REI.UN RioCan Real Estate Investment Trust

• All-time high new leasing spread of 52.5% drove blended leasing spread to 23.4%
• More than 1,150,000 square feet of leases completed, including 489,000 square feet of new leases
• Retail committed occupancy of 98.3%; commercial in-place occupancy improved 60 basis points sequentially
• Strategic leasing activity translated to an increase in grocery and essential uses, including three new grocery store leases, one of which transformed another open-air centre to grocery-anchored

RioCan Real Estate Investment Trust (“RioCan" or the "Trust”) (TSX: REI.UN) announced today its financial results for the three and six months ended June 30, 2024.

“The demand for RioCan's well-located, open-air, necessity-based properties, coupled with our team's deep experience, continues to deliver positive outcomes for our business. The strength of our assets and favourable market conditions resulted in record-breaking leasing spreads as we strategically selected resilient tenants while achieving higher rents, further improving our portfolio quality and our future growth potential,” said Jonathan Gitlin, President and CEO of RioCan. “RioCan is proud to have launched the Wellington Market at our flagship development, The Well. The remarkable success of this premier asset is delivering new income that continues to ramp up, strengthening our balance sheet and bolstering our growth trajectory."

Financial Highlights

 

 

 

 

 

 

 

 

 

 

 

 

Three months ended June 30

 

Six months ended June 30

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

 

 

2024

 

 

 

2023

 

 

 

2024

 

 

 

2023

 

 

 

 

 

 

 

 

 

 

 

 

FFO 1

 

$

127.8

 

 

$

131.6

 

 

$

263.7

 

 

$

263.0

FFO per unit - diluted 1

 

$

0.43

 

 

$

0.44

 

 

$

0.88

 

 

$

0.88

Net income

 

$

122.4

 

 

$

112.0

 

 

$

251.0

 

 

$

230.0

Weighted average Units outstanding - diluted (in thousands)

 

 

300,463

 

 

 

300,500

 

 

 

300,461

 

 

 

300,524

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As at

 

 

 

 

 

 

 

June 30, 2024

 

 

December 31, 2023

 

 

 

 

 

 

 

 

 

 

 

 

Net book value per unit

 

 

 

 

 

 

 

$

25.02

 

 

$

24.76

 

 

 

 

 

 

 

 

 

 

 

 

• FFO per unit was $0.43, a decrease of $0.01 per unit or 2.3% over the same period last year. Strong operating performance and completed developments increased NOI. In addition, higher residential inventory gains and higher interest income also added to FFO. This growth was offset by the loss of NOI related to the sale of lower quality commercial properties, higher interest expense and a higher provision reversal in the prior year.
• Net income of $122.4 million was $10.4 million higher than the same period last year. In addition to the items described above, net income included a $16.5 million favourable change in the fair value on investment properties.
• Our FFO Payout Ratio1 of 61.5%, Liquidity1 of $1.5 billion, Unencumbered Assets1 of $8.1 billion, floating rate debt at 8.1%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.

Outlook

• For 2024, we anticipate FFO per unit to be within the range of $1.79 to $1.82 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.
• Due to a purposeful approach to tenant selection, Commercial Same Property NOI excluding provision1 growth is expected to be between 2.0% and 2.5%, for the full year 2024. Following previously disclosed tenant vacancies, we used the opportunity to replace transitional tenants with more relevant and resilient retailers at higher rents. The time required to build out space for this type of user is longer than we had assumed in our original guidance impacting this metric in the current year while our Commercial SPNOI growth target for future years remains at 3%.
• Spending for the retail in-fill projects is now expected to be between $30 million to $40 million compared with the $50 million to $60 million range disclosed in Q1 2024 as a result of timing delays related to the municipal permitting processes.

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.

Operational Highlights (i)

 

Three months ended June 30

 

Twelve months ended June 30

 

 

2024

 

 

2023

 

 

2024

 

 

2023

 

 

 

 

 

 

 

 

 

 

 

 

Occupancy - committed (ii)

 

97.5

%

 

 

97.4

%

 

 

97.5

%

 

 

97.4

%

Retail occupancy - committed (ii)

 

98.3

%

 

 

98.0

%

 

 

98.3

%

 

 

98.0

%

Blended leasing spread

 

23.4

%

 

 

9.0

%

 

 

14.5

%

 

 

9.3

%

New leasing spread

 

52.5

%

 

 

11.3

%

 

 

29.8

%

 

 

13.2

%

Renewal leasing spread

 

10.7

%

 

 

8.2

%

 

 

10.4

%

 

 

8.4

%

 

 

 

 

 

 

 

 

 

 

 

 

(i) Includes commercial portfolio only.

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

• Achieved a record new leasing spread of 52.5%, which drove the blended leasing spread to 23.4%. Renewal leasing spreads were also strong at 10.7%.
• 1.2 million square feet of space was leased in the quarter including 489 thousand square feet of new leases.
• Retail committed occupancy of 98.3% was up 40 basis points when compared to Q1 2024, rebounding to previous levels.
• Commercial in-place occupancy was 96.6%, which improved by 60 basis points compared to Q1 2024 due to move-ins of retail tenants as well as increased occupancy at our Yonge Eglinton Centre office.
• Strategic leasing activity further improved the resiliency of our income and NAV growth and included:
  • Three new grocery tenants, one of which converted an open-air centre into a grocery-anchored centre. This brings the total number of new grocery leases this year to six as of August 8, 2024, transforming three retail assets into highly valued grocery-anchored centres.
  • Pre-emptively leased a 135,000 square foot unit in the Greater Toronto Area to Canadian Tire which was due to become vacant later this year, moving to market rents that are more than double those paid in the legacy lease.
  • Completed a 35,000 square foot lease with Decathlon, a sporting goods retailer, at South Edmonton Common.
• As of August 8, 2024, eight of the 10 initial vacant units that resulted from tenant failures discussed in prior quarters have been leased, two leases of which were completed in the Second Quarter. Negotiations for the two remaining units are in the final stages. Tenants have taken possession of five units and are expected to commence paying cash rent in approximately 5 months from June 30, 2024, on a weighted average basis.
• Commercial Same Property NOI excluding provision1 increased by 2.6%. This is an improvement of 2.5% compared to the first quarter of this year and we expect continued improvement as signed tenancies reach cash rent commencement.
• Strong and stable tenants comprised 87.9% of annualized net rent, improved 60 basis points year-over-year.

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.

RioCan Living Update 1

• Total NOI generated from our residential rental operations was $7.2 million, an increase of $2.1 million or 40.7% over the same period last year. On a Residential Same Property NOI2 basis, growth was 8.6% in the Second Quarter.
• RioCan LivingTM has 14 buildings or 3,160 residential units in operation, 12 of which are stabilized.
• Construction of suites at FourFifty The WellTM is complete and, as at August 8, 2024, 75.8% of the units are leased at rents in-line with expectations. In the Second Quarter, due to completion of construction, we stopped capitalization of interest expense and other carrying costs relating to this property, which resulted in a short term negative impact of $1.5 million on FFO for the Second Quarter. We expect that this will contribute positively as the NOI from the property ramps up.

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 June 30

 

Six months ended June 30

(in millions except square feet)

 

 

2024

 

 

 

2023

 

 

 

2024

 

 

 

2023

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

53.0

 

 

 

110.0

 

 

 

107.0

 

 

 

176.0

Development Spending

 

$

102.9

 

 

$

103.0

 

 

$

192.3

 

 

$

191.3

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

 

 

1,074.0

 

 

 

1,850.0

 

 

 

1,074.0

 

 

 

1,850.0

 

 

 

 

 

 

 

 

 

 

 

 

(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.

• During the Second Quarter, $57.5 million or 53,000 square feet of properties under development were transferred to income producing properties.
• Value recognized in the Trust's residential inventory and properties under development balances for zoned projects, excluding those under construction, is $32.84 per square foot and $19.06 per square foot for the total development pipeline.
• We continue to take a disciplined approach to construction with no new mixed-use starts planned for the foreseeable future.
• High foot traffic at The WellTM is exceeding expectations and gained significant momentum from the official opening of Wellington Market in Q2 2024. As at August 8, 2024, 97% of the total commercial space at The Well is leased with 92% or 1,383,000 square feet (at 100% ownership interest) in tenant possession. The retail component is 93% leased, with more than three quarters of the space open and operating. Additional retail tenants are expected to open in the coming months.

Investing and Capital Recycling

• As of August 8, 2024, closed, firm and conditional dispositions totalled $91.3 million. Closed investment property dispositions in the first half of 2024 included a cinema-anchored property and two open-air centres for combined sales proceeds of $21.2 million. Non-core residential inventory development land was sold in the Second Quarter for sales proceeds of $12.0 million resulting in an inventory gain of $5.0 million.
• Conditional transactions include the sale of an underutilized portion of an open-air retail site in Quebec. In this transaction, approximately half of the site will be sold to an industrial developer at a market capitalization rate that is in the low-3's based on current income. We will relocate certain high-value tenants to the remaining portion of the centre, improving the utilization and quality of the site. Proceeds from the sale less costs relating to tenant relocation and other items, results in net proceeds that are approximately 84% higher than IFRS carrying value. Any value creation from improvement of the remaining centre would be incremental value related to this transaction.
• RioCan issued $55.6 million of new loans as part of its real estate lending program during the Second Quarter, bringing the year-to-date total of new loans advanced to $123.7 million, earning an average interest rate of 11.5%. Repayment of existing loans totalled $30.7 million on a year-to-date basis.

Capital Management Update

• On May 31, 2024, RioCan issued $300.0 million Series AK senior unsecured debentures. These debentures were issued at a coupon rate of 5.455% per annum and will mature on March 1, 2031.
• On June 14, 2024, the Trust entered into bond forward contracts to sell on October 1, 2024 $300.0 million of Government of Canada Bonds due June 1, 2031 with an effective bond yield of 3.228%.
• On June 26, 2024, the Trust amended its $1.25 billion revolving unsecured operating line of credit. The maturity date was extended to May 31, 2029 and certain covenants were amended to be less restrictive. All other material terms and conditions remained the same.

Balance Sheet Strength

(in millions except percentages)

As at

 

 

 

 

 

June 30, 2024

 

December 31, 2023

 

 

 

 

 

 

 

 

 

 

 

Liquidity (i) 1

 

 

 

 

 

 

$

1,523

 

 

$

1,964

Adjusted Debt to Adjusted EBITDA (i) 1

 

 

 

 

 

 

9.18x

 

 

9.28x

Unencumbered Assets (i) 1

 

 

 

 

 

 

$

8,132

 

 

$

8,090

 

 

 

 

 

 

 

 

 

 

 

(i) At RioCan's proportionate share.

• Adjusted Debt to Adjusted EBITDA of 9.18x on a proportionate share basis as at June 30, 2024, compared to 9.28x as at the end of 2023 and 9.49x as at Q2 2023. The decrease was primarily due to higher Adjusted EBITDA, partially offset by higher Average Total Adjusted Debt balances. We expect to reach the high end of the 8.0x - 9.0x long-term target range by the end of this year.
• Weighted average term to maturity was 3.61 years, compared to 2.97 years as at December 31, 2023.
• As at June 30, 2024, Liquidity of $1.5 billion included $1.0 billion of revolving line of credit available and $0.4 billion in undrawn construction lines and other bank loans. Liquidity decreased by $440.6 million when compared to the prior year end, returning to more typical levels, mainly due to timing of capital recycling, investment and financing activities.
• 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 generated 57.5% of Annual Normalized NOI1.
• The Trust’s exposure to floating rate debt was 8.1% of total debt as at June 30, 2024. Excluding construction loans, floating rate exposure was 4.3%.

1. A non-GAAP measurement. For definitions, reconciliations and the basis of presentation of RioCan's non-GAAP measures, refer to the Basis of Presentation and Non-GAAP Measures section in this News Release.

Conference Call and Webcast

Interested parties are invited to participate in a conference call with management on Friday, August 9, 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: 684427.

For those unable to participate in the live mode, a replay will be available at 1-866-813-9403 with access code: 596512.

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, mixed-use properties located in prime, high-density transit-oriented areas where Canadians want to shop, live and work. As at June 30, 2024, our portfolio is comprised of 187 properties with an aggregate net leasable area of approximately 33 million square feet (at RioCan's interest). To learn more about us, please visit www.riocan.com.

Basis of Presentation and Non-GAAP Measures

All figures included in this News Release are expressed in Canadian dollars unless otherwise noted. RioCan’s unaudited interim condensed consolidated financial statements ("Condensed Consolidated Financial Statements") are prepared in accordance with International Financial Reporting Standards (IFRS). Financial information included within this News Release does not contain all disclosures required by IFRS, and accordingly should be read in conjunction with the Trust's Condensed Consolidated Financial Statements and MD&A for the three and six months ended June 30, 2024, 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 ("Commercial SPNOI"), Commercial Same Property NOI excluding provision, Residential Same Property NOI ("Residential SPNOI"), Development Spending, 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 and six months ended June 30, 2024.

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 June 30, 2024 and December 31, 2023:

As at

June 30, 2024

December 31, 2023

(thousands of dollars)

IFRS basis

Equity-accounted investments

RioCan's proportionate share

IFRS basis

Equity-accounted investments

RioCan's proportionate share

Assets

 

 

 

 

 

 

Investment properties

$

13,847,439

$

409,997

 

$

14,257,436

$

13,561,718

$

411,811

 

$

13,973,529

Equity-accounted investments

 

384,161

 

(384,161

)

 

—

 

383,883

 

(383,883

)

 

—

Mortgages and loans receivable

 

394,713

 

(5,337

)

 

389,376

 

289,533

 

(6,707

)

 

282,826

Residential inventory

 

266,677

 

382,178

 

 

648,855

 

217,186

 

407,946

 

 

625,132

Assets held for sale

 

8,850

 

—

 

 

8,850

 

19,075

 

—

 

 

19,075

Receivables and other assets

 

269,900

 

55,069

 

 

324,969

 

246,652

 

50,681

 

 

297,333

Cash and cash equivalents

 

50,789

 

7,321

 

 

58,110

 

124,234

 

14,506

 

 

138,740

Total assets

$

15,222,529

$

465,067

 

$

15,687,596

$

14,842,281

$

494,354

 

$

15,336,635

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

Debentures payable

$

3,689,225

$

—

 

$

3,689,225

$

3,240,943

$

—

 

$

3,240,943

Mortgages payable

 

2,806,952

 

159,960

 

 

2,966,912

 

2,740,924

 

158,292

 

 

2,899,216

Lines of credit and other bank loans

 

645,092

 

215,015

 

 

860,107

 

879,246

 

231,963

 

 

1,111,209

Accounts payable and other liabilities

 

562,727

 

90,092

 

 

652,819

 

543,398

 

104,099

 

 

647,497

Total liabilities

$

7,703,996

$

465,067

 

$

8,169,063

$

7,404,511

$

494,354

 

$

7,898,865

 

 

 

 

 

 

 

Equity

 

 

 

 

 

 

Unitholders’ equity

 

7,518,533

 

—

 

 

7,518,533

 

7,437,770

 

—

 

 

7,437,770

Total liabilities and equity

$

15,222,529

$

465,067

 

$

15,687,596

$

14,842,281

$

494,354

 

$

15,336,635

The following tables reconcile the consolidated statements of income from IFRS to RioCan's proportionate share basis for the three and six months ended June 30, 2024 and 2023:

 

Three months ended June 30, 2024

Three months ended June 30, 2023

(thousands of dollars)

IFRS basis

Equity-accounted investments

RioCan's proportionate share

IFRS basis

Equity-accounted investments

RioCan's proportionate share

Revenue

 

 

 

 

 

 

Rental revenue

$

275,863

$

8,089

 

$

283,952

 

$

270,913

 

$

9,982

 

$

280,895

Residential inventory sales

 

12,866

 

6,914

 

 

19,780

 

 

—

 

 

517

 

 

517

 

Property management and other service fees

 

3,469

 

(348

)

 

3,121

 

 

5,139

 

 

—

 

 

5,139

 

 

 

292,198

 

14,655

 

 

306,853

 

 

276,052

 

 

10,499

 

 

286,551

 

Operating costs

 

 

 

 

 

 

Rental operating costs

 

 

 

 

 

 

Recoverable under tenant leases

 

91,021

 

806

 

 

91,827

 

 

93,622

 

 

905

 

 

94,527

 

Non-recoverable costs

 

7,889

 

638

 

 

8,527

 

 

3,594

 

 

451

 

 

4,045

 

Residential inventory cost of sales

 

7,600

 

5,412

 

 

13,012

 

 

—

 

 

261

 

 

261

 

 

 

106,510

 

6,856

 

 

113,366

 

 

97,216

 

 

1,617

 

 

98,833

 

Operating income

 

185,688

 

7,799

 

 

193,487

 

 

178,836

 

 

8,882

 

 

187,718

 

Other income (loss)

 

 

 

 

 

 

Interest income

 

10,839

 

438

 

 

11,277

 

 

5,701

 

 

665

 

 

6,366

 

Income from equity-accounted investments

 

2,115

 

(2,115

)

 

—

 

 

5,830

 

 

(5,830

)

 

—

 

Fair value gain (loss) on investment properties, net

 

5,887

 

(1,810

)

 

4,077

 

 

(10,594

)

 

(1,072

)

 

(11,666

)

Investment and other income (loss)

 

609

 

(1,378

)

 

(769

)

 

1,657

 

 

123

 

 

1,780

 

 

 

19,450

 

(4,865

)

 

14,585

 

 

2,594

 

 

(6,114

)

 

(3,520

)

Other expenses

 

 

 

 

 

 

Interest costs, net

 

64,393

 

2,867

 

 

67,260

 

 

49,974

 

 

2,724

 

 

52,698

 

General and administrative

 

14,611

 

24

 

 

14,635

 

 

14,846

 

 

20

 

 

14,866

 

Internal leasing costs

 

3,092

 

—

 

 

3,092

 

 

3,018

 

 

—

 

 

3,018

 

Transaction and other costs

 

679

 

43

 

 

722

 

 

1,594

 

 

24

 

 

1,618

 

 

 

82,775

 

2,934

 

 

85,709

 

 

69,432

 

 

2,768

 

 

72,200

 

Income before income taxes

$

122,363

$

—

 

$

122,363

 

$

111,998

 

$

—

 

$

111,998

 

Current income tax expense

 

—

 

—

 

 

—

 

 

31

 

 

—

 

 

31

 

Net income

$

122,363

$

—

 

$

122,363

 

$

111,967

 

$

—

 

$

111,967

 

 

Six months ended June 30, 2024

Six months ended June 30, 2023

(thousands of dollars)

IFRS basis

Equity-accounted investments

RioCan's proportionate share

IFRS basis

Equity-accounted investments

RioCan's proportionate share

Revenue

 

 

 

 

 

 

Rental revenue

$

564,243

 

$

16,262

 

$

580,505

 

$

545,594

 

$

17,432

 

$

563,026

 

Residential inventory sales

 

23,334

 

 

77,931

 

 

101,265

 

 

—

 

 

2,880

 

 

2,880

 

Property management and other service fees

 

8,008

 

 

(597

)

 

7,411

 

 

9,958

 

 

—

 

 

9,958

 

 

 

595,585

 

 

93,596

 

 

689,181

 

 

555,552

 

 

20,312

 

 

575,864

 

Operating costs

 

 

 

 

 

 

Rental operating costs

 

 

 

 

 

 

Recoverable under tenant leases

 

202,220

 

 

1,731

 

 

203,951

 

 

192,430

 

 

1,786

 

 

194,216

 

Non-recoverable costs

 

16,640

 

 

1,343

 

 

17,983

 

 

11,043

 

 

1,145

 

 

12,188

 

Residential inventory cost of sales

 

14,622

 

 

62,934

 

 

77,556

 

 

—

 

 

1,387

 

 

1,387

 

 

 

233,482

 

 

66,008

 

 

299,490

 

 

203,473

 

 

4,318

 

 

207,791

 

Operating income

 

362,103

 

 

27,588

 

 

389,691

 

 

352,079

 

 

15,994

 

 

368,073

 

Other income (loss)

 

 

 

 

 

 

Interest income

 

19,786

 

 

1,075

 

 

20,861

 

 

12,742

 

 

1,268

 

 

14,010

 

Income from equity-accounted investments

 

18,821

 

 

(18,821

)

 

—

 

 

11,344

 

 

(11,344

)

 

—

 

Fair value gain (loss) on investment properties, net

 

9,138

 

 

(2,202

)

 

6,936

 

 

(27,959

)

 

(451

)

 

(28,410

)

Investment and other income (loss)

 

3,639

 

 

(1,831

)

 

1,808

 

 

4,544

 

 

(213

)

 

4,331

 

 

 

51,384

 

 

(21,779

)

 

29,605

 

 

671

 

 

(10,740

)

 

(10,069

)

Other expenses

 

 

 

 

 

 

Interest costs, net

 

125,832

 

 

5,902

 

 

131,734

 

 

97,957

 

 

5,218

 

 

103,175

 

General and administrative

 

28,527

 

 

25

 

 

28,552

 

 

30,464

 

 

31

 

 

30,495

 

Internal leasing costs

 

6,685

 

 

—

 

 

6,685

 

 

5,743

 

 

—

 

 

5,743

 

Transaction and other costs

 

2,278

 

 

(118

)

 

2,160

 

 

1,982

 

 

5

 

 

1,987

 

 

 

163,322

 

 

5,809

 

 

169,131

 

 

136,146

 

 

5,254

 

 

141,400

 

Income before income taxes

$

250,165

 

$

—

 

$

250,165

 

$

216,604

 

$

—

 

$

216,604

 

Current income tax recovery

 

(794

)

 

—

 

 

(794

)

 

(13,367

)

 

—

 

 

(13,367

)

Net income

$

250,959

 

$

—

 

$

250,959

 

$

229,971

 

$

—

 

$

229,971

 

NOI and Same Property NOI

The following table reconciles operating income to NOI and Same Property NOI to NOI for the three and six months ended June 30, 2024 and 2023:

 

Three months ended June 30

Six months ended June 30

(thousands of dollars)

 

2024

 

 

2023

 

 

2024

 

 

2023

 

Operating Income

$

185,688

 

$

178,836

 

$

362,103

 

$

352,079

 

Adjusted for the following:

 

 

 

 

Property management and other service fees

 

(3,469

)

 

(5,139

)

 

(8,008

)

 

(9,958

)

Residential inventory gains

 

(5,266

)

 

—

 

 

(8,712

)

 

—

 

Operational lease revenue from ROU assets

 

1,783

 

 

1,571

 

 

3,478

 

 

3,428

 

NOI

$

178,736

 

$

175,268

 

$

348,861

 

$

345,549

 

 

Three months ended June 30

Six months ended June 30

(thousands of dollars)

 

2024

 

2023

 

2024

 

2023

Commercial

 

 

 

 

Commercial Same Property NOI

$

150,724

$

150,306

$

294,919

$

293,818

NOI from income producing properties:

 

 

 

 

Acquired (i)

 

987

 

8

 

2,434

 

635

Disposed (i)

 

136

 

4,821

 

721

 

9,928

 

 

1,123

 

4,829

 

3,155

 

10,563

 

 

 

 

 

NOI from completed commercial developments

 

11,070

 

7,946

 

20,634

 

13,840

NOI from properties under de-leasing (ii)

 

4,826

 

5,852

 

9,442

 

11,594

Lease cancellation fees

 

1,600

 

179

 

1,711

 

4,741

Straight-line rent adjustment

 

2,179

 

1,027

 

5,426

 

1,600

NOI from commercial properties

 

171,522

 

170,139

 

335,287

 

336,156

Residential

 

 

 

 

Residential Same Property NOI

 

5,205

 

4,795

 

9,226

 

8,668

NOI from income producing properties:

 

 

 

 

Acquired (i)

 

950

 

197

 

1,772

 

197

Disposed (i)

 

17

 

1

 

17

 

48

 

 

967

 

198

 

1,789

 

245

NOI from completed residential developments

 

1,042

 

136

 

2,559

 

480

NOI from residential rental

 

7,214

 

5,129

 

13,574

 

9,393

NOI

$

178,736

$

175,268

$

348,861

$

345,549

(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 June 30

Six months ended June 30

(thousands of dollars)

 

2024

 

2023

 

2024

 

2023

Commercial Same Property NOI

$

150,724

$

150,306

$

294,919

$

293,818

Residential Same Property NOI

 

5,205

 

4,795

 

9,226

 

8,668

Same Property NOI

$

155,929

$

155,101

$

304,145

$

302,486

Commercial Same Property NOI excluding provision

 

Three months ended June 30

Six months ended June 30

(thousands of dollars)

 

2024

 

 

2023

 

 

2024

 

 

2023

 

Commercial Same Property NOI

$

150,724

 

$

150,306

 

$

294,919

 

$

293,818

 

Add (exclude):

 

 

 

 

Same property (recovery) provision for credit losses

 

(600

)

 

(4,036

)

 

(863

)

 

(3,876

)

Commercial Same Property NOI excluding provision

$

150,124

 

$

146,270

 

$

294,056

 

$

289,942

 

 

Three months ended March 31

(thousands of dollars)

 

2024

 

 

2023

 

Commercial Same Property NOI

$

145,122

 

$

144,598

 

Add (exclude):

 

 

Same property (recovery) provision for credit losses

 

(264

)

 

177

 

Commercial Same Property NOI excluding provision

$

144,858

 

$

144,775

 

FFO

The following table reconciles net income attributable to Unitholders to FFO for the three and six months ended June 30, 2024 and 2023:

 

Three months ended June 30

Six months ended June 30

(thousands of dollars, except where otherwise noted)

 

2024

 

 

2023

 

 

2024

 

 

2023

 

Net income attributable to Unitholders

$

122,363

 

$

111,967

 

$

250,959

 

$

229,971

 

Add back (deduct):

 

 

 

 

Fair value (gains) losses, net

 

(5,887

)

 

10,594

 

 

(9,138

)

 

27,959

 

Fair value losses included in equity-accounted investments

 

1,810

 

 

1,072

 

 

2,202

 

 

451

 

Internal leasing costs

 

3,092

 

 

3,018

 

 

6,685

 

 

5,743

 

Transaction losses on investment properties, net (i)

 

1,508

 

 

176

 

 

1,457

 

 

112

 

Transaction gains on equity-accounted investments

 

—

 

 

—

 

 

(31

)

 

—

 

Transaction costs on sale of investment properties

 

73

 

 

344

 

 

947

 

 

511

 

ERP implementation costs

 

1,874

 

 

2,454

 

 

4,410

 

 

6,408

 

ERP amortization

 

(409

)

 

—

 

 

(409

)

 

—

 

Change in unrealized fair value on marketable securities

 

142

 

 

(173

)

 

1,260

 

 

813

 

Current income tax expense (recovery)

 

—

 

 

31

 

 

(794

)

 

(13,367

)

Operational lease revenue from ROU assets

 

1,427

 

 

1,196

 

 

2,772

 

 

2,550

 

Operational lease expenses from ROU assets in equity-accounted investments

 

(17

)

 

(13

)

 

(34

)

 

(25

)

Capitalized interest on equity-accounted investments (ii)

 

1,810

 

 

966

 

 

3,455

 

 

1,843

 

FFO

$

127,786

 

$

131,632

 

$

263,741

 

$

262,969

 

Add back:

 

 

 

 

Restructuring costs

 

—

 

 

11

 

 

646

 

 

624

 

FFO Adjusted

$

127,786

 

$

131,643

 

$

264,387

 

$

263,593

 

 

 

 

 

 

FFO per unit - basic

$

0.43

 

$

0.44

 

$

0.88

 

$

0.88

 

FFO per unit - diluted

$

0.43

 

$

0.44

 

$

0.88

 

$

0.88

 

FFO Adjusted per unit - diluted

$

0.43

 

$

0.44

 

$

0.88

 

$

0.88

 

Weighted average number of Units - basic (in thousands)

 

300,463

 

 

300,386

 

 

300,461

 

 

300,374

 

Weighted average number of Units - diluted (in thousands)

 

300,463

 

 

300,500

 

 

300,461

 

 

300,524

 

 

 

 

 

 

FFO for last four quarters

 

 

$

532,053

 

$

525,415

 

Distributions paid for last four quarters

 

 

$

327,471

 

$

313,887

 

FFO Payout Ratio

 

 

 

61.5

%

 

59.7

%

(i) Represents net transaction gains or losses connected to certain investment properties during the period.

(ii) This amount represents the interest capitalized to RioCan's equity-accounted investment in WhiteCastle New Urban Fund 2, LP, WhiteCastle New Urban Fund 3, LP, WhiteCastle New Urban Fund 4, LP, WhiteCastle New Urban Fund 5, LP, RioCan-Fieldgate JV, RC (Queensway) LP, RC (Leaside) LP - Class B, PR Bloor Street LP and RC Yorkville LP. This amount is not capitalized to development projects under IFRS but is allowed as an adjustment under REALPAC’s definition of FFO.

Development Spending

Total Development Spending for the three and six months ended June 30, 2024 and 2023 is as follows:

 

Three months ended June 30

Six months ended June 30

(thousands of dollars)

 

2024

 

2023

 

2024

 

2023

Development expenditures on balance sheet:

 

 

 

 

Properties under development

$

52,475

$

67,610

$

96,748

$

134,522

Residential inventory

 

33,108

 

31,640

 

63,592

 

49,191

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

 

17,289

 

3,749

 

32,002

 

7,634

Total Development Spending

$

102,872

$

102,999

$

192,342

$

191,347

 

Three months ended June 30

Six months ended June 30

(thousands of dollars)

 

2024

 

2023

 

2024

 

2023

Mixed-use projects

$

94,739

$

84,045

$

178,905

$

165,269

Retail projects

 

8,133

 

18,954

 

13,437

 

26,078

Total Development Spending

$

102,872

$

102,999

$

192,342

$

191,347

Total Contractual Debt

The following table reconciles total debt to Total Contractual Debt as at June 30, 2024 and December 31, 2023:

As at

June 30, 2024

December 31, 2023

 

 

(thousands of dollars)

IFRS basis

Equity-accounted investments

RioCan's proportionate share

IFRS basis

Equity-accounted investments

RioCan's proportionate share

Debentures payable

$

3,689,225

 

$

—

 

$

3,689,225

 

$

3,240,943

 

$

—

 

$

3,240,943

 

Mortgages payable

 

2,806,952

 

 

159,960

 

 

2,966,912

 

 

2,740,924

 

 

158,292

 

 

2,899,216

 

Lines of credit and other bank loans

 

645,092

 

 

215,015

 

 

860,107

 

 

879,246

 

 

231,963

 

 

1,111,209

 

Total debt

$

7,141,269

 

$

374,975

 

$

7,516,244

 

$

6,861,113

 

$

390,255

 

$

7,251,368

 

Less:

 

 

 

 

 

 

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

 

(32,285

)

 

(531

)

 

(32,816

)

 

(24,019

)

 

(484

)

 

(24,503

)

Total Contractual Debt

$

7,173,554

 

$

375,506

 

$

7,549,060

 

$

6,885,132

 

$

390,739

 

$

7,275,871

 

Floating Rate Debt and Fixed Rate Debt

The following table summarizes RioCan's Ratio of floating rate debt to total debt as at June 30, 2024 and December 31, 2023:

As at

June 30, 2024

December 31, 2023

(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

$

6,716,501

 

$

187,975

$

6,904,476

 

$

6,543,106

 

$

212,554

$

6,755,660

 

Total floating rate debt

 

424,768

 

 

187,000

 

611,768

 

 

318,007

 

 

177,701

 

495,708

 

Total debt

$

7,141,269

 

$

374,975

$

7,516,244

 

$

6,861,113

 

$

390,255

$

7,251,368

 

Ratio of floating rate debt to total debt

 

5.9

%

 

 

8.1

%

 

4.6

%

 

 

6.8

%

Liquidity

As at June 30, 2024, RioCan had approximately $1.5 billion of Liquidity as summarized in the following table:

As at

June 30, 2024

December 31, 2023

 

(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

$

1,042,000

$

—

$

1,042,000

$

1,250,000

$

—

$

1,250,000

Undrawn construction lines and other bank loans

 

287,545

 

135,716

 

423,261

 

385,715

 

189,563

 

575,278

Cash and cash equivalents

 

50,789

 

7,321

 

58,110

 

124,234

 

14,506

 

138,740

Liquidity

$

1,380,334

$

143,037

$

1,523,371

$

1,759,949

$

204,069

$

1,964,018

Adjusted EBITDA

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

Twelve months ended

June 30, 2024

December 31, 2023

(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

$

59,790

 

$

—

 

$

59,790

 

$

38,802

 

$

—

 

$

38,802

 

Add (deduct) the following items:

 

 

 

 

 

 

Income tax recovery:

 

 

 

 

 

 

Current

 

(792

)

 

—

 

 

(792

)

 

(13,365

)

 

—

 

 

(13,365

)

Fair value losses on investment properties, net

 

413,311

 

 

15,874

 

 

429,185

 

 

450,408

 

 

14,123

 

 

464,531

 

Change in unrealized fair value on marketable securities (i)

 

1,312

 

 

—

 

 

1,312

 

 

865

 

 

—

 

 

865

 

Internal leasing costs

 

12,861

 

 

—

 

 

12,861

 

 

11,919

 

 

—

 

 

11,919

 

Non-cash unit-based compensation expense

 

10,007

 

 

—

 

 

10,007

 

 

10,154

 

 

—

 

 

10,154

 

Interest costs, net

 

236,823

 

 

12,023

 

 

248,846

 

 

208,948

 

 

11,339

 

 

220,287

 

Restructuring costs

 

1,390

 

 

—

 

 

1,390

 

 

1,368

 

 

—

 

 

1,368

 

ERP implementation costs

 

10,034

 

 

—

 

 

10,034

 

 

12,032

 

 

—

 

 

12,032

 

Depreciation and amortization

 

2,057

 

 

—

 

 

2,057

 

 

2,632

 

 

—

 

 

2,632

 

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

 

2,312

 

 

(114

)

 

2,198

 

 

1,180

 

 

(83

)

 

1,097

 

Transaction costs on investment properties

 

6,043

 

 

1

 

 

6,044

 

 

5,606

 

 

1

 

 

5,607

 

Operational lease revenue (expenses) from ROU assets

 

5,338

 

 

(64

)

 

5,274

 

 

5,116

 

 

(55

)

 

5,061

 

Adjusted EBITDA

$

760,486

 

$

27,720

 

$

788,206

 

$

735,665

 

$

25,325

 

$

760,990

 

(i) The fair value gains and losses on marketable securities may include both the change in unrealized fair value and realized gains and losses on the sale of marketable securities. By adding back the change in unrealized fair value on marketable securities, RioCan effectively continues to include realized gains and losses on the sale of marketable securities in Adjusted EBITDA and excludes unrealized fair value gains and losses on marketable securities in Adjusted EBITDA.

(ii) Includes transaction gains and losses realized on the disposition of investment properties.

Adjusted Debt to Adjusted EBITDA Ratio

Adjusted Debt to Adjusted EBITDA is calculated as follows:

Twelve months ended

June 30, 2024

December 31, 2023

(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

$

6,995,346

 

$

358,122

 

$

7,353,468

 

$

6,879,087

 

$

317,231

 

$

7,196,318

 

Less: average cash and cash equivalents

 

(103,374

)

 

(10,911

)

 

(114,285

)

 

(120,952

)

 

(11,408

)

 

(132,360

)

Average Total Adjusted Debt

$

6,891,972

 

$

347,211

 

$

7,239,183

 

$

6,758,135

 

$

305,823

 

$

7,063,958

 

Adjusted EBITDA (i)

$

760,486

 

$

27,720

 

$

788,206

 

$

735,665

 

$

25,325

 

$

760,990

 

Adjusted Debt to Adjusted EBITDA

 

9.06

 

 

 

9.18

 

 

9.19

 

 

 

9.28

 

(i) Adjusted EBITDA is reconciled in the immediately preceding table.

Unencumbered Assets

The tables below summarize RioCan's Unencumbered Assets and Percentage of Normalized NOI Generated from Unencumbered Assets as at June 30, 2024 and December 31, 2023:

As at

 

June 30, 2024

December 31, 2023

(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

 

$

13,847,439

 

$

409,997

$

14,257,436

 

$

13,561,718

 

$

411,811

$

13,973,529

 

Less: Encumbered investment properties

 

 

5,775,322

 

 

350,261

 

6,125,583

 

 

5,531,177

 

 

352,425

 

5,883,602

 

Unencumbered Assets

 

$

8,072,117

 

$

59,736

$

8,131,853

 

$

8,030,541

 

$

59,386

$

8,089,927

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Annual Normalized NOI - total portfolio (i)

 

$

700,180

 

$

25,692

$

725,872

 

$

692,092

 

$

25,664

$

717,756

 

Annual Normalized NOI - Unencumbered Assets (i)

 

$

413,832

 

$

3,728

$

417,560

 

$

396,888

 

$

3,736

$

400,624

 

Percentage of Normalized NOI Generated from Unencumbered Assets

> 50.0%

 

59.1

%

 

 

57.5

%

 

57.3

%

 

 

55.8

%

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

 

Three months ended June 30, 2024

Three months ended December 31, 2023

(thousands of dollars)

IFRS basis

Equity-accounted investments

RioCan's proportionate share

IFRS basis

Equity-accounted investments

RioCan's proportionate share

NOI (i)

$

178,736

 

$

6,423

$

185,159

 

$

176,306

 

$

6,416

$

182,722

 

Adjust the following:

 

 

 

 

 

 

Miscellaneous revenue

 

(704

)

 

—

 

(704

)

 

(874

)

 

—

 

(874

)

Percentage rent

 

(1,387

)

 

—

 

(1,387

)

 

(2,339

)

 

—

 

(2,339

)

Lease cancellation fees

 

(1,600

)

 

—

 

(1,600

)

 

(70

)

 

—

 

(70

)

Normalized NOI - total portfolio

$

175,045

 

$

6,423

$

181,468

 

$

173,023

 

$

6,416

$

179,439

 

Annual Normalized NOI - total portfolio (ii)

$

700,180

 

$

25,692

$

725,872

 

$

692,092

 

$

25,664

$

717,756

 

 

 

 

 

 

 

 

NOI from Unencumbered Assets

$

106,204

 

$

932

$

107,136

 

$

101,349

 

$

934

$

102,283

 

Adjust the following for Unencumbered Assets:

 

 

 

 

 

 

Miscellaneous revenue

 

(554

)

 

—

 

(554

)

 

(796

)

 

—

 

(796

)

Percentage rent

 

(1,029

)

 

—

 

(1,029

)

 

(1,331

)

 

—

 

(1,331

)

Lease cancellation fees

 

(1,163

)

 

—

 

(1,163

)

 

—

 

 

—

 

—

 

Normalized NOI - Unencumbered Assets

$

103,458

 

$

932

$

104,390

 

$

99,222

 

$

934

$

100,156

 

Annual Normalized NOI - Unencumbered Assets (ii)

$

413,832

 

$

3,728

$

417,560

 

$

396,888

 

$

3,736

$

400,624

 

(i) Refer to the NOI and Same Property NOI table of this section for reconciliation from NOI to operating income.

(ii) Calculated by multiplying Normalized NOI by a factor of 4.

Forward-Looking Information

This News Release contains forward-looking information within the meaning of applicable Canadian securities laws. This information reflects RioCan’s objectives, our strategies to achieve those objectives, as well as statements with respect to management’s beliefs, estimates and intentions concerning anticipated future events, results, circumstances, performance or expectations that are not historical facts. Forward-looking information can generally be identified by the use of forward-looking terminology such as “outlook”, “objective”, “may”, “will”, “would”, “expect”, “intend”, “estimate”, “anticipate”, “believe”, “should”, “plan”, “continue”, or similar expressions suggesting future outcomes or events. Such forward-looking information reflects management’s current beliefs and is based on information currently available to management. All forward-looking information in this News Release is qualified by these cautionary statements. Forward-looking information is not a guarantee of future events or performance and, by its nature, is based on RioCan’s current estimates and assumptions, which are subject to numerous risks and uncertainties, including those described in the “Risks and Uncertainties” section in RioCan's MD&A for the three and six months ended June 30, 2024 and in our most recent Annual Information Form, which could cause actual events or results to differ materially from the forward-looking information contained in this News Release. Although the forward-looking information contained in this News Release is based upon what management believes are reasonable assumptions, there can be no assurance that actual results will be consistent with this forward-looking information.

The forward-looking statements contained in this News Release are made as of the date hereof, and should not be relied upon as representing RioCan’s views as of any date subsequent to the date of this News Release. Management undertakes no obligation, except as required by applicable law, to publicly update or revise any forward-looking information, whether as a result of new information, future events or otherwise.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240808717180/en/

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