REI.UN:CC - RioCan achieves high end of FFO guidance range and announces 6% distribution increase

• 5.0 million s q. ft. of new and renewed leases with new leasing spread o f 12.3% and blended spread of 9.0%

• Strong tenant demand delivered retail committed occupancy of 97.9% and renewal retention ratio of 91.5%

TORONTO, Feb. 15, 2023 (GLOBE NEWSWIRE) -- RioCan Real Estate Investment Trust (“RioCan" or the "Trust”) (TSX: REI.UN) announced today its financial results for the three months and year ended December 31, 2022 (the "Fourth Quarter").

“RioCan's well-positioned assets, strong and stable tenant mix and delivery of exceptional developments drove strong results in 2022,” said Jonathan Gitlin, President and CEO of RioCan. “RioCan has proven the stability and resilience of our portfolio and our ability to deliver on our growth strategy. We are poised to succeed in any environment and benefit from the favourable supply / demand dynamics within the Canadian retail real estate sector. At the same time, our established development platform continues to fuel future growth. With confidence in our competitive advantages, I am pleased to announce a distribution increase aligned with our goal to deliver consistent, sustainable growth for our unitholders."

FFO per Unit and Net Income

• Full year FFO per unit was $1.71, an increase of $0.11 per unit or 7% over the prior year. Same Property NOI ¹ growth of 4.3% contributed an $0.08 increase in FFO per unit. Completed commercial developments drove FFO per unit higher by $0.02. Residential NOI ¹ accounted for $0.03 per unit of the FFO increase. Higher interest expense, which was partially insulated by hedges and higher interest income, resulted in a net $0.01 decrease in FFO per unit. The $0.07 reduction in FFO per unit from properties sold was mostly offset by a $0.06 FFO per unit accretion from Normal Course Issuer Bid (NCIB) activity.
• Net income for the year of $236.8 million was $361.6 million lower than the prior year due to fair value loss on investment properties of $241.1 million compared to a $124.1 million fair value gain in 2021. The fair value loss in 2022 was driven by increased capitalization rate assumptions, an impact of $408.5 million loss, partially offset by the positive impact of $167.4 million from higher property level NOI due to strong leasing. Over the long-term, underlying fundamentals are expected to drive cash flow growth offsetting short-term interest rate volatility that is currently impacting portfolio valuation.
• Net book value per unit was $25.73, an increase of $0.19 over the prior year, as the above fair value losses were offset by retained earnings, after distributions, gains from hedging activities and the accretive benefit of unit buybacks.
• Our FFO Payout Ratio of 59.0%, Liquidity ¹ of $1.5 billion, Unencumbered Asset ¹ pool of $8.3 billion, floating rate debt at 8.0% of total debt and staggered debt maturities, all contribute to our financial flexibility and balance sheet strength.
• RioCan's Board of Trustees has approved a 6% increase to the monthly distribution to Unitholders from $0.085 to $0.090 per unit commencing with the February 2023 distribution, payable on March 7, 2023 to Unitholders of record as at February 28, 2023. This brings RioCan's annualized distribution to $1.08 per unit.
• 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 Spending ¹ of $400 million to $450 million.

Operation Highlights

^{(i) Includes commercial portfolio only.
(ii) Information presented as at respective periods then ended.}

• Same Property NOI for 2022 grew by 4.3% driven by increases in occupancy, rent growth from contractual rent steps, increases in rent upon renewal and a lower pandemic-related provision, partially offset by certain 2021 favourable items which did not recur in 2022.
• Retail committed occupancy improved to 97.9%, driving committed occupancy for the commercial portfolio up to 97.4%. In the Fourth Quarter, the tenant retention ratio reached a new high of 93.5%, reflecting strong tenant demand for high quality, well-located retail space that is in short supply.
• The commercial blended leasing spread for the year of 9.0% was bolstered by new leasing spreads of 12.3%. Renewal leasing spreads were 8.2% or 9.2% excluding the impact of fixed renewals.

RioCan Living Update ¹

• As at February 15, 2023, the RioCan Living™ residential rental portfolio is comprised of 2,219 purpose-built completed units across 10 buildings located in Toronto, Montreal, Ottawa and Calgary, including Rhythm™ which was completed in the Fourth Quarter. The eight stabilized buildings are 95.7% leased. The two most recently completed buildings, Luma™ and Rhythm, are currently in lease-up.
• Leasing velocity was excellent across the portfolio given increased demand and constrained supply in major markets.
• As of December 31, 2022, 2,575 condominium and townhouse units are under construction. Between 2023 and 2026, these projects are expected to generate combined sales revenue of over $860.0 million that can be redeployed to fund our development pipeline. Of RioCan’s six active condominium construction projects, 85% of the total units have been pre-sold, representing 95% of pro-forma revenues.
  

Development Highlights

• In 2022, our development team continued to execute on our projects under construction with the Value of Development Deliveries ¹ reaching $688.2 million. We completed 651,000 square feet of NLA, including four residential rental buildings - Latitude™, Luma and Rhythm in Ottawa, as well as Strada™ in Toronto - which added a combined 246,000 square feet or 650 residential units to the RioCan Living portfolio. In addition, 608 condominium units were completed which generated revenue of $118.7 million and residential inventory gains of $22.4 million in 2022.
• At The Well™, office and parking construction are substantially complete and the retail will follow in the coming months. Approximately 1,023,000 square feet (at 100% ownership interest) is in tenant possession and 11 tenants are now operating in their respective units.
• The 592 rental residential units at FourFifty The Well™ will be completed in phases starting in mid-2023, through to early-2024. Pre-leasing of this building is scheduled to commence in Q1 2023.
• During 2022, we commenced construction at our Verge™ and Queen & Ashbridge™ mixed-use projects, both in Toronto, bringing the total number of mixed-use development projects under construction to 11.
• In parallel, our team continued to advance our pipeline of future development. Zoning approvals were obtained at RioCan Leaside Centre, Shoppers World Brampton, 2323 Yonge Street and RioCan Grand Park, solidifying approximately 5.5 million square feet of zoned density. Our total zoned square footage was 15.0 million at the end of 2022.
• The Trust continues to unlock value by advancing the development opportunities embedded within the existing portfolio, which has long term potential of 42.9 million square feet. With many opportunities to advance, we have chosen five on which to prioritize our efforts. These Focus Five sites are large scale, transit-oriented, mixed-use developments in the Greater Toronto Area that we are currently advancing through zoning and the site plan approval process. The projects, to be built in phases, have the potential to yield 20.2 million square feet, which could include as many as 23,126 residential units. The scale of these projects provides optionality to create value through development, partnerships and air rights sales, driving growth for many years to come.
• Our Focus Five projects are as follows:
  
  

Capital Management Update

• RioCan redeemed, in full, its $300.0 million, 2.83% Series Y unsecured debenture upon maturity on October 3, 2022. The repayment was primarily funded through six mortgages for a combined total of $295.5 million at a weighted average hedged interest rate of 3.67%.
• The Trust settled a total of $500 million of bond forward contracts during 2022, which resulted in a weighted average interest rate reduction of 109 basis points or a weighted average hedged interest rate of 3.68% for $507.5 million of 7-year debt.
• The Trust entered into bond forward contracts on November 24, 2022 to sell $200.0 million of Government of Canada Bonds due June 1, 2030 with an effective bond yield of 2.876% in April 2023, to hedge the anticipated issuance of fixed rate debt.
• As announced on November 3, 2022, RioCan renewed its Normal Course Issuer Bid, to acquire up to a maximum of 30,247,803 Units, subject to a daily maximum of 207,826.
• During 2022, 9,539,675 Units were acquired and cancelled at a weighted average purchase price of $21.36 per unit for a total cost of $203.9 million.
• RioCan established an automatic securities purchase plan on December 12, 2022 which allows for the purchase of Units under the NCIB at times when RioCan would ordinarily not be permitted to purchase Units due to regulatory restrictions and customary self-imposed blackout periods. There is no obligation to buy under this plan unless the Trust provides instructions to do so prior to each blackout period.
• On January 31, 2023, RioCan refinanced its $200 million non-revolving unsecured credit facility with a weighted average annual all-in fixed rate of 4.93% through interest rate swaps and a maturity date of February 5, 2025 with an option to extend to January 30, 2026, all other terms were similar to the matured facility.

Investing and Capital Recycling

• In 2022, the Trust completed $459.8 million of dispositions at a weighted average capitalization rate of 7.7%. These dispositions, which include two enclosed centres and certain non-core and secondary market assets, improve our overall portfolio quality and generate capital that can be recycled into more productive uses.
• As of February 15, 2023, the Trust has $43.0 million of firm or conditional deals or deals that closed subsequent to year end.
• Total Acquisitions ¹ during 2022 totalled $193.9 million including 139 income producing residential rental units acquired by RioCan through its purchase of a 90% interest in the first phase of Market, a new apartment complex in the heart of Laval, Montreal's largest suburban area. Market is RioCan Living's first acquisition of an operational multi-unit residential building and contributes to the diversification of RioCan's asset base and income stream.
  

Balance Sheet Strength

^{(i) At RioCan's proportionate share.}

• As at December 31, 2022, the Trust had $1.5 billion of Liquidity in the form of a $1.1 billion undrawn revolving line of credit, $0.3 billion undrawn construction lines and other bank loans and $0.1 billion cash and cash equivalents. Pursuant to the terms of its credit agreement, the Trust has a $250 million option to increase its commitment under the revolving line of credit.
• RioCan’s unencumbered asset pool of $8.3 billion, which can be used to obtain secured financing to provide additional liquidity, generated 55.9% of Annual Normalized NOI ¹ and provided 2.18x coverage over Unsecured Debt ¹ .
• Adjusted Debt to Adjusted EBITDA ¹ was 9.51x on a proportionate share basis, as at December 31, 2022, compared to 9.59x as at the end of 2021. The decrease was primarily due to higher Adjusted EBITDA due to growth in earnings from operations and development deliveries, partially offset by higher average Total Adjusted Debt balances, as development activities were partially funded with incremental debt.
  

Conference Call and Webcast

Interested parties are invited to participate in a conference call with management on Thursday, February 16, 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: https://www.netroadshow.com/events/login?show=a354a1be&confId=45471. Participants who pre-register 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: 887284.

For those unable to participate in the live mode, a replay will be available at 1-866-813-9403 with access code 334986.

To access the simultaneous webcast, visit RioCan’s website at http://investor.riocan.com/investor-relations/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 December 31, 2022, our portfolio is comprised of 193 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 annual audited consolidated financial statements ("2022 Annual 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 2022 Annual Consolidated Financial Statements and MD&A for the three months and year ended December 31, 2022, 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, FFO Adjusted per unit , Net Operating Income ("NOI"), Same Property NOI, Adjusted Same Property NOI, Development Spending, Value of Development Deliveries, Total Acquisitions, Liquidity, Adjusted Debt to Adjusted EBITDA, Total Adjusted Debt to Total Adjusted Assets, RioCan's Proportionate Share, Ratio of Unsecured Debt to Total Contractual Debt, Ratio of Secured Debt to Total Contractual Debt, 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 three months and year ended December 31, 2022.

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 sheet from IFRS to RioCan's proportionate share basis as at December 31, 2022 and December 31, 2021:

The following tables reconcile the consolidated statements of income (loss) from IFRS to RioCan's proportionate share basis for the three months and years ended December 31, 2022 and 2021:

NOI and Same Property NOI

The following table reconciles operating income to NOI and Same Property NOI to NOI for the three months and years ended December 31, 2022 and 2021:

^{(i) Includes properties acquired or disposed during the periods being compared.}

Same Property NOI including completed properties under development (PUD)

Adjusted Same Property NOI

FFO

The following table reconciles net income (loss) attributable to Unitholders to FFO for the three months and years ended December 31, 2022 and 2021:

Development Spending

Total Development Spending for the three months and years ended December 31, 2022 and 2021 are as follows:

Value of Development Deliveries

Total Value of Development Deliveries for the three months and years ended December 31, 2022 and 2021 are as follows:

Total Acquisitions

Total Acquisitions for the three months and years ended December 31, 2022 and 2021 are as follows:

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 December 31, 2022 and 2021:

Liquidity

As at December 31, 2022, RioCan had $1.5 billion of Liquidity as summarized in the following table:

Unsecured Debt and Secured Debt

The following table reconciles total Unsecured Debt and Secured Debt to Total Contractual Debt as at December 31, 2022 and 2021:

Adjusted EBITDA

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