RioCan Reports Second Quarter 2023 Results With Strong Core Business and Development Deliveries Driving Growth in FFO per unit

RioCan Reports Second Quarter 2023 Results With Strong Core Business and Development Deliveries Driving Growth in FFO per unit

Article content

  • Solid Property Fundamentals with Retail Occupancy of 98.0% and New Leasing Spread of 11.3%
  • Achieved zoning for 2.0 million square feet at RioCan Scarborough Centre in Toronto’s Golden Mile

TORONTO — August 1, 2023–RioCan Real Estate Investment Trust (“RioCan” or the “Trust”) (TSX: REI.UN) announced today its financial results for the three and six months ended June 30, 2023 (the “Second Quarter”).

“RioCan reported another quarter of operational excellence. Our quality portfolio maintained high occupancy and drove strong leasing spreads while our development completions continued to deliver new and diversified income,” said Jonathan Gitlin, President and CEO of RioCan. “The consistent strength of our operating results are evidence that our business is set up to succeed in any environment. The RioCan team remains focused on delivering growing and sustainable value for the long-term while we pro-actively manage risk and improve our balance sheet.”

Article content

Advertisement 2

Story continues below

Article content

Financial Highlights

Three months ended June 30

Six months ended June 30

(in millions, except where otherwise noted, and per unit values)

2023

2022

2023

2022

FFO 1

$

131.6

$

131.7

$

263.0

$

262.2

FFO per unit – diluted 1

$

0.44

$

0.43

$

0.88

$

0.85

Net income

$

112.0

$

78.5

$

230.0

$

238.5

Weighted average Units outstanding – diluted (in thousands)

300,500

308,537

300,524

309,324

As at

June 30, 2023

December 31, 2022

Net book value per unit

$

26.00

$

25.73

1.

A non-GAAP measurement. For definitions, reconciliations and the basis of presentation of RioCan’s non-GAAP measures, refer to the Basis of Presentation and Non-GAAP Measures section in this News Release.

FFO per Unit and Net Income

  • FFO per unit for the Second Quarter was $0.44, $0.01 per unit higher than the same period last year.
    • Same Property NOI1 growth of 5.2% contributed a $0.03 increase in FFO per unit.
    • FFO from completed developments and residential rental ramp up drove FFO per unit higher by $0.02.
    • Higher interest expense, net of higher interest income, decreased FFO per unit by $0.02.
    • The reduction in FFO per unit from properties sold was partially offset by accretion from prior year unit buybacks, resulting in a net reduction of $0.01 per unit.
    • A number of other items combined for a net reduction of $0.01 in FFO per unit, including lower residential inventory gains, due to timing, and lower lease cancellation fees, partially offset by lower restructuring expenses and higher income from equity-accounted investments.
  • Net income for the Second Quarter of $112.0 million exceeded the comparable period last year by $33.5 million, an increase of 42.7%, mainly due to lower fair value losses on investment properties in the current quarter.
  • Our FFO Payout Ratio1 of 59.7%, Liquidity1 of $1.7 billion, Unencumbered Asset1 pool of $8.6 billion, floating rate debt at 6.6%1 of total debt and staggered debt maturities, all contribute to our financial flexibility and balance sheet strength.
  • For 2023, we anticipate FFO per unit to be within the range of $1.77 to $1.80, SPNOI growth of 3%, and an FFO Payout Ratio of between 55% to 65%. Development Spending1 is expected to be between $400 million to $450 million.

1.

A non-GAAP measurement. For definitions, reconciliations and the basis of presentation of RioCan’s non-GAAP measures, refer to the Basis of Presentation and Non-GAAP Measures section in this News Release.

Advertisement 3

Story continues below

Article content

Operation Highlights

Three months ended June 30

Six months ended June 30

2023

2022

2023

2022

Operation Highlights (i)

Occupancy – committed (ii)

97.4

%

97.2

%

97.4

%

97.2

%

Retail occupancy – committed (ii)

98.0

%

97.6

%

98.0

%

97.6

%

Blended leasing spread

9.0

%

10.5

%

10.3

%

9.8

%

New leasing spread

11.3

%

6.8

%

12.5

%

11.1

%

Renewal leasing spread

8.2

%

11.2

%

9.6

%

9.3

%

(i)

Includes commercial portfolio only.

(ii)

Information presented as at respective periods then ended.

  • In the context of strong fundamentals for our necessity-based retail portfolio, our team continued to deliver solid operating results in the Second Quarter. Same Property NOI grew by 5.2%, driven by increases in rent growth from contractual rent steps, rent upon renewal and a recovery of past pandemic-related provisions.
  • A strong blended leasing spread of 9.0% resulted from new and renewal leasing spreads of 11.3% and 8.2%, respectively. Excluding fixed-rate renewals, the blended leasing spread would be 9.8% for the quarter and 11.1% for the year-to-date.
  • Average net rent per occupied square foot of $21.34 improved 4.7% over the same period last year while new leasing in the Second Quarter generated average net rent per square foot of $26.90.
  • Retail committed occupancy remained steady at 98.0%. In-place retail occupancy of 96.9% declined 40 basis points sequentially driven by temporary vacant units transitioning to new committed tenants taking physical occupancy in the coming quarters. We continue to improve quality of the tenant base with strong and stable tenants comprising 87.3% of annualized net rent, an increase of 50 basis points compared to the prior quarter.

RioCan Living Update 1

  • As at August 1, 2023, 11 of the 12 RioCan LivingTM buildings in operation are stabilized and are 99.0% leased. Total NOI generated from our residential rental operations for the Second Quarter was $5.1 million, an increase of $1.7 million or 50.8% over the same period last year. An increase of approximately 9% in average monthly rent per occupied square foot on a same property basis contributed to the year-over-year improvement.
  • Approximately 20% of the 592 rental residential units at FourFifty The WellTM are pre-leased as of August 1, 2023, at rates in-line with or above expectations. Pre-leasing commenced in March 2023 in anticipation of the phased completion beginning in August 2023 and continuing through to early 2024.
  • As of June 30, 2023, 2,575 condominium and townhouse units are under construction and are expected to generate combined sales revenue of over $860.0 million between 2023 and 2026 that can be redeployed to fund our development pipeline. Of RioCan’s six active condominium construction projects, 86% of the total units have been pre-sold, representing 96% of pro-forma total revenues. There were no residential inventory gains recognized during the first half of the year due to the timing of condominium/townhouse sales. We expect residential inventory gains in the second half of the year.

Article content

Advertisement 4

Story continues below

Article content

1.

Units at 100% ownership interest.

Development Highlights

Three months ended June 30

Six months ended June 30

(in millions except square feet)

2023

2022

2023

2022

Development Highlights

Development Completions – sq. ft. in thousands (i)

110.0

69.0

176.0

214.0

Development Spending

$

103.0

$

139.6

$

191.3

$

231.5

Development Projects Under Construction – sq. ft. in thousands (ii)

1,850.0

2,320.0

1,850.0

2,320.0

(i)

At RioCan’s ownership. Represents net leasable area (NLA) of property under development completions. Excludes NLA of residential inventory completions.

(ii)

Information presented as at the respective periods then ended, includes properties under development and residential inventory, equity-accounted joint ventures and represents gross floor area of the respective projects.

  • In the quarter, 110,000 square feet of NLA was completed, comprised mainly of commercial space at The WellTM. For the full year, we expect to complete 640,900 square feet of development, which we expect to contribute $25.6 million of stabilized NOI that will ramp up over the course of 2023 and 2024.
  • As at August 1, 2023, approximately 1,229,000 square feet (at 100% ownership interest) of commercial space at The Well is in tenant possession with approximately 95% of the total commercial space leased. The retail component is 87% leased, as compared with 82% as at our prior quarterly release, with another 7% in late stage negotiations. The retail at The Well has been physically opening in phases and the majority of tenants are expected to be open by November 2023.
  • During the Second Quarter, zoning was achieved for 2.0 million square feet for the first two phases at RioCan Scarborough Centre (Golden Mile) in Toronto, a Focus Five site and one of the premier development corridors in Toronto. Later phases of this site, an additional 2.3 million square feet, are expected to be zoned in the future. Completion of zoning is a significant value creation step. We will continue to exercise discipline as it relates to the commencement of physical construction.
  • RioCan continues to revisit zoning applications to optimize density and use in order to improve project economics. We successfully amended zoning for 11YV during the quarter, resulting in an incremental three floors and expanding density to a site already underway.
  • The 15.9 million of zoned square footage includes 1.9 million square feet of projects under construction and 1.5 million square feet of shovel ready projects, which can be commenced or delayed at RioCan’s discretion.
See also  Jobs Report Suggests Fed Pause, iCapital's Amoroso Says

Advertisement 5

Story continues below

Article content

Investing and Capital Recycling

  • As of August 1, 2023, closed, firm or conditional dispositions totalled $302.3 million.
  • Firm dispositions include a non-grocery anchored Open Air Centre in Surrey, B.C., at a capitalization rate of 4.99%, which is expected to close in December 2023.
  • Closed dispositions for the first half of 2023 were $67.2 million at a weighted average capitalization rate of 7.69%, including the sale of non-core assets located in Calgary, Alberta and Orillia, Ontario, consistent with our strategy to improve portfolio quality.
  • Year to date, Total Acquisitions1 were $104.9 million.
  • Total Acquisitions in the Second Quarter included three phases of Bellevue, a residential rental complex in Montreal, Quebec for a gross purchase price of $55.3 million. As part of this purchase, RioCan assumed $42.2 million of pre-existing contractual debt at a blended contractual interest rate of 2.64% and remaining weighted average term to maturity of 8.4 years. The acquisition included 124 income producing units and an adjacent parcel of vacant land for future development. We agreed to acquire an additional 60 units, which are under construction, upon satisfaction of certain conditions.
  • The remaining acquisitions related to land assembly activity and retail pads at an existing property.

1.

A non-GAAP measurement. For definitions, reconciliations and the basis of presentation of RioCan’s non-GAAP measures, refer to the Basis of Presentation and Non-GAAP Measures section in this News Release.

Capital Management Update

  • On April 18, 2023, RioCan redeemed, in full, its $200.0 million, 3.725% Series T unsecured debentures upon maturity.
  • On June 26, 2023, RioCan issued $300.0 million of Series AH senior unsecured debentures. These debentures were issued at a coupon rate of 5.962% per annum and will mature on October 1, 2029. Inclusive of the benefit of bond forward hedges, the all-in rate is 5.284%.
  • Over the last 12 months, the Trust has settled a total of $1.0 billion of bond forward contracts, for total realized gains of $57.3 million, which resulted in a weighted average interest rate reduction of 84 basis points or a weighted average hedged interest rate of 4.45% for $1.0 billion of debt with a weighted average term of 6.3 years.
  • On May 4, 2023, the Trust extended the maturity on its operating line of credit by a year to May 31, 2028. All other terms and conditions remain the same.
  • Subsequent to quarter end, we closed a $15.0 million, at our share, CMHC mortgage with a 4.29% fixed rate and a 10- year term relating to our StradaTM residential rental property.
  • In addition to the bond forward hedging, the Trust’s limited exposure to floating rate debt at 6.6% of total debt, serves to mitigate short-term interest rate volatility. Floating rate exposure increased sequentially, from 5.4% at the end of the first quarter of 2023, due to draws on our corporate revolving line of credit, which will fluctuate based on cash needs and timing of other financing activities. Excluding the balance of the revolving unsecured operating line of credit as at June 30, 2023, the majority of which was paid down subsequent to quarter end using proceeds from the Series AH debentures, the Ratio of floating rate debt to total debt1 is 3.6%.

Advertisement 6

Story continues below

Article content

1.

A non-GAAP measurement. For definitions, reconciliations and the basis of presentation of RioCan’s non-GAAP measures, refer to the Basis of Presentation and Non-GAAP Measures section in this News Release.

Balance Sheet Strength

(in millions except percentages)

As at

June 30, 2023

December 31, 2022

Balance Sheet Strength Highlights

Liquidity (i) 1

$

1,666

$

1,548

Adjusted Debt to Adjusted EBITDA (i) 1

9.49x

9.51x

Total Adjusted Debt to Total Adjusted Assets (i) 1

45.6%

45.2%

Unencumbered Assets (i) 1

$

8,631

$

8,257

Unencumbered Assets to Unsecured Debt (i) 1

207%

218%

(i)

At RioCan’s proportionate share.

  • As at June 30, 2023, the Trust had $1.7 billion of Liquidity in the form of a $1.0 billion undrawn revolving line of credit, $0.4 billion undrawn construction lines and other bank loans and $0.3 billion cash and cash equivalents.
  • Pursuant to the terms of its credit agreement, the Trust has an option to increase the commitment under its revolving line of credit by $250 million.
  • RioCan’s unencumbered asset pool of $8.6 billion, which can be used to obtain secured financing to provide additional liquidity at lower interest rates than unsecured debt, generated 58.1% of Annual Normalized NOI1 and provided 2.07x coverage over Unsecured Debt1. Subsequent to quarter end, the revolving line of credit was repaid with cash proceeds from the Series AH debenture, improving the coverage over Unsecured Debt to 2.18x. When compared to Q1 2023, Unencumbered Assets increased by $356.1 million mainly from the repayment of mortgages payable.
  • Adjusted Debt to Adjusted EBITDA was 9.49x on a proportionate share basis, as at June 30, 2023, compared to 9.51x as at the end of 2022. The decrease was primarily due to higher Adjusted EBITDA, partially offset by higher Average Total Adjusted Debt balances.

1.

A non-GAAP measurement. For definitions, reconciliations and the basis of presentation of RioCan’s non-GAAP measures, refer to the Basis of Presentation and Non-GAAP Measures section in this News Release.

Conference Call and Webcast

Interested parties are invited to participate in a conference call with management on Wednesday, August 2, 2023 at 10:00 a.m. (ET). Participants will be required to identify themselves and the organization on whose behalf they are participating.

To access the conference call, click on the following link to register at least 10 minutes prior to the scheduled start of the call: Pre-registration link. Participants who pre-register at any time prior to the call will receive an email with dial-in credentials including a login passcode and PIN to gain immediate access to the live call. Those that are unable to pre-register may dial-in for operator assistance by calling 1-833-950-0062 and entering the access code: 836769.

Advertisement 7

Story continues below

Article content

For those unable to participate in the live mode, a replay will be available at 1-866-813-9403 with access code: 976025.

To access the simultaneous webcast, visit RioCan’s website at Events and Presentations and click on the link for the webcast.

About RioCan

RioCan is one of Canada’s largest real estate investment trusts. RioCan owns, manages and develops retail-focused, increasingly mixed-use properties located in prime, high-density transit-oriented areas where Canadians want to shop, live and work. As at June 30, 2023, our portfolio is comprised of 193 properties with an aggregate net leasable area of approximately 33.5 million square feet (at RioCan’s interest) including office, residential rental and 11 development properties. To learn more about us, please visit www.riocan.com.

Basis of Presentation and Non-GAAP Measures

All figures included in this News Release are expressed in Canadian dollars unless otherwise noted. RioCan’s unaudited interim condensed consolidated financial statements (“Condensed Consolidated Financial Statements”) are prepared in accordance with International Financial Reporting Standards (IFRS). Financial information included within this News Release does not contain all disclosures required by IFRS, and accordingly should be read in conjunction with the Trust’s Condensed Consolidated Financial Statements and MD&A for the three and six months ended June 30, 2023, which are available on RioCan’s website at www.riocan.com and on SEDAR at www.sedar.com.

Consistent with RioCan’s management framework, management uses certain financial measures to assess RioCan’s financial performance, which are not in accordance with generally accepted accounting principles (GAAP) under IFRS. Funds From Operations (“FFO”), FFO per unit, Net Operating Income (“NOI”), Same Property NOI, Development Spending, Total Acquisitions, Ratio of floating rate debt to total debt, Liquidity, Adjusted Debt to Adjusted EBITDA, Total Adjusted Debt to Total Adjusted Assets, RioCan’s Proportionate Share, Unencumbered Assets to Unsecured Debt and Percentage of Normalized NOI Generated from Unencumbered Assets, as well as other measures that may be discussed elsewhere in this News Release, do not have a standardized definition prescribed by IFRS and are, therefore, unlikely to be comparable to similar measures presented by other reporting issuers. RioCan supplements its IFRS measures with these Non-GAAP measures to aid in assessing the Trust’s underlying performance and reports these additional measures so that investors may do the same. Non-GAAP measures should not be considered as alternatives to net income or comparable metrics determined in accordance with IFRS as indicators of RioCan’s performance, liquidity, cash flow, and profitability. For full definitions of these measures, please refer to the “Non-GAAP Measures section in RioCan’s MD&A for the three and six months ended June 30, 2023.

See also  Allianz Increases Revenues by 4.5 % to 36.5 Billion Euros

Advertisement 8

Story continues below

Article content

The reconciliations for non-GAAP measures included in this News Release are outlined as follows:

RioCan’s Proportionate Share

The following table reconciles the consolidated balance sheets from IFRS to RioCan’s proportionate share basis as at June 30, 2023 and December 31, 2022:

As at

June 30, 2023

December 31, 2022

(in thousands of dollars)

IFRS basis

Equity-

accounted investments

RioCan’s proportionate share

IFRS basis

Equity-

accounted investments

RioCan’s proportionate share

Assets

Investment properties

$

13,875,163

$

413,564

$

14,288,727

$

13,807,740

$

398,701

$

14,206,441

Equity-accounted investments

383,958

(383,958

)

364,892

(364,892

)

Mortgages and loans receivable

223,299

223,299

269,339

269,339

Residential inventory

327,596

238,732

566,328

272,005

214,536

486,541

Assets held for sale

155,000

155,000

42,140

42,140

Receivables and other assets

304,488

43,619

348,107

259,514

37,779

297,293

Cash and cash equivalents

253,944

13,324

267,268

86,229

8,001

94,230

Total assets

$

15,523,448

$

325,281

$

15,848,729

$

15,101,859

$

294,125

$

15,395,984

Liabilities

Debentures payable

$

3,241,201

$

$

3,241,201

$

2,942,051

$

$

2,942,051

Mortgages payable

2,643,007

182,941

2,825,948

2,659,180

172,100

2,831,280

Lines of credit and other bank loans

1,202,628

102,723

1,305,351

1,141,112

89,187

1,230,299

Accounts payable and other liabilities

626,624

38,814

665,438

630,624

32,838

663,462

Total liabilities

$

7,713,460

$

324,478

$

8,037,938

$

7,372,967

$

294,125

$

7,667,092

Equity

Unitholders’ equity

7,809,988

803

7,810,791

7,728,892

7,728,892

Total liabilities and equity

$

15,523,448

$

325,281

$

15,848,729

$

15,101,859

$

294,125

$

15,395,984

The following tables reconcile the consolidated statements of income from IFRS to RioCan’s proportionate share basis for the three and six months ended June 30, 2023 and 2022:

Three months ended June 30, 2023

Three months ended June 30, 2022

(in thousands of dollars)

IFRS basis

Equity-

accounted investments

RioCan’s proportionate share

IFRS basis

Equity-

accounted investments

RioCan’s proportionate share

Revenue

Rental revenue

$

270,913

$

9,982

$

280,895

$

267,302

$

7,363

$

274,665

Residential inventory sales

517

517

35,005

35,005

Property management and other service fees

5,139

5,139

6,112

6,112

276,052

10,499

286,551

308,419

7,363

315,782

Operating costs

Rental operating costs

Recoverable under tenant leases

93,622

905

94,527

92,129

661

92,790

Non-recoverable costs

3,594

451

4,045

5,521

575

6,096

Residential inventory cost of sales

261

261

29,857

29,857

97,216

1,617

98,833

127,507

1,236

128,743

Operating income

178,836

8,882

187,718

180,912

6,127

187,039

Other income (loss)

Interest income

5,701

665

6,366

4,885

574

5,459

Income from equity-accounted investments

5,830

(5,830

)

1,165

(1,165

)

Fair value loss on investment properties, net

(10,594

)

(1,072

)

(11,666

)

(42,270

)

(3,476

)

(45,746

)

Investment and other income (loss)

1,657

123

1,780

(1,379

)

(149

)

(1,528

)

2,594

(6,114

)

(3,520

)

(37,599

)

(4,216

)

(41,815

)

Other expenses

Interest costs, net

49,974

2,724

52,698

43,659

1,807

45,466

General and administrative

14,846

20

14,866

16,400

16

16,416

Internal leasing costs

3,018

3,018

2,825

2,825

Transaction and other costs

1,594

24

1,618

1,517

88

1,605

69,432

2,768

72,200

64,401

1,911

66,312

Income before income taxes

$

111,998

$

$

111,998

$

78,912

$

$

78,912

Current income tax expense

31

31

452

452

Net income

$

111,967

$

$

111,967

$

78,460

$

$

78,460

Advertisement 9

Story continues below

Article content

Six months ended June 30, 2023

Six months ended June 30, 2022

(in thousands)

IFRS basis

Equity-

accounted investments

RioCan’s proportionate share

IFRS basis

Equity-

accounted investments

RioCan’s proportionate share

Revenue

Rental revenue

$

545,594

$

17,432

$

563,026

$

539,433

$

14,301

$

553,734

Residential inventory sales

2,880

2,880

50,974

936

51,910

Property management and other service fees

9,958

9,958

11,993

11,993

555,552

20,312

575,864

602,400

15,237

617,637

Operating costs

Rental operating costs

Recoverable under tenant leases

192,430

1,786

194,216

192,251

1,284

193,535

Non-recoverable costs

11,043

1,145

12,188

11,577

1,163

12,740

Residential inventory cost of sales

1,387

1,387

43,793

422

44,215

203,473

4,318

207,791

247,621

2,869

250,490

Operating income

352,079

15,994

368,073

354,779

12,368

367,147

Other income (loss)

Interest income

12,742

1,268

14,010

8,946

1,144

10,090

Income from equity-accounted investments

11,344

(11,344

)

5,255

(5,255

)

Fair value loss on investment properties, net

(27,959

)

(451

)

(28,410

)

(6,838

)

(4,266

)

(11,104

)

Investment and other income (loss)

4,544

(213

)

4,331

(1,563

)

(207

)

(1,770

)

671

(10,740

)

(10,069

)

5,800

(8,584

)

(2,784

)

Other expenses

Interest costs, net

97,957

5,218

103,175

85,425

3,648

89,073

General and administrative

30,464

31

30,495

27,863

31

27,894

Internal leasing costs

5,743

5,743

5,810

5,810

Transaction and other costs

1,982

5

1,987

2,692

105

2,797

136,146

5,254

141,400

121,790

3,784

125,574

Income before income taxes

$

216,604

$

$

216,604

$

238,789

$

$

238,789

Current income tax (recovery) expense

(13,367

)

(13,367

)

271

271

Net income

$

229,971

$

$

229,971

$

238,518

$

$

238,518

NOI and Same Property NOI

The following table reconciles operating income to NOI and Same Property NOI to NOI for the three and six months ended June 30, 2023 and 2022:

Three months ended June 30

Six months ended June 30

(thousands of dollars)

2023

2022

2023

2022

Operating Income

$

178,836

$

180,912

$

352,079

$

354,779

Adjusted for the following:

Property management and other service fees

(5,139

)

(6,112

)

(9,958

)

(11,993

)

Residential inventory gains

(5,148

)

(7,181

)

Operational lease revenue from ROU assets

1,571

1,386

3,428

2,731

NOI

$

175,268

$

171,038

$

345,549

$

338,336

Three months ended June 30

Six months ended June 30

(thousands of dollars)

2023

2022

2023

2022

Same Property NOI

$

157,215

$

149,430

$

308,260

$

295,385

NOI from income producing properties:

Acquired (i)

170

80

366

226

Disposed (i)

597

8,228

1,562

18,373

767

8,308

1,928

18,599

NOI from completed properties under development

8,020

4,055

14,027

8,244

NOI from properties under de-leasing under development

2,931

2,813

5,600

5,531

Lease cancellation fees

179

2,671

4,741

3,554

Straight-line rent adjustment

1,027

359

1,600

1,274

NOI from residential rental

5,129

3,402

9,393

5,749

NOI

$

175,268

$

171,038

$

345,549

$

338,336

Advertisement 10

Story continues below

Article content

(i)

Includes properties acquired or disposed of during the periods being compared.

FFO

The following table reconciles net income attributable to Unitholders to FFO for the three and six months ended June 30, 2023 and 2022:

Three months ended June 30

Six months ended June 30

(thousands of dollars, except where otherwise noted)

2023

2022

2023

2022

Net income attributable to Unitholders

$

111,967

$

78,460

$

229,971

$

238,518

Add back/(Deduct):

Fair value losses, net

10,594

42,270

27,959

6,838

Fair value losses included in equity-accounted investments

1,072

3,476

451

4,266

Internal leasing costs

3,018

2,825

5,743

5,810

Transaction losses on investment properties, net (i)

176

353

112

736

Transaction costs on sale of investment properties

344

713

511

1,314

ERP implementation costs

2,454

6,408

Change in unrealized fair value on marketable securities

(173

)

1,401

813

1,401

Current income tax expense (recovery)

31

452

(13,367

)

271

Operational lease revenue from ROU assets

1,196

985

2,550

1,930

Operational lease expenses from ROU assets in equity-accounted investments

(13

)

(11

)

(25

)

(23

)

Capitalized interest on equity-accounted investments (ii)

966

733

1,843

1,169

FFO

$

131,632

$

131,657

$

262,969

$

262,230

Add back:

Restructuring costs

11

3,170

624

3,780

FFO Adjusted

$

131,643

$

134,827

$

263,593

$

266,010

FFO per unit – basic

$

0.44

$

0.43

$

0.88

$

0.85

FFO per unit – diluted

$

0.44

$

0.43

$

0.88

$

0.85

FFO Adjusted per unit – diluted

$

0.44

$

0.44

$

0.88

$

0.86

Weighted average number of Units – basic (in thousands)

300,386

308,312

300,374

309,070

Weighted average number of Units – diluted (in thousands)

300,500

308,537

300,524

309,324

FFO for last 4 quarters

$

525,415

$

535,661

Distributions paid for last 4 quarters

$

313,887

$

306,986

FFO Payout Ratio

59.7

%

57.3

%

(i)

Represents net transaction gains or losses connected to certain investment properties during the period.

(ii)

This amount represents the interest capitalized to RioCan’s equity-accounted investment in WhiteCastle New Urban Fund 2, LP, WhiteCastle New Urban Fund 3, LP, WhiteCastle New Urban Fund 4, LP, WhiteCastle New Urban Fund 5, LP, RioCan-Fieldgate JV, RC (Queensway) LP, RC (Leaside) LP- Class B and PR Bloor Street LP. This amount is not capitalized to properties under development under IFRS, but is allowed as an adjustment under REALPAC’s definition of FFO.

Development Spending

Total Development Spending for the three and six months ended June 30, 2023 and 2022 is as follows:

Advertisement 11

Story continues below

Article content

Three months ended June 30

Six months ended June 30

(thousands of dollars)

2023

2022

2023

2022

Development expenditures on balance sheet:

Properties under development

$

67,610

$

96,106

$

134,522

$

157,271

Residential inventory

31,640

35,363

49,191

63,708

RioCan’s share of Development Spending from equity-accounted joint ventures

3,749

8,136

7,634

10,510

Total Development Spending

$

102,999

$

139,605

$

191,347

$

231,489

Total Acquisitions

Total Acquisitions for the three and six months ended June 30, 2023 and 2022 are as follows:

Three months ended June 30

Six months ended June 30

(thousands of dollars)

2023

2022

2023

2022

Income producing properties

$

70,271

$

$

70,271

$

89,948

Properties under development

5,736

34,583

11,946

Residential inventory

19,440

RioCan’s share of acquisitions from equity-accounted joint ventures

66,497

Total Acquisitions

$

76,007

$

$

104,854

$

187,831

Total Adjusted Debt and Total Contractual Debt

The following tables reconcile total debt to Total Adjusted Debt, total assets to Total Adjusted Assets, and total debt to Total Contractual Debt as at June 30, 2023 and December 31, 2022:

As at

June 30, 2023

December 31, 2022

(thousands of dollars, except where otherwise noted)

IFRS basis

Equity-accounted investments

RioCan’s

proportionate share

IFRS basis

Equity-accounted investments

RioCan’s

proportionate share

Debentures payable

$

3,241,201

$

$

3,241,201

$

2,942,051

$

$

2,942,051

Mortgages payable

2,643,007

182,941

2,825,948

2,659,180

172,100

2,831,280

Lines of credit and other bank loans

1,202,628

102,723

1,305,351

1,141,112

89,187

1,230,299

Total debt

$

7,086,836

$

285,664

$

7,372,500

$

6,742,343

$

261,287

$

7,003,630

Cash and cash equivalents

253,944

13,324

267,268

86,229

8,001

94,230

Total Adjusted Debt

$

6,832,892

$

272,340

$

7,105,232

$

6,656,114

$

253,286

$

6,909,400

Total assets

$

15,523,448

$

325,281

$

15,848,729

$

15,101,859

$

294,125

$

15,395,984

Cash and cash equivalents

253,944

13,324

267,268

86,229

8,001

94,230

Total Adjusted Assets

$

15,269,504

$

311,957

$

15,581,461

$

15,015,630

$

286,124

$

15,301,754

Total Adjusted Debt to Total Adjusted Assets

44.7

%

45.6

%

44.3

%

45.2

%

See also  UK exports to the EU boomed 4.4% in July

As at

June 30, 2023

December 31, 2022

(thousands of dollars)

IFRS basis

Equity-

accounted investments

RioCan’s proportionate share

IFRS basis

Equity-

accounted investments

RioCan’s

proportionate share

Total debt

$

7,086,836

$

285,664

$

7,372,500

$

6,742,343

$

261,287

$

7,003,630

Less:

Unamortized debt financing costs, premiums and discounts on origination and debt assumed, and modifications

(23,343

)

(601

)

(23,944

)

(15,634

)

(690

)

(16,324

)

Total Contractual Debt

7,110,179

286,265

7,396,444

6,757,977

261,977

7,019,954

Advertisement 12

Story continues below

Article content

Floating Rate Debt and Fixed Rate Debt

As at

June 30, 2023

December 31, 2022

(thousands of dollars, except where otherwise noted)

IFRS basis

Equity-

accounted investments

RioCan’s proportionate share

IFRS basis

Equity-

accounted investments

RioCan’s proportionate share

Total fixed rate debt

$

6,683,145

$

200,612

$

6,883,757

$

6,301,054

$

141,720

$

6,442,774

Total floating rate debt

403,691

85,052

488,743

441,289

119,567

560,856

Total debt

$

7,086,836

$

285,664

$

7,372,500

$

6,742,343

$

261,287

$

7,003,630

Ratio of floating rate debt to total debt

5.7

%

6.6

%

6.5

%

8.0

%

Total floating rate debt

$

403,691

$

85,052

$

488,743

$

441,289

$

119,567

$

560,856

Less:

Revolving unsecured operating line of credit

224,770

224,770

131,601

131,601

Total floating rate debt

(excluding revolving unsecured operating line of credit)

$

178,921

$

85,052

$

263,973

$

309,688

$

119,567

$

429,255

Ratio of floating rate debt to total debt (excluding revolving unsecured operating line of credit)

2.5

%

3.6

%

4.6

%

6.1

%

Liquidity

As at June 30, 2023, RioCan had approximately $1.7 billion of Liquidity as summarized in the following table:

As at

June 30, 2023

December 31, 2022

(thousands of dollars)

IFRS basis

Equity-

accounted investments

RioCan’s

proportionate share

IFRS basis

Equity-

accounted investments

RioCan’s

proportionate share

Undrawn revolving unsecured operating line of credit

$

1,023,000

$

$

1,023,000

$

1,116,351

$

$

1,116,351

Undrawn construction lines and other bank loans

283,110

92,273

375,383

267,562

70,094

337,656

Cash and cash equivalents

253,944

13,324

267,268

86,229

8,001

94,230

Liquidity

$

1,560,054

$

105,597

$

1,665,651

$

1,470,142

$

78,095

$

1,548,237

Adjusted EBITDA

The following table reconciles consolidated net income attributable to Unitholders to Adjusted EBITDA:

Twelve months ended

June 30, 2023

December 31, 2022

(thousands of dollars)

IFRS basis

Equity-

accounted investments

RioCan’s proportionate share

IFRS basis

Equity-

accounted investments

RioCan’s proportionate share

Net income attributable to Unitholders

$

228,225

$

$

228,225

$

236,772

$

$

236,772

Add (deduct) the following items:

Income tax expense (recovery):

Current

(12,717

)

(12,717

)

921

921

Fair value losses on investment properties, net

262,249

12,393

274,642

241,128

16,208

257,336

Change in unrealized fair value on marketable securities (i)

3,195

3,195

3,783

3,783

Internal leasing costs

12,137

12,137

12,204

12,204

Non-cash unit-based compensation expense

9,766

9,766

9,056

9,056

Interest costs, net

192,897

9,812

202,709

180,365

8,242

188,607

Restructuring costs

1,134

1,134

4,289

4,289

ERP implementation costs

6,408

6,408

Depreciation and amortization

4,201

4,201

4,774

4,774

Transaction losses on the sale of investment properties, net (ii)

400

400

1,024

1,024

Transaction costs on investment properties

4,935

4,935

5,734

3

5,737

Operational lease revenue (expenses) from ROU assets

4,706

(48

)

4,658

4,086

(46

)

4,040

Adjusted EBITDA

$

717,536

$

22,157

$

739,693

$

704,136

$

24,407

$

728,543

Advertisement 13

Story continues below

Article content

(i)

The fair value gains and losses on marketable securities may include both the change in unrealized fair value and realized gains and losses on the sale of marketable securities. By adding back the change in unrealized fair value on marketable securities, RioCan effectively continues to include realized gains and losses on the sale of marketable securities in Adjusted EBITDA and excludes unrealized fair value gains and losses on marketable securities in Adjusted EBITDA.

(ii)

Includes transaction gains and losses realized on the disposition of investment properties.

Adjusted Debt to Adjusted EBITDA Ratio

Adjusted Debt to Adjusted EBITDA is calculated as follows:

Twelve months ended

June 30, 2023

December 31, 2022

(thousands of dollars, except where otherwise noted)

IFRS basis

Equity-

accounted investments

RioCan’s

proportionate share

IFRS basis

Equity-

accounted investments

RioCan’s

proportionate share

Adjusted Debt to Adjusted EBITDA

Average total debt outstanding

$

6,872,987

$

268,708

$

7,141,695

$

6,756,628

$

251,888

$

7,008,516

Less: average cash and cash equivalents

(112,497

)

(10,092

)

(122,589

)

(74,871

)

(8,791

)

(83,662

)

Average Total Adjusted Debt

$

6,760,490

$

258,616

$

7,019,106

$

6,681,757

$

243,097

$

6,924,854

Adjusted EBITDA (i)

$

717,536

$

22,157

$

739,693

$

704,136

$

24,407

$

728,543

Adjusted Debt to Adjusted EBITDA

9.42

9.49

9.49

9.51

(i)

Adjusted EBITDA is reconciled in the immediately preceding table above.

Unencumbered Assets

The tables below summarize RioCan’s Unencumbered Assets to Unsecured Debt and Percentage of Normalized NOI Generated from Unencumbered Assets as at June 30, 2023 and December 31, 2022:

As at

June 30, 2023

December 31, 2022

(thousands of dollars, except where otherwise noted)

Targeted

Ratios

IFRS basis

Equity-

accounted investments

RioCan’s proportionate share

IFRS basis

Equity-

accounted investments

RioCan’s proportionate share

Unencumbered Assets

$

8,570,191

$

60,966

$

8,631,157

$

8,200,280

$

56,228

$

8,256,508

Total Unsecured Debt

$

4,177,000

$

$

4,177,000

$

3,783,649

$

$

3,783,649

Unencumbered Assets to Unsecured Debt

> 200%

205

%

207

%

217

%

218

%

Subsequent to quarter end:

Change in Unencumbered Assets

Repayment of Unsecured Debt on July 4, 2023

(210,000

)

(210,000

)

Proforma Unencumbered Assets

$

8,570,191

$

60,966

$

8,631,157

Proforma Unsecured Debt

$

3,967,000

$

$

3,967,000

Proforma Unencumbered Assets to Unsecured Debt

216

%

218

%

Annual Normalized NOI – total portfolio (i)

$

688,892

$

33,648

$

722,540

$

646,540

$

23,488

$

670,028

Annual Normalized NOI – Unencumbered Assets (i)

$

415,972

$

3,644

$

419,616

$

370,804

$

3,440

$

374,244

Percentage of Normalized NOI Generated from Unencumbered Assets

> 50.0%

60.4

%

58.1

%

57.4

%

55.9

%

Advertisement 14

Story continues below

Article content

(i) Annual Normalized NOI are reconciled in the table below.

Three months ended
June 30, 2023

Three months ended
December 31, 2022

(thousands of dollars)

IFRS basis

Equity-

accounted investments

RioCan’s proportionate share

IFRS basis

Equity-

accounted investments

RioCan’s proportionate share

NOI (i)

$

175,268

$

8,412

$

183,680

$

166,062

$

5,872

$

171,934

Adjust the following:

Miscellaneous revenue

(1,134

)

(1,134

)

(802

)

(802

)

Percentage rent

(1,732

)

(1,732

)

(3,234

)

(3,234

)

Lease cancellation fees

(179

)

(179

)

(391

)

(391

)

Normalized NOI – total portfolio

$

172,223

$

8,412

$

180,635

$

161,635

$

5,872

$

167,507

Annual Normalized NOI – total portfolio(ii)

$

688,892

$

33,648

$

722,540

$

646,540

$

23,488

$

670,028

NOI from unencumbered assets

$

105,983

$

911

$

106,894

$

94,957

$

860

$

95,817

Adjust the following for Unencumbered Assets:

Miscellaneous revenue

(629

)

(629

)

(518

)

(518

)

Percentage rent

(1,198

)

(1,198

)

(1,430

)

(1,430

)

Lease cancellation fees

(163

)

(163

)

(308

)

(308

)

Normalized NOI – Unencumbered Assets

$

103,993

$

911

$

104,904

$

92,701

$

860

$

93,561

Annual Normalized NOI – Unencumbered Assets (ii)

$

415,972

$

3,644

$

419,616

$

370,804

$

3,440

$

374,244

(i) Refer to the NOI and Same Property NOI table of this section for reconciliation from NOI to operating income.

(ii) Calculated by multiplying Normalized NOI by a factor of 4.

Forward-Looking Information

This News Release contains forward-looking information within the meaning of applicable Canadian securities laws. This information reflects RioCan’s objectives, our strategies to achieve those objectives, as well as statements with respect to management’s beliefs, estimates and intentions concerning anticipated future events, results, circumstances, performance or expectations that are not historical facts. Forward-looking information can generally be identified by the use of forward-looking terminology such as “outlook”, “objective”, “may”, “will”, “would”, “expect”, “intend”, “estimate”, “anticipate”, “believe”, “should”, “plan”, “continue”, or similar expressions suggesting future outcomes or events. Such forward-looking information reflects management’s current beliefs and is based on information currently available to management. All forward-looking information in this News Release is qualified by these cautionary statements. Forward-looking information is not a guarantee of future events or performance and, by its nature, is based on RioCan’s current estimates and assumptions, which are subject to numerous risks and uncertainties, including those described in the “Risks and Uncertainties” section in RioCan’s MD&A for the three and six months ended June 30, 2023 and in our most recent Annual Information Form, which could cause actual events or results to differ materially from the forward-looking information contained in this News Release. Although the forward-looking information contained in this News Release is based upon what management believes are reasonable assumptions, there can be no assurance that actual results will be consistent with this forward-looking information.

Advertisement 15

Story continues below

Article content

The forward-looking statements contained in this News Release are made as of the date hereof, and should not be relied upon as representing RioCan’s views as of any date subsequent to the date of this News Release. Management undertakes no obligation, except as required by applicable law, to publicly update or revise any forward-looking information, whether as a result of new information, future events or otherwise.

View source version on businesswire.com: https://www.businesswire.com/news/home/20230801515143/en/

logo

Contacts

RioCan Real Estate Investment Trust
Dennis Blasutti
Chief Financial Officer
416-866-3033 | www.riocan.com

Article content

Comments

Postmedia is committed to maintaining a lively but civil forum for discussion and encourage all readers to share their views on our articles. Comments may take up to an hour for moderation before appearing on the site. We ask you to keep your comments relevant and respectful. We have enabled email notifications—you will now receive an email if you receive a reply to your comment, there is an update to a comment thread you follow or if a user you follow comments. Visit our Community Guidelines for more information and details on how to adjust your email settings.

Join the Conversation

Leave a Reply

Your email address will not be published. Required fields are marked *