Smartcentres Real Estate Investment Trust · TSX:SRU.UN
Smartcentres Real Estate Investment Trust — Q3 2019 Earnings Presentation
75 slides from Smartcentres Real Estate Investment Trust's earnings presentation, Nov 20, 2019
Slide 1: Infinite Possibilities – Investor Presentation Q3 2019
INFINITE POSSIBILITIES… INVESTOR PRESENTATION Q3 2019
Slide 2: Notice to Reader
NOTICE TO READER Readers are cautioned that certain terms used in this Investor Presentation (“Presentation”) such as Funds from Operations ("FFO"), Adjusted Cashflow from Operations ("ACFO"), "Gross Book Value", "Payout Ratio", "Interest Coverage", "Total Debt to Adjusted EBITDA" and any related pe
Slide 3: Contents
CONTENTS ▪ Overview Page 4 ▪ Intensification & Development Page 6 ▪ Featured Initiatives Page 19 ▪ Retail Portfolio Page 62 ▪ Financial Highlights Page 69 SMARTCENTRES REIT | Q3 2019 INVESTOR PRESENTATION 3
Slide 4: Our Evolution Continues
OUR EVOLUTION CONTINUES… 1989-1994 1999 2003 2014 MITCHELL GOLDHAR WALMART FIRST TRANSACTION PENGUIN PICKUP HELPS BRING JOINT VENTURE WITH CALLOWAY REIT CONCEPT IS WALMARTTO CANADA WITH SMARTCENTRES (CWT ASSETS $100M CAD) INTRODUCED (WMT SALES $21B USD) Canada 2015 2016 2018 CALLOWAY REIT SMARTCENTR
Slide 5: On Our Journey of Infinite Possibilities
ON OUR JOURNEY OF INFINITE POSSIBILITIES 34.4M SF income producing retail portfolio $9.7B dynamic real estate portfolio value 94 properties on which intensification opportunities have been identified 256 individual development projects (59.3M SF of density. REIT share 27.9M SF) An individual develop
Slide 6: Best Positioned for Intensification
BEST POSITIONED FOR INTENSIFICATION BEST PORTFOLIO IN THE COUNTRY EASY ACCESS FLEXIBLE STRUCTURES MAJOR INTERSECTIONS ONLY 25% COVERAGE TRANSIT CONNECTIVITY 2,775 UNBUILT ACRES STRONG TENANT RELATIONSHIPS SMARTCENTRES REIT | Q3 2019 INVESTOR PRESENTATION 6
Slide 7: Best Positioned for Intensification – Development Team
BEST POSITIONED FOR INTENSIFICATION DEVELOPMENT DEVELOPMENT THIS TEAM 60M 155 86% IN OUR DNA TEAM OF DEVELOPED SF DEVELOPED IN-HOUSE RESOURCES OF OUR CURRENT SINCE 1989 FOCUSED ON RETAIL AREA INTENSIFICATION PLANNERS / DEVELOPERS • ENGINEERS • GOVERNMENT RELATIONS • LEASING • ENVIRONMENTAL / GEOTECH
Slide 8: $9.7B in Real Estate Assets + $12.1B Planned Intensification
$9.7B IN REAL ESTATE ASSETS + $12.1B IN PLANNED INTENSIFICATION (REIT SHARE $5.5B) SMARTCENTRES REIT | Q3 2019 INVESTOR PRESENTATION 8
Slide 9: Properties Identified for Intensification
94 PROPERTIES IDENTIFIED FOR INTENSIFICATION… BRITISH COLUMBIA ALBERTA SASKATCHEWAN MANITOBA ONTARIO QUEBEC ATLANTIC TOTAL MARKED FOR INTENSIFICATION 6 3 2 2 61 20 0 94 UNDER REVIEW FOR INTENSIFICATION 8 4 3 1 34 3 10 63 TOTAL PROPERTIES 14 7 5 3 95 23 10 157 …AND MORE TO COME9 SMARTCENTRES REIT | Q
Slide 10: Development Status
DEVELOPMENT STATUS 256 INDIVIDUAL DEVELOPMENT PROJECTS ACROSS 94 PROPERTIES SELF-STORAGE (48) OFFICE BUILDINGS (10) RECURRING RECURRING TOTAL NON-RETAIL NON- PROJECT (SOSHAL) RECURRING COUNT 196 + 60 = 256 APARTMENTS LIVING (88) SENIORS (45) (77%) (23%) (100%) HOTELS (5) SMARTCENTRES REIT | Q3 2019
Slide 11: 256 Development Projects
256 DEVELOPMENT PROJECTS 34 71 151 256 UNDERWAY ACTIVE FUTURE TOTAL CONSTRUCTION INITIATION (YEARS) 1 2 3 4 5 6+ 33 32 74 139 PLANNING ENTITLEMENTS(#) PROJECT SF 1 13,300,000 2 3 14,000,000 4 5 32,000,000 59,300,000 REIT SHARE 6,000,000 6,400,000 15,500,000 27,900,000 POTENTIAL VALUE CREATION ($) $9
Slide 12: Value Creation $3.0B–$3.6B
VALUE CREATION $3.0B POTENTIAL VALUE CREATION $3.6B TO FROM THE 256 INTENSIFICATION PROJECTS REIT SHARE: $1.3B-$1.5B SMARTCENTRES REIT | Q3 2019 INVESTOR PRESENTATION 12
Slide 13: Value Creation Example: 1900 Eglinton Ave E
VALUE CREATION EXAMPLE 1900 EGLINTON AVE E 28 ACRES ∙ 380,000 SF SMARTCENTRES REIT | Q3 2019 INVESTOR PRESENTATION 13
Slide 14: 1900 Eglinton Ave E – Planning Entitlements
VALUE CREATION EXAMPLE 1900 EGLINTON AVE E PLANNING ENTITLEMENTS FOR 5.3 MILLION SF (INCL. 14 TOWERS > 20 STORIES) FULL 20-YEAR BUILD-OUT WOULD YIELD $250M IN POTENTIAL VALUE ABOVE THE CURRENT IFRS VALUE.
Slide 15: 1900 Eglinton Ave E – Phase 1 Apartments
VALUE CREATION EXAMPLE 1900 EGLINTON AVE E PHASE 1: 2 APARTMENTS POTENTIAL VALUE CREATION: $7 MILLION ONLY PHASE 1 OF THIS REDEVELOPMENT IS INCLUDED IN TOTAL PROJECT COUNT (256) & POTENTIAL VALUE CREATION ($3.0B - $3.6B) CALCULATIONS.
Slide 16: Major Mixed-Use Development Initiatives
MAJOR MIXED-USE DEVELOPMENT INITIATIVES Estimated Costs ($M) Estimated Gain on Final Sale GLA Completion SRU 100% Site Project Type ('000sf) / Year % Share Share SRU Share Yield Profit % SRU Share Timing Units 1. VMC (Office Towers) a. KPMG (T#1) Office 360sf 2016 50% $180 $90.0 5.7% — — — (2) b. Pw
Slide 17: Major Mixed-Use Development Initiatives (continued)
MAJOR MIXED-USE DEVELOPMENT INITIATIVES Estimated Costs ($M) Estimated Gain on Final Sale GLA Completion SRU 100% Site Project Type ('000sf) / Year % Share Share SRU Share Yield Profit % SRU Share Timing Units 9. StudioCentre (Toronto) SRU-Penguin JV Mixed-Use 150sf 2022-2023 50% $53 $26.5 6.0%-7.0%
Slide 18: Recent Events and Announcements
RECENT EVENTS ANNOUNCEMENTS ANNOUNCED SOON TO BE EXPECTED BY SEPTEMBER 12, 2019 ANNOUNCED Q4 REPORTING +1 3 NEW PARTMENT JV PARTNER ON NEW NEW JOINT VENTURE PROPERTY JOINT VENTURE PROJECTS +5 SENIORS’ PROJECTS 7.8 ACRE GTA IN JOINT VENTURE BARRIE LAKEFRONT +4 PROJECTS APARTMENT THE COMMUNITY APARTME
Slide 19: Featured Initiatives
FEATURED INITIATIVES 1. SMARTVMC (VAUGHAN METROPOLITAN CENTRE), TORONTO | 100 ACRES – Page 20 2. VAUGHAN NORTH WEST, TORONTO | 42 ACRES – Page 33 3. OAKVILLE NORTH, TORONTO | 52 ACRES – Page 36 4. OAKVILLE SOUTH, TORONTO | 21 ACRES – Page 39 5. WESTSIDE MALL, TORONTO | 12 ACRES – Page 42 6. 7. BRADF
Slide 20: 1. SmartVMC
1. SMARTVMC VAUGHAN METROPOLITAN CENTRE, TORONTO ▪ Long term build (10 – 15 years) ▪ A 50:50 JV between SmartCentres and Penguin Properties. Mitchell Goldhar deeply involved in all aspects of the project ▪ Potential density of 19M sf. of residential, office and retail development for the whole 100-a
Slide 21: Yonge & Bloor Pre vs Post Subway
YONGE & BLOOR PRE VS POST SUBWAY 1940s 1950s 1960s SMARTCENTRES REIT | Q3 2019 INVESTOR PRESENTATION 21
Slide 22: SmartVMC: 100 Acres, 19 Million SF of Potential
100 ACRES 501,254 SF 19 MILLION SF OF POTENTIAL SMARTCENTRES REIT | Q3 2019 INVESTOR PRESENTATION 22
Slide 23: Setting the Stage…
SETTING THE STAGE… SMARTCENTRES REIT | Q3 2019 INVESTOR PRESENTATION 23
Slide 24: …For a New City Centre
…FOR A NEW CITY CENTRE SMARTCENTRES REIT | Q3 2019 INVESTOR PRESENTATION 24
Slide 25: VMC Vision…
VMC VISION… SMARTCENTRES REIT | Q3 2019 INVESTOR PRESENTATION 25 25
Slide 26: …Becoming Reality
…BECOMING REALITY (AS OF SEPTEMBER 2019) SMARTCENTRES REIT | Q3 2019 INVESTOR PRESENTATION 26
Slide 27: KPMG Tower
KPMG TOWER 365,000 SF RENDERING REALITY SMARTCENTRES REIT | Q3 2019 INVESTOR PRESENTATION 100% LEASED 27
Slide 28: PwC/YMCA Tower
PWC/YMCA TOWER PWC / YMCA * 220,000 SF * 100% LEASED RENDERING REALITY SMARTCENTRES SMARTCENTRESREIT REIT| Q2 2019 | Q3 INVESTOR 2019 PRESENTATION INVESTOR PRESENTATION 28 *Pending certification
Slide 29: Future
FUTURE SMARTCENTRES REIT | Q3 2019 INVESTOR PRESENTATION 29
Slide 30: Tower 1, 2 & 3 Profits Exceed Expectations
1, 2 & 3 RENDERING REALITY SOLD OUT TOWER 1, 2 & 3 RETURN MILLION IN PROFIT PROFITS EXCEED EXPECTATIONS >35% ON COST +$30 OVER ORIGINAL APPROVAL
Slide 31: The East Block
THE EAST BLOCK RENTAL RESIDENTIAL & TRANSIT CITY 4&5 SOLD OUT CONSTRUCTION STARTED FALL 2019 SMARTCENTRES REIT | Q3 2019 INVESTOR PRESENTATION 31
Slide 32: A New City Centre… & Beyond
A NEW CITY CENTRE…& BEYOND 170+ ACRES ∙ 26+ MILLION SF OF POTENTIAL (REIT SHARE 10.5 MILLION SF) HWY 407 SMARTCENTRES REIT | Q3 2019 INVESTOR PRESENTATION
Slide 33: 2. Vaughan Northwest, Toronto
2. VAUGHAN NORTHWEST, TORONTO ▪ Existing Walmart anchored shopping centre at Major Mackenzie Drive and Weston Road in Vaughan ▪ JV with Fieldgate on 16-acre site for 230-300 freehold townhomes. Construction to commence in 2020; possession in 2021 and 2022 ▪ JV with SmartStop for a self-storage facil
Slide 34: Vaughan NW
VAUGHAN NW 42 ACRES ∙ 177,906 SF SMARTCENTRES REIT | Q3 2019 INVESTOR PRESENTATION 34
Slide 35: Vaughan NW: 1.7 Million SF of Potential
VAUGHAN NW 1.7 MILLION SF OF POTENTIAL SMARTCENTRES REIT | Q3 2019 INVESTOR PRESENTATION 35
Slide 36: 3. Oakville North
3. OAKVILLE NORTH (DUNDAS & TRAFALGAR), TORONTO ▪ An existing 461,000 sf. shopping centre on 52 acres at Highway 5 and Trafalgar Road in Oakville. Anchored by a 195,000 sf. Walmart Supercentre and a 120,000 sf. Real Canadian Superstore ▪ Located within the Uptown Core area in the Town of Oakville, i
Slide 37: Oakville North
OAKVILLE NORTH 52 ACRES ∙ 461,226 SF SMARTCENTRES REIT | Q3 2019 INVESTOR PRESENTATION 37
Slide 38: Oakville North – Planning Entitlements
OAKVILLE NORTH PLANNING ENTITLEMENTS FOR 5.5 MILLION SF SMARTCENTRES REIT | Q3 2019 INVESTOR PRESENTATION 38
Slide 39: 4. Oakville South
4. OAKVILLE SOUTH, TORONTO We have initiated discussions with municipalities, tenants and potential partners to evolve this site into: ▪ A 180,000 sf. shopping centre, anchored by strong retailers such as Metro food store, Shoppers Drug Mart, LCBO, Winners and Goodlife Fitness ▪ A JV for a Revera se
Slide 40: Oakville South
OAKVILLE SOUTH 21 ACRES ∙ 330,000 SF SMARTCENTRES REIT | Q3 2019 INVESTOR PRESENTATION 40
Slide 41: Oakville South: 430,000 SF of Potential
OAKVILLE SOUTH 430,000 SF OF POTENTIAL SMARTCENTRES REIT | Q3 2019 INVESTOR PRESENTATION 41
Slide 42: 5. Westside Mall
5. WESTSIDE MALL, TORONTO ▪ 12-acre urban redevelopment site ▪ Currently a 140,000 sf shopping centre ▪ New Eglinton Crosstown Light Rapid Transit (LRT) station to open on site ▪ New links to existing GO network will connect new East:West to existing North:South transit framework ▪ Long-term project
Slide 43: SMARTCENTRES REIT | Q3 2019 INVESTOR PRESENTATION
SMARTCENTRES REIT | Q3 2019 INVESTOR PRESENTATION 43
Slide 44: Westside Mall
WESTSIDE MALL 12 ACRES ∙ 144,405 SF SMARTCENTRES REIT | Q3 2019 INVESTOR PRESENTATION 44
Slide 45: Westside Mall – Planning Entitlements
WESTSIDE MALL PLANNING ENTITLEMENTS FOR 3 MILLION SF SMARTCENTRES REIT | Q3 2019 INVESTOR PRESENTATION 45
Slide 46: 6. Bradford
6. BRADFORD, TORONTO ▪ 57 acre Walmart-anchored site in the growing community of Bradford ▪ Currently a 280,000 sf shopping centre. ▪ Preliminary intensification plans include a hotel, a seniors residence, town homes, and mid-rise residential apartments and/or condominiums ▪ Early consultations are
Slide 47: Bradford
BRADFORD 57 ACRES ∙ 278,860 SF SMARTCENTRES REIT | Q3 2019 INVESTOR PRESENTATION 47
Slide 48: Bradford: 565,000 SF of Potential
BRADFORD 565,000 SF OF POTENTIAL SMARTCENTRES REIT | Q3 2019 INVESTOR PRESENTATION 48
Slide 49: 7. Pickering
7. PICKERING, TORONTO ▪ 48 acre Walmart-anchored site in the rapidly growing City of Pickering ▪ Adjacent to Hwy 401; 5 minutes from the Pickering Go Station and Durham Live ▪ Currently a 546,000 sf shopping centre; Potential for 7.8 million sf. ▪ Preliminary intensification plans include high-rise
Slide 50: Pickering
PICKERING 48 ACRES ∙ 546,000 SF SMARTCENTRES REIT | Q3 2019 INVESTOR PRESENTATION 50
Slide 51: Pickering: Million SF of Potential
PICKERING 8 MILLION SF OF POTENTIAL SMARTCENTRES REIT | Q3 2019 INVESTOR PRESENTATION 51
Slide 52: 8. Chilliwack
8. CHILLIWACK, VANCOUVER ▪ Official Community Plan and Rezoning Approval by Council Sept. 2019 ▪ Proposal included demolition of the current enclosed mall to accommodate: o 162,798 sf of Commercial o 2.63 acres of Residential o 3 6-storey residential towers with 200+ units o Structured at grade park
Slide 53: Chilliwack
CHILLIWACK 15.5 ACRES ∙ 124,865 SF SMARTCENTRES REIT | Q3 2019 INVESTOR PRESENTATION 53
Slide 54: Chilliwack: 325,000 SF of Potential
CHILLIWACK 325,000 SF OF POTENTIAL SMARTCENTRES REIT | Q3 2019 INVESTOR PRESENTATION 54
Slide 55: 9. Laval Centre
9. LAVAL CENTRE, MONTREAL ▪ Lands designated by City as “Centre-Ville”, due to highway and transit access ▪ Anchored by a 160,000 square foot Walmart Supercentre ▪ Parcels of land sold to others for a seniors’ residence, hotel and an office development ▪ JV with Jadco for Equinoxe Daniel- Johnson; 3
Slide 56: Laval Centre
LAVAL CENTRE 35 ACRES ∙ 159,779 SF SMARTCENTRES REIT | Q3 2019 INVESTOR PRESENTATION 56
Slide 57: Laval Centre: 4.5 Million SF of Potential
LAVAL CENTRE 4.5 MILLION SF OF POTENTIAL SMARTCENTRES REIT | Q3 2019 INVESTOR PRESENTATION 57
Slide 58: Laval Centre – Rental Residential Apartments
LAVAL CENTRE RENTAL RESIDENTIAL APARTMENTS RENDERING REALITY SMARTCENTRES REIT | Q3 2019 INVESTOR PRESENTATION 58 DANIEL-JOHNSON
Slide 59: 10. Pointe-Claire
10. POINTE-CLAIRE, MONTREAL ▪ Walmart and Home Depot anchored site in West Montreal purchased in 2016 ▪ Very well-located site – transit (new light rail transit line to downtown) and road access ▪ Master planning activities moving forward with strong support from council ▪ Secured zoning for a multi
Slide 60: Pointe-Claire
POINTE-CLAIRE 22 ACRES ∙ 384,915 SF SMARTCENTRES REIT | Q3 2019 INVESTOR PRESENTATION 60
Slide 61: Pointe-Claire: Million SF of Potential
POINTE-CLAIRE 2 MILLION SF OF POTENTIAL SMARTCENTRES REIT | Q3 2019 INVESTOR PRESENTATION 61
Slide 62: Our Retail Is…
OUR RETAIL IS… SMARTCENTRES REIT | Q3 2019 INVESTOR PRESENTATION 62
Slide 63: …Still Rockin'
…STILL ROCKIN’ Toronto Premium Outlets SMARTCENTRES REIT | Q3 2019 INVESTOR PRESENTATION 63
Slide 64: 34.4 Million SF Portfolio
34.4 MILLION SF PORTFOLIO AVERAGE PROPERTY AGE: 15 YEARS GROCERY/ CENTRES NOI OCCUPANCY TENANT PHARMA # % % % % G-VECTOM 99 73 97.9 71.2 100 PRIMARY 32 16 98.4 77.2 100 SECONDARY 27 11 98.7 86.6 100 TOTAL 158 100% 98.1% 74% 100% SMARTCENTRES REIT | Q3 2019 INVESTOR PRESENTATION 64
Slide 65: High-Quality Tenants
HIGH-QUALITY TENANTS… TOP 6 TENANTS ANNUAL RENT $202,400,000 $37,500,000 RENTAL INCOME $33,800,000 FROM TOP 6 TENANTS $332,500,000 $21,800,000 TOP 6 TENANTS $18,700,000 REPRESENT 42% OF TOTAL RENTAL INCOME $18,300,000 SMARTCENTRES REIT | Q3 2019 INVESTOR PRESENTATION 65
Slide 66: Stable Retail Income Base
STABLE RETAIL INCOME BASE…. LEASE MATURITY BY AREA (in millions of square feet) Average roll of 2.4M sf. annually (7.0% of total GLA per year) 1.6 1.9 2.3 1.6 1.7 0.9 0.6 0.8 0.6 0.7 1.0 0.6 0.4 2.0 0.7 0.6 1.9 0.3 1.1 1.4 1.4 0.5 1.2 0.2 0.8 0.6 0.7 0.2 0.3 0.4 - - - 2019 2020 2021 2022 2023 2024 2
Slide 67: …& Continued Expansion
…& CONTINUED EXPANSION 51% REPLACEMENT 49% NEW SMARTCENTRES REIT | Q2 2019 INVESTOR PRESENTATION 67
Slide 68: Ongoing Services Innovation… New Revenue Sources
ONGOING SERVICES INNOVATION… 5G CELL TOWERS EV CHARGING STATIONS DIGITAL SIGNAGE PENGUIN PICKUP … NEW REVENUE SOURCES SMARTCENTRES REIT | Q3 2019 INVESTOR PRESENTATION 68
Slide 69: Total Returns to Unit Holders Continue to Grow
TOTAL RETURNS TO UNIT HOLDERS CONTINUE TO GROW $1,200 14.9% AVERAGE ANNUAL RETURN SINCE IPO $1,061.94 (as of November 11, 2019) $1,000 $800 $600 $585.65 $400 $421.40 $200 $0 SmartCentres TSX Capped REIT TSX Composite SMARTCENTRES REIT | Q3 2019 INVESTOR PRESENTATION 69
Slide 70: Continued Growth in Rental Revenue & FFO per Unit
CONTINUED GROWTH IN RENTAL REVENUE & FFO PER UNIT (AS OF DECEMBER 31, 2018) RENTAL REVENUE FFO (in millions of $) ($ per unit) 6.8% CAGR 4.0% CAGR since 2014 since 2014 2.28 790 2.17 2.20 747 2.10 728 1.95 670 608 2014 2015 2016 2017 2018 2014 2015 2016* 2017 2018 * Excludes $0.06 per unit of non-re
Slide 71: Stable Cashflow
STABLE CASHFLOW 84.7% 81.1% 83.1% 81.8% 83.0% PAYOUT RATIO* 2014 2015 2016 2017 2018 in thousands of dollars, except per Unit information) FFO per Unit(1) 1.95 2.10 2.17(3) 2.20 2.28 AFFO/ACFO per Unit(2) 1.84 1.99 2.00(3) 2.10 2.13 Distributions per Unit 1.56 1.61 1.66 1.71 1.76 DRIP participation
Slide 72: Total Assets Valued at $9.7B
TOTAL ASSETS VALUED AT $9.7B TOTAL ASSETS (in billions of $) 30.8% CAGR 9.4 9.5 9.7 since 2002 8.5 8.7 7.1 7.1 6.5 6.0 4.2 4.2 4.4 3.6 3.9 2.6 1.0 0.1 0.2 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Q3 2019 SMARTCENTRES REIT | Q3 2019 INVESTOR PRESENTATION 72
Slide 73: Debt / Maturity Leverage
DEBT / MATURITY LEVERAGE DEBT MATURITY (in millions of $) 400 371 350 320 300 300 275 250 250 250 203 200 200 180 160 140 119 100 80 87 100 45 33 3 0 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 BEYOND Secured Debt Unsecured Bank Loans Unsecured Debentures ▪ Interest costs on refinancing availa
Slide 74: Leverage Profile
LEVERAGE PROFILE Sep. 30 Dec. 31 Dec. 31 Dec. 31 2019 2018 2017 2016 Debt to Aggregate Assets 41.8% 43.9% 45.4%(1) 44.3% Ratio of Secured Debt to Unsecured Debt 0.83X 1.1X 1.4X 2.0X Unencumbered Assets $4.7B $4.3B $3.4B $2.7B Adjusted Debt to Adjusted EBITDA 7.8X 8.2X 8.4X 8.4X Interest Coverage 3.3
Slide 75: Conservative Capital Structure
CONSERVATIVE CAPITAL STRUCTURE Secured Mortgage Financing 18.5% Amount - $1.8B Weighted Avg Interest Rate – 4.00% $9.7B Weighted Avg Term to Maturity – 4.3 years Total Enterprise Value Unsecured Debentures Amount - $1.9B Focused on: 19.6% Weighted Avg Interest Rate – 3.28% Weighted Avg Term to Matur
SmartCentres Real Estate Investment Trust — Q3 2019 Earnings Presentation on 6ix