Riocan Real Estate Investment Trust · TSX:REI.UN
Riocan Real Estate Investment Trust — Q1 2023 Earnings Presentation
53 slides from Riocan Real Estate Investment Trust's earnings presentation, May 11, 2023
Slide 1: Quality and Growth - First Quarter 2023 Investor Presentation
QUALITY AND GROWTH MAY 10, 2023 FIRST 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 97.4% occupancy 191 properties (1) 33M Sq. Ft. aggregate net leasable area 14M Sq. Ft. VANCOUVER pipeline 5 assets 1.4M sq.ft.(2) 6.0% (3) zoned for development BBB CALGARY 15 assets MONTREAL 17 assets 1.8M sq.ft. (2) 3.5M sq.ft. (2) investment grade credit 11.8%(3) EDMO
Slide 4: High-quality portfolio: strong performance, Q1 2023 results
High-quality portfolio STRONG PERFORMANCE – Q1 2023 RESULTS $0.44 $173.2M FUNDS FROM OPERATING INCOME OPERATIONS (“FFO”) PER UNIT (1) $118.0M 3.4% NET SAME PROPERTY NET INCOME OPERATING INCOME ("SPNOI") GROWTH (1) 59.3% $42.1M FFO PAYOUT CAPITAL RECYCLING ACTIVITY RATIO (1) At a weighted avg. cap ra
Slide 5: Our objective: Deliver long-term Unitholder value
Our objective: Deliver long-term Unitholder value 5-Year Targets (2022 - 2026, inclusive) Resilient 1 retail 4 - 5% (1) 5 - 7% (2) 10 - 12% (3) Intelligent 2 diversification Distribution FFO Total yield growth Unitholder 3 Customer centrism RESILIENT INCOME SPNOI GROWTH return DEVELOPMENT 4 Responsi
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 omni-channel experience combines ◦ Housing demand outstripping supply in estate sector online and physical spaces as major markets, p
Slide 8: Confidence in strength of portfolio
Confidence in strength of portfolio ON TRACK TO ACHIEVE ANNUAL GUIDANCE Q1 2023 FY 2023 ACTUAL TARGET SPNOI growth 3.4% 3% FFO per unit $0.44 $1.77 to $1.80 FFO payout ratio 59.3% 55% to 65% Development Spending $88M $400M to $450M * Represent non-GAAP measures RIOCAN | INVESTOR PRESENTATION ( First
Slide 9: Executing from a position of strength
Executing from a position of strength RIOCAN | INVESTOR PRESENTATION ( First 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 Q1 2023 RioCan Peer Average (includes CRR, CRT, FCR and SRU) 1) Major market exposure not widely disclosed in 2017 Source: Most recent p
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 250,000 $135,000 $102,000 154,000 62% 32% 2017 2022 2017 2022 Source: DemoStats - 2022 - Trends, 2022 Environics Analytics RIOCAN | INVESTOR PRESENTATION ( Firs
Slide 12: Dominant Core Toronto position
Dominant Core Toronto position 6.5M SQ. FT. OF OPERATING ASSETS, WITH AN ADDITIONAL 3.8M SQ. FT OF ZONED DENSITY NLA in Metropolitan Toronto (in millions of sq. ft.)* RioCan properties within Metropolitan Toronto RioCan First Capital Choice Properties SmartCentres CT Crombie — 5.0 10.0 * NLA include
Slide 13: High quality, necessity-based retail revenue
High quality, necessity-based retail revenue 97.4% 86.8% Property committed occupancy (2) strong and stable tenants (3) Type (1) z 57.2% 29.7% • Retail: 87.7% grocery anchored mixed-use / • Office: 9.1% centres (5) urban (4) (5) • Residential Rental: 3.2% 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 PATTERNS 19.3% 14.1% 11.6% 10.7% Grocery / Essential Specialty Value Pharmacy / Personal Retailers Retailers Liquor Services 10.3% 8.1% 7.8% 7.2% 5.8% 5.0% 0.1% Experiential (1) Other Furni
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% 91.2% 86.7% 83.8% 12.3% $20.16 $20.98 $21.13 9.4% $19.75 $19.80 9.0% 6.3% 5.0% 2019 2020 2021 2022 Q1 2023 2019 2020 2021 2022 Q1 20
Slide 16: Positive trends in occupancy
Positive trends in occupancy EXCEEDS PRE-PANDEMIC LEVELS AS RESILIENT TENANTS CONTINUE TO SEEK QUALITY SPACE 97.9% 98.0% 97.2% 97.2% 97.4% 97.4% 97.2% 96.7% 96.8% 96.8% 96.1% 96.3% 96.1% 95.7% 94.9% 2019 2020 2021 2022 Q1 2023 Committed Portfolio Committed Retail In-place Portfolio RIOCAN | INVESTOR
Slide 17: Robust portfolio fundamentals
Robust portfolio fundamentals DELIVER STRONG FINANCIAL PERFORMANCE FFO per Unit SPNOI Growth $0.44 $0.44 4.1% $0.42 $0.42 3.4% (1) (1) $0.42 $0.43 Q1 2022 Q1 2023 Q1 2022 Q1 2023 (1) (1) FFO/unit FFO Adjusted/unit Core FFO/unit 1) Represents a non-GAAP measure. RIOCAN | INVESTOR PRESENTATION ( First
Slide 18: Active development fueling long-term growth
Active development fueling long-term growth RIOCAN | INVESTOR PRESENTATION ( First Quarter 2023) | 18
Slide 19: Development pipeline offers compelling opportunities
Development Development relevant image pipeline offers compelling opportunities % ~ % 100 84 located in located in Canada’s six major markets the GTA ~ % ~ % 88 72 are residential located on developments transit route *% of total GFA at RioCan’s interest RIOCAN | INVESTOR PRESENTATION ( First Quarte
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 Peer Average: 6% 42 41 (1) (1) 15% 10% 25 7
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 41.8M SQ FT DEVELOPMENT PIPELINE Zoning application Zoning Shovel Underway (1) submitted approved (1) ready (1) 8.2M SQ FT 10.5M SQ SQ FT 1.5M SQ FT 1.9M FT 19.7M SQ FT Fut
Slide 23: Development pipeline drives intelligent diversification
Development pipeline drives intelligent diversification DIVERSIFICATION OF CASH FLOWS AND ENHANCED INCOME GROWTH POTENTIAL Active Development 13.9M SQ FT Residential Rental Condominium / Townhouse Retail Office Zoned 48% 33% 16% 3% * GFA at RioCan’s interest RIOCAN | INVESTOR PRESENTATION ( First Qu
Slide 24: 2,219 residential rental units in operations
2,219 Residential rental units in operations (1) CRYSTALLIZING VALUE WITH AN ADVANCED DEVELOPMENT PROGRAM 10 Completed Rental Buildings since 2019 eCentral Frontier Brio Pivot Litho 2019 2020 2021 Rhythm Luma Latitude Strada Market 2022 1) Residential units at 100% ownership interest RIOCAN | INVEST
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 rate yield yield Frontier – Ottawa, ON Latitude – Ottawa, ON (1) (2) % 3.7 % 4.2 4.
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 ( First Quarter 2023) | 27
Slide 28: Disciplined capital allocation framework
Disciplined capital allocation framework SUPPORTS SELF-FUNDED DEVELOPMENT PIPELINE Trailing twelve months ended March 31, 2023 Other inflows (1), $66M Acquisitions & other (3), $112M Capital recycling, Unit buybacks, $204M $392M Development spend, Debt issuance, $101M $382M Changes in WC(2),$30M Cha
Slide 29: Lowest payout ratio helps fund development
Lowest payout ratio helps fund development ATTRACTIVE YIELD WHILE FUNDING INDUSTRY LEADING GROWTH (1) (2) 2023 FFO Payout Ratio Attractive distribution yield Peer Average: 76% Peer Average:5.9% @ peer avg. 7.2% 86% payout ratio 6.5% 74% 75% 76% 5.8% 5.8% 5.7% 69% 5.2% 61% 5.3% RioCan CT Crombie Firs
Slide 30: Capital Structure
Capital Structure Enterprise Value $13.2B Interest As at Q1 2023 Rate (1) Mortgages Payable $2.9B 3.4% 25% Secured Construction Lines $0.3B 6.0% Total Secured Debt (2) (3) $3.2B 3.7% Unsecured Debentures $3.2B 3.2% Non-Revolving Unsecured Credit Facilities $0.7B 4.0% 29% Total Unsecured Debt (2) (3)
Slide 31: Disciplined and prudent balance sheet management
Disciplined and prudent balance sheet management CAPITAL STRUCTURE METRICS 5-YEAR TARGET March 31, 2023 (2022 - 2026, inclusive) Excluding Adjusted Debt to Adjusted EBITDA (1) (2) 8.0x – 9.0x 9.48x development: 7.4x Ratio of Unsecured vs. Secured Debt (1) (2) 70% / 30% 54% / 46% Weighted average to
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 Redemption of $200 million series T Debenture in April 2023 1,500 Refinanced $200M of non-revolving credit facility to February 1,250 200 2025 with an option to extend to January 3
Slide 33: Driving long-term value through a dedicated ESG program
Driving long-term value through a dedicated ESG program RIOCAN | INVESTOR PRESENTATION ( First Quarter 2023) | 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 MSCI ESG Rating Upgrade GRESB 2022 Real Estate Awarded to Canadian employers that lead Rating upgrade to 'A" driven by governance Assessment - Standing Investments the
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 (First 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 &
Slide 39: Retailers continue to expand their physical footprint
Retailers continue to expand their physical footprint “We will invest more than $2 billion into the economy, creating thousands Galen Weston, Executive Chairman, President & CEO, of jobs, adding discount supermarkets in underserved regions, expanding Loblaw Companies Limited, our TNT supermarket cha
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- ~17Sq. located retailFt. well over market 0.7% 0.9% 1.0% 0.6% values, supply constraints are 1.3% expected to persist In Million
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 - large scale projects
APPENDIX Focus Five - large scale projects * GFA is square footage at RioCan's interest and number of residential units are at 100% interest RIOCAN RIOCAN | INVESTOR | INVESTOR PRESENTATION PRESENTATION (First (March Quarter 2022) 2023) | 43
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: 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 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 BETWEEN 2023 AND 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)
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 ( First Quarter 2023) | 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 ( First Quarter 2023)
RioCan Real Estate Investment Trust — Q1 2023 Earnings Presentation on 6ix