Riocan Real Estate Investment Trust · TSX:REI.UN
Riocan Real Estate Investment Trust — Q4 2022 Earnings Presentation
53 slides from Riocan Real Estate Investment Trust's earnings presentation, Feb 16, 2023
Slide 1: Quality and Growth
QUALITY AND GROWTH February 15, 2023 FOURTH QUARTER 2022 I N V E S T O R P R E S E N TAT I O N Frontier & Latitude Ottawa, ON
Slide 2: Contents
Contents • At a glance About RioCan • Strong performance • Clear objective, strong competitive advantages • Physical retail critical to omni-channel strategies Strong Demand • Population Growth • Supply / Demand dynamics • Portfolio evolution RESILIENT INCOME • Compelling attributes Quality • High p
Slide 3: RioCan at a glance
RioCan at a glance Committed 97.4% occupancy 193 properties (1) 34M Sq. Ft. aggregate net leasable area 15M Sq. Ft. VANCOUVER 5 assets pipeline 1.4M sq.ft.(2) 5.8% (3) zoned for development BBB CALGARY 16 assets 3.6M sq.ft. (2) MONTREAL 17 assets 1.8M sq.ft. (2) investment grade credit 12.2% (3) EDM
Slide 4: High-quality portfolio: 2022 results
High-quality portfolio STRONG PERFORMANCE – 2022 RESULTS $1.71 $712.7M FUNDS FROM OPERATING INCOME OPERATIONS (“FFO”) PER UNIT (1) $236.8M 4.3% NET INCOME SAME PROPERTY NET OPERATING INCOME GROWTH (1) 59.0% $459.8M FFO PAYOUT CAPITAL RECYCLING RATIO (1) ACTIVITY At a weighted avg. cap rate of 7.74%
Slide 5: Our objective: deliver long-term unitholder value
Our objective: DELIVER LONG-TERM UNITHOLDER VALUE 5-Year Targets (YE 2021- YE 2026) 1 Resilient retail 4 - 5% (1) 5 - 7% (2) 10 - 12% (3) 2 Intelligent diversification Distribution FFO Total yield growth Unitholder 3 Customer centrism RESILIENT INCOME SPNOI GROWTH return DEVELOPMENT 4 Grow responsib
Slide 6: Clear differentiators
Clear differentiators ENABLE SUSTAINABLE GROWTH Resilient, necessity-based retail Industry-leading development pipeline • Located in Canada’s most in-demand • Advanced zoning entitlements already and growing markets in place • Diversified and defensive tenant mix • In-house development expertise • P
Slide 7: Favourable market dynamics
Favourable market dynamics TAILWIND FOR EXISTING GROWTH OPPORTUNITIES Growing Population Evolving Retail Tight Supply • Population growth fuels demand for real • Full e-commerce experience combines • Housing demand outstripping supply in estate sector online and physical spaces as major markets, par
Slide 8: Confidence in strength of portfolio
Confidence in strength of portfolio ON TRACK TO ACHIEVE FIVE-YEAR COMPOUNDED ANNUAL GROWTH IN FFO/UNIT OF 5 – 7% (1) 2022 ACTUAL 2023 TARGETS SPNOI growth 4.3% 3% FFO per unit $1.71 $1.77 - $1.80 FFO payout ratio 59% 55% - 65% Development Spending (2) $427.1M $400M to $450M * Represent non-GAAP meas
Slide 9: Executing from a position of quality
Executing from a position of quality RIOCAN | INVESTOR PRESENTATION (Fourth Quarter 2022) |9
Slide 10: Accomplished: Major Market strategy
Accomplished: Major Market strategy MAJOR URBAN CENTRE EXPOSURE OUTPACES PEER AVERAGE % of Rent from Canada’s Six Major Markets 92% 76% 69% 66% NA(1) 2017 2022 RioCan Peer Average (includes CHP, CRR, CRT, FCR and SRU) 1) Major market exposure not widely disclosed in 2017 Source: Most recent peer qua
Slide 11: 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 Incomes ~180,000 +39% ~250,000 $110,000 +23% $135,000 people in 2017 people in 2022 avg household avg household income in 2017 income in 2022 Source: DemoStats - 2022
Slide 12: Dominant position in Canada's largest city
Dominant position in Canada’s largest city 7.4M SQ. FT. OF OPERATING ASSETS, WITH AN ADDITIONAL 12.8M SQ. FT OF ZONED DENSITY(1) Square Feet in Core Toronto (2) RioCan properties in Core Toronto (2) Toronto Pearson RioCan International Airport First 3 Capital Choice Properties SmartCentres CT TTC –
Slide 13: High-quality, necessity-based retail revenue
High-quality, necessity-based retail revenue 97.4% 86.5% Property committed occupancy (2) strong and stable tenants (3) Type (1) z 57.4% 29.4% • Retail: 88.5% grocery anchored mixed-use / • Office: 8.5% • Residential Rental: 3.0% centres (5) urban (4) (5) 1) Percentage of annualized contractual gros
Slide 14: Necessity-based retail anchor tenants
Necessity-based retail anchor tenants A CURATED AND DIVERSIFIED TENANT BASE IN LOCKSTEP WITH CONSUMER SPENDING PATTTERNS 19.2% 14.9% 14.0% 10.9% Grocery / Specialty Essential Value Pharmacy / Retailers Personal Retailers Liquor Services 9.5% 8.3% 7.2% 5.9% 5.7% 4.3% 0.1% Furniture Other Quick Sit-do
Slide 15: Demand driven leasing activity and spreads
Demand driven leasing activity and spreads HIGH PERFORMANCE AND GROWTH ORIENTED PORTFOLIO Retention Ratios Blended Leasing Spreads Average Net Rent PSF (1) 9.4% 9.0% 91% 91% 92% $20.98 89% $20.16 6.3% $19.75 $19.80 87% 5.7% $19.07 5.0% 5.0% 84% $17.75 2017 2018 2019 2020 2021 2022 2017 2018 2019 202
Slide 16: Positive trends in occupancy
Positive trends in occupancy EXCEEDS PRE-PANDEMIC LEVELS AS RESILIENT TENANTS CONTINUE TO SEEK QUALITY SPACE Select New Leases in 2022: 97.4% 97.1% 97.2% 96.8% 96.6% 96.8% 95.7% 96.1% 96.3% 96.1% 95.6% 94.9% 2017 2018 2019 2020 2021 2022 Committed In-place RIOCAN | INVESTOR PRESENTATION (Fourth Quar
Slide 17: Strong portfolio fundamentals
Strong portfolio fundamentals DELIVERED STRONG FINANCIAL PERFORMANCE SPNOI Growth FFO per Unit $1.73 $1.71 4.3% $1.66 $1.65 3.4% $1.60 (1) (1) $1.55 SPNOI 2021 2022 2021 2022 FFO/Unit FFO adjusted / unit Core FFO/Unit Growth of 7% in both headline and core FFO * Represent non-GAAP measures RIOCAN |
Slide 18: Active development fueling long-term growth
Active development fueling long-term growth RIOCAN | INVESTOR PRESENTATION (Fourth Quarter 2022) | 18
Slide 19: Development pipeline offers compelling opportunities
Development pipeline offers compelling opportunities 100 % ~82% located in Canada’s located in six major markets the GTA ~88% ~70% are residential located on developments transit route * % of total GFA at RioCan’s interest RIOCAN | INVESTOR PRESENTATION (Fourth Quarter 2022) | 19
Slide 20: 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 21: 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. 15% Peer Average: 6% 43 41 (1) (1) 10% 24
Slide 22: Staggered pipeline provides consistent cadence of deliveries
Staggered pipeline provides consistent cadence of deliveries Adding value as projects progress through the development pipeline 42.9M SQ FT DEVELOPMENT PIPELINE Zoning application Zoned Shovel Underway submitted ready 8.2M SQ 11.5M SQ FT 1.5M SQ FT 2.0M under construction SQ FT FT 19.7M SQ FT Future
Slide 23: Development pipeline drives intelligent diversification
Development pipeline drives intelligent diversification DIVERSIFICATION OF CASH FLOWS AND ENHANCED INCOME GROWTH POTENTIAL Active development 15.0M (1) SQ FT Residential Condominium / Retail Office Rental Townhouse Zoned + Shovel ready + Underway 50% 30% 17% 3% 1) At RioCan’s interest RIOCAN | INVES
Slide 24: 2,219 residential rental units in operations
2,219 Residential rental units in operations CRYSTALIZING VALUE WITH AN ADVANCED DEVELOPMENT PROGRAM 10 Completed Rental Buildings since 2019 eCentral Frontier Brio Pivot Litho 2019 2020 2021 Market Rhythm Luma Latitude Strada 2022 * Units are at 100% interest RIOCAN | INVESTOR PRESENTATION (Fourth
Slide 25: 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 Frontier – Ottawa, ON Latitude – Ottawa, ON rate yield yield 3.7 % (1) 4.2 % 4.9 %
Slide 26: 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 (1) $ 100-200M average run rate per year 1) Between 2023 and 2026, 2,575 condominium or townhouse units either u
Slide 27: Financial flexibility – prudent capital allocation and balance sheet management
Financial flexibility – prudent capital allocation and balance sheet management RIOCAN | INVESTOR PRESENTATION (Fourth Quarter 2022) | 27
Slide 28: Disciplined capital allocation framework
Disciplined capital allocation framework SUPPORTS SELF-FUNDED DEVELOPMENT PIPELINE 2022 Cash Flows Other inflows (1), $67M Acquisitions & other (3), $156M Capital recycling, Unit buybacks,$204M $421M Debt issuance, $91M Development Spend, Change in WC (2), $70M $1.2B $404M Core priorities Capital Ex
Slide 29: Low payout ratio helps fund development
Low payout ratio helps fund development ATTRACTIVE YIELD WHILE FUNDING INDUSTRY LEADING GROWTH (2) Lowest 2023 FFO Payout Ratio (1) Attractive distribution yield 2023 Peer Average: 75% 86% Peer Average: 5.4% 73% 75% 6.7% 74% 67% @ peer avg. 5.9% 60% payout ratio 4.8% 5.1% 5.4% 5.5% 4.8% RioCan RioCa
Slide 30: Capital Structure
Capital Structure Enterprise Value $13.4B Interest (in billions) Q4 2022 Rate (1) Mortgages Payable $2.8B 3.4% Secured Construction Lines $0.4B 5.9% Total Secured Debt (2) (3) $3.2B 3.7% Unsecured Debentures $3.0B 3.0% Non-Revolving Unsecured Credit Facilities $0.7B 3.6% Revolving Unsecured Operatin
Slide 31: Disciplined and prudent balance sheet management
Disciplined and prudent balance sheet management CAPITAL STRUCTURE METRICS 5-YEAR TARGET December 31, 2022 Excluding Adjusted Debt to Adjusted EBITDA (2), (3) 8.0x – 9.0x 9.5x (1) development: 7.4x Ratio of Unsecured vs. Secured Debt (3) 70% / 30% 54% / 46% Weighted average to term maturity 5.0 year
Slide 32: Ample liquidity and laddered debt maturity
Ample liquidity and laddered debt maturity Refinanced $200M of non-revolving credit facility to January 2026 subsequent to year end RIOCAN | INVESTOR PRESENTATION (Fourth Quarter 2022) | 32
Slide 33: Driving long-term value through a dedicated ESG program
Driving long-term value through a dedicated ESG program RIOCAN | INVESTOR PRESENTATION (Fourth Quarter 2022) | 33
Slide 34: Embedding best practices in everything we do
Embedding best practices in everything we do SELECT ACHIEVEMENTS ENVIRONMENT SOCIAL GOVERNANCE Sector Leader 2022 Greenest Employers Completed stakeholder GRESB 2022 Real Estate Awarded to Canadian employers that lead materiality assessment Assessment - Standing Investments the nation in creating a
Slide 35: RioCan's ESG Commitments
RioCan’s ESG Commitments Resilient Business Future proofing our business through best-in-class governance and climate-resilient assets that contribute towards transitioning to the low-carbon economy Purposeful Impact Pursuing sustainable economic growth by purposefully creating value and impact for
Slide 36: 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 37: Favourable market dynamics
APPENDIX Favourable market dynamics RIOCAN RIOCAN | INVESTOR | INVESTOR PRESENTATION PRESENTATION (Fourth (March Quarter 2022)2022) | 37
Slide 38: 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 &
Slide 39: 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 40: 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) The Government of Canada seeks to welcome over 430,000 new immigrants each year - the highest levels in its history and 3X more immigrants on per capita basis than the U.S.(1) Populat
Slide 41: Newly constructed retail represents only ~1% of existing supply
Canadian Retail Over the last five years newly Real Estate is constructed retail represents only Supply ~1% of existing supply Constrained With replacement costs for 1.3% 1.3% 0.7% 0.9% 1.0% 0.6% well-located ~17Sq. Ft. retail exceeding market values, supply constraints are expected to In Millions o
Slide 42: Demand for physical space continues to grow
Demand for physical space continues to grow Space in major market locations with attractive demographics that facilitate last kilometre delivery, is in high demand. At ICSC Toronto 2022, RioCan conducted a survey to better understand where our tenants see growth for their business and what challenge
Slide 43: Focus Five – future large scale projects
APPENDIX Focus Five – future large scale projects * square footage and number of residential units are at 100% interest RIOCAN RIOCAN | INVESTOR | INVESTOR PRESENTATION PRESENTATION (Fourth (March Quarter 2022)2022) | 43
Slide 44: RioCan Leaside
• 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 45: 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 approximately 4.1M sq. ft. incl
Slide 46: RioCan Scarborough Centre
• Located in The Golden Mile district of Toronto and directly adjacent to the newly constructed transit station of the Eglington 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
Slide 47: 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: Final zoning app
Slide 48: 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 49: Accelerated capital recycling
Accelerated capital recycling CONDOMINIUM / TOWNHOME DEVELOPMENT EXPECTED TO PROVIDE OVER $860M IN SALES REVENUE THROUGH TO 2026 Projects currently underway U.C. Towns 2 U.C. Towers 11YV Queen & Verge Ashbridge Sale Status SOLD OUT 88% Pre-sold in two 99% Pre-sold 96% Pre-sold 97% Pre-Sold (1) tower
Slide 50: 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 51: 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 52: Quality. Growth.
Quality. Growth. RIOCAN | INVESTOR PRESENTATION (Fourth Quarter 2022) | 52
Slide 53: 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 2022)
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