REI.UN RioCan Real Estate Investment Trust

• Superior operational performance included retail committed occupancy increasing 50 bps to a record 98.4%, higher blended leasing spreads of 10.7% and greater Same Property NOI growth year-over-year
• Delivered ~ 600,000 square feet of top quality development assets, including The WellTM and a growing residential portfolio, that has continued to add a steady stream of new NOI

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, 2023.

“RioCan continued to capitalize on Canada's short supply of quality space and robust retailer demand, generating some of the best operational results we have ever seen, and achieved our financial objectives for 2023,” said Jonathan Gitlin, President and CEO of RioCan. “Our performance speaks to the reliability and quality of our open air retail, prime locations, and foundation of necessity-based retailers. As we celebrate our 30th anniversary, we cement our position as a valuable long-term investment and Canada's premier REIT. RioCan's third consecutive annual distribution increase to Unitholders reflects our confidence in delivering continued operational excellence and meaningful value creation."

Financial Highlights

 

 

 

 

 

 

 

 

 

 

 

 

Three months ended December 31

 

Years ended December 31

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

 

 

2023

 

 

 

2022

 

 

 

2023

 

 

 

2022

 

 

 

 

 

 

 

 

 

 

 

 

FFO 1

 

$

132.9

 

 

$

127.6

 

 

$

531.3

 

 

$

524.7

FFO per unit - diluted 1

 

$

0.44

 

 

$

0.42

 

 

$

1.77

 

 

$

1.71

Net income (loss)

 

$

(117.7)

 

 

$

(5.0)

 

 

$

38.8

 

 

$

236.8

Weighted average Units outstanding - diluted (in thousands)

 

 

300,417

 

 

 

302,423

 

 

 

300,479

 

 

 

306,247

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As at

 

 

 

 

 

 

 

December 31, 2023

 

 

December 31, 2022

 

 

 

 

 

 

 

 

 

 

 

 

Net book value per unit

 

 

 

 

 

 

 

$

24.76

 

 

$

25.73

 

 

 

 

 

 

 

 

 

 

 

 

• Full year FFO per unit was $1.77, an increase of $0.06 per unit or 3.5% over the prior year.
  • Commercial Same Property NOI1 grew by 4.8%, contributing a $0.09 increase in FFO per unit.
  • NOI from completed commercial developments drove FFO per unit higher by $0.05.
  • Residential NOI1 accounted for $0.03 per unit of the FFO per unit increase.
  • Reduced NOI from the sale of commercial properties resulted in a $0.10 reduction in FFO per unit.
  • Higher interest expense, which was partially insulated by hedges, debt reduction impact of property sales proceeds, and higher investment and interest income, resulted in a net $0.05 decrease in FFO per unit.
  • Accretion from Normal Course Issuer Bid activity resulted in an increase of $0.03 FFO per unit while all other combined variances accounted for the remaining $0.01 increase in FFO per unit.
• Net income for the year of $38.8 million was $198.0 million lower than the prior year due to a fair value loss on investment properties of $450.4 million compared to a $241.1 million fair value loss in 2022. The fair value loss in 2023 was driven by increased capitalization rate assumptions, partially offset by higher stabilized NOI.
• Our FFO Payout Ratio1 of 60.5%, Liquidity1 of $2.0 billion, Unencumbered Assets1 of $8.1 billion, floating rate debt at 6.8%1 of total debt and staggered debt maturities, all contribute to our financial flexibility and balance sheet strength.

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.

Distribution Increase and Outlook

• RioCan's Board of Trustees approved a 2.8% increase to the monthly distribution to Unitholders from $0.09 to $0.0925 per unit commencing with the February 2024 distribution, payable on March 7, 2024 to Unitholders of record as at February 29, 2024. This brings RioCan's annualized distribution to $1.11 per unit and is the third consecutive annual distribution increase as we provide sustainable distribution growth to Unitholders while maintaining our payout ratio targets.
• For 2024, we anticipate FFO per unit to be within the range of $1.79 to $1.82, Commercial SPNOI growth of ~ 3%, and an FFO Payout Ratio of between 55% to 65%. Development Spending1 on mixed-use projects is expected to be between $250 million to $300 million and spending for the construction of retail projects of $50 million to $60 million.
• The Trust continuously reviews its longer-term targets in the context of ever-evolving macroeconomic and business environments. Refer to the Outlook section of the MD&A for more information.

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 (i)

 

Three months ended December 31

 

Years ended December 31

 

 

2023

 

 

2022

 

 

2023

 

 

2022

Occupancy - committed (ii)

 

97.4 %

 

 

97.4 %

 

 

97.4 %

 

 

97.4 %

Retail occupancy - committed (ii)

 

98.4 %

 

 

97.9 %

 

 

98.4 %

 

 

97.9 %

Blended leasing spread

 

9.0 %

 

 

8.8 %

 

 

10.7 %

 

 

9.0 %

New leasing spread

 

13.2 %

 

 

11.8 %

 

 

14.7 %

 

 

12.3 %

Renewal leasing spread

 

8.7 %

 

 

8.3 %

 

 

9.8 %

 

 

8.2 %

 

(i) Includes commercial portfolio only.

(ii) Information presented as at respective periods then ended.

• Commercial Same Property NOI grew by 4.8%, driven by contractual rent steps, strong leasing and recovery of provisions for credit losses. The impact of net provision reversals during 2023 contributed 1.2% to this SPNOI growth.
• A record high 98.4% retail committed occupancy increased by 50 basis points over last year, underscoring the demand for well-located retail space. When compared to Q3 2023, retail in-place occupancy increased by 40 basis points to 98.0%.
• The blended leasing spread of 10.7% in 2023 was comprised of new and renewal leasing spreads of 14.7% and 9.8%, respectively. Excluding fixed-rate renewals, the renewal leasing spread would be 11.4% for the year, reflective of the strong leasing environment. New leasing in 2023 generated average net rent per square foot of $27.75, well above the average net rent per occupied square foot of $21.51.
• 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 87.5% of annualized net rent and strengthen the quality of the tenant mix.

RioCan Living Update 1

• Continued strong performance and leasing environment for our stabilized properties drove Residential Same Property NOI2 growth of 13.8% in 2023.
• Total NOI generated from our residential rental operations for 2023 was $21.5 million, an increase of $7.9 million or 57.7% over the prior year.
• RioCan LivingTM has 13 buildings in operation, representing 2,738 residential units. 11 of these buildings are stabilized and 96.5% leased as at February 13, 2024.
• Occupancy commenced at FourFifty The WellTM on August 1, 2023. As at February 13, 2024, 45.8% of the units are leased at rents above expectations.
• The 2,573 condominium and townhouse units that are under construction are expected to generate combined sales revenue of over $780.0 million between 2024 and 2026. 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.

2. 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.

Development Highlights

 

Three months ended December 31

 

Years ended December 31

(in millions except square feet)

 

 

2023

 

 

 

2022

 

 

 

2023

 

 

 

2022

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

272.0

 

 

 

258.0

 

 

 

599.0

 

 

 

651.0

Development Spending

 

$

94.4

 

 

$

114.6

 

 

$

399.9

 

 

$

427.1

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

 

 

1,235.0

 

 

 

1,945.0

 

 

 

1,235.0

 

 

 

1,945.0

 

 

 

 

 

 

 

 

 

 

 

 

(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.

• For the full year, 599,000 square feet of property under development were completed which are expected to contribute $27.2 million of stabilized cash NOI. Rental income has commenced in 2023 and is expected to ramp up over the course of 2024. Completions include 460,000 square feet related to The Well, comprised of 123,000 square feet of purpose-built rental residential and 337,000 square feet of commercial space. In addition, 32 U.C. Towns 2 townhouse units were completed and sold in the quarter, generating a $4.8 million inventory gain.
• As at February 13, 2024, approximately 96% of the total commercial space at The Well is leased with approximately 91% or 1,352,000 square feet (at 100% ownership interest) in tenant possession. The retail component is 93% leased, with more than half of the space open and operating. The remaining retail tenants will open steadily over the first half of 2024.
• Zoning approvals for 4.0 million square feet of residential inventory were obtained in 2023 including for RioCan Scarborough Centre (Golden Mile Phase One & Two) in Toronto, RioCan Hall in the entertainment district in downtown Toronto, 83 Bloor Street West located in the prestigious downtown Toronto neighbourhood of Yorkville and East Hills South Block in Calgary. As cost of financing conditions persist, RioCan does not intend to commence new physical construction of mixed-use properties in 2024.
• Total zoned square footage of 17.4 million at Q4 2023 compares to 15.0 million at Q4 2022, an increase of 2.4 million as newly zoned projects were partially offset by development deliveries. Zoned square footage includes 1.2 million square feet of projects under construction and 1.7 million square feet of shovel ready projects. Value recognized in the Trust's properties under development balance for zoned projects, excluding those under construction, is $31.04 per square foot.

Investing and Capital Recycling

• During 2023, and including the subsequent event period, RioCan executed on capital recycling activities that improved portfolio quality and the balance sheet, summarized as follows:
  • Dispositions: Closed $295.4 million of investment property dispositions, all of which were unencumbered assets, and provided $6.0 million vendor take-back financing.
  • Acquisitions: Closed $263.1 million of Total Acquisitions to February 13, 20241, which included both debt assumed of $119.6 million, at an average contractual interest rate of 2.68% and a weighted average term of 5.3 years, and a $40.9 million deferred payment.
  • Lending Program: Issued $84.1 million of new loans receivable offset by $74.6 million of loans repaid. With the weighted average interest rate on new loans at 11.1% we expect our lending program to be accretive to FFO, and help partially offset the impact of higher interest rates.
  • Net cash raised from the above capital recycling activities was $177.3 million.
• Dispositions improved our portfolio quality through reducing exposure to secondary markets, enclosed malls and certain tenant categories, including:
  • An enclosed mall in Winnipeg, Manitoba;
  • Three cinema-anchored centres in Surrey, British Columbia; Gatineau, Quebec and Orillia, Ontario; and
  • A non-grocery-anchored centre in Calgary, Alberta.
• In addition, the Trust sold a 12.5% interest in the 11YV project, thereby reducing its interest in the project to 37.5%. The resulting gain of $12.1 million was mainly attributable to the value of the underlying residential inventory. Subsequent to year end, RioCan further reduced its interest in the project to 25.0% by selling an additional 12.5% interest.
• Subsequent to year end, the Trust also entered into firm deals to dispose full or partial interests in a number of properties totalling $31.1 million including two secondary market assets, one of which is cinema-anchored, and a piece of non-core development land.
• Strategic acquisitions added to our major market portfolio including new stock residential assets and an urban, grocery-anchored retail asset with development upside. Strategic acquisitions included the following previously announced transactions:
  • A multi-phase residential rental asset in Quebec, which included in-place Canada Mortgage and Housing Corporation (CMHC) debt;
  • Land assemblies for development; and
  • Purchase of a parking lot lease at a Focus Five2 project to remove a significant encumbrance to development.
  • Two acquisitions closed subsequent to year end:
    • 50.0% ownership in an operating and stabilized rental residential property in Calgary, Alberta for $52.9 million, which included $32.7 million of in-place debt at a weighted average contractual interest rate of 1.97%; and
    • A 50.0% managing interest in an urban grocery-anchored centre in Toronto, Ontario which is currently undergoing re-zoning to create additional density. The Trust will manage the property and the development process, earning fees for these activities. The purchase was settled with $13.2 million cash, the assumption of $46.1 million of in-place debt at a weighted average contractual interest rate of 3.20%, and agreed upon future consideration for density, estimated to be $40.9 million, to be paid as various development milestones are met.
• The above capital recycling activities are representative of our on-going strategy to rotate capital away from lower quality, higher risk assets to premium quality retail and residential assets in the best markets in Canada. This process, which began a number of years ago, has positioned our portfolio to perform well in any economic environment.

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

• During 2023, the Trust issued $800.0 million of senior unsecured debentures, including $300.0 million of Series AI debentures at a coupon rate of 6.488%, which can be repaid at par on or after September 29, 2024. This feature allows the Trust to refinance these debentures in the near-term with longer-term debt at lower interest rates and provides the Trust with additional flexibility in the current volatile interest rate environment.
• The Trust settled a total of $500.0 million of bond forward contracts during 2023 in conjunction with the issuance of $200.0 million Series AG and $300.0 million Series AH senior unsecured debentures on March 6, 2023 and June 26, 2023, respectively. Inclusive of $16.8 million of realized gains from these contracts, the combined weighted average hedged interest rate for these debentures is 5.244% with a combined weighted average term of 5.6 years.
• Since Q3 reporting on November 2, 2023 to February 13, 2024, the Trust arranged $608.0 million in permanent financing at a weighted average interest rate of 5.4%, across various financing types including debentures, commercial mortgages and CMHC mortgages.
• Included in that permanent financing were $300.0 million Series AJ senior unsecured debentures issued on February 12, 2024. These debentures were issued at a coupon rate of 5.470% per annum and will mature on March 1, 2030. The proceeds were used to repay, in full, the $300.0 million, 3.29% Series W unsecured debentures upon maturity on February 12, 2024.

Balance Sheet Strength

(in millions except percentages)

As at

 

 

 

 

 

December 31, 2023

 

December 31, 2022

 

 

 

 

 

 

 

 

 

 

 

Liquidity (i) 1

 

 

 

 

 

 

$

1,964

 

 

$

1,548

Adjusted Debt to Adjusted EBITDA (i) 1

 

 

 

 

 

 

9.28x

 

 

9.51x

Unencumbered Assets (i) 1

 

 

 

 

 

 

$

8,090

 

 

$

8,257

 

 

 

 

 

 

 

 

 

 

 

(i) At RioCan's proportionate share.

• As at December 31, 2023, the Trust had $2.0 billion of Liquidity. The Trust has full availability of its $1.3 billion revolving line of credit in addition to $0.6 billion in undrawn construction lines and other bank loans and $0.1 billion cash and cash equivalents. Liquidity increased by $415.8 million when compared to the prior year, providing greater flexibility in debt refinancing strategies.
• Pursuant to the terms of its credit agreement, the Trust has an option to increase the commitment under its revolving line of credit by $250.0 million.
• RioCan’s Unencumbered Assets of $8.1 billion, which can be used to obtain secured financing to provide additional liquidity at lower interest rates than unsecured debt, generated 55.8% of Annual Normalized NOI1.
• Adjusted Debt to Adjusted EBITDA improved to 9.28x on a proportionate share basis as at December 31, 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.
• As at December 31, 2023, the Trust's weighted average term to maturity on a proportionate share basis was 2.97 years. However, inclusive of financing activities completed in early 2024, the weighted average term to maturity as at February 13, 2024 was extended to approximately 3.5 years.
• The Trust’s exposure to floating rate debt was 6.8% of total debt as at December 31, 2023. Excluding construction loans, floating rate exposure was 3.5%.

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, February 14, 2024 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: 218112.

For those unable to participate in the live mode, a replay will be available at 1-866-813-9403 with access code: 539726.

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 December 31, 2023, our portfolio is comprised of 188 properties with an aggregate net leasable area of approximately 32.6 million square feet (at RioCan's interest) including office, residential rental and 9 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 ("2023 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 2023 Annual Consolidated Financial Statements and MD&A for the three months and year ended December 31, 2023, which are available on RioCan's website at www.riocan.com and on SEDAR+ at www.sedarplus.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, Commercial Same Property NOI, Residential Same Property NOI, Development Spending, Total Acquisitions to February 13, 2024, Ratio of floating rate debt to total debt, Liquidity, Adjusted Debt to Adjusted EBITDA, RioCan's Proportionate Share, Unencumbered Assets 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 months and year ended December 31, 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 December 31, 2023 and December 31, 2022:

As at

December 31, 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

$

13,561,718

$

411,811

$

13,973,529

$

13,807,740

$

398,701

$

14,206,441

Equity-accounted investments

 

383,883

 

(383,883)

 

—

 

364,892

 

(364,892)

 

—

Mortgages and loans receivable

 

289,533

 

(6,707)

 

282,826

 

269,339

 

—

 

269,339

Residential inventory

 

217,186

 

407,946

 

625,132

 

272,005

 

214,536

 

486,541

Assets held for sale

 

19,075

 

—

 

19,075

 

42,140

 

—

 

42,140

Receivables and other assets

 

246,652

 

50,681

 

297,333

 

259,514

 

37,779

 

297,293

Cash and cash equivalents

 

124,234

 

14,506

 

138,740

 

86,229

 

8,001

 

94,230

Total assets

$

14,842,281

$

494,354

$

15,336,635

$

15,101,859

$

294,125

$

15,395,984

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

Debentures payable

$

3,240,943

$

—

$

3,240,943

$

2,942,051

$

—

$

2,942,051

Mortgages payable

 

2,740,924

 

158,292

 

2,899,216

 

2,659,180

 

172,100

 

2,831,280

Lines of credit and other bank loans

 

879,246

 

231,963

 

1,111,209

 

1,141,112

 

89,187

 

1,230,299

Accounts payable and other liabilities

 

543,398

 

104,099

 

647,497

 

630,624

 

32,838

 

663,462

Total liabilities

$

7,404,511

$

494,354

$

7,898,865

$

7,372,967

$

294,125

$

7,667,092

 

 

 

 

 

 

 

Equity

 

 

 

 

 

 

Unitholders’ equity

 

7,437,770

 

—

 

7,437,770

 

7,728,892

 

—

 

7,728,892

Total liabilities and equity

$

14,842,281

$

494,354

$

15,336,635

$

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 months and years ended December 31, 2023 and 2022:

 

Three months ended December 31, 2023

Three months ended 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

Revenue

 

 

 

 

 

 

Rental revenue

$

276,510

$

8,124

$

284,634

$

268,864

$

7,516

$

276,380

Residential inventory sales

 

13,789

 

11,365

 

25,154

 

33,873

 

—

 

33,873

Property management and other service fees

 

6,611

 

—

 

6,611

 

3,450

 

—

 

3,450

 

 

296,910

 

19,489

 

316,399

 

306,187

 

7,516

 

313,703

Operating costs

 

 

 

 

 

 

Rental operating costs

 

 

 

 

 

 

Recoverable under tenant leases

 

94,445

 

881

 

95,326

 

95,258

 

836

 

96,094

Non-recoverable costs

 

7,397

 

605

 

8,002

 

9,060

 

606

 

9,666

Residential inventory cost of sales

 

8,994

 

9,117

 

18,111

 

26,448

 

—

 

26,448

 

 

110,836

 

10,603

 

121,439

 

130,766

 

1,442

 

132,208

Operating income

 

186,074

 

8,886

 

194,960

 

175,421

 

6,074

 

181,495

Other income (loss)

 

 

 

 

 

 

Interest income

 

6,401

 

618

 

7,019

 

6,272

 

599

 

6,871

Income (loss) from equity-accounted investments

 

(7,190)

 

7,190

 

—

 

(3,864)

 

3,864

 

—

Fair value loss on investment properties, net

 

(222,921)

 

(13,506)

 

(236,427)

 

(115,507)

 

(8,404)

 

(123,911)

Investment and other income (loss)

 

4,459

 

(25)

 

4,434

 

240

 

324

 

564

 

 

(219,251)

 

(5,723)

 

(224,974)

 

(112,859)

 

(3,617)

 

(116,476)

Other expenses

 

 

 

 

 

 

Interest costs, net

 

58,940

 

3,108

 

62,048

 

48,320

 

2,394

 

50,714

General and administrative

 

15,459

 

23

 

15,482

 

12,845

 

23

 

12,868

Internal leasing costs

 

3,156

 

—

 

3,156

 

3,306

 

—

 

3,306

Transaction and other costs

 

6,945

 

32

 

6,977

 

3,236

 

40

 

3,276

 

 

84,500

 

3,163

 

87,663

 

67,707

 

2,457

 

70,164

Loss before income taxes

$

(117,677)

$

—

$

(117,677)

$

(5,145)

$

—

$

(5,145)

Current income tax recovery

 

(18)

 

—

 

(18)

 

(184)

 

—

 

(184)

Net loss

$

(117,659)

$

—

$

(117,659)

$

(4,961)

$

—

$

(4,961)

 

Year ended December 31, 2023

Year ended December 31, 2022

(in thousands)

IFRS basis

Equity-accounted investments

RioCan's proportionate share

IFRS basis

Equity-accounted investments

RioCan's proportionate share

Revenue

 

 

 

 

 

 

Rental revenue

$

1,091,105

$

33,609

$

1,124,714

$

1,074,192

$

29,221

$

1,103,413

Residential inventory sales

 

13,789

 

63,222

 

77,011

 

118,659

 

936

 

119,595

Property management and other service fees

 

18,977

 

—

 

18,977

 

20,996

 

—

 

20,996

 

 

1,123,871

 

96,831

 

1,220,702

 

1,213,847

 

30,157

 

1,244,004

Operating costs

 

 

 

 

 

 

Rental operating costs

 

 

 

 

 

 

Recoverable under tenant leases

 

374,149

 

3,549

 

377,698

 

376,914

 

2,889

 

379,803

Non-recoverable costs

 

26,320

 

2,338

 

28,658

 

27,955

 

2,394

 

30,349

Residential inventory cost of sales

 

8,994

 

49,476

 

58,470

 

96,286

 

422

 

96,708

 

 

409,463

 

55,363

 

464,826

 

501,155

 

5,705

 

506,860

Operating income

 

714,408

 

41,468

 

755,876

 

712,692

 

24,452

 

737,144

Other income (loss)

 

 

 

 

 

 

Interest income

 

25,131

 

2,559

 

27,690

 

20,902

 

2,326

 

23,228

Income from equity-accounted investments

 

18,383

 

(18,383)

 

—

 

2,349

 

(2,349)

 

—

Fair value loss on investment properties, net

 

(450,408)

 

(14,123)

 

(464,531)

 

(241,128)

 

(16,208)

 

(257,336)

Investment and other income (loss)

 

8,501

 

(339)

 

8,162

 

(1,842)

 

277

 

(1,565)

 

 

(398,393)

 

(30,286)

 

(428,679)

 

(219,719)

 

(15,954)

 

(235,673)

Other expenses

 

 

 

 

 

 

Interest costs, net

 

208,948

 

11,339

 

220,287

 

180,365

 

8,242

 

188,607

General and administrative

 

60,367

 

56

 

60,423

 

54,437

 

74

 

54,511

Internal leasing costs

 

11,919

 

—

 

11,919

 

12,204

 

—

 

12,204

Transaction and other costs

 

9,344

 

(213)

 

9,131

 

8,274

 

182

 

8,456

 

 

290,578

 

11,182

 

301,760

 

255,280

 

8,498

 

263,778

Income before income taxes

$

25,437

$

—

$

25,437

$

237,693

$

—

$

237,693

Current income tax (recovery) expense

 

(13,365)

 

—

 

(13,365)

 

921

 

—

 

921

Net income

$

38,802

$

—

$

38,802

$

236,772

$

—

$

236,772

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, 2023 and 2022:

 

Three months ended December 31

Years ended December 31

(thousands of dollars)

 

2023

 

2022

 

2023

 

2022

Operating Income

$

186,074

$

175,421

$

714,408

$

712,692

Adjusted for the following:

 

 

 

 

Property management and other service fees

 

(6,611)

 

(3,450)

 

(18,977)

 

(20,996)

Residential inventory gains

 

(4,795)

 

(7,425)

 

(4,795)

 

(22,373)

Operational lease revenue from ROU assets

 

1,638

 

1,516

 

6,717

 

5,666

NOI

$

176,306

$

166,062

$

697,353

$

674,989

 

Three months ended December 31

Years ended December 31

(thousands of dollars)

 

2023

 

2022

 

2023

 

2022

Commercial:

 

 

 

 

Commercial Same Property NOI

$

150,698

$

142,019

$

596,558

$

569,416

NOI from income producing properties:

 

 

 

 

Acquired (i)

 

566

 

8

 

2,010

 

462

Disposed (i)

 

2,494

 

8,830

 

15,351

 

46,709

 

 

3,060

 

8,838

 

17,361

 

47,171

 

 

 

 

 

NOI from completed commercial developments

 

9,181

 

4,878

 

31,964

 

16,948

NOI from properties under de-leasing (ii)

 

4,213

 

5,111

 

18,842

 

20,829

Lease cancellation fees

 

70

 

391

 

5,253

 

5,119

Straight-line rent adjustment

 

2,638

 

806

 

5,898

 

1,884

NOI from commercial properties

 

169,860

 

162,043

 

675,876

 

661,367

Residential:

 

 

 

 

Residential Same Property NOI

 

4,088

 

3,507

 

7,123

 

6,260

NOI from income producing properties:

 

 

 

 

Acquired (i)

 

401

 

—

 

2,975

 

1,667

Disposed (i)

 

—

 

—

 

48

 

(7)

 

 

401

 

—

 

3,023

 

1,660

NOI from completed residential developments

 

1,957

 

512

 

11,331

 

5,702

NOI from residential rental

 

6,446

 

4,019

 

21,477

 

13,622

NOI

$

176,306

$

166,062

$

697,353

$

674,989

(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

 

Three months ended December 31

Years ended December 31

(thousands of dollars)

 

2023

 

2022

 

2023

 

2022

Commercial Same Property NOI

$

150,698

$

142,019

$

596,558

$

569,416

Residential Same Property NOI

 

4,088

 

3,507

 

7,123

 

6,260

Same Property NOI

$

154,786

$

145,526

$

603,681

$

575,676

FFO

The following table reconciles net income (loss) attributable to Unitholders to FFO for the three months and years ended December 31, 2023 and 2022:

 

Three months ended December 31

Years ended December 31

(thousands of dollars, except where otherwise noted)

 

2023

 

2022

 

2023

 

2022

Net income (loss) attributable to Unitholders

$

(117,659)

$

(4,961)

$

38,802

$

236,772

Add back/(Deduct):

 

 

 

 

Fair value losses, net

 

222,921

 

115,507

 

450,408

 

241,128

Fair value losses included in equity-accounted investments

 

13,506

 

8,404

 

14,124

 

16,207

Internal leasing costs

 

3,156

 

3,306

 

11,919

 

12,204

Transaction losses on investment properties, net (i)

 

1,147

 

560

 

1,182

 

1,027

Transaction gains on equity-accounted investments

 

(14)

 

—

 

(83)

 

—

Transaction costs on sale of investment properties

 

5,094

 

2,652

 

5,601

 

5,734

ERP implementation costs

 

3,503

 

—

 

12,032

 

—

Change in unrealized fair value on marketable securities

 

(1,846)

 

382

 

865

 

3,782

Current income tax (recovery) expense

 

(18)

 

(184)

 

(13,365)

 

921

Operational lease revenue from ROU assets

 

1,283

 

1,120

 

5,116

 

4,086

Operational lease expenses from ROU assets in equity-accounted investments

 

(16)

 

(12)

 

(55)

 

(46)

Capitalized interest on equity-accounted investments (ii)

 

1,833

 

869

 

4,735

 

2,863

FFO

$

132,890

$

127,643

$

531,281

$

524,678

Add back:

 

 

 

 

Restructuring costs

 

24

 

510

 

1,368

 

4,289

FFO Adjusted

$

132,914

$

128,153

$

532,649

$

528,967

 

 

 

 

 

FFO per unit - basic

$

0.44

$

0.42

$

1.77

$

1.71

FFO per unit - diluted

$

0.44

$

0.42

$

1.77

$

1.71

FFO Adjusted per unit - diluted

$

0.44

$

0.42

$

1.77

$

1.73

Weighted average number of Units - basic (in thousands)

 

300,417

 

302,321

 

300,392

 

306,069

Weighted average number of Units - diluted (in thousands)

 

300,417

 

302,423

 

300,479

 

306,247

 

 

 

 

 

FFO for last 4 quarters

 

 

$

531,281

$

524,678

Distributions paid for last 4 quarters

 

 

$

321,414

$

309,416

FFO Payout Ratio

 

 

 

60.5%

 

59.0%

(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, PR Bloor Street LP and RC Yorkville 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 months and years ended December 31, 2023 and 2022 is as follows:

 

Three months ended December 31

Years ended December 31

(thousands of dollars)

 

2023

 

2022

 

2023

 

2022

Development expenditures on balance sheet:

 

 

 

 

Properties under development

$

52,267

$

78,282

$

244,260

$

298,409

Residential inventory

 

26,875

 

33,631

 

127,118

 

112,597

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

 

15,223

 

2,639

 

28,568

 

16,062

Total Development Spending

$

94,365

$

114,552

$

399,946

$

427,068

 

Three months ended December 31

Years ended December 31

(thousands of dollars)

 

2023

 

2022

 

2023

 

2022

Mixed-use projects

$

83,271

$

88,642

$

346,956

$

394,926

Retail projects

 

11,094

 

25,910

 

52,990

 

32,142

Total Development Spending

$

94,365

$

114,552

$

399,946

$

427,068

Total Acquisitions

Total Acquisitions for the three months and years ended December 31, 2023 and 2022 are as follows:

 

Three months ended December 31

Years ended December 31

(thousands of dollars)

 

2023

 

2022

 

2023

 

2022

 

 

 

 

 

Income producing properties

$

—

$

5,011

$

75,473

$

96,031

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

$

—

$

5,011

$

110,056

$

193,914

Subsequent event acquisitions to February 13, 2024

 

153,089

 

n.a

 

153,089

 

n.a

Total Acquisitions to February 13, 2024

$

153,089

n.a

$

263,145

n.a

Total Contractual Debt

The following table reconciles total debt to Total Contractual Debt as at December 31, 2023 and December 31, 2022:

As at

December 31, 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

$

3,240,943

$

—

$

3,240,943

$

2,942,051

$

—

$

2,942,051

Mortgages payable

 

2,740,924

 

158,292

 

2,899,216

 

2,659,180

 

172,100

 

2,831,280

Lines of credit and other bank loans

 

879,246

 

231,963

 

1,111,209

 

1,141,112

 

89,187

 

1,230,299

Total debt

$

6,861,113

$

390,255

$

7,251,368

$

6,742,343

$

261,287

$

7,003,630

Less:

 

 

 

 

 

 

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

 

(24,019)

 

(484)

 

(24,503)

 

(15,634)

 

(690)

 

(16,324)

Total Contractual Debt

$

6,885,132

$

390,739

$

7,275,871

$

6,757,977

$

261,977

$

7,019,954

Floating Rate Debt and Fixed Rate Debt

The following table summarizes RioCan's Ratio of floating rate debt to total debt as at December 31, 2023 and December 31, 2022:

As at

December 31, 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

$

6,543,106

$

212,554

$

6,755,660

$

6,301,054

$

141,720

$

6,442,774

Total floating rate debt

 

318,007

 

177,701

 

495,708

 

441,289

 

119,567

 

560,856

Total debt

$

6,861,113

$

390,255

$

7,251,368

$

6,742,343

$

261,287

$

7,003,630

Ratio of floating rate debt to total debt

 

4.6%

 

 

6.8%

 

6.5%

 

 

8.0%

Liquidity

As at December 31, 2023, RioCan had approximately $2.0 billion of Liquidity as summarized in the following table:

As at

December 31, 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

$

1,250,000

$

—

$

1,250,000

$

1,116,351

$

—

$

1,116,351

Undrawn construction lines and other bank loans

 

385,715

 

189,563

 

575,278

 

267,562

 

70,094

 

337,656

Cash and cash equivalents

 

124,234

 

14,506

 

138,740

 

86,229

 

8,001

 

94,230

Liquidity

$

1,759,949

$

204,069

$

1,964,018

$

1,470,142

$

78,095

$

1,548,237

Adjusted EBITDA

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

Year ended

December 31, 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

$

38,802

$

—

$

38,802

$

236,772

$

—

$

236,772

Add (deduct) the following items:

 

 

 

 

 

 

Income tax (recovery) expense:

 

 

 

 

 

 

Current

 

(13,365)

 

—

 

(13,365)

 

921

 

—

 

921

Fair value losses on investment properties, net

 

450,408

 

14,123

 

464,531

 

241,128

 

16,208

 

257,336

Change in unrealized fair value on marketable securities (i)

 

865

 

—

 

865

 

3,783

 

—

 

3,783

Internal leasing costs

 

11,919

 

—

 

11,919

 

12,204

 

—

 

12,204

Non-cash unit-based compensation expense

 

10,154

 

—

 

10,154

 

9,056

 

—

 

9,056

Interest costs, net

 

208,948

 

11,339

 

220,287

 

180,365

 

8,242

 

188,607

Restructuring costs

 

1,368

 

—

 

1,368

 

4,289

 

—

 

4,289

ERP implementation costs

 

12,032

 

—

 

12,032

 

—

 

—

 

—

Depreciation and amortization

 

2,632

 

—

 

2,632

 

4,774

 

—

 

4,774

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

 

1,180

 

(83)

 

1,097

 

1,024

 

—

 

1,024

Transaction costs on investment properties

 

5,606

 

1

 

5,607

 

5,734

 

3

 

5,737

Operational lease revenue (expenses) from ROU assets

 

5,116

 

(55)

 

5,061

 

4,086

 

(46)

 

4,040

Adjusted EBITDA

$

735,665

$

25,325

$

760,990

$

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:

Year ended

December 31, 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

$

6,879,087

$

317,231

$

7,196,318

$

6,756,628

$

251,888

$

7,008,516

Less: average cash and cash equivalents

 

(120,952)

 

(11,408)

 

(132,360)

 

(74,871)

 

(8,791)

 

(83,662)

Average Total Adjusted Debt

$

6,758,135

$

305,823

$

7,063,958

$

6,681,757

$

243,097

$

6,924,854

Adjusted EBITDA (i)

$

735,665

$

25,325

$

760,990

$

704,136

$

24,407

$

728,543

Adjusted Debt to Adjusted EBITDA

 

9.19

 

 

9.28

 

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 and Percentage of Normalized NOI Generated from Unencumbered Assets as at December 31, 2023 and December 31, 2022:

As at

 

December 31, 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

Investment Properties

$

13,561,718

$

411,811

$

13,973,529

$

13,807,740

$

398,701

$

14,206,441

Less: Encumbered Investment Properties

 

5,531,177

 

352,425

 

5,883,602

 

5,607,460

 

342,473

 

5,949,933

Unencumbered Assets

$

8,030,541

$

59,386

$

8,089,927

$

8,200,280

$

56,228

$

8,256,508

Annual Normalized NOI - total portfolio (i)

 

$

692,092

$

25,664

$

717,756

$

646,540

$

23,488

$

670,028

Annual Normalized NOI - Unencumbered Assets (i)

 

$

396,888

$

3,736

$

400,624

$

370,804

$

3,440

$

374,244

Percentage of Normalized NOI Generated from Unencumbered Assets

> 50.0%

 

57.3 %

 

 

55.8 %

 

57.4 %

 

 

55.9 %

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

 

Three months ended December 31, 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)

$

176,306

$

6,416

$

182,722

$

166,062

$

5,872

$

171,934

Adjust the following:

 

 

 

 

 

 

Miscellaneous revenue

 

(874)

 

—

 

(874)

 

(802)

 

—

 

(802)

Percentage rent

 

(2,339)

 

—

 

(2,339)

 

(3,234)

 

—

 

(3,234)

Lease cancellation fees

 

(70)

 

—

 

(70)

 

(391)

 

—

 

(391)

Normalized NOI - total portfolio

$

173,023

$

6,416

$

179,439

$

161,635

$

5,872

$

167,507

Annual Normalized NOI - total portfolio(ii)

$

692,092

$

25,664

$

717,756

$

646,540

$

23,488

$

670,028

 

 

 

 

 

 

 

NOI from Unencumbered Assets

$

101,349

$

934

$

102,283

$

94,957

$

860

$

95,817

Adjust the following for Unencumbered Assets:

 

 

 

 

 

 

Miscellaneous revenue

 

(796)

 

—

 

(796)

 

(518)

 

—

 

(518)

Percentage rent

 

(1,331)

 

—

 

(1,331)

 

(1,430)

 

—

 

(1,430)

Lease cancellation fees

 

—

 

—

 

—

 

(308)

 

—

 

(308)

Normalized NOI - Unencumbered Assets

$

99,222

$

934

$

100,156

$

92,701

$

860

$

93,561

Annual Normalized NOI - Unencumbered Assets (ii)

$

396,888

$

3,736

$

400,624

$

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 months and year ended December 31, 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.

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