Smartcentres Real Estate Investment Trust · TSX:SRU.UN

Smartcentres Real Estate Investment Trust — SmartREIT (Smart Real Estate Investment Trust) — Q3 2015 Earnings Presentation

57 slides from Smartcentres Real Estate Investment Trust's earnings presentation, November 2015

  1. Slide 1: Investor Presentation Based on Third Quarter 2015

    Investor Presentation Based on Third Quarter 2015 November 2015

  2. 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 Funds from Operations ("AFFO"), "Gross Book Value", "Payout Ratio", "Interest Coverage", "Total Debt to Adjusted EBITDA" and any related per U

  3. Slide 3: Vision: Creating Exceptional Places to Shop and Work

    Vision Creating Exceptional Places to Shop and Work SmartREIT 3

  4. Slide 4: Smart Real Estate Investment Trust

    Smart Real Estate Investment Trust  One of Canada’s premier REITs  Equity capitalization of $4.9 billion (unit price of $31.63 as of November 13, 2015)  Total asset value of $8.5 billion  138 shopping centres across Canada SmartREIT 4

  5. Slide 5: Q3 2015 - Solid Performance

    Q3 2015 - Solid Performance  98.7% occupancy  Portfolio increased in value by $1.3 billion to $8.5 billion over same period last year  FFO per unit increased by 10.2%  2015 tenant retention of 75% already completed by quarter-end at an average rental increase of 6.2%  Montreal Premium Outlets o

  6. Slide 6: Q3 2015 - Solid Performance

    Q3 2015 - Solid Performance Sept. 30, Sept. 30, 2015 2014 Change FFO / unit $0.54 $0.49 +10.2% AFFO / unit $0.52 $0.46 +13.0% Payout ratio 76.9% 83.9% -7.0% Debt to Aggregate Assets 45.3% 43.5% +1.8% Liquidity: Cash Resources $406.0M $354.4M +14.6% Unencumbered Asset Pool $2.5B $2.3B +8.7% Debt to a

  7. Slide 7: What Makes SmartREIT Strong

    What Makes SmartREIT Strong  The capabilities of our team  The quality of our portfolio  The quality of our tenants  Our strategic relationships  Our healthy balance sheet SmartREIT 7

  8. Slide 8: The Capabilities of our Team

    The Capabilities of our Team  Integrated team of approximately 300 employees  The most experienced retail development team in Canada  50 million square feet and in excess of 170 centres developed and built over the last 20 years  Very experienced and capable leasing, and operations groups  Exce

  9. Slide 9: SmartREIT's Portfolio

    SmartREIT’s Portfolio  30.8 million square feet of shopping centre space  Average age: 12 years (youngest in the industry)  Low capital expenditures  Coast to coast locations  84% are urban or near urban markets  Virtually 100% of sites contain both a food store and a pharmacy, either in a Wal

  10. Slide 10: SmartREIT's Portfolio

    SmartREIT’s Portfolio Total # of Properties – 138* Total Square Feet – 30.8 million* 72% of our sites are Walmart anchored or shadow-anchored (86% by total area) Alberta Manitoba 7 3 Saskatchewan Quebec B.C. 4 20 13 Atlantic Ontario 10 81 * Excludes 3 redevelopment properties and 8 development lands

  11. Slide 11: Stable Cash Flow

    Stable Cash Flow AFFO Payout Ratio  Distribution fully funded from operating cashflow 94.0%  Efficient capital allocation 90.3% 88.6% 84.7%  Efficient and transparent 76.9% distribution 2011 2012 2013 2014 Q3 2015 $ per unit FFO 1.70 1.79 1.85 1.95 1.58 AFFO 1.65 1.71 1.75 1.84 1.49 Distributions

  12. Slide 12: SmartREIT's Tenant Base

    SmartREIT’s Tenant Base  72% of our sites are Walmart anchored or shadow-anchored (86% by total area)  92% of our tenants are national  Our top ten tenants generate 50% of our revenue  Adding exciting new tenants all the time Results in:  75% tenant retention as of quarter-end already for 2015

  13. Slide 13: Stable Income Base

    Stable Income Base  Average lease term of 7.1 years  Average remaining lease term of 9.1 years for Walmart, with multiple renewal options of up to 80 years  Average remaining lease term excluding Walmart is 5.5 years  Q3 2015 average retention rate at 75% already and lifts on renewals of 6.2% 

  14. Slide 14: Transformation

    Transformation Transforming into a leading, fully-integrated REIT with best-in-class capabilities SmartREIT 14

  15. Slide 15: Transformational SmartCentres Acquisition Positions SmartREIT for Growth

    Transformational SmartCentres Acquisition Positions SmartREIT for Growth Transaction Highlights 1. Acquired a large, high quality portfolio of real estate 2. Created a fully-integrated real estate platform 3. Provides enhanced growth opportunities SmartREIT 15

  16. Slide 16: Transformation of Calloway into SmartREIT

    Transformation of Calloway into SmartREIT 1 2 Calloway Then SmartREIT Now 1. 27.4M square feet of GLA 1. 30.8M square feet of GLA 2. 129 properties 2. 149 properties 3. 98.6% occupancy 3. 98.7% occupancy 4. Weighted average lease term 6.7 years 4. Weighted average lease term 7.1 years 5. 2.7M square

  17. Slide 17: Financing of Transaction

    Financing of Transaction  Purchase price within formal valuation range  Approximately $629 million of assumed debt at a weighted average interest rate of 2.6%  Issuance of $174 million in Class B LP units of SmartREIT subsidiary partnerships to certain vendors, exchangeable for REIT units on a on

  18. Slide 18: Acquisition Involved a Large, High Quality Real Estate Portfolio

    Acquisition Involved a Large, High Quality Real Estate Portfolio Acquisition Properties SmartREIT GLA at Share Province % Acquired Occupancy Major Tenants1 Shopping Centres (SF 000s) Future In Place Development Total Earnout Alliston SmartCentre ON 100% 171 165 --- 336 100% Walmart Supercentre, Doll

  19. Slide 19: Well Tenanted, High Quality Portfolio

    Well Tenanted, High Quality Portfolio Consistent With Our Existing Business The following table illustrates the top ten tenants for SmartREIT’s Property Portfolio as at September 30, 2015, in terms of their percentage contribution to gross rental revenues of SmartREIT’s Portfolio: Tenant % of Gross

  20. Slide 20: Governance Rights and Non-Compete Agreement

    Governance Rights and Non-Compete Agreement Reflective of Mitchell Goldhar’s significant ownership position and his ongoing relationship with the REIT, certain governance rights of Mitchell Goldhar and related entities (“MG Entities”) have been amended and extended, and he has entered into a non-com

  21. Slide 21: Strategic Relationships

    Strategic Relationships  Walmart  Mitchell Goldhar  Simon Property Group  Investors Group SmartREIT 21

  22. Slide 22: Strategic Relationship - Walmart Canada

    Strategic Relationship - Walmart Canada  Walmart Canada Number of Walmart Stores attributes  Value pricing and fresh food generates huge traffic 189 287 Other  Dominant retailer Shadow 14 SmartREIT  Will benefit from the 11 88 94 closure of Target  76% of Canadians live Supercentres Total Walma

  23. Slide 23: Strategic Relationship - Mitchell Goldhar

    Strategic Relationship - Mitchell Goldhar  JV Partner  Vaughan Metropolitan Centre  StudioCentre Site  Salmon Arm  Consultant on mixed use projects  Board Chair, Trustee and Investment Committee member  Ad hoc advice and council on shopping centre portfolio  Multiple on-going business relati

  24. Slide 24: Strategic Relationship - Simon Property Group

    Strategic Relationship - Simon Property Group  Largest public real estate company in the U.S.  Engaged primarily in retail real estate properties including regional malls, Premium Outlets and The Mills®  Exceptional relationships with the world’s largest retailers  Canada is part of a continuing

  25. Slide 25: Strategic Relationship - Investors Group

    Strategic Relationship - Investors Group (“IG”)  One of Canada’s largest financial services companies with $120 billion under management  SmartREIT has jointly acquired properties with IG from SmartCentres in the past  SmartREIT is continuing to look for joint acquisition and development properti

  26. Slide 26: Our Balance Sheet is Strong

    Our Balance Sheet is Strong  Unencumbered pool at $2.5 billion  Ready access to mortgage and unsecured debt capital when needed  Key ratios improving  Payout ratio declined to 76.9% in Q3, already under current target of 82% to 87%  Renewing interest rates much lower than maturing rates  Our f

  27. Slide 27: Debt Maturity / Leverage

    Debt Maturity / Leverage Debt Maturity (in millions of $) 160 3.6% 90 4.7% 100 5.0% 150 3.4% 150 3.7% 200 4.0% 150 4.1% 150 3.7% 379 3.7% 335 4.2% 341 2.0% 244 3.9% 3.6% 225 154 4.1% 146 4.7% 2.9% 115 5.4% 121 4.8% 100 25 4.2% 2015* 2016 2017 2018 2019 2020 2021 2022 2023 2024 Thereafter Secured Deb

  28. Slide 28: SmartREIT's Key Challenges and Opportunities

    SmartREIT’s Key Challenges and Opportunities  Our core platform has great stability, resulting in inherent growth in same property income of 1% to 1.5%  Along with other REITs, our cost of capital is expected to climb as interest rates rise  Acquisition supply is slowing with more competitive bid

  29. Slide 29: Key Growth Principles We Are Following

    Key Growth Principles We Are Following  Growth will come from a wide variety of areas  Risk management will be a key consideration as we allocate capital  We will take a reasoned and disciplined approach for the long term  We will continue to work with key partners to drive growth SmartREIT 29

  30. Slide 30: SmartREIT's Growth Drivers

    SmartREIT’s Growth Drivers 1. Unique portfolio of department store-anchored value-focused retailers  Improve organic same property growth above 1% 2. Retail intensification of approximately 300,000 square feet in existing portfolio  Place Bourassa  South Oakville  Other sites to be identified Sm

  31. Slide 31: SmartREIT's Growth Drivers (cont'd)

    SmartREIT’s Growth Drivers (cont’d) 3. Premium Outlet Malls  Value oriented sites, principally in fashion segment  Market dynamics currently very supportive 4. Internal Growth Pipeline  Approximately 4.9 million square feet of future development and earnouts across multiple sites SmartREIT 31

  32. Slide 32: SmartREIT's Growth Drivers (cont'd)

    SmartREIT’s Growth Drivers (cont’d) 5. Vaughan Metropolitan Centre  GTA’s largest future mixed used development 6. Other mixed use opportunities identified and moving through the zoning process SmartREIT 32

  33. Slide 33: SmartREIT's Growth Drivers (cont'd)

    SmartREIT’s Growth Drivers (cont’d) 7. Walmart JV  SmartREIT has stepped into SmartCentres’ role to provide planning, development, leasing and other services to Walmart in Canada  SmartCentres has built over 170 shopping centres over the last 20 years and we expect to continue that business into t

  34. Slide 34: SmartREIT's Growth Drivers (cont'd)

    SmartREIT’s Growth Drivers (cont’d) 8. Platform Leverage  Over and above the various development opportunities noted, we have acquired the most experienced retail development platform in Canada. We will be looking for third party development and redevelopment opportunities to maximize the platform

  35. Slide 35: Greater Toronto Area

    Greater Toronto Area Key development area for SmartREIT 1 2 4 3 1. Vaughan Metropolitan Centre 2. Westside Mall 3. StudioCentre 4. Toronto Premium Outlets SmartREIT 35

  36. Slide 36: Premium Outlets

    Premium Outlets  Toronto Premium Outlets (Halton Hills)  JV with Simon Property Group  500,000 SF when all phases are completed  Phase I opened August 1, 2013  Overall yield will be in the double digits  Montreal Premium Outlets (Mirabel)  JV with Simon Property Group  Phase I – 350,000 SF 

  37. Slide 37: Premium Outlets

    Premium Outlets SmartREIT 37

  38. Slide 38: Vaughan Metropolitan Centre ("VMC")

    Vaughan Metropolitan Centre (“VMC”)  A long term build (10 – 15 years)  A 50:50 JV between SmartREIT and SmartCentres  Potential density of 6 million square feet of residential, office and retail development  First development underway – KPMG tower complex with 360,000 SF of LEED Gold space, ope

  39. Slide 39: VMC - Pedestrian Tunnel Connections

    VMC - Pedestrian Tunnel Connections SmartREIT 39

  40. Slide 40: VMC Today: Under Construction

    VMC Today: Under Construction SmartREIT 40

  41. Slide 41: VMC Today: Under Construction

    VMC Today: Under Construction Construction of the KPMG Tower: glazing almost complete SmartREIT 41

  42. Slide 42: VMC - Aerial

    Aerial Overview fy | HOME OFFICE |e ‘BUS RAPID © trast svor KPMG TOWER

  43. Slide 43: VMC - Major Construction Projects in Vicinity

    VMC – Major Construction Projects in Vicinity SmartREIT 43

  44. Slide 44: VMC - Rapid Transit to Downtown Toronto

    VMC - Rapid Transit to Downtown Toronto SmartREIT 44

  45. Slide 45: VMC - TTC Subway Extension

    VMC - TTC Subway Extension SmartREIT 45

  46. Slide 46: Additional Mixed Use Potential Opportunities

    Additional Mixed Use Potential Opportunities  StudioCentre (Lakeshore Boulevard East)  1.2 million square foot site owned jointly with SmartCentres  Received council approval in November 2015 relating to the rezoning application  Westside Mall Toronto (Eglinton and Caledonia)  Shopping centre r

  47. Slide 47: StudioCentre

    StudioCentre SmartREIT 47

  48. Slide 48: StudioCentre

    StudioCentre Architect’s rendering of potential new site layout SmartREIT 48

  49. Slide 49: StudioCentre

    StudioCentre  StudioCentre is a brownfield location next to Toronto’s eastern waterfront. A former industrial site, today it is an underutilized film production centre  SmartREIT and SmartCentres intend to revitalize the centre, adding new production, office, and retail opportunities  A rezoning

  50. Slide 50: Westside Mall Toronto

    Westside Mall Toronto  Current density - 143,800 square feet  City of Toronto proposed density for site: 4.5x coverage = approximately 2.15 million square feet  Buildings height of up to 33 storeys  LRT to open by 2020; construction well underway. Tunnel boring is complete in front of the centre

  51. Slide 51: Other Issues We Are Monitoring

    Other Issues We Are Monitoring  In the coming years, retailers’ businesses will be affected by:  E-commerce  Aging population  Urbanization and the move to more convenient shopping  Changing ethnic mix of population  We will continue to monitor the impact of these issues and will adjust our bu

  52. Slide 52: E-commerce Responses

    E-commerce Responses  Penguin Pick-Up:  Initiative driven by SmartCentres  Convenient locations for consumers to pick up products ordered online  Drives traffic to shopping centres and supports tenants  Four SmartREIT locations part of the initiative  Piloting free Wi-Fi at select Western Cana

  53. Slide 53: The Best Offense Starts With a Strong Defense - SmartREIT

    The Best Offense Starts With a Strong Defense - SmartREIT  Best-in-Class Portfolio  Newest retail portfolio amongst all Canadian peers. 84% located in urban or near urban locations, with strong national tenants as anchors  Strong Financial Position  Strong balance sheet and strong credit metrics

  54. Slide 54: Appendix

    Appendix SmartREIT 54

  55. Slide 55: July 2015 Acquisition – Haney Place Mall

    July 2015 Acquisition – Haney Place Mall Address: 11900 Haney Place, Maple Ridge, BC Major Intersection: Lougheed Highway & 224th street Site Area: 227,000 square feet Occupancy: 97% Major Tenants: Walmart Supercentre (opening soon), Thrifty Foods, Dollar Tree, Rexall Pharmacy, Westminster Savings S

  56. Slide 56: SmartCentres Acquisition - Oakville SmartCentre

    SmartCentres Acquisition - Oakville SmartCentre Address: 234 Hays Boulevard, Oakville, ON Major Intersection: Highway 5 & Trafalgar Road Site Area: 445,000 square feet Occupancy: 100% Major Tenants: Walmart Supercentre, Real Canadian Superstore (Loblaws), LCBO, CIBC SmartREIT 56

  57. Slide 57: SmartCentres Acquisition - Oshawa South SmartCentre

    SmartCentres Acquisition - Oshawa South SmartCentre Address: 680 Laval Drive, Oshawa, ON Major Intersection: Stevenson Road & Laval Drive Site Area: 540,000 square feet Occupancy: 100% Major Tenants: Walmart Supercentre, Lowe’s, Sail, CIBC SmartREIT 57

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