Riocan Real Estate Investment Trust · TSX:REI.UN
Riocan Real Estate Investment Trust — Q3 2023 Earnings Presentation
51 slides from Riocan Real Estate Investment Trust's earnings presentation, Nov 3, 2023
Slide 1: Quality and Growth - Third Quarter 2023 Investor Presentation
QUALITY AND GROWTH NOVEMBER 2, 2023 THIRD QUARTER 2023 INVESTOR PRESENTATION Frontier & Latitude, Ottawa, ON
Slide 2: Contents
Contents • At a glance About RioCan • Strong performance • Clear objective, strong competitive advantages • Population growth Strong Demand • Physical retail critical to omni-channel strategies • Favourable supply / demand dynamics RESILIENT INCOME • Portfolio evolution • Compelling attributes Quali
Slide 3: RioCan at a glance
RioCan at a glance Committed 97.5% occupancy 192 properties (1) 34M Sq. Ft. aggregate net leasable area 17M Sq. Ft. VANCOUVER pipeline 5 assets 1.4M sq.ft.(2) 5.7% (3) zoned for development BBB CALGARY 15 assets MONTREAL 19 assets 1.9M sq.ft. (2) 3.5M sq.ft. (2) investment grade credit 11.6%(3) EDMO
Slide 4: Strong performance and balance sheet
Strong performance and balance sheet Q3 2023 RESULTS $0.45 $176.3M FUNDS FROM OPERATING INCOME OPERATIONS (“FFO”) PER UNIT (1) $(73.5)M 3.7% NET LOSS SAME PROPERTY NET OPERATING INCOME ("SPNOI") GROWTH (1) 60.4% $67.2M FFO PAYOUT DISPOSITIONS RATIO (1) COMPLETED At a weighted avg. cap rate of 7.7% $
Slide 5: Our objective: Deliver long-term Unitholder value
Our objective: Deliver long-term Unitholder value Resilient 1 retail Sustainable Intelligent 2 diversification and FFO Robust Growing growth Total 3 Distribution Unitholder Customer centrism RESILIENT SPNOI GROWTH INCOME return DEVELOPMENT 4 Responsible growth & INVESTMENT RIOCAN | INVESTOR PRESENTA
Slide 6: Clear differentiators
Clear differentiators ENABLE SUSTAINABLE GROWTH Resilient, necessity-based retail De-risked development pipeline ◦ Located in Canada’s most in-demand ◦ Flexibility to time construction starts and growing markets with opportunities located on existing ◦ Diversified and defensive tenant mix income pro
Slide 7: Favourable market dynamics
Favourable market dynamics LONG-TERM MACRO-TRENDS PRESENT MEANINGFUL DEMAND DRIVERS Growing Population Evolving Retail Tight Supply ◦ Population growth fuels demand for real ◦ Full omni-channel experience combines ◦ Housing demand outstripping supply in estate sector online and physical spaces as ma
Slide 8: Confidence in strength of portfolio
Confidence in strength of portfolio ON TRACK TO ACHIEVE ANNUAL GUIDANCE YTD 2023 FY 2023 GUIDANCE ACTUAL SPNOI growth 4.3% 3% FFO per unit $1.33 $1.77 to $1.80 FFO payout ratio 60.4% 55% to 65% Development Spending $306M $400M to $450M Note: all figures represent a Non-GAAP measure RIOCAN | INVESTOR
Slide 9: Executing from a position of strength
Executing from a position of strength RIOCAN | INVESTOR PRESENTATION ( Third Quarter 2023) |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% 92% 76% 69% 61% 66% N/A(1) 2017 Q3 2023 RioCan Peer Average (includes CRR, CRT, FCR and SRU) 1) Major market exposure not widely disclosed in 2017 Source: Company Q2 20
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 Income 260,000 $140,000 $102,000 154,000 69% 37% 2017 2023 2017 2023 Note: Data updated once a year as annual statistics become available each spring. Source: DemoStat
Slide 12: Dominant Core Toronto position
Dominant Core Toronto position 6.9M SQ. FT. OF OPERATING ASSETS, WITH AN ADDITIONAL 5.9M SQ. FT (1) OF ZONED DENSITY NLA in Metropolitan Toronto (in millions of sq. ft.) (2) RioCan properties within Metropolitan Toronto RioCan First Capital Choice Properties SmartCentres CT Crombie — 5.0 10.0 1) Squ
Slide 13: High-quality, necessity-based retail revenue
High-quality, necessity-based retail revenue 97.5% 87.4% Property committed occupancy (2) strong and stable tenants (3) Type (1) z 56.1% 30.8% • Retail: 85.8% grocery anchored mixed-use / • Office: 10.0% centres (5) urban (4) (5) • Residential Rental: 4.2% 1) Percentage of annualized contractual gro
Slide 14: Necessity-based retail anchor tenants
Necessity-based retail anchor tenants A CURATED AND DIVERSIFIED TENANT BASE IN LOCKSTEP WITH CONSUMER SPENDING PATTERNS 19.9% 14.0% 11.7% 10.8% Grocery / Essential Specialty Value Pharmacy / Personal Retailers Retailers Liquor Services 10.5% 8.1% 7.5% 7.1% 5.8% 4.5% 0.1% Experiential (1) Other Quick
Slide 15: Demand driven leasing activity and spreads
Demand driven leasing activity and spreads HIGH PERFORMANCE AND GROWTH ORIENTED PORTFOLIO (1) Retention Ratios Blended Leasing Spreads Average Net Rent PSF 89.4% 91.5% 86.7% 83.8% 85.7% 11.2% $20.98 $21.39 $19.75 $19.80 $20.16 9.4% 9.0% 6.3% 5.0% 2019 2020 2021 2022 YTD 2023 2019 2020 2021 2022 YTD
Slide 16: Demand continues to drive high occupancy
Demand continues to drive high occupancy RESILIENT AND EXPANDING TENANTS SEEK QUALITY SPACE 97.9% 98.0% 98.0% 98.3% 97.2% 97.5% 97.4% 97.4% 97.4% 96.9% 96.8% 96.8% 96.1% 96.7% 96.4% 96.1% 95.7% 94.9% 2020 2021 2022 Q1 2023 Q2 2023 Q3 2023 Committed Portfolio Committed Retail In-place Portfolio RIOCA
Slide 17: Development ready for future growth
Development ready for future growth RIOCAN | INVESTOR PRESENTATION ( Third Quarter 2023) | 17
Slide 18: 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 19: 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 Peer Average: 7% 44 40 (1) (1) 15% 23 8% 18
Slide 20: Size and scale of modular pipeline provides flexibility
Size and scale of modular pipeline provides flexibility to time project starts ADDING VALUE THROUGH EVERY STEP OF THE DEVELOPMENT PROCESS 43.6M SQ FT DEVELOPMENT PIPELINE Zoning application Zoning Shovel Underway (1) submitted approved (1) ready (1) 4.8M SQ FT 13.6M SQ SQ FT 1.5M SQ FT 1.7M FT Achie
Slide 21: Development pipeline drives intelligent diversification
Development pipeline drives intelligent diversification DIVERSIFICATION OF CASH FLOWS AND ENHANCED INCOME GROWTH POTENTIAL Strong Development Pipeline 16.8M SQ (1) FT Residential Rental (2) Condominium / Townhouse (2) Retail Office Zoned 45% 40% 13% 2% 1) GFA at RioCan’s interest. 2) Percentage of r
Slide 22: 2,579 Residential rental units in operation
2,579 Residential rental units in operation (1) CRYSTALLIZING VALUE WITH AN ADVANCED DEVELOPMENT PROGRAM 13 Rental buildings in operations since 2019 eCentralTM 2019 FrontierTM StradaTM LatitudeTM BrioTM PivotTM 2020 2022 LumaTM RhythmTM Bellevue Phase FourFifty 2021 LithoTM MarketTM One & Two The W
Slide 23: 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 (1) (2) % 3.7 % 4.2 4.
Slide 24: Self-funding development growth
Self-funding development growth WITH OPTIONS TO REALLOCATE RETAINED CAPITAL AS APPROPRIATE ~$ 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 2
Slide 25: Accelerated capital recycling
Accelerated capital recycling CONDOMINIUM / TOWNHOME DEVELOPMENT EXPECTED TO PROVIDE OVER $800M IN SALES REVENUE BETWEEN 2023 AND 2026 Projects currently underway U.C. Towers Queen & VergeTM U.C. Towns 2 11YV Two & Three AshbridgeTM Sale Status SOLD OUT 90% Pre-sold in two towers (1) 99% Pre-sold (1
Slide 26: Financial flexibility – prudent capital allocation and balance sheet management
Financial flexibility – prudent capital allocation and balance sheet management RIOCAN | INVESTOR PRESENTATION ( Third Quarter 2023) | 26
Slide 27: Disciplined capital allocation framework
Disciplined capital allocation framework SUPPORTS SELF-FUNDED DEVELOPMENT PIPELINE Trailing twelve months ended September 30, 2023 Other inflows (1), $98M Working capital & other, $150M Capital recycling, Acquisitions & investments (4), $281M $126M Unit buybacks, $75M Debt issuance (2), $172M Develo
Slide 28: Conservative payout ratio
Conservative payout ratio PROVIDING FINANCIAL FLEXIBILITY FOR DISCIPLINED SUSTAINABLE GROWTH 2023 FFO Payout Ratio (1) Attractive distribution yield (2) Peer Average: 76.3% Peer Average: 7.2% @ peer avg. payout ratio 85% 8.6% 8.0% 76% 77% 75% 7.3% 7.1% 68% 6.6% 61% 6.2% 6.4% RioCan CT First Capital
Slide 29: Capital Structure
Capital Structure Enterprise Value $12.7B Interest As at Q3 2023 Rate (1) Mortgages Payable $2.8B 3.5% 25% Secured Construction Lines $0.4B 6.5% Total Secured Debt (2) (3) $3.2B 3.9% Unsecured Debentures $3.3B 3.7% Non-Revolving Unsecured Credit Facilities $0.7B 4.0% Revolving Unsecured Operating Li
Slide 30: Disciplined and prudent balance sheet management
Disciplined and prudent balance sheet management CAPITAL STRUCTURE METRICS 5-YEAR TARGET September 30, 2023 (2022 - 2026, inclusive) Adjusted Debt to Adjusted EBITDA (1) (2) 8.0x – 9.0x 9.45x Ratio of Unsecured vs. Secured Debt (2) 70% / 30% 56% / 44% Weighted average to term maturity 5.0 years 3.25
Slide 31: Net Debt to EBITDA improves as developments generate income
Net Debt to EBITDA improves as developments generate income and residential portfolio stabilizes Q3 2023 Net Debt to EBITDA Breakdown(1) (3) (2) Internal target range 8-9x Q3 2023 Q3 2023 (1) 1) Pro-share MD&A methodology as at Q3 2023. 2) Includes commercial development and residential inventory. 3
Slide 32: Ample liquidity and laddered debt maturity
Ample liquidity and laddered debt maturity Debt Maturity Profile after given effects of recent financing strategy 1,750 Refinanced $200M of non-revolving credit facility to February 1,500 2025 with an option to extend to January 30, 2026 1,250 Issued $300M Series AI unsecured debentures with 200 an
Slide 33: Driving long-term value through a dedicated ESG program
Driving long-term value through a dedicated ESG program RIOCAN | INVESTOR PRESENTATION ( Third Quarter 2023) | 33
Slide 34: Embedding best practices in everything we do
Embedding best practices in everything we do SELECT ACHIEVEMENTS ENVIRONMENT SOCIAL GOVERNANCE First place ranking Top 100 Employers MSCI ESG Rating Upgrade Top position among Canadian peers in Recognized as one of Greater Rating upgrade to 'A" driven by governance 2023 GRESB Real Estate Assessment
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 | INVESTOR PRESENTATION (March 2022) | 37 RIOCAN | INVESTOR PRESENTATION (Third Quarter 2023)
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 (1
Slide 39: Retailers continue to expand their physical footprint
Retailers continue to expand their physical footprint Galen Weston, Executive “You want to add square footage that's in line with accelerating population Chairman, President & CEO, growth...we are continuing to build our pipeline of new stores so that we Loblaw Companies Limited, can meet that deman
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) By 2025, Canada will admit 12.5 immigrants per 1,000 residents, 4x more than the 3.0 immigrants per 1,000 residents the United States plans to welcome(1) Number of immigrants to Canad
Slide 41: Canadian Retail Real Estate Supply Constrained
Canadian Retail Over the last five years newly Real Estate is constructed retail represents Supply only ~1% of existing supply Constrained With replacement costs for well- 1.0% 0.6% 0.2% ~17Sq. located retailFt. well over market 1.3% 0.7% 0.9% values, supply constraints are In Millions of Sq. Ft. ex
Slide 42: Focus Five - large scale projects
APPENDIX Focus Five - large scale projects Note: GFA is square footage at RioCan's interest and number of residential units are at 100% interest RIOCAN RIOCAN | INVESTOR | INVESTOR PRESENTATION PRESENTATION (Third (March Quarter 2022) 2023) | 42
Slide 43: 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 44: RioCan Leaside Centre
▪ 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: 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 46: RioCan Scarborough Centre
▪ Located in The Golden Mile district of Toronto and directly adjacent to the newly constructed transit station of the Eglinton 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 r
Slide 47: 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 ~4.1M sq. ft. including ~4,700
Slide 48: 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 can generally be identified by the use of forward-looking termin
Slide 49: 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 50: Quality. Growth.
Quality. Growth. RIOCAN | INVESTOR PRESENTATION ( Third Quarter 2023) | 50
Slide 51: 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 ( Third Quarter 2023)
RioCan Real Estate Investment Trust — Q3 2023 Earnings Presentation on 6ix