REI.UN RioCan Real Estate Investment Trust

• Superior property fundamentals generated record retail occupancy of 98.3%, new leasing spread of 21.0% and same-property NOI in excess of target range
• Development deliveries continued to add steady stream of new and diversified NOI

RioCan Real Estate Investment Trust (“RioCan" or the "Trust”) (TSX: REI.UN) announced today its financial results for the three and nine months ended September 30, 2023 (the "Third Quarter").

“RioCan had a strong quarter as extensive demand for our space drove leasing velocity, standout leasing spreads and record occupancy. Our performance reflects the quality of our locations as well as the track-record and cycle-tested experience of RioCan's team,” said Jonathan Gitlin, President and CEO of RioCan. “We are perfectly positioned to benefit from Canada's favourable retail real estate landscape that will continue to be strong due to the limited supply of quality space. RioCan continues to actively manage risk, improve our balance sheet and further strengthen our foundation to drive future growth and value creation."

Financial Highlights

 

 

 

 

 

 

 

 

 

 

 

 

Three months ended September 30

 

Nine months ended September 30

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

 

 

2023

 

 

 

2022

 

 

 

2023

 

 

 

2022

 

 

 

 

 

 

 

 

 

 

 

 

FFO 1

 

$

135.4

 

 

$

134.8

 

 

$

398.4

 

 

$

397.0

FFO per unit - diluted 1

 

$

0.45

 

 

$

0.44

 

 

$

1.33

 

 

$

1.29

Net income (loss)

 

$

(73.5)

 

 

$

3.2

 

 

$

156.5

 

 

$

241.7

Weighted average Units outstanding - diluted (in thousands)

 

 

300,471

 

 

 

304,005

 

 

 

300,508

 

 

 

307,534

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

September 30,

 

 

December 31,

As at

2023

2022

 

 

 

 

 

 

 

 

 

 

 

 

Net book value per unit

 

 

 

 

 

 

 

$

25.49

 

 

$

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 Third Quarter was $0.45, which was $0.01 per unit higher than the same period last year.
  • Same Property NOI1 growth of 3.7% contributed a $0.02 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 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.
• Net loss for the Third Quarter of $73.5 million compared to $3.2 million of net income last year. The decrease was mainly due to fair value losses of $199.5 million on investment properties in the current quarter compared to $118.8 million in Q3 2022, primarily from increasing capitalization rates to reflect current market conditions resulting from rising interest rates.
• Our FFO Payout Ratio1 of 60.4%, Liquidity1 of $1.6 billion, Unencumbered Assets1 of $8.5 billion, floating rate debt at 7.9%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.

Operation Highlights

 

Three months ended September 30

 

Nine months ended September 30

 

 

2023

 

 

2022

 

 

2023

 

 

2022

Operation Highlights (i)

 

 

 

 

 

 

 

 

 

 

 

Occupancy - committed (ii)

 

97.5 %

 

 

97.3 %

 

 

97.5 %

 

 

97.3 %

Retail occupancy - committed (ii)

 

98.3 %

 

 

97.8 %

 

 

98.3 %

 

 

97.8 %

Blended leasing spread

 

12.9 %

 

 

7.9 %

 

 

11.2 %

 

 

9.0 %

New leasing spread

 

21.0 %

 

 

15.9 %

 

 

14.9 %

 

 

12.4 %

Renewal leasing spread

 

11.2 %

 

 

6.6 %

 

 

10.2 %

 

 

8.2 %

 

 

 

 

 

 

 

 

 

 

 

 

(i)

Includes commercial portfolio only.

(ii)

Information presented as at respective periods then ended.

• Strong leasing velocity continues to be a dominant theme as RioCan's high-quality, necessity-based retail portfolio continued to generate strong activity, spreads, occupancy and operating results in the Third Quarter. Same Property NOI grew by 3.7%, driven by increases in rent growth from contractual rent steps, rent upon renewal and the recovery of past pandemic-related provisions.
• Retail committed occupancy improved to an all-time high of 98.3% and in-place retail occupancy of 97.6% increased 70 basis points sequentially.
• A robust blended leasing spread of 12.9% resulted from new and renewal leasing spreads of 21.0% and 11.2%, respectively.
• New leasing in the Third Quarter generated average net rent per square foot of $27.02, well above the average net rent per occupied square foot of $21.39.
• Our strong demographic profile with a population and household income of 260,000 and $140,000, respectively within a five kilometre radius of the Trust's properties continues to attract strong and stable tenants which comprise 87.4% of annualized net rent.

RioCan Living Update 1

• Of the 13 RioCan Living™ buildings in operation 11 are stabilized and 97.5% leased as at November 2, 2023. Total NOI generated from our residential rental operations for the Third Quarter was $5.6 million, an increase of $1.8 million or 46.3% over the same period last year. An increase of approximately 8% in average monthly rent per occupied square foot on a same property basis contributed to the year-over-year improvement.
• Occupancy commenced at FourFifty The Well™ on August 1, 2023. Construction of 236 units was completed in the quarter. The remaining 356 units will be completed in phases through Q4 2023 and early 2024. Pre-leasing commenced in March 2023 and units are leasing at a healthy velocity and at rates in-line or above expectations.
• The 2,605 condominium and townhouse units that are under construction as of September 30, 2023, are expected to generate combined sales revenue of over $800.0 million between 2023 and 2026 that can be redeployed to productive uses such as paying down debt or development. Of RioCan’s six active condominium construction projects, 86% of the total units have been pre-sold, representing 95% of pro-forma total revenues.

1.

Units at 100% ownership interest.

Development Highlights

 

Three months ended September 30

 

Nine months ended September 30

(in millions except square feet)

 

 

2023

 

 

 

2022

 

 

 

2023

 

 

 

2022

 

 

 

 

 

 

 

 

 

 

 

 

Development Highlights

 

 

 

 

 

 

 

 

 

 

 

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

 

 

151.0

 

 

 

179.0

 

 

 

327.0

 

 

 

393.0

Development Spending

 

$

114.2

 

 

$

81.0

 

 

$

305.6

 

 

$

312.5

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

 

 

1,685.0

 

 

 

2,152.0

 

 

 

1,685.0

 

 

 

2,152.0

 

 

 

 

 

 

 

 

 

 

 

 

(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, 151,000 square feet of NLA was completed, comprised mainly of 72,000 square feet of purpose-built rental at FourFifty The Well and 63,000 square feet of commercial space at The Well™. For the full year, we expect to complete 630,200 square feet of GFA of development. We expect these development completions to contribute $25.5 million of stabilized NOI that will ramp up over the course of 2023 and 2024.
• As at November 2, 2023, approximately 96% of the total commercial space at The Well is leased with approximately 89% or 1,323,000 square feet (at 100% ownership interest) in tenant possession. The retail component is 91% leased with another 2% in late stage negotiations. New additions to the tenant roster, such as Lululemon and Sephora, further enhance the retail mix at The Well. The retail at The Well has been physically opening in phases, and the majority of tenants are expected to be open by the end of 2023.
• Zoning approvals for 1.2 million square feet of residential inventory were obtained in the quarter comprised of 83 Bloor Street West, located in the prestigious Yorkville neighbourhood in downtown Toronto, and East Hills South Block in Calgary. Completion of zoning is a significant step in the value creation process. RioCan continues to revisit zoning applications to optimize density and use in order to improve project economics. As cost and financing conditions persist, RioCan does not intend on commencing any material new physical construction in the near term.
• Total zoned square footage of 16.8 million includes 1.7 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.

Investing and Capital Recycling

• On September 28, 2023, RioCan entered into an agreement which resulted in 11YV project becoming an equity-accounted joint venture where RioCan subsequently reduced its 50.0% ownership interest to 39.6%. The resulting $10.1 million gain in the quarter was mainly attributable to the value of the underlying residential inventory. Subsequent to quarter end, RioCan sold an additional 2.1% interest reducing its interest to 37.5% in the underlying 11YV project.
• As of November 2, 2023, closed and firm dispositions of non-core assets totalled $295.2 million at a weighted average capitalization rate of 6.92%, including closed dispositions of $140.2 million. Closed dispositions include an enclosed centre in Winnipeg, Manitoba and a movie theatre anchored centre in Gatineau, Quebec, both of which were sold subsequent to quarter end. Disposition of these non-core assets continued the Trust's program to continually improve asset quality.
• Year-to-date, Total Acquisitions1 were $110.1 million including the purchase of residential rental properties, certain land assemblies for development and the purchase of an income producing parking lot lease at a Focus Five2 project to remove a significant encumbrance.

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.

2.

Focus Five projects are large scale, transit-oriented, mixed-use developments in the Greater Toronto Area that the Trust is currently advancing through zoning and the site plan approval process.

Capital Management Update

• On September 29, 2023, RioCan issued $300.0 million of Series AI senior unsecured debentures. These debentures were issued at a coupon rate of 6.488% per annum and will mature on September 29, 2026. RioCan will have the option to repay Series AI debentures at par, in whole or in part, on or after September 29, 2024. RioCan also redeemed, in full, its $300.0 million, 3.210% Series AA unsecured debentures upon maturity.
• The Trust's limited exposure to floating rate debt at 7.9% of total debt serves to mitigate short-term interest rate volatility. The proportion of floating rate debt increased when compared to last quarter mainly due to the timing of refinancing and hedging activities. We expect to reduce our exposure to floating rate debt by year end.

Balance Sheet Strength

(in millions except percentages)

As at

 

 

 

 

 

September 30, 2023

 

December 31, 2022

 

 

 

 

 

 

 

 

 

 

 

Balance Sheet Strength Highlights

 

 

 

 

 

 

 

 

 

 

Liquidity (i) 1

 

 

 

 

 

 

$

1,634

 

 

$

1,548

Adjusted Debt to Adjusted EBITDA (i) 1

 

 

 

 

 

 

9.45x

 

 

9.51x

Total Adjusted Debt to Total Adjusted Assets (i) 1

 

 

 

 

 

 

 

46.5 %

 

 

 

45.2 %

Unencumbered Assets (i) 1

 

 

 

 

 

 

$

8,549

 

 

$

8,257

Unencumbered Assets to Unsecured Debt (i) 1

 

 

 

 

 

 

 

211 %

 

 

 

218 %

 

 

 

 

 

 

 

 

 

 

 

(i)

At RioCan's proportionate share.

• As at September 30, 2023, the Trust had $1.6 billion of Liquidity in the form of a $1.1 billion undrawn revolving line of credit, $0.4 billion undrawn construction lines and other bank loans and $0.1 billion cash and cash equivalents. A new credit facility for the construction of the Queen & Ashbridge™ condominium component was executed in the quarter.
• 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 Assets of $8.5 billion, which can be used to obtain secured financing to provide additional liquidity at lower interest rates than unsecured debt, generated 60.0% of Annual Normalized NOI1 and provided 2.11x coverage over Unsecured Debt1. When compared to Q2 2023, Unencumbered Assets decreased by $81.8 million mainly from decrease in fair values.
• Adjusted Debt to Adjusted EBITDA was 9.45x on a proportionate share basis as at September 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 Friday, November 3, 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: 176245.

For those unable to participate in the live mode, a replay will be available at 1-866-813-9403 with access code: 613637.

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 September 30, 2023, our portfolio is comprised of 192 properties with an aggregate net leasable area of approximately 33.6 million square feet (at RioCan's interest) including office, residential rental and 10 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 nine months ended September 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 nine months ended September 30, 2023.

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 September 30, 2023 and December 31, 2022:

As at

September 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

$

13,696,048

$

422,424

$

14,118,472

$

13,807,740

$

398,701

$

14,206,441

Equity-accounted investments

 

395,924

 

(395,924)

 

—

 

364,892

 

(364,892)

 

—

Mortgages and loans receivable

 

229,877

 

—

 

229,877

 

269,339

 

—

 

269,339

Residential inventory

 

198,913

 

397,063

 

595,976

 

272,005

 

214,536

 

486,541

Assets held for sale

 

230,000

 

—

 

230,000

 

42,140

 

—

 

42,140

Receivables and other assets

 

292,421

 

51,258

 

343,679

 

259,514

 

37,779

 

297,293

Cash and cash equivalents

 

43,220

 

9,355

 

52,575

 

86,229

 

8,001

 

94,230

Total assets

$

15,086,403

$

484,176

$

15,570,579

$

15,101,859

$

294,125

$

15,395,984

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

Debentures payable

$

3,240,680

$

—

$

3,240,680

$

2,942,051

$

—

$

2,942,051

Mortgages payable

 

2,641,601

 

171,182

 

2,812,783

 

2,659,180

 

172,100

 

2,831,280

Lines of credit and other bank loans

 

1,007,059

 

207,680

 

1,214,739

 

1,141,112

 

89,187

 

1,230,299

Accounts payable and other liabilities

 

540,135

 

105,314

 

645,449

 

630,624

 

32,838

 

663,462

Total liabilities

$

7,429,475

$

484,176

$

7,913,651

$

7,372,967

$

294,125

$

7,667,092

 

 

 

 

 

 

 

Equity

 

 

 

 

 

 

Unitholders’ equity

 

7,656,928

 

—

 

7,656,928

 

7,728,892

 

—

 

7,728,892

Total liabilities and equity

$

15,086,403

$

484,176

$

15,570,579

$

15,101,859

$

294,125

$

15,395,984

The following tables reconcile the consolidated statements of income (loss) from IFRS to RioCan's proportionate share basis for the three and nine months ended September 30, 2023 and 2022:

 

Three months ended September 30, 2023

Three months ended September 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

$

269,001

$

8,052

$

277,053

$

265,895

$

7,405

$

273,300

Residential inventory sales

 

—

 

48,977

 

48,977

 

33,812

 

—

 

33,812

Property management and other service fees

 

2,408

 

—

 

2,408

 

5,553

 

—

 

5,553

 

 

271,409

 

57,029

 

328,438

 

305,260

 

7,405

 

312,665

Operating costs

 

 

 

 

 

 

Rental operating costs

 

 

 

 

 

 

Recoverable under tenant leases

 

87,274

 

884

 

88,158

 

89,405

 

769

 

90,174

Non-recoverable costs

 

7,880

 

588

 

8,468

 

7,318

 

627

 

7,945

Residential inventory cost of sales

 

—

 

38,972

 

38,972

 

26,045

 

—

 

26,045

 

 

95,154

 

40,444

 

135,598

 

122,768

 

1,396

 

124,164

Operating income

 

176,255

 

16,585

 

192,840

 

182,492

 

6,009

 

188,501

Other income (loss)

 

 

 

 

 

 

Interest income

 

5,988

 

672

 

6,660

 

5,684

 

581

 

6,265

Income from equity-accounted investments

 

14,229

 

(14,229)

 

—

 

958

 

(958)

 

—

Fair value loss on investment properties, net

 

(199,528)

 

(167)

 

(199,695)

 

(118,783)

 

(3,537)

 

(122,320)

Investment and other income (loss)

 

(502)

 

(99)

 

(601)

 

(519)

 

162

 

(357)

 

 

(179,813)

 

(13,823)

 

(193,636)

 

(112,660)

 

(3,752)

 

(116,412)

Other expenses

 

 

 

 

 

 

Interest costs, net

 

52,051

 

3,012

 

55,063

 

46,620

 

2,201

 

48,821

General and administrative

 

14,444

 

—

 

14,444

 

13,729

 

19

 

13,748

Internal leasing costs

 

3,020

 

—

 

3,020

 

3,088

 

—

 

3,088

Transaction and other costs

 

417

 

(250)

 

167

 

2,346

 

37

 

2,383

 

 

69,932

 

2,762

 

72,694

 

65,783

 

2,257

 

68,040

Income (loss) before income taxes

$

(73,490)

$

—

$

(73,490)

$

4,049

$

—

$

4,049

Current income tax expense

 

20

 

—

 

20

 

834

 

—

 

834

Net income (loss)

$

(73,510)

$

—

$

(73,510)

$

3,215

$

—

$

3,215

 

Nine months ended September 30, 2023

Nine months ended September 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

$

814,595

$

25,485

$

840,080

$

805,328

$

21,703

$

827,031

Residential inventory sales

 

—

 

51,857

 

51,857

 

84,786

 

936

 

85,722

Property management and other service fees

 

12,366

 

—

 

12,366

 

17,546

 

—

 

17,546

 

 

826,961

 

77,342

 

904,303

 

907,660

 

22,639

 

930,299

Operating costs

 

 

 

 

 

 

Rental operating costs

 

 

 

 

 

 

Recoverable under tenant leases

 

279,704

 

2,668

 

282,372

 

281,656

 

2,053

 

283,709

Non-recoverable costs

 

18,923

 

1,733

 

20,656

 

18,895

 

1,789

 

20,684

Residential inventory cost of sales

 

—

 

40,359

 

40,359

 

69,838

 

422

 

70,260

 

 

298,627

 

44,760

 

343,387

 

370,389

 

4,264

 

374,653

Operating income

 

528,334

 

32,582

 

560,916

 

537,271

 

18,375

 

555,646

Other income (loss)

 

 

 

 

 

 

Interest income

 

18,730

 

1,940

 

20,670

 

14,630

 

1,726

 

16,356

Income from equity-accounted investments

 

25,573

 

(25,573)

 

—

 

6,213

 

(6,213)

 

—

Fair value loss on investment properties, net

 

(227,487)

 

(618)

 

(228,105)

 

(125,621)

 

(7,803)

 

(133,424)

Investment and other income (loss)

 

4,042

 

(313)

 

3,729

 

(2,082)

 

(44)

 

(2,126)

 

 

(179,142)

 

(24,564)

 

(203,706)

 

(106,860)

 

(12,334)

 

(119,194)

Other expenses

 

 

 

 

 

 

Interest costs, net

 

150,008

 

8,231

 

158,239

 

132,045

 

5,849

 

137,894

General and administrative

 

44,908

 

32

 

44,940

 

41,592

 

50

 

41,642

Internal leasing costs

 

8,763

 

—

 

8,763

 

8,898

 

—

 

8,898

Transaction and other costs

 

2,399

 

(245)

 

2,154

 

5,038

 

142

 

5,180

 

 

206,078

 

8,018

 

214,096

 

187,573

 

6,041

 

193,614

Income before income taxes

$

143,114

$

—

$

143,114

$

242,838

$

—

$

242,838

Current income tax (recovery) expense

 

(13,347)

 

—

 

(13,347)

 

1,105

 

—

 

1,105

Net income

$

156,461

$

—

$

156,461

$

241,733

$

—

$

241,733

NOI and Same Property NOI

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

 

Three months ended September 30

Nine months ended September 30

(thousands of dollars)

 

2023

 

2022

 

2023

 

2022

Operating Income

$

176,255

$

182,492

$

528,334

$

537,271

Adjusted for the following:

 

 

 

 

Property management and other service fees

 

(2,408)

 

(5,553)

 

(12,366)

 

(17,546)

Residential inventory gains

 

—

 

(7,767)

 

—

 

(14,948)

Operational lease revenue from ROU assets

 

1,650

 

1,419

 

5,079

 

4,149

NOI

$

175,497

$

170,591

$

521,047

$

508,926

 

Three months ended September 30

Nine months ended September 30

(thousands of dollars)

 

2023

 

2022

 

2023

 

2022

Same Property NOI

$

153,808

$

148,346

$

457,539

$

438,706

NOI from income producing properties:

 

 

 

 

Acquired (i)

 

358

 

7

 

787

 

376

Disposed (i)

 

338

 

8,111

 

1,867

 

26,485

 

 

696

 

8,118

 

2,654

 

26,861

 

 

 

 

 

NOI from completed properties under development

 

8,668

 

3,813

 

22,698

 

12,060

NOI from properties under de-leasing (ii)

 

4,586

 

5,481

 

14,683

 

15,889

Lease cancellation fees

 

442

 

1,175

 

5,183

 

4,729

Straight-line rent adjustment

 

1,660

 

(196)

 

3,260

 

1,078

NOI from commercial properties

 

15,356

 

10,273

 

45,824

 

33,756

NOI from residential rental

 

5,637

 

3,854

 

15,030

 

9,603

NOI

$

175,497

$

170,591

$

521,047

$

508,926

(i)

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

(ii)

NOI from limited number of properties undergoing significant de-leasing in preparation for redevelopment or intensification.

FFO

The following table reconciles net income (loss) attributable to Unitholders to FFO for the three and nine months ended September 30, 2023 and 2022:

 

Three months ended September 30

Nine months ended September 30

(thousands of dollars, except where otherwise noted)

 

2023

 

2022

 

2023

 

2022

Net income attributable to Unitholders

$

(73,510)

$

3,215

$

156,461

$

241,733

Add back/(Deduct):

 

 

 

 

Fair value losses, net

 

199,528

 

118,783

 

227,487

 

125,621

Fair value losses included in equity-accounted investments

 

167

 

3,537

 

618

 

7,803

Internal leasing costs

 

3,020

 

3,088

 

8,763

 

8,898

Transaction (gains) losses on investment properties, net (i)

 

(77)

 

(270)

 

35

 

465

Transaction gains on equity-accounted investments

 

(69)

 

—

 

(69)

 

—

Transaction (recoveries) costs on sale of investment properties

 

(4)

 

1,769

 

507

 

3,084

ERP implementation costs

 

2,121

 

—

 

8,530

 

—

Change in unrealized fair value on marketable securities

 

1,898

 

1,999

 

2,711

 

3,400

Current income tax expense (recovery)

 

20

 

834

 

(13,347)

 

1,105

Operational lease revenue from ROU assets

 

1,283

 

1,035

 

3,833

 

2,964

Operational lease expenses from ROU assets in equity-accounted investments

 

(14)

 

(12)

 

(39)

 

(34)

Capitalized interest on equity-accounted investments (ii)

 

1,059

 

825

 

2,902

 

1,994

FFO

$

135,422

$

134,803

$

398,392

$

397,033

Add back:

 

 

 

 

Restructuring costs

 

720

 

—

 

1,344

 

3,779

FFO Adjusted

$

136,142

$

134,803

$

399,736

$

400,812

 

 

 

 

 

FFO per unit - basic

$

0.45

$

0.44

$

1.33

$

1.29

FFO per unit - diluted

$

0.45

$

0.44

$

1.33

$

1.29

FFO Adjusted per unit - diluted

$

0.45

$

0.44

$

1.33

$

1.30

Weighted average number of Units - basic (in thousands)

 

300,405

 

303,912

 

300,384

 

307,332

Weighted average number of Units - diluted (in thousands)

 

300,471

 

304,005

 

300,508

 

307,534

 

 

 

 

 

FFO for last 4 quarters

 

 

$

526,035

$

543,556

Distributions paid for last 4 quarters

 

 

$

317,500

$

308,221

FFO Payout Ratio

 

 

 

60.4%

 

56.7%

(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 nine months ended September 30, 2023 and 2022 is as follows:

 

Three months ended September 30

Nine months ended September 30

(thousands of dollars)

 

2023

 

2022

 

2023

 

2022

Development expenditures on balance sheet:

 

 

 

 

Properties under development

$

57,470

$

62,856

$

191,992

$

220,127

Residential inventory

 

51,052

 

15,258

 

100,243

 

78,966

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

 

5,711

 

2,913

 

13,345

 

13,423

Total Development Spending

$

114,233

$

81,027

$

305,580

$

312,516

Total Acquisitions

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

 

Three months ended September 30

Nine months ended September 30

(thousands of dollars)

 

2023

 

2022

 

2023

 

2022

 

 

 

 

 

Income producing properties

$

5,202

$

1,072

$

75,473

$

91,020

Properties under development

 

—

 

—

 

34,583

 

11,946

Residential inventory

 

—

 

—

 

—

 

19,440

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

 

—

 

—

 

—

 

66,497

Total Acquisitions

$

5,202

$

1,072

$

110,056

$

188,903

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 September 30, 2023 and December 31, 2022:

As at

September 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

$

3,240,680

$

—

$

3,240,680

$

2,942,051

$

—

$

2,942,051

Mortgages payable

 

2,641,601

 

171,182

 

2,812,783

 

2,659,180

 

172,100

 

2,831,280

Lines of credit and other bank loans

 

1,007,059

 

207,680

 

1,214,739

 

1,141,112

 

89,187

 

1,230,299

Total debt

$

6,889,340

$

378,862

$

7,268,202

$

6,742,343

$

261,287

$

7,003,630

Cash and cash equivalents

 

43,220

 

9,355

 

52,575

 

86,229

 

8,001

 

94,230

Total Adjusted Debt

$

6,846,120

$

369,507

$

7,215,627

$

6,656,114

$

253,286

$

6,909,400

 

 

 

 

 

 

 

Total assets

$

15,086,403

$

484,176

$

15,570,579

$

15,101,859

$

294,125

$

15,395,984

Cash and cash equivalents

 

43,220

 

9,355

 

52,575

 

86,229

 

8,001

 

94,230

Total Adjusted Assets

$

15,043,183

$

474,821

$

15,518,004

$

15,015,630

$

286,124

$

15,301,754

 

 

 

 

 

 

 

Total Adjusted Debt to Total Adjusted Assets

 

45.5 %

 

 

46.5 %

 

44.3 %

 

 

45.2 %

As at

September 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

$

6,889,340

$

378,862

$

7,268,202

$

6,742,343

$

261,287

$

7,003,630

Less:

 

 

 

 

 

 

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

 

(23,797)

 

(547)

 

(24,344)

 

(15,634)

 

(690)

 

(16,324)

Total Contractual Debt

$ 

6,913,137

$ 

379,409

$ 

7,292,546

$ 

6,757,977

$ 

261,977

$ 

7,019,954

Floating Rate Debt and Fixed Rate Debt

As at

September 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

$

6,510,510

$

181,982

$

6,692,492

$

6,301,054

$

141,720

$

6,442,774

Total floating rate debt

 

378,830

 

196,880

 

575,710

 

441,289

 

119,567

 

560,856

Total debt

$

6,889,340

$

378,862

$

7,268,202

$

6,742,343

$

261,287

$

7,003,630

Ratio of floating rate debt to total debt

 

5.5%

 

 

7.9%

 

6.5%

 

 

8.0%

Liquidity

As at September 30, 2023, RioCan had approximately $1.6 billion of Liquidity as summarized in the following table:

As at

September 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

$

1,139,000

$

—

$

1,139,000

$

1,116,351

$

—

$

1,116,351

Undrawn construction lines and other bank loans

 

251,907

 

190,416

 

442,323

 

267,562

 

70,094

 

337,656

Cash and cash equivalents

 

43,220

 

9,355

 

52,575

 

86,229

 

8,001

 

94,230

Liquidity

$

1,434,127

$

199,771

$

1,633,898

$

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

September 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

$

151,500

$

—

$

151,500

$

236,772

$

—

$

236,772

Add (deduct) the following items:

 

 

 

 

 

 

Income tax (recovery) expense:

 

 

 

 

 

 

Current

 

(13,531)

 

—

 

(13,531)

 

921

 

—

 

921

Fair value losses on investment properties, net

 

342,994

 

9,023

 

352,017

 

241,128

 

16,208

 

257,336

Change in unrealized fair value on marketable securities (i)

 

3,094

 

—

 

3,094

 

3,783

 

—

 

3,783

Internal leasing costs

 

12,069

 

—

 

12,069

 

12,204

 

—

 

12,204

Non-cash unit-based compensation expense

 

10,002

 

—

 

10,002

 

9,056

 

—

 

9,056

Interest costs, net

 

198,328

 

10,624

 

208,952

 

180,365

 

8,242

 

188,607

Restructuring costs

 

1,854

 

—

 

1,854

 

4,289

 

—

 

4,289

ERP implementation costs

 

8,530

 

—

 

8,530

 

—

 

—

 

—

Depreciation and amortization

 

2,712

 

—

 

2,712

 

4,774

 

—

 

4,774

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

 

594

 

(69)

 

525

 

1,024

 

—

 

1,024

Transaction costs on investment properties

 

3,162

 

(1)

 

3,161

 

5,734

 

3

 

5,737

Operational lease revenue (expenses) from ROU assets

 

4,955

 

(51)

 

4,904

 

4,086

 

(46)

 

4,040

Adjusted EBITDA

$

726,263

$

19,526

$

745,789

$

704,136

$

24,407

$

728,543

(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

September 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

$

6,875,311

$

292,517

$

7,167,828

$

6,756,628

$

251,888

$

7,008,516

Less: average cash and cash equivalents

 

(106,768)

 

(10,343)

 

(117,111)

 

(74,871)

 

(8,791)

 

(83,662)

Average Total Adjusted Debt

$

6,768,543

$

282,174

$

7,050,717

$

6,681,757

$

243,097

$

6,924,854

Adjusted EBITDA (i)

$

726,263

$

19,526

$

745,789

$

704,136

$

24,407

$

728,543

Adjusted Debt to Adjusted EBITDA

 

9.32

 

 

9.45

 

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 September 30, 2023 and December 31, 2022:

As at

 

September 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

 

$

8,488,425

$

60,958

$

8,549,383

$

8,200,280

$

56,228

$

8,256,508

Total Unsecured Debt

 

$

4,061,000

$

—

$

4,061,000

$

3,783,649

$

—

$

3,783,649

Unencumbered Assets to Unsecured Debt

> 200%

 

209 %

 

 

211 %

 

217 %

 

 

218 %

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Annual Normalized NOI - total portfolio (i)

 

$

683,240

$

25,440

$

708,680

$

646,540

$

23,488

$

670,028

Annual Normalized NOI - Unencumbered Assets (i)

 

$

421,432

$

3,740

$

425,172

$

370,804

$

3,440

$

374,244

Percentage of Normalized NOI Generated from Unencumbered Assets

> 50.0%

 

61.7 %

 

 

60.0 %

 

57.4 %

 

 

55.9 %

(i)

Annual Normalized NOI are reconciled in the table below.

 

Three months ended September 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)

$

175,497

$

6,360

$

181,857

$

166,062

$

5,872

$

171,934

Adjust the following:

 

 

 

 

 

 

Miscellaneous revenue

 

(1,366)

 

—

 

(1,366)

 

(802)

 

—

 

(802)

Percentage rent

 

(2,879)

 

—

 

(2,879)

 

(3,234)

 

—

 

(3,234)

Lease cancellation fees

 

(442)

 

—

 

(442)

 

(391)

 

—

 

(391)

Normalized NOI - total portfolio

$

170,810

$

6,360

$

177,170

$

161,635

$

5,872

$

167,507

Annual Normalized NOI - total portfolio(ii)

$

683,240

$

25,440

$

708,680

$

646,540

$

23,488

$

670,028

 

 

 

 

 

 

 

NOI from Unencumbered Assets

$

108,288

$

935

$

109,223

$

94,957

$

860

$

95,817

Adjust the following for Unencumbered Assets:

 

 

 

 

 

 

Miscellaneous revenue

 

(795)

 

—

 

(795)

 

(518)

 

—

 

(518)

Percentage rent

 

(1,943)

 

—

 

(1,943)

 

(1,430)

 

—

 

(1,430)

Lease cancellation fees

 

(192)

 

—

 

(192)

 

(308)

 

—

 

(308)

Normalized NOI - Unencumbered Assets

$

105,358

$

935

$

106,293

$

92,701

$

860

$

93,561

Annual Normalized NOI - Unencumbered Assets (ii)

$

421,432

$

3,740

$

425,172

$

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 nine months ended September 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.

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/20231102702168/en/

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