Q1 2019 Conference Call Presentation...78.0% 77.9% $0.46 $0.47 • FFO/unit increased from $0.46 to...
Transcript of Q1 2019 Conference Call Presentation...78.0% 77.9% $0.46 $0.47 • FFO/unit increased from $0.46 to...
Q1 2019 Conference Call Presentation
May 7, 2019
RioCan’s consolidated financial statements are prepared in accordance with IFRS. Consistent with RioCan’s management framework, management uses certain financial
measures to assess RioCan’s financial performance, which are not generally accepted accounting principles (GAAP) under IFRS.
The following measures, Funds From Operations (“FFO”), Net Operating Income (“NOI”), Adjusted Earnings before interest, taxes, depreciation and amortization
(“Adjusted EBITDA”), Debt to Adjusted EBITDA, Same Property NOI, Interest Coverage, Debt Service Coverage, Fixed Charge Coverage, and Total Enterprise Value
as well as other measures discussed in this presentation, do not have a standardized definition prescribed by IFRS and are, therefore, unlikely to be comparable to similar
measures presented by other reporting issuers.
Non-GAAP measures should not be considered as alternatives to net earnings or comparable metrics determined in accordance with IFRS as indicators of RioCan’s
performance, liquidity, cash flow, and profitability. For a full definition of these measures, please refer to the “Non-GAAP Measures” in RioCan’s Management’s Discussion and
Analysis for the quarter ended March 31, 2019. RioCan uses these measures to better assess the Trust’s underlying performance and provides these additional measures so that
investors may do the same.
NON-GAAP MEASURES
Certain information included in this presentation contains forward-looking statements within the meaning of applicable securities laws including, among others, statements
concerning our objectives, our strategies to achieve those objectives, as well as statements with respect to management's beliefs, plans, estimates, and intentions, and similar
statements concerning anticipated future events, results, circumstances, performance or expectations that are not historical facts. Certain material factors, estimates or
assumptions were applied in drawing a conclusion or making a forecast or projection as reflected in these statements and actual results could differ materially from such
conclusions, forecasts or projections.
The forward looking information contained in this presentation is made as of the date hereof.
Additional information on the material risks that could cause our actual results to differ materially from the conclusions, forecast or projections in these statements and the
material factors, estimates or assumptions that were applied in drawing a conclusion or making a forecast or projection as reflected in the forward-looking information can be
found in our most recent annual information form and annual report that are available on our website and at www.sedar.com.
Except as required by applicable law, RioCan undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information,
future events or otherwise.
FORWARD LOOKING INFORMATION
Q1 | RioCan | 02
FORWARD LOOKING ADVISORY & NON-GAAP MEASURES
78.0% 77.9%
$0.46
$0.47
• FFO/unit increased from $0.46 to $0.47 from Q1 2018 to Q1 2019 despite:
o $1.0B in asset sales since Q1 2018
o $1.0M increase in unit-based compensation costs due to mark-to-market adjustment
o $0.9M one-time IFRS debt modification cost
o $0.5M lease up loss in connection with the lease up of our first residential rental building
o $4.4M lower realized gains due to lower volume of marketable securities sold
Target is to be
below 80%
FFO Payout Ratio * FFO per Unit
FUNDS FROM OPERATIONS (“FFO”) & PAYOUT RATIO
Q1 | RioCan | 03
Q1 2018 Q1 2019 Q1 2018 Q1 2019
* For the twelve months ended
94.1%
95.6% 96.7% 96.9% 96.6% 96.9%
Avg. Net Rents Blended Leasing Spread (commercial only)
$17.93 $19.16
OPERATIONAL HIGHLIGHTS
Q1 | RioCan | 04
Overall Commercial Portfolio Office
Committed Occupancy
8.3%
10.7%
Avg. Rents and Leasing Spreads
Q1 2018 Q1 2019 Q1 2018 Q1 2019
+30 bps
+6.9%
+150 bps
+240 bps
Q1 2018 Q1 2019 Q1 2018 Q1 2019
Retail
Q1 2018 Q1 2019
+20 bps
1.4%
2.5%
1.7%
2.9%
OPERATIONAL HIGHLIGHTS
Q1 | RioCan | 05
RENT BREAKDOWN Q1 2019
SAME PROPERTY NOI GROWTH
Total Portfolio
Major Markets
Q1 2019 Q1 2019 (Excl. Bombay/Bowring and
Incl. Completed Developments)
Q1 2019
Grocery / Pharmacy /
Liquor / Restaurants
28%
Personal Services 22%
Value Retailers 14%
Specialty Retailers
10%
Furniture & Home 10%
Department Stores & Apparel
8%
Movie Theatres 5%
Entertainment & Hobby
3%
3%
since 2007
6%
since 2007
8%
since 2007
74% OF RENT FROM NECESSITY-BASED
AND SERVICE-ORIENTED TENANTS
Q1 2019 (Excl. Bombay/Bowring and
Incl. Completed Developments)
DEVELOPMENT PROGRESSING WELL RESIDENTIAL RENTAL
Q1 | RioCan | 06
• 36 storey, 466-unit rental
building
• 203 units leased with 78
units occupied (as of
March 31, 2019)
• Rents averaging $3.85
per square foot (for
market rent units)
• Stabilization by mid-2020
• $0.5M lease-up loss in
the first quarter of
operations; $5.2M gains
recognized in the quarter
on eCondos
• 23 storey, 228-unit rental
building
• 126 units pre-leased with
rent per square foot
averaging $2.48
• First occupancy in mid-
2019 with stabilization in
mid-2020
• Zoning approved for four
residential towers (up to
840 units)
• Construction for Phase 2
accelerated to Q2 2019
RESIDENTIAL RENTAL
Q1 | RioCan | 07
Disposition Progress as of May 6, 2019
Transaction type Value (M)
• Sale prices to-date are materially in line with IFRS value
• $1.5B progress since the October 2017 announcement which
encompasses 75 properties
• Dispositions span a broad range of secondary markets
Closed and Firm $1,294
Conditional / LOI $ 177
Total to Date $1,471
Weighted Average Cap Rate 6.69%
MAJOR MARKET STRATEGY
Q1 | RioCan | 08
85.4% 87.5%
>90%
YE 2018 Q1 2019 Vision
% of Revenues from Major Markets
46.8% 47.6%
>50%
YE 2018 Q1 2019 Vision
% of Revenues from GTA
Progress on our two key strategic metrics
DEVELOPMENT PROGRESSING WELL
RioCan Hall - 126 John Street, Toronto, Ontario
Key Statistics (Q1 2019)
Development Completions:
- NLA Completed (in sf) 92,000
- Costs Transferred $101.8M
Development Expenditures: $92.5M
Active Urban Intensification Projects:
- Average Net Rents (psf) $32.26 1
DEVELOPMENT PROGRESSING WELL
Q1 | RioCan | 09
• All development projects are located in
Canada's six major markets and includes
71.1% or 18.7 million square feet of
residential projects (at RioCan’s interest) 1. Based on 811,000 square feet of committed or in-place leases as of May 6, 2019
2. Increase of 2.1M sf of zoning applications submitted from Q4 2018 due to new applications including application for RioCan Hall in Toronto
Zoned, 11.2M sf, 42.6%
Application submitted, 7.5M sf, 28.5%
Future est. density, 7.6M sf, 28.9%
Total Pipeline by Zoning Status (26.3M sf)
2
• Updated estimates for development yield and value creation for five urban intensification and
greenfield development projects that are complete or close to completion are shown below:
DEVELOPMENT YIELD AND VALUE CREATION
Q1 | RioCan | 10
$574.9M
Total
Estimated Net
Project Costs 1
$33.1M
Estimated
Stabilized
NOI
$791.7M
Estimated
Future Stabilized
Value 2
5.8%
Estimated Yield on
Total Costs (10 bps higher than
previous estimate)
$243.3M
Total Estimated
Incremental
Value Creation3
Bathurst College Centre, Toronto
King and Portland Centre, Toronto
ePlace, Toronto Frontier, Ottawa
Frontier, Ottawa
Sage Hill, Calgary
1. Total estimated net project costs include the cost of acquiring the remaining 50% interest in the residential rental tower and the remaining 50% interest in
the retail component at ePlace
2. Excludes condo gains
3. Includes $26.5M of condo gains. Of the total estimated incremental value creation of $243.3M, $176.3M has been recognized through property fair
market values, applicable interim and fee income and applicable condo gains
As at
Mar 31, 2019 Target
Properties Under Development (“PUD”) & Residential Inventory $1.2B N/A
PUD and Residential Inventory as % of Gross Assets – Per Line of
Credit and Credit Facilities Agreements 8.4% ~ 10%1
Investment in Greenfield Development and Residential Inventory as
% of Unitholder’s Equity – Per Declaration of Trust 4.8% N/A
Current PUD and InventoryBalance
Annual Development Spend Annual DevelopmentCompletions
Target PUD and InventoryBalance *
$1.2B
$400M-$500M
< $1.5B
$300M-$600M
1. Maximum permitted is 15%. RioCan targets this metric to be no more than 10% (except for short-term fluctuations as large projects are
completed)
• RioCan is committed to self-funding its development program and maintaining a strong balance sheet
FUNDING DEVELOPMENT
Q1 | RioCan | 11
CONSISTENTLY ABOVE 95%
Capital Structure Metrics
Target Q1 20191
Debt to Adjusted EBITDA <8.0x 7.94x
Debt to Total Assets 38% - 42% 42.2%
Interest Coverage >3.0x 3.55x
Debt Service Coverage >2.25x 3.01x
Fixed Coverage >1.10x 1.15x
Unencumbered Assets N/A $8.0B
Unencumbered Assets to Unencumbered Debt >2.0x 2.29x
NOI % from Unencumbered Assets >50% 59.6%
Unsecured vs. Secured Debt 60% / 40% 58% / 42%
FFO Payout Ratio <80% 77.9%
PRUDENT CAPITAL MANAGEMENT & FLEXIBLE CAPITAL STRUCTURE
STRONG BALANCE SHEET
Q1 | RioCan | 12 1. Metrics are calculated based on RioCan’s proportionate share
Jonathan Gitlin,
President &
Chief Operating Officer
Q1 | RioCan | 13
PRESIDENT & COO COMMENTS
Edward Sonshine, O.Ont., Q.C.
Chief Executive Officer
Q1 | RioCan | 14
CEO COMMENTS
Q1 | RioCan | 15
Edward Sonshine, O.Ont., Q.C. Chief Executive Officer
Jonathan Gitlin
President & Chief Operating Officer
Qi Tang
Senior Vice President & Chief Financial Officer
Contact Information RioCan Yonge Eglinton Centre 2300 Yonge Street P.O. Box 2386 Toronto, ON M4P 1E4
(T) 1-800-465-2733 or (416) 866-3033