Smartcentres Real Estate Investment Trust · TSX:SRU.UN

Smartcentres Real Estate Investment Trust — Smart Real Estate Investment Trust — Investor Presentation (September 2017)

63 slides from Smartcentres Real Estate Investment Trust's investor presentation, September 2017

  1. Slide 1: Investor Presentation

    Investor Presentation Based on Second Quarter 2017 September 2017

  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"), Adjusted Cashflow from Operations ("ACFO"), "Gross Book Value", "Payout Ratio", "Interest Coverage", "Total De

  3. Slide 3: Smart Real Estate Investment Trust (TSX:SRU.UN)

    Smart Real Estate Investment Trust (TSX:SRU.UN)  One of Canada’s premier REITs  $4.7 billion equity capitalization (unit price of $30.24 as of August 25, 2017)  $8.8 billion total asset value  142 shopping centres, 1 office property and 1 mixed-use property across Canada SMART REAL ESTATE INVEST

  4. Slide 4: Track Record of Performance – Total Return to Unitholders

    Track Record of Performance Total Return to Unitholders  11.4% average annual return since IPO (as of August 25, 2017) $1,200 $1,000 $894.86 $800 $600 $422.24 $400 $351.24 $200 $0 SmartREIT TSX Capped REIT TSX Composite SMART REAL ESTATE INVESTMENT TRUST 4

  5. Slide 5: Track Record of Performance – Rental Revenue and FFO Growth

    Track Record of Performance Growth in Rental Revenue Growth in FFO / Unit  7.4% CAGR since 2012  5.6% CAGR since 2012 Rental Revenue FFO (in millions of $) ($ per unit) 727.8 2.23 670.3 2.10 607.6 1.95 573.0 1.79 1.85 546.1 2012 2013 2014 2015 2016 2012 2013 2014 2015 2016 * YTD and remainder of y

  6. Slide 6: Track Record of Performance – Growth in Total Assets

    Track Record of Performance Growth in Total Assets  36.8% CAGR since 2002 Total Assets (in millions of $) 8,739 8,505 7,070 7,107 6,480 5,956 4,194 4,237 4,374 3,894 3,584 2,564 1,015 109 229 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 SMART REAL ESTATE INVESTMENT TRU

  7. Slide 7: Key Investment Highlights

    Key Investment Highlights  The quality of our shopping centre portfolio  Our exceptional list of growth initiatives  Our healthy balance sheet and financial flexibility  The quality and depth of our development team and JV relationships SMART REAL ESTATE INVESTMENT TRUST 7

  8. Slide 8: SmartREIT's Retail Shopping Centre Portfolio

    SmartREIT’s Retail Shopping Centre Portfolio  31.9 million square feet of principally open format shopping centre space  Average age: 13.6 years (youngest in the industry)  Lower capital expenditures  Coast to coast locations  84% are urban or near urban markets  82% by square feet in Ontario,

  9. Slide 9: SmartREIT's Portfolio Properties

    SmartREIT’s Portfolio 144 Properties* 31.9 million square feet* Alberta Manitoba 8 3 Saskatchewan Quebec BC 4 22 13 Atlantic Ontario 10 84 * Excludes 8 development lands totalling 0.9 million square feet upon completion and an additional 3.2 million square feet of development density associated with

  10. Slide 10: Market Conditions

    Market Conditions Why is Canada different from the United States  Much lower square feet of retail per person (15 vs. 23) traditionally drives higher rents per square foot  Power Centres and Big Box retail are only 20 years old in Canada, so assets are still very relevant to consumers’ daily shop

  11. Slide 11: Stable Income Base

    Stable Income Base  Average lease term of 6.0 years  Average remaining lease term of 7.3 years for Walmart, with multiple renewal options of up to 80 years  Average remaining lease term excluding Walmart is 4.9 years  2017 average retention rate to date at 66% and lifts on renewals of 2.2%  Ave

  12. Slide 12: Well Tenanted, High Quality Portfolio

    Well Tenanted, High Quality Portfolio The following table illustrates the top ten tenants for SmartREIT’s Property Portfolio as at June 30, 2017, in terms of their percentage contribution to gross rental revenues of SmartREIT’s Portfolio: % of Average DBRS Number of Gross Tenant Remaining Credit Sto

  13. Slide 13: Current Leasing Environment

    Current Leasing Environment  Former Target space and other bankrupt space causing overhang in certain markets  Sears store closure will also have some additional limited impact in certain markets  Fashion segment still rationalizing, but we have limited exposure  Value segment still growing – Do

  14. Slide 14: OneREIT Proposed Transaction Summary

    OneREIT Proposed Transaction Summary  12 Properties / $429 million  2.2 million square feet / 93% leased  Ontario (10) / BC (1) / Saskatchewan (1)  10 Food-anchored / inclusive of 6 Walmarts  NOI of $26 - $28 million (Year 1 to Year 2)  FFO / Unit growth near $0.04 - $0.05  Average lease term

  15. Slide 15: OneREIT Transaction – In Effect Two Portfolios

    OneREIT Transaction – In Effect Two Portfolios A. Stability  99.5% leased  Walmart Supercentre anchored  Very strong national tenants / covenants  Coupon clipper B. Growth & Stability  90% leased  Redevelopment opportunity for part / all of each property  100,000 square feet of future retail

  16. Slide 16: Highlights of the Property Portfolio

    Highlights of the 12 Property Portfolio City Property Province Acquired GLA Leased Major Tenants and Features % (sf) % Walmart, Costco, Mississauga Creekside Crossing 30% 122,402 98% LCBO, Beer Store, RBC, TD, CIBC (New ON dominant urban retail centre) Chilliwack Safeway, Winners, Sport Chek (Strate

  17. Slide 17: Key Investment Highlights – SmartREIT's Key Growth Initiatives

    Key Investment Highlights – SmartREIT’s Key Growth Initiatives 1. Intensify and expand existing 31.9 million square feet of retail properties  Retail  Seniors Housing  Residential – condominium, rental and single family housing  Self Storage 2. Urban Development Properties 3. Toronto Premium Out

  18. Slide 18: SmartREIT Retail Intensification

    SmartREIT Retail Intensification  Multiple sites under investigation for intensification. Currently estimated 50+ sites have potential  Majority of initial sites in the Greater Toronto Area  Collaborate with JV partners who bring expertise  Can be both new builds or retrofit in existing building

  19. Slide 19: Major Mixed-Use Real Estate Initiatives

    Major Mixed-Use Real Estate Initiatives Estimated Costs ($M) Estimated Gain on Final Sale GLA ('000sf) SRU NOI at 100% NOI at SRU Completion Site Project Type / Units % Share 100% SRU Share ($M) Share ($M) Year Yield Profit % SRU Share Timing a. KPMG (T#1) Office 360sf 50% $180.0 $90.0 $10.2 $5.1 20

  20. Slide 20: SmartREIT's Urban Development Properties

    SmartREIT’s Urban Development Properties  Major urban developments in Toronto, Montreal and Ottawa  Linked to new transit infrastructure  Mixture of Office, Residential (condominium and rental) and Retail  Potential of in excess of 10 million square feet of development over time  Will involve e

  21. Slide 21: Vaughan Metropolitan Centre (VMC)

    Vaughan Metropolitan Centre (“VMC”)  A long term build (10 – 15 years)  A 50:50 JV between SmartREIT and Penguin Investments. Mitchell Goldhar intimately involved in all aspects of the project  Potential density of 16-17 million square feet of residential, office and retail development for the wh

  22. Slide 22: VMC – Aerial

    VMC – Aerial Aerial Overview SMART REAL ESTATE INVESTMENT TRUST 22

  23. Slide 23: VMC – Aerial

    VMC – Aerial Transit Overview SMART REAL ESTATE INVESTMENT TRUST 23

  24. Slide 24: VMC – Phases I & II of Office Development

    VMC – Phases 1 & 2 of Office Development  First development completed – KPMG Tower complex with 365,000 square feet of LEED Gold space, opened in 2016  16th Annual Real Estate Excellence (REX) Award for Office Development of the Year for the GTA  Office tenants include KPMG, Green for Life, Mille

  25. Slide 25: VMC – KPMG Tower Lobby

    VMC – KPMG Tower Lobby SMART REAL ESTATE INVESTMENT TRUST 25

  26. Slide 26: VMC – Transit City Condos

    VMC – Transit City Condos SMART REAL ESTATE INVESTMENT TRUST 26

  27. Slide 27: VMC – PwC-YMCA Tower

    VMC – PwC-YMCA Tower SMART REAL ESTATE INVESTMENT TRUST 27

  28. Slide 28: SmartCentres VMC Central Park

    SmartCentres VMC Central Park SMART REAL ESTATE INVESTMENT TRUST 28

  29. Slide 29: VMC – Residential Development

    VMC – Residential Development  First residential development is a JV with CentreCourt Developments, an experienced GTA-based condominium developer  Initial plan was for a 55 storey condominium tower with over 500 suites, anchored by a BUCA-branded restaurant and BAR BUCA, together with an associat

  30. Slide 30: VMC – Major Construction Projects in Vicinity

    VMC – Major Construction Projects in Vicinity (2) (1) (3) (1) Liberty office and residential development at Weston Road and Hwy 7 (2) KPMG Tower at VMC (3) Cortellucci residential development at Jane Street and Hwy 7 SMART REAL ESTATE INVESTMENT TRUST 30

  31. Slide 31: Vaughan NW – Residential Development

    Vaughan NW – Residential Development  Existing Walmart anchored shopping centre at Major Mackenzie Drive and Weston Road in Vaughan  JV with Fieldgate on 16-acre site  Up to 230 freehold townhomes to be built  Construction to commence in 2018 and possession to occur in 2019 and 2020  Significan

  32. Slide 32: Vaughan NW – Residential Development

    Vaughan NW – Residential Development SMART REAL ESTATE INVESTMENT TRUST 32

  33. Slide 33: Laval Centre

    Laval Centre  Lands designated by City as “Centre-Ville”, due to highway and transit access  43 acre site anchored by a 160,000 square foot Walmart Supercentre  Parcels of land under contract for seniors housing, hotel and office development of 400,000 square feet  JV for 290,000 square feet of

  34. Slide 34: Laval Centre with Jadco

    Laval Centre with Jadco SMART REAL ESTATE INVESTMENT TRUST 34

  35. Slide 35: Westside Mall Toronto

    Westside Mall Toronto  Inner urban redevelopment site. Currently an approximate 140,000 square foot shopping centre  New Light Rapit Transit (LRT) station as part of Eglinton Cross Town system to open on site  New links to existing GO network will link new East:West to existing North:South transi

  36. Slide 36: Westside Mall Toronto

    Westside Mall Toronto SMART REAL ESTATE INVESTMENT TRUST 36

  37. Slide 37: 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 Penguin Investments intend to revitalize the centre, adding new film production, office, and retail opportunities 

  38. Slide 38: StudioCentre

    StudioCentre Architect’s rendering of potential new site layout SMART REAL ESTATE INVESTMENT TRUST 38

  39. Slide 39: Self Storage

    Self Storage  Identified business opportunity to build self storage properties based on market demand with established JV partner  Buildings on average 100,000 square feet to 130,000 square feet  Development yield expected to be 7.5% to 8.5%  Additional returns from sale of land into the JV  5

  40. Slide 40: Self Storage with SmartStop

    Self Storage with SmartStop SMART REAL ESTATE INVESTMENT TRUST 40

  41. Slide 41: Premium Outlets

    Premium Outlets  Toronto Premium Outlets  JV with Simon Property Group  500,000 square feet when all phases are completed  Phase I opened August 1, 2013  Phase II construction – Underway with new parking facility as part of expansion  Stabilized yield continues to be in the double digits  Mon

  42. Slide 42: Premium Outlets

    Premium Outlets SMART REAL ESTATE INVESTMENT TRUST 42

  43. Slide 43: Toronto Premium Outlets – Expansion

    Toronto Premium Outlets (“TPO”) – Expansion SMART REAL ESTATE INVESTMENT TRUST 43

  44. Slide 44: TPO Expansion – Construction of Parking Deck

    TPO Expansion – Construction of Parking Deck SMART REAL ESTATE INVESTMENT TRUST 44

  45. Slide 45: Key Investment Highlights – Our Balance Sheet Will Support Extensive Asset Growth

    Key Investment Highlights – Our Balance Sheet Will Support Extensive Asset Growth  Unencumbered pool at $2.9 billion = flexibility  Ready access to mortgage and unsecured debt capital when needed = strong liquidity  Key ratios improving  Payout ratio at 77.3% in Q2 2017, leading to the announced

  46. Slide 46: Debt Maturity / Leverage

    Debt Maturity / Leverage Debt Maturity (in millions of $) 4.6% 4.2% 4.3% 4.1% 3.8% 160 3.4% 3.6% 3.4% 3.4% 3.2% 0 0 2.7% 300 150 200 150 100 250 0 142 325 307 123 139 259 146 85 328 63 48 2017* 2018 2019 2020 2021 2022 2023 2024 2025 2026 Thereafter Secured Debt Unsecured Debentures Average Int. Rat

  47. Slide 47: Leverage Profile

    Leverage Profile Dec. 31 Dec. 31 Dec. 31 Jun. 30 2014 2015 2016 2017 Debt to Aggregate Assets 42.8% 44.7%(1) 44.3% 43.9% Secured Debt to Aggregate Assets 24.7% 31.2%(2) 29.5% 27.6% Unencumbered Assets $2.4B $2.5B $2.7B $2.9B Debt to Adjusted EBITDA 7.4X 8.4X(1) 8.4X 8.4X Interest Coverage 2.7X 3.0X

  48. Slide 48: Conservative Capital Structure

    Conservative Capital Structure  Total Enterprise Value – $8.6 Billion Secured Mortgage Financing 27.9% Amount - $2.4 billion Weighted Avg Interest Rate – 3.76% Weighted Avg Term to Maturity – 4.8 years Unsecured Debentures Focused on: 15.2% Amount - $1.31 billion Weighted Avg Interest Rate – 2.88%

  49. Slide 49: Stable Cash Flow – AFFO Payout Ratio

    Stable Cash Flow AFFO Payout Ratio 90.3% 88.6% 84.7% 81.1% 79.8% 77.3% 2012 2013 2014 2015 2016 Q2 2017 ($ per unit) FFO 1.79 1.85 1.95 2.10 2.23* 1.10** AFFO 1.71 1.75 1.84 1.99 2.10* 1.05** Distributions 1.55 1.55 1.56 1.61 1.66 0.85** * includes $9.9 million settlement proceeds associated with th

  50. Slide 50: Key Investment Highlights – Quality of Development Capability

    Key Investment Highlights – Quality of Development Capability Can Be a Differentiator  Significant involvement from Mitchell Goldhar on all key projects  Very experienced development team  Close to 200 shopping centre developments over last 20 years  Up to 50 million square feet built  Growing

  51. Slide 51: Development, Design & Construction Teams

    Development, Design & Construction Teams Huw Thomas Chief Executive Officer Peter Forde President & Chief Operating Officer 18 Years Mauro Pambianchi Chief Development Officer 16 Years EVP, Portfolio SVP, Portfolio SVP, Design & EVP, Portfolio VP, Land VP, Development Leader Leader Construction Lead

  52. Slide 52: 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

  53. Slide 53: E-commerce Response – Penguin Pick-Up

    E-commerce Response – Penguin Pick-Up Penguin Pick-Up located at Scarborough (1900 Eglinton) SmartCentre SMART REAL ESTATE INVESTMENT TRUST 53

  54. Slide 54: E-commerce Responses

    E-commerce Responses  Penguin Pick-Up:  Initiative driven by Penguin Investments  Convenient locations for consumers to pick up products ordered online  Drives traffic to shopping centres and supports tenants  11 SmartREIT locations in place for the initiative at year-end, along with 57 externa

  55. Slide 55: 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

  56. Slide 56: Appendix

    Appendix SMART REAL ESTATE INVESTMENT TRUST 56

  57. Slide 57: Strategic Relationships

    Strategic Relationships  Walmart  Mitchell Goldhar  Simon Property Group  CentreCourt Developments  Jadco Corporation  SmartStop Asset Management SMART REAL ESTATE INVESTMENT TRUST 57

  58. Slide 58: Strategic Relationship - Walmart Canada

    Strategic Relationship - Walmart Canada  Walmart Canada Number of Walmart Stores attributes  Value pricing and fresh food generates huge traffic 227 301 Other Shadow  Dominant retailer SmartREIT 13 14  Has benefited from the 90 95 closure of Target Supercentres Total Walmart (330)* Stores (410)*

  59. Slide 59: 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

  60. Slide 60: 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 provides strong tenant base for

  61. Slide 61: Strategic Relationship – CentreCourt Developments

    Strategic Relationship – CentreCourt Developments  Leader in the development of high-rise condominiums in downtown Toronto  Since 2011, CentreCourt has completed and/or is in various stages of developing over 3,000 condominium units in six major high-rise projects with a development value of over

  62. Slide 62: Strategic Relationship – Jadco Corporation

    Strategic Relationship – Jadco Corporation  Well reputed family-owned business  Has gained a strong foothold in the real estate sector in the Greater Montreal Area  Strengths lie in its commitment to excellence in building exceptional living and mixed-used environments  Diversified portfolio com

  63. Slide 63: Strategic Relationship – SmartStop Asset Management

    Strategic Relationship – SmartStop Asset Management  Diversified real estate company focused on self storage assets, along with student and senior housing  Portfolio currently includes 65,000 self storage units, 7.5 million rentable square feet and $1 billion of real estate assets under management

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