Construction Lines 13.5 32.1 — 30.7 $ 76.3 Mortgages Payables (1) — 106.9 74.4 81.3 $ 262.6 Unsecured Debentures — 200.0 300.0 — $ 500.0 Total $ 213.5 $ 339.
Slide 45: Appendix: Featured Projects
APPENDIX Featured Projects * square footage and number of residential units are at 100% interest RIOCAN RIOCAN | INVESTOR | INVESTOR PRESENTATION PRESENTATION (Second (March Quarter 2022) 2022) | 45
Slide 46: The Well - mixed-use community in King West, Toronto
TM The Well - A true mixed-use community anchoring King West area of Downtown Toronto ~1.2 million sq. ft. of distinctive office space housing active primarily knowledge-based workers 98% LEASED ~320k sq. ft. of forward-thinking retail providing meaningful experiences and everyday needs 81% PRE-LEAS
Slide 47: RioCan Hall
◦ Currently ~227k sq. ft. of income producing retail in the heart of Toronto’s entertainment district ◦ ~800k sq. ft. of mixed-use density contemplated through two tower development TORONTO, ON RIOCAN HALL RIOCAN | INVESTOR PRESENTATION (Second ( SecondQuarter Quarter2022) 2022) | 47
Slide 48: RioCan Colossus Centre
◦ >50 acre site currently consisting of 571k sq. ft. of income producing retail HWY 400 ◦ ~10M sq. ft. of mixed-use density HWY 407 contemplated involving multi-phase development HWY 7 VAUGHAN, ON RIOCAN COLOSSUS CENTRE RIOCAN | INVESTOR PRESENTATION ( Second Quarter 2022) | 48
Slide 49: Verge
◦ First independent condo launch under RioCan Living banner in partnership with four investors ◦ Retail at grade ◦ Verge (Phase One) – 95% pre-sold (1)(2) • 10-storey, 197 unit ◦ Verge (Phase Two) – 93% pre-sold (1)(2) • 17-storey, 335 unit 1 - As of August 8, 2022 2 - Based on released units for sa
Slide 50: Frontier and Latitude
Latitude, Phase Two - 88% leased (1) ◦ 20-storey, 209 unit residential rental ◦ Occupancy commenced in Q1 2022 Frontier, Phase One – 93% leased (1) ◦ 23-storey, 228 unit residential rental 1 - As of August 8, 2022 OTTAWA, ON FRONTIER AND LATITUDE RIOCAN | INVESTOR PRESENTATION ( Second Quarter 2022)
Slide 51: Litho.
◦ 9-storey, 210 unit residential rental ◦ ~32k sq. ft. of retail ◦ ~90% leased (1) ◦ Launched in July 2021 1 - As of August 8, 2022 TORONTO, ON LITHO. RIOCAN | INVESTOR PRESENTATION ( Second Quarter 2022) | 51
Slide 52: Strada
◦ 8-storey, 61 unit residential rental ◦ ~6k sq. ft. of retail ◦ Occupancy commenced in Q1 2022 ◦ ~98% leased (1) 1 - As of August 8, 2022 TORONTO, ON STRADA RIOCAN | INVESTOR PRESENTATION ( Second Quarter 2022) | 52
Slide 53: Luma
◦ 9-storey, 168 unit residential rental ◦ ~11K sq. ft. of retail ◦ Occupancy commenced in Q2 2022 ◦ ~36% leased (1) 1 - As of August 8, 2022 OTTAWA, ON LUMA RIOCAN | INVESTOR PRESENTATION ( Second Quarter 2022) | 53
Slide 54: Rhythm
◦ 24-storey, 214 unit residential rental ◦ ~20K sq. ft. of retail ◦ Expected to commence occupancy in Q4 2022 OTTAWA, ON RHYTHM RIOCAN | INVESTOR PRESENTATION ( Second Quarter 2022) | 54
Slide 55: Condo / Townhouse development and value creation
Condo / Townhouse development and value creation Alternate source of income and cash flow providing efficient capital recycling Condominiums Condominiums Condominiums U.C. TowerTM 11 YV Queen & AshbridgeTM Sold Out ~99% Pre-Sold ~96% Pre-Sold Sales Status (1) (399 Units) (4) (503 Units) (2) (587 Uni
Slide 56: Condo / Townhouses high demand for recent launches
Condo / Townhouses high demand for recent launches Pre-sales progressing well with rapid unit sales [Placeholder for Rendering] Townhomes Condominiums Condominiums Condominiums Condominiums TM U.C. Towns 2 U.C. Tower 2 U.C. Tower 3 Verge (Phase Two) Verge (Phase One) Sales Sold Out Sold Out (3) ~54%
Slide 57: Value creation underway - projects under construction
Value creation underway - projects under construction (in thousands of square feet) NLA ('000s) Estimated Density (NLA) at RioCan’s Interest RioCan Ownership Residential Residential Under Anticipated date Commercial Completed (i) Total As at June 30, 2022 Location % (Partner) At 100% Rental Inventor
Slide 58: Value creation underway - projects with zoning approval
Value creation underway - projects with zoning approval NLA (‘000s) Estimated Density (NLA) at RioCan’s Interest (in thousands of square feet) RioCan Ownership Residential Residential Active Pre- Development Commercial Shovel Ready Total As at June 30, 2022 Location % (Partner) At 100% Rental Invent
Slide 59: 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 generally can be identified by the use of forward-looking termin
Slide 60: 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 61: Quality. Growth.
Quality. Growth. RIOCAN | INVESTOR PRESENTATION ( Second Quarter 2022) | 61
Slide 62: 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 ( Second Quarter 2022)
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