RioCan Real Estate Investment Trust. Management Presentation November 21, 2006

Transcription

1 RioCan Real Estate Investment Trust Management Presentation November 21, 2006

2 Forward-looking Statements Certain information included in this presentation contains forward-looking statements within the meaning of applicable securities laws including, among others, statements concerning our 2006 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. 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 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. 2

3 THE CANADIAN MARKETPLACE

4 Canadian Real Estate Investment Market Cap rates have fallen 100 basis points in the last 18 months Many deals transacted in the 5.75% to 6.5% range Covenant, location and quality are key to maximizing value Quality real estate is scarce and highly sought after Especially those with long lease terms and strong covenant Competitive market open to alternative structures tax advantages 4

5 Pricing Parametres by Asset Type P R I M A R Y M A R K E T S REGIONAL MALLS Cap rate range of 5.0% to 5.75% Top retailers in each category High CRU sales Irreplaceable locations POWER CENTRES Cap rate range of 5.75% to 6.75% Excellent locations / access Strong anchors Major retail nodes FOOD-ANCHORED PLAZAS Cap rate range of 5.75% to 6.25% Superior locations Dependant on anchor sales and term Limited competition with barriers to entry COMMUNITY MALLS Cap rate range of 7.25% to 7.75% Dense established communities Risk of new format retail development Typically high capital expenditure VALUE-ADD SHOPPING CENTRES Cap rate range of 8.0% to 8.5% Usually high vacancy / vacant anchor Development/Re-merchandising requirements Reflection of age/community/competition requirements 5

6 Pricing Parametres by Asset Type S E C O N D A R Y / T E R T I A R Y M A R K E T S Generally 50 basis points higher on cap rates More susceptible to competition Less liquidity More difficult to finance Narrower pool of tenants 6

7 Shopping Centre GLA per Capita At approximately 30 sq. ft. per capita, the U.S. may have reached a saturation 12.7 sf/ capita 17.1 sf/ Canada = 14.0 sf / capita point With only 16.5 million sq. ft. under construction in 2006/2007, Canada remains a more disciplined market with room to grow capita 11.3 sf/ 13.1 sf/ capita capita 14.5 sf/ capita U.S. = approx sf / capita 11.1 sf/ capita 13.6 sf/ capita 16.0 sf/ capita 13.9 sf/ capita 15.8 sf/ capita (approx 0.5 sq. ft. per capita increase) 7

8 Only six metropolitan markets within Canada have in excess of one million people 8

9 Canada s Six High Growth Markets Market year growth 5 year % change Toronto, Ontario 4,747,199 5,203, , % Montreal, 3,471,259 3,606, , % Quebec Vancouver, 2,040,295 2,159, , % British Columbia Ottawa- 1,078,477 1,142,669 64, % Gatineau, Ontario/Quebec Calgary, Alberta 952,494 1,037,136 84, % Edmonton, 946,875 1,001,636 54, % Alberta Total Six Markets 13,236,599 14,151, , % Total Canada 30,689,035 31,946,316 1,257, % Source - Statistics Canada Report dated May 26,

10 More people greater retail sales more demand for space and higher rents higher growth greater liquidity greater value creation more value added and intensification opportunities 10

11 RioCan has largely become the Urban Market REIT 11

12 Gross Revenue from Six High Growth Markets At September 30, 2006 EXISTING EXISTING & DEVELOPMENTS # of % of % of Total # of % of % of Total City Centres GLA Total GLA Gross Income Gross Income Centres GLA Total GLA Gross Income Gross Income GTA 46 7,663, % 178,285, % 51 8,536, % 200,443, % Ottawa 20 2,354, % 59,208, % 20 2,490, % 62,672, % Montreal 19 2,990, % 56,086, % 19 3,816, % 70,924, % Calgary 10 1,673, % 37,228, % 10 1,826, % 41,437, % Edmonton 5 652, % 15,342, % 6 822, % 18,980, % Vancouver 9 1,067, % 26,057, % 9 1,067, % 26,057, % TOTAL ,401, % 372,208, % ,559, % 420,515, % Concentration on properties located in Canada s six high growth markets including: Calgary Edmonton Montreal Ottawa Toronto Vancouver In other markets such as Quebec City, Kingston, Sudbury or Moncton the strategy is to own the dominant unenclosed new format retail centre 12

13 Property Ownership by Geographic Area (square feet) At September 30, 2006 Provincial RioCan's Partners' Retailer owned Total interests NLA interests anchors site NLA Ontario Central 10,940,484 2,871,273 2,965,016 16,776,773 Ontario East 3,992,040 1,111,124 1,021,045 6,124,209 Ontario West 2,420, ,687 2,965,478 Total Ontario 17,353,315 3,982,397 4,530,748 25,866,460 Quebec 5,441, ,180 1,592,781 7,918,920 Alberta 2,654,677 1,109,118 1,728,805 5,492,600 British Columbia 1,778,050 1,200, ,074 3,319,209 New Brunswick 1,165, , ,615 1,679,140 Saskatchewan 317, , ,535 Newfoundland 183, ,160 Manitoba 178, ,874 Prince Edward Island 164, , ,510 Income Producing Properties 29,236,677 7,757,708 8,569,023 45,563,408 Properties Under Development 2,855,450 1,339, ,000 5,076,000 Total 32,092,127 9,157,258 9,390,023 50,639,408 Six High Growth Markets RioCan's Partners' Retailer owned Total interests NLA interests anchors site NLA Calgary, Alberta 1,673, ,148 1,022,735 3,250,973 Edmonton, Alberta 652, , ,070 1,781,046 Montreal, Quebec 2,990, , ,700 4,160,264 Ottawa, Ontario 1 2,354, ,544 1,155,000 4,161,548 Toronto, Ontario 2 7,663,573 2,042,787 1,926,941 11,633,301 Vancouver, British Columbia 3 1,067, , ,074 2,140,753 Income Producing Properties 16,401,315 5,442,050 5,284,520 27,127,885 Properties Under Development 2,553,350 1,187, ,000 4,410,000 Total 18,954,665 6,629,700 5,953,520 31,537,885 Notes: 1. Area extends from Nepean and Vanier, to Gatineau, Quebec. 2. Area extends north to Newmarket, west to Burlington and east to Ajax. 3. Area extends east to Abbotsford. 13

14 RIOCAN OVERVIEW

15 Current Overview of RioCan Largest REIT in Canada Enterprise value of over $7.5 billion 204 shopping centres, including 8 under development Differ in size, location, format and quality Two most important attributes of quality: Location of the shopping centre Credit worthiness of the tenants and longevity of the leases 15

16 Asset Type as a % of Gross Revenue At September 30, 2006 New Format Retail 47.8% Grocery Anchored Centre 23.0% Enclosed Shopping Centre 18.7% Urban Retail 5.9% Non-Grocery Anchored Strip 3.8% Other 0.7% 16

17 Stability of Revenue Streams National Tenants 1995 = 68% of portfolio revenue 2006 = 83% of portfolio revenue 17

18 Stability of Revenue Streams Top 10 Tenants A diverse, high quality tenant base and long leaseterm profile provides substantial income stability At September 30, 2006 Percentage of Weighted Annualized Gross Average Remaining Top 10 Tenants Rental Revenue Lease Term (yrs) Metro/A&P/Dominion/Super C 6.0% 10.4 Famous Players/Cineplex/Galaxy Cinemas 5.8% 16.1 Zellers/The Bay/Home Outfitters 5.0% 9.2 Wal-Mart 4.3% 11.4 Loblaws/No Frills/Fortinos/Zehrs/Maxi 4.1% 7.6 Canadian Tire/PartSource/Mark's Work Wearhouse 3.4% 13.4 Winners/HomeSense 3.3% 6.7 Staples/Business Depot 2.5% 9.4 Reitmans/Penningtons/Smart Set/Addition-Elle 1.7% 4.9 Shoppers Drug Mart 1.6% 8.0 Total 37.7% 18

19 Portfolio Repositioning During the first ten months of 2006, we acquired: South Trail Crossing, a 282,800 square foot new format retail centre located in Calgary, AB Impact Plaza, a 133,300 square foot community centre located in Surrey, BC Cherry Hill Shopping Centre, a 74,000 square foot community centre located in Fergus, ON SuperValu Plaza, a 83,400 square foot community plaza located in Quispamsis, NB In 2005, we: Acquired a total of 1.88MM sq.ft.; all new format retail and in urban markets (except for one, being a dominant centre in Quebec City) Disposed of 21 shopping centres totaling 3.37MM sq.ft.; 12 of which were enclosed malls, none located in Canada s six high growth markets 19

20 Organic growth Development Redevelopment Asset management Growth Strategies 20

21 Lease Renewals Done in-house by a team that exclusively looks after the retention of existing tenants Lease Expiries at September 30, 2006 Retail Class GLA New Format Retail 12,781,422 42, , , , , % 3.9% 4.7% 5.9% 5.9% Grocery Anchored Centre 7,113,446 98, , ,219 1,025, , % 9.5% 9.4% 14.4% 13.2% Enclosed Shopping Centre 6,710, , , , , , % 7.4% 11.4% 9.5% 12.7% Non-Grocery Anchored Strip 1,261,360 28,871 89, , , , % 7.1% 11.1% 8.1% 9.5% Urban Retail 1,028,332 3,082 14, , ,541 46, % 1.4% 11.5% 23.5% 4.5% Other 341,398 3,082 8,809 2,702 44, % 2.6% 0.8% 13.1% 0.0% TOTAL 29,236, ,080 1,789,633 2,296,987 2,804,086 2,707, % 6.1% 7.9% 9.6% 9.3% 21

22 New Format Retail Expiries ,000 square feet ,000 square feet ,000 square feet ,000 square feet 22

23 Rental Rates SIGNAL HILL CENTRE, CALGARY, AB RIOCAN BEACON HILL, CALGARY, AB Avg. rate in : $16 per square foot Current rate: $25 per square foot 23

24 Rental Rates TRINITY COMMON, BRAMPTON, ON RIOCAN CENTRE BURLOAK, OAKVILLE, ON Avg. rate in 1999: $17 per square foot Current rate: $27 per square foot 24

25 RioCan s Development Program Greenfield developments with partners and through in-house capabilities Total development = 5.4 million square feet, excluding shadow anchors RioCan s owned interest = 3.5 million square feet Goal is to expand existing owned portfolio by 250,000 square feet per annum In 2005, expanded by over 385,000 square feet In 2006, we anticipate adding over 361,000 square feet 25

26 RioCan s Development Program 26

27 RioCan s Development Program RIOCAN BEACON HILL, CALGARY, AB 27

28 RioCan s Development Program RIOCAN CENTRE BURLOAK, OAKVILLE, ON 28

29 RioCan s Development Program RIOCAN MEADOWS, EDMONTON, AB 29

30 Redevelopment and Expansion of Existing Properties AVENUE ROAD, TORONTO, ON 30

31 Redevelopment and Expansion of Existing Properties LAWRENCE SQUARE, TORONTO, ON 31

32 RioCan Retail Value Limited First fund for RioCan Formed in 2003 Partnership (RRVLP) RioCan, TIAA-CREF and OMERS together committed $200 million of equity RioCan acts as general partner and handles all asset management and property management functions RioCan benefits by participating as a minority investor and by earning incentive fees and, asset and property management fees in the form of income 32

33 RioCan Retail Value Limited Partnership (RRVLP) The $200 million of equity has been successfully invested in 12 properties comprising 3.4 million square feet and over $500 million To date, six properties have been sold, generating IRRs between 19-70% before fees 33

34 Canada Pension Plan Investment Board (CPPIB) Strategic Alliance In October 2004, RioCan and CPPIB announced an agreement to acquire premier regional power centres in Canada on a 50/50 basis During the second quarter of 2006, entered into a firm agreement with CPPIB to sell, on a forward sale basis, the following: a 50% interest in each of RioCan Centre Burloak, located in Oakville and RioCan Meadows, located in Edmonton RioCan (22.5%) and Trinity Development Group Inc. (27.5%) agreed to sell a 50% interest in RioCan Beacon Hill, located in Calgary In September 2006, RioCan announced that it completed the first component of the previously announced agreement The first component consists of approximately 168,000 square feet of newly completed retail space at RioCan Beacon Hill Upon full completion, the centre will comprise approximately 800,000 square feet including anchors Costco and Home Depot, both of whom are already open; additional retailers already open include Winners/HomeSense, Royal Bank, Linens N Things, Golf Town, Michaels and The Shoe Company; the centre will also be tenanted by, amongst others, Canadian Tire, Reitmans, Roots, TD Canada Trust, Mark s Work Wearhouse, Sport Chek and La Senza 34

35 Debt Overview $2.71 billion in debt comprised of: $1.818 billion of term mortgage $870 million in seven unsecured debenture issues $22 million of construction loans 35

36 Summarized Balance Sheets and Other Financial Information At September 30, 2006 (in thousands, except percentage amounts) September 30, 2006 December 31, 2005 Total assets $ 4,535,896 $ 4,272,796 Real estate investments $ 4,338,776 $ 4,168,006 Income properties $ 4,016,277 $ 3,874,727 Total debt: Mortgages payable $ 1,840,884 $ 1,753,277 Debentures payable 870, ,000 $ 2,710,884 $ 2,423,277 Unitholders' equity $ 1,656,800 $ 1,675,570 Cash and short-term investments $ 80,550 $ 22,874 Available lines of credit $ 87,000 $ 89,000 Debt-to-aggregate assets ratio 56.2% 53.9% 36

37 Summarized Income Statement and Other Financial Information At September 30, 2006 (in thousands, except per unit amounts) Nine months ended September 30, 2006 Year ended December 31, 2005 Rental revenue $ 429,291 $ 548,880 Net earnings $ 120,377 $ 132,574 Net earnings per unit - basic and diluted $ 0.61 $ 0.68 Recurring distributable income $ 209,019 $ 275,046 Recurring distributable income per unit $ $

38 RioCan s Debt Profile Borrowings to date have been confined exclusively to the Canadian market: 26% from life insurance industry 32% from unsecured debt market 33% from mortgage conduit market 6% from banks Remainder from pension funds and other lenders 38

39 Debt Repayment Schedule At September 30, 2006 (unaudited - in thousand of dollars, except percentage amounts) Scheduled Percentage Principal maturities: principal Principal Total of total debt weighted average Future repayments by year of maturity amortization maturities debt outstanding interest rate 2006 $ 13,192 $ 9,442 $ 22, % 6.3% , , , % 6.6% , , , % 5.2% , , , % 6.1% , , , % 6.6% , , , % 5.4% , , , % 6.2% , , , % 5.9% ,681 90, , % 6.3% , , , % 4.9% , , , % 5.3% ,974 2,350 14, % 7.4% ,886 2,338 11, % 7.5% ,843-4, % 7.1% ,027-2, % 7.8% ,400 5, % 7.2% , , % 6.0% ,933 6, % 6.8% 5.6 years weighted average term to maturity $ 341,888 $ 2,368,996 $ 2,710, % 6.0% 39

40 Unencumbered Income Properties 46 income producing properties unencumbered with mortgage debt 2007 Budget NOI ±$51 million Value at 6.25% cap rate = $816 million 40

41 Consistent Moderate Leverage As per RioCan s Declaration of Trust, leverage is measured at the historic book cost of assets 60.0% 55.0% 50.0% 47.3% 48.2% 51.9% 53.1% 53.8% 53.9% 56.2% 45.0% 40.0% 35.0% 30.0% 25.0% 20.0% At Sept 30, 06 41

42 Leverage at NAV and Market Current market valuation parameters along with RioCan s strong ability to create value has resulted in a leverage ratio that, on a Net Asset Value and Unit Market Value basis, is extremely conservative 60.0% 55.0% 50.0% 56.2% LEVERAGE BOOK, NAV, MARKET 45.0% 40.0% 35.0% 30.0% 25.0% 39.7% 35.2% 20.0% Book* NAV** Market*** Notes: * Based on historic book cost as of September 30, 2006 ** NAV per unit of $20.73 based on an average of public analysts estimates *** Market Value per unit of $25.05 based on the closing price of RioCan s units on the TSX on November 7,

43 Strong Historical Interest Coverage Interest coverage has historically been in excess of 2.5x, well above the current 1.65x maintenance test At the current x coverage EBITDA could fall by a sizable $161 million annually or 38% before the threshold would be reached 43

44 Debt Coverage Ratios Current EBITDA interest coverage (note) Debt Service Coverage Note: Includes gains on property held for resale, interest income and income from discontinued operations 44

45 Continuous Distribution Increase PER UNIT DISTRIBUTION $1.40 $1.20 $1.00 $0.80 $0.60 $1.04 $1.07$1.08 $0.95 $0.78 $0.65 $0.58 $0.43 $1.11 $1.14 $1.32 $1.23 $1.27 $0.40 $0.20 $ Current Annualized Year-Ended December 31 45

46 Current 2006 Fiscal Conservatism From 1999 to present, RioCan has decreased its payout ratio 100% 95% 90% 85% 80% 75% 70% 97.4% PAYOUT RATIO 93.0% 88.2% 91.3% 90.1% 88.9% 88.9% 87.1% 86.7% 85.3% 80.4% 78.5% 76.9% 77.6% Payout as a % of Funds from Operations 72.8% Payout as a % of Funds from Operations including DRP 72.1% Year-Ended December 31 Note: 2005 FFO adjusted to exclude impact of costs of early extinguishment of debentures 46

47 2006 Debt Strategy Current leverage ratio is approximately 56.2%, allowing ±$460 MM of new debt before reaching 60% leverage Intention is to finance growth with debt until leverage limits are ±58% 47

48 Governance Board of Trustees Non-executive Chairman Paul Godfrey,C.M., President & CEO, The Toronto Blue Jays Baseball Club 8 out of 9 Trustees are independent Clare R. Copeland, Chairman of Toronto Hydro Corporation Raymond Gelgoot, Senior Partner, Fogler, Rubinoff LLP Frank W. King,O.C., President, Metropolitan Investment Corporation Dale H. Lastman, Co-Chair and Partner, Goodmans LLP Ronald W. Osborne, Corporate Director Sharon Sallows, Partner, Ryegate Capital Corporation Edward Sonshine, Q.C., President & CEO, RioCan REIT Michael Stephenson, Principal, Stephenson, Leftwick & Short Board Committees: Investment Human Resources and Compensation Audit Nominating and Governance 48

49 Return to Unitholders Ten months ended October 31, % Year ended December 31, % 10 year compounded annual return to December 31, % 49

50 RioCan Real Estate Investment Trust RioCan REIT The Exchange Tower 130 King Street West, Suite 700 Toronto, ON /