Q Conference Call Presentation. February 12, 2019

Transcription

1 Q Conference Call Presentation February 12, 2019

2 FORWARD LOOKING ADIVISORY & NON-GAAP MEASURES FORWARD LOOKING INFORMATION Certain information included in this presentation contains forward-looking statements within the meaning of applicable securities laws including, among others, statements concerning our objectives, our strategies to achieve those objectives, as well as statements with respect to management's beliefs, plans, estimates, and intentions, and similar statements concerning anticipated future events, results, circumstances, performance or expectations that are not historical facts. Certain material factors, estimates or assumptions were applied in drawing a conclusion or making a forecast or projection as reflected in these statements and actual results could differ materially from such conclusions, forecasts or projections. The forward looking information contained in this presentation is made as of the date hereof. Additional information on the material risks that could cause our actual results to differ materially from the conclusions, forecast or projections in these statements and the material factors, estimates or assumptions that were applied in drawing a conclusion or making a forecast or projection as reflected in the forward-looking information can be found in our most recent annual information form and annual report that are available on our website and at Except as required by applicable law, RioCan undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise. 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 IFRS. The following measures, RioCan s Proportionate Share (or Interest), Funds From Operations ( FFO ), Net Operating Income ( NOI ), Adjusted Earnings before interest, taxes, depreciation and amortization ( Adjusted EBITDA ), Debt to Adjusted EBITDA, Same Property NOI, Interest Coverage, Debt Service Coverage, Fixed Charge Coverage, and Total Enterprise Value as well as other measures discussed in this presentation, do not have a standardized definition prescribed by IFRS and are, therefore, unlikely to be comparable to similar measures presented by other reporting issuers. Non-GAAP measures should not be considered as alternatives to net earnings or comparable metrics determined in accordance with IFRS as indicators of RioCan s performance, liquidity, cash flow, and profitability. For a full definition of these measures, please refer to the Non-GAAP Measures in RioCan s Management s Discussion and Analysis for the year ended December 31, RioCan uses these measures to better assess the Trust s underlying performance and provides these additional measures so that investors may do the same. Q4 RioCan 01

3 FUNDS FROM OPERATIONS ( FFO ) & PAYOUT RATIO FFO/unit increased $0.06 or 3.3% from 2017 to 2018 despite: o Nearly $1.0B asset sales in 2018 o $7.5M in severance costs FFO/unit growth of 4.7% from 2017 to 2018 excluding severance costs FFO/unit growth of 9.9% since 2016 FFO per Unit FFO Payout Ratio $1.68 $1.79 $ % Target is to be below 80% 78.8% 77.9% Q4 RioCan 02

4 OPERATIONAL HIGHLIGHTS SPNOI Growth Total Portfolio Major Markets 2.1% 2.2% 2.2% 2.6% Total Portfolio Committed Occupancy Major Markets 96.6% 97.1% 97.6% 97.7% Q4 RioCan 03

5 ACCELERATION OF MAJOR MARKET STRATEGY Disposition Progress as of December 31, 2018 Transaction type Value (M) Closed and Firm $1,265 Conditional $191 Total to Date $1,456 Weighted Average Cap Rate 6.68% Sale prices to-date are materially in line with IFRS value $1.5B progress since the October 2017 announcement represents approximately 73% of the $2.0B disposition target Dispositions span a broad range of secondary markets 22.9M RioCan units purchased and cancelled since October 2017 at an average purchase price of $24.51 per unit for a total cost of $561.2M % of Revenues from Major Markets % of Revenues from GTA 76.1% 85.4% >90% 40.9% 46.8% >50% Vision Vision Q4 RioCan 04

6 Committed Occupancy Average Net Rent Per Square Foot (PSF) HIGH-PERFORMANCE PORTFOLIO High occupancy and strong net rent growth (8-year average net rent CAGR 3.2%) 100.0% $ % 97.5% 97.2% 96.9% 97.0% $ % $ % $ % $19.00 $18.00 $ % $16.07 $16.63 $ % Sears departure $17.00 $16.00 $14.82 $15.21 Target departure $ % $14.00 Committed Occupancy Average Net Rent PSF Q4 RioCan 05

7 DEVELOPMENT PROGESSING WELL DEVELOPMENT PROGRESSING WELL 491 College St. W. - Completed King Portland Centre - Completed Key Statistics (2018) Development on the Balance Sheet $ 1.2B Development as a % of Total Assets (Max permitted 15%) 8.5% eplace - Near Completion Frontier Phase I - Near Completion Development Completions: - NLA Completed (in SF) 799,000 - Costs Transferred $550.9M Development Expenditures $473.4M Bathurst College Centre - Near Completion Q4 RioCan 06

8 DEVELOPMENT YIELD AND VALUE CREATION Estimates of development yield and value creation are as follows for five urban intensification and greenfield development projects that are complete or close to completion: Ownership (For data in this table) Total Estimated Net Project Costs Estimated Stabilized NOI Estimated Yield on Total Costs Estimated Future Stabilized Value Estimated Residential Inventory Gains Total Estimated Incremental Value Creation Yonge Eglinton Northeast Corner 100% $223.2M $11.8M 5.3% $327.3M $14.0M $118.1M (eplace) 1 King Portland Centre 50% $86.4M $5.5M 6.4% $129.9M $12.5M $56.0M Bathurst College Centre 100% $109.4M $5.2M 4.8% $115.4M N/A $6.0M Gloucester (Frontier) 2 50% $34.1M $1.8M 5.3% $44.8M N/A $10.7M Sage Hill 3 100% $120.8M $8.5M 7.0% $161.0M N/A $40.2M TOTAL $573.9M $32.8M 5.7% $778.4M $26.5M $231.0M 1. Total estimated project costs include estimated project costs for the Trust's current 50% interest, net of applicable interim and fee income during the development period, plus the cost of acquiring the remaining 50% interest in the residential rental tower at costs plus $10 million and the remaining 50% interest in the retail component based on stabilized retail NOI at a 7.0% capitalization rate pursuant to the existing agreements with our project partners. Both transactions are expected to close in Total estimated net project costs include land costs for this phase one development. Excluding the cost of the phase one land which has been owned by the Trust since 1999 as part of the 7.1-acre shopping center, the estimated development yield would be 5.8%. 3. The estimated yield on the Trust's original 50% interest in this project is 8.4%. In February 2019 the Trust acquired the remaining 50% ownership interest for $70.4 million, which is higher than the estimated net project costs of the Trust's original 50% interest in the project. The blended yield on this project is therefore 7.0%. As of December 31, 2018, $165.4 million of the incremental value creation has been recognized through property IFRS fair market values, applicable interim and fee income, and inventory gains Q4 RioCan 07

9 FUNDING DEVELOPMENT RioCan is committed to self-funding its development program and maintaining a strong balance sheet As at Dec 31, 2018 Target Properties Under Development ( PUD ) & Residential Inventory $1.2B N/A PUD and Residential Inventory as % of Gross Assets Per Line of Credit and Credit Facilities Agreements Investment in Greenfield Development and Residential Inventory as % of Unitholder s Equity Per Declaration of Trust 8.5% ~ 10% 1 5.3% N/A $400M-$500M $300M-$600M < $1.5B $1.2B Current PUD and Inventory Balance Annual Development Spend Annual Development Completions Target PUD and Inventory Balance * 1. Maximum permitted is 15%. RioCan targets this metric to be no more than 10% (except for short-term fluctuations as large projects are completed) Q4 RioCan 08

10 STRONG BALANCE SHEET PRUDENT CAPITAL MANAGEMENT & FLEXIBLE CAPITAL STRUCTURE Capital Structure Metrics Target Debt to Adjusted EBITDA <8.0x 7.88x Debt to Total Assets 38% - 42% 42.1% Interest Coverage >3.0x 3.63x Debt Service Coverage >2.25x 3.05x Fixed Coverage CONSISTENTLY ABOVE >1.10x 95% 1.15x Unencumbered Assets N/A $8.0B Unencumbered Assets to Unencumbered Debt >2.0x 2.31x NOI % from Unencumbered Assets >50% 59.1% Unsecured vs. Secured Debt 60% / 40% 58% / 42% FFO Payout Ratio <80% 77.9% 1. Metrics are calculated based on RioCan s proportionate share Q4 RioCan 09

11 KEY METRICS IN CANADA S SIX MAJOR MARKETS 171 assets M SF 85.4% of annualized revenue 2.6% SPNOI growth 97.7% committed occupancy 11M+ SF zoned for development 35 assets 4.8M SF 12 assets 1.7M SF 20 assets 3.0M SF Edmonton 7 assets 1.8M SF Vancouver Calgary Ottawa Montreal 14 assets 3.2M SF Toronto 83 assets M SF 1. Excludes 16 active properties under development with 2.2M sf at RioCan s interest 2. Excludes 12 active properties under development with 1.7M sf at RioCan s interest Q4 RioCan 10

12 BURLINGTON CENTRE - REDEVELOPMENT COMPLETION Q4 RioCan 11

13 STRATEGIC REDEVELOPMENT Lawrence Square, Toronto ON Yonge Sheppard Centre, Toronto ON Q4 RioCan 12

14 THE ABILITY TO UNLOCK INTRINSIC VALUE Deep executive bench operating one of the largest and longest-running REITs in Canada. Long track record of driving success and value, resulting in respect, trust and deep relationships. Uniquely integrated to drive the highest returns and best use of every property for continued optimization. Proven balance of calculated risk-taking and prudent financial management. Q4 RioCan 13

15 SUCESSFULLY DELIVERING DEVELOPMENT PROJECTS Q4 RioCan 14

16 SUCESSFULLY DELIVERING FRONTIER PHASE I, OTTAWA, ON Gloucester Silver City, Ottawa, ON Frontier Phase I Frontier Phase I Frontier Phases I-IV Q4 RioCan 15

17 TRANSFORMING TORONTO S WEST SIDE THE WELL Proposed Q4 RioCan 16

18 SUCESSFULLY EXECUTING AND DELIVERING RESULTS KEY DIFFERENTIATORS STRATEGIC PRIORITIES 25 YEARS OF REIT LEADERSHIP LEADING MAJOR MARKET PORTFOLIO CONCENTRATE WITHIN MAJOR MARKETS Strengthen Canada s leading major market portfolio by focusing on properties within fast-growing, high-population and high-income areas in order to achieve higher occupancy and rent growth. DRIVE ORGANIC GROWTH Strategically evolve our tenant mix to stay ahead of changing consumer trends and drive strong results from operating efficiency and ancillary revenue. UNPARALLELED DEVELOPMENT PIPELINE STRONG BALANCE SHEET UNLOCK INTRINSIC VALUE Bring our major market assets to their highest and best use by capitalizing on opportunities to intensify transit-oriented properties with mixed-use and residential developments, generating new sources of cash flow and NAV growth from completions. MANAGE RISK EFFECTIVELY Utilize our diversified and strong tenant base, disciplined and staggered development approach, sophisticated management team and fortress balance sheet to control development risks, embed sustainability and diversify our portfolio. Q4 RioCan 17

19 CEO COMMENTS Edward Sonshine, O.Ont., Q.C. Chief Executive Officer Q4 RioCan 18

20 Edward Sonshine, O.Ont., Q.C. Chief Executive Officer Jonathan Gitlin Chief Operating Officer Qi Tang Senior Vice President & Chief Financial Officer Contact Information RioCan Yonge Eglinton Centre 2300 Yonge Street P.O. Box 2386 Toronto, ON M4P 1E4 (T) or (416) Q4 RioCan 19