TORONTO--(BUSINESS WIRE)--RioCan Real Estate Investment Trust ("RioCan" or the "Trust") (TSX: REI.UN) announced today its financial results for the three and nine months ended September 30, 2023 (the "Third Quarter").
"RioCan had a strong quarter as extensive demand for our space drove leasing velocity, standout leasing spreads and record occupancy. Our performance reflects the quality of our locations as well as the track-record and cycle-tested experience of RioCan's team," said Jonathan Gitlin, President and CEO of RioCan. "We are perfectly positioned to benefit from Canada's favourable retail real estate landscape that will continue to be strong due to the limited supply of quality space. RioCan continues to actively manage risk, improve our balance sheet and further strengthen our foundation to drive future growth and value creation."
Financial Highlights | |||||||||||||||
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(in millions, except where otherwise noted, and per unit values) | 2023 | 2022 | 2023 | 2022 | |||||||||||
FFO 1 | $ | 135.4 | $ | 134.8 | $ | 398.4 | $ | 397.0 | |||||||
FFO per unit - diluted 1 | $ | 0.45 | $ | 0.44 | $ | 1.33 | $ | 1.29 | |||||||
Net income (loss) | $ | (73.5) | $ | 3.2 | $ | 156.5 | $ | 241.7 | |||||||
Weighted average Units outstanding - diluted (in thousands) | 300,471 | 304,005 | 300,508 | 307,534 | |||||||||||
September 30, | December 31, | ||||||||||||||
As at | 2023 | 2022 | |||||||||||||
Net book value per unit | $ | 25.49 | $ | 25.73 | |||||||||||
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. |
FFO per Unit and Net Income
- FFO per unit for the Third Quarter was $0.45, which was $0.01 per unit higher than the same period last year.
- Same Property NOI1 growth of 3.7% contributed a $0.02 increase in FFO per unit.
- FFO from completed developments and residential rental ramp up drove FFO per unit higher by $0.02.
- Higher interest expense decreased FFO per unit by $0.02.
- The reduction in FFO per unit from properties sold was partially offset by accretion from prior year unit buybacks, resulting in a net reduction of $0.01 per unit.
- Net loss for the Third Quarter of $73.5 million compared to $3.2 million of net income last year. The decrease was mainly due to fair value losses of $199.5 million on investment properties in the current quarter compared to $118.8 million in Q3 2022, primarily from increasing capitalization rates to reflect current market conditions resulting from rising interest rates.
- Our FFO Payout Ratio1 of 60.4%, Liquidity1 of $1.6 billion, Unencumbered Assets1 of $8.5 billion, floating rate debt at 7.9%1 of total debt and staggered debt maturities, all contribute to our financial flexibility and balance sheet strength.
- For 2023, we anticipate FFO per unit to be within the range of $1.77 to $1.80, SPNOI growth of 3%, and an FFO Payout Ratio of between 55% to 65%. Development Spending1 is expected to be between $400 million to $450 million.
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
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2023 | 2022 | 2023 | 2022 | ||||||||
Operation Highlights (i) | |||||||||||
Occupancy - committed (ii) | 97.5 % | 97.3 % | 97.5 % | 97.3 % | |||||||
Retail occupancy - committed (ii) | 98.3 % | 97.8 % | 98.3 % | 97.8 % | |||||||
Blended leasing spread | 12.9 % | 7.9 % | 11.2 % | 9.0 % | |||||||
New leasing spread | 21.0 % | 15.9 % | 14.9 % | 12.4 % | |||||||
Renewal leasing spread | 11.2 % | 6.6 % | 10.2 % | 8.2 % | |||||||
(i) | Includes commercial portfolio only. |
(ii) | Information presented as at respective periods then ended. |
- Strong leasing velocity continues to be a dominant theme as RioCan's high-quality, necessity-based retail portfolio continued to generate strong activity, spreads, occupancy and operating results in the Third Quarter. Same Property NOI grew by 3.7%, driven by increases in rent growth from contractual rent steps, rent upon renewal and the recovery of past pandemic-related provisions.
- Retail committed occupancy improved to an all-time high of 98.3% and in-place retail occupancy of 97.6% increased 70 basis points sequentially.
- A robust blended leasing spread of 12.9% resulted from new and renewal leasing spreads of 21.0% and 11.2%, respectively.
- New leasing in the Third Quarter generated average net rent per square foot of $27.02, well above the average net rent per occupied square foot of $21.39.
- 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 87.4% of annualized net rent.
RioCan Living Update 1
- Of the 13 RioCan Living buildings in operation 11 are stabilized and 97.5% leased as at November 2, 2023. Total NOI generated from our residential rental operations for the Third Quarter was $5.6 million, an increase of $1.8 million or 46.3% over the same period last year. An increase of approximately 8% in average monthly rent per occupied square foot on a same property basis contributed to the year-over-year improvement.
- Occupancy commenced at FourFifty The Well on August 1, 2023. Construction of 236 units was completed in the quarter. The remaining 356 units will be completed in phases through Q4 2023 and early 2024. Pre-leasing commenced in March 2023 and units are leasing at a healthy velocity and at rates in-line or above expectations.
- The 2,605 condominium and townhouse units that are under construction as of September 30, 2023, are expected to generate combined sales revenue of over $800.0 million between 2023 and 2026 that can be redeployed to productive uses such as paying down debt or development. 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. |
Development Highlights
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(in millions except square feet) | 2023 | 2022 | 2023 | 2022 | |||||||||||
Development Highlights | |||||||||||||||
Development Completions - sq. ft. in thousands (i) | 151.0 | 179.0 | 327.0 | 393.0 | |||||||||||
Development Spending | $ | 114.2 | $ | 81.0 | $ | 305.6 | $ | 312.5 | |||||||
Development Projects Under Construction - sq. ft. in thousands (ii) | 1,685.0 | 2,152.0 | 1,685.0 | 2,152.0 | |||||||||||
(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. |
- In the quarter, 151,000 square feet of NLA was completed, comprised mainly of 72,000 square feet of purpose-built rental at FourFifty The Well and 63,000 square feet of commercial space at The Well. For the full year, we expect to complete 630,200 square feet of GFA of development. We expect these development completions to contribute $25.5 million of stabilized NOI that will ramp up over the course of 2023 and 2024.
- As at November 2, 2023, approximately 96% of the total commercial space at The Well is leased with approximately 89% or 1,323,000 square feet (at 100% ownership interest) in tenant possession. The retail component is 91% leased with another 2% in late stage negotiations. New additions to the tenant roster, such as Lululemon and Sephora, further enhance the retail mix at The Well. The retail at The Well has been physically opening in phases, and the majority of tenants are expected to be open by the end of 2023.
- Zoning approvals for 1.2 million square feet of residential inventory were obtained in the quarter comprised of 83 Bloor Street West, located in the prestigious Yorkville neighbourhood in downtown Toronto, and East Hills South Block in Calgary. Completion of zoning is a significant step in the value creation process. RioCan continues to revisit zoning applications to optimize density and use in order to improve project economics. As cost and financing conditions persist, RioCan does not intend on commencing any material new physical construction in the near term.
- Total zoned square footage of 16.8 million includes 1.7 million square feet of projects under construction and 1.5 million square feet of shovel ready projects, which can be commenced or delayed at RioCan's discretion.
Investing and Capital Recycling
- On September 28, 2023, RioCan entered into an agreement which resulted in 11YV project becoming an equity-accounted joint venture where RioCan subsequently reduced its 50.0% ownership interest to 39.6%. The resulting $10.1 million gain in the quarter was mainly attributable to the value of the underlying residential inventory. Subsequent to quarter end, RioCan sold an additional 2.1% interest reducing its interest to 37.5% in the underlying 11YV project.
- As of November 2, 2023, closed and firm dispositions of non-core assets totalled $295.2 million at a weighted average capitalization rate of 6.92%, including closed dispositions of $140.2 million. Closed dispositions include an enclosed centre in Winnipeg, Manitoba and a movie theatre anchored centre in Gatineau, Quebec, both of which were sold subsequent to quarter end. Disposition of these non-core assets continued the Trust's program to continually improve asset quality.
- Year-to-date, Total Acquisitions1 were $110.1 million including the purchase of residential rental properties, certain land assemblies for development and the purchase of an income producing parking lot lease at a Focus Five2 project to remove a significant encumbrance.
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
- On September 29, 2023, RioCan issued $300.0 million of Series AI senior unsecured debentures. These debentures were issued at a coupon rate of 6.488% per annum and will mature on September 29, 2026. RioCan will have the option to repay Series AI debentures at par, in whole or in part, on or after September 29, 2024. RioCan also redeemed, in full, its $300.0 million, 3.210% Series AA unsecured debentures upon maturity.
- The Trust's limited exposure to floating rate debt at 7.9% of total debt serves to mitigate short-term interest rate volatility. The proportion of floating rate debt increased when compared to last quarter mainly due to the timing of refinancing and hedging activities. We expect to reduce our exposure to floating rate debt by year end.
Balance Sheet Strength
(in millions except percentages) As at | September 30, 2023 | December 31, 2022 | ||||||||||
Balance Sheet Strength Highlights | ||||||||||||
Liquidity (i) 1 | $ | 1,634 | $ | 1,548 | ||||||||
Adjusted Debt to Adjusted EBITDA (i) 1 | 9.45x | 9.51x | ||||||||||
Total Adjusted Debt to Total Adjusted Assets (i) 1 | 46.5 % | 45.2 % | ||||||||||
Unencumbered Assets (i) 1 | $ | 8,549 | $ | 8,257 | ||||||||
Unencumbered Assets to Unsecured Debt (i) 1 | 211 % | 218 % | ||||||||||
(i) | At RioCan's proportionate share. |
- As at September 30, 2023, the Trust had $1.6 billion of Liquidity in the form of a $1.1 billion undrawn revolving line of credit, $0.4 billion undrawn construction lines and other bank loans and $0.1 billion cash and cash equivalents. A new credit facility for the construction of the Queen & Ashbridge condominium component was executed in the quarter.
- 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 million.
- RioCan's Unencumbered Assets of $8.5 billion, which can be used to obtain secured financing to provide additional liquidity at lower interest rates than unsecured debt, generated 60.0% of Annual Normalized NOI1 and provided 2.11x coverage over Unsecured Debt1. When compared to Q2 2023, Unencumbered Assets decreased by $81.8 million mainly from decrease in fair values.
- Adjusted Debt to Adjusted EBITDA was 9.45x on a proportionate share basis as at September 30, 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.
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, November 3, 2023 at 10:00 a.m. (ET). Participants will be required to identify themselves and the organization on whose behalf they are participating.
To access the conference call, click on the following link to register at least 10 minutes prior to the scheduled start of the call: 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: 176245.
For those unable to participate in the live mode, a replay will be available at 1-866-813-9403 with access code: 613637.
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 September 30, 2023, our portfolio is comprised of 192 properties with an aggregate net leasable area of approximately 33.6 million square feet (at RioCan's interest) including office, residential rental and 10 development properties. To learn more about us, please visit www.riocan.com.
Basis of Presentation and Non-GAAP Measures
All figures included in this News Release are expressed in Canadian dollars unless otherwise noted. RioCan's 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 nine months ended September 30, 2023, which are available on RioCan's website at www.riocan.com and on SEDAR at www.sedar.com.
Consistent with RioCan's management framework, management uses certain financial measures to assess RioCan's financial performance, which are not in accordance with generally accepted accounting principles (GAAP) under IFRS. Funds From Operations ("FFO"), FFO per unit, Net Operating Income ("NOI"), Same Property NOI, Development Spending, Total Acquisitions, Ratio of floating rate debt to total debt, Liquidity, Adjusted Debt to Adjusted EBITDA, Total Adjusted Debt to Total Adjusted Assets, RioCan's Proportionate Share, Unencumbered Assets to Unsecured Debt and Percentage of Normalized NOI Generated from Unencumbered Assets, as well as other measures that may be discussed elsewhere in this News Release, do not have a standardized definition prescribed by IFRS and are, therefore, unlikely to be comparable to similar measures presented by other reporting issuers. RioCan supplements its IFRS measures with these Non-GAAP measures to aid in assessing the Trust's underlying performance and reports these additional measures so that investors may do the same. Non-GAAP measures should not be considered as alternatives to net income or comparable metrics determined in accordance with IFRS as indicators of RioCan's performance, liquidity, cash flow, and profitability. For full definitions of these measures, please refer to the "Non-GAAP Measures" section in RioCan's MD&A for the three and nine months ended September 30, 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 September 30, 2023 and December 31, 2022:
As at | September 30, 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 | $ | 13,696,048 | $ | 422,424 | $ | 14,118,472 | $ | 13,807,740 | $ | 398,701 | $ | 14,206,441 |
Equity-accounted investments | 395,924 | (395,924) | - | 364,892 | (364,892) | - | ||||||
Mortgages and loans receivable | 229,877 | - | 229,877 | 269,339 | - | 269,339 | ||||||
Residential inventory | 198,913 | 397,063 | 595,976 | 272,005 | 214,536 | 486,541 | ||||||
Assets held for sale | 230,000 | - | 230,000 | 42,140 | - | 42,140 | ||||||
Receivables and other assets | 292,421 | 51,258 | 343,679 | 259,514 | 37,779 | 297,293 | ||||||
Cash and cash equivalents | 43,220 | 9,355 | 52,575 | 86,229 | 8,001 | 94,230 | ||||||
Total assets | $ | 15,086,403 | $ | 484,176 | $ | 15,570,579 | $ | 15,101,859 | $ | 294,125 | $ | 15,395,984 |
Liabilities | ||||||||||||
Debentures payable | $ | 3,240,680 | $ | - | $ | 3,240,680 | $ | 2,942,051 | $ | - | $ | 2,942,051 |
Mortgages payable | 2,641,601 | 171,182 | 2,812,783 | 2,659,180 | 172,100 | 2,831,280 | ||||||
Lines of credit and other bank loans | 1,007,059 | 207,680 | 1,214,739 | 1,141,112 | 89,187 | 1,230,299 | ||||||
Accounts payable and other liabilities | 540,135 | 105,314 | 645,449 | 630,624 | 32,838 | 663,462 | ||||||
Total liabilities | $ | 7,429,475 | $ | 484,176 | $ | 7,913,651 | $ | 7,372,967 | $ | 294,125 | $ | 7,667,092 |
Equity | ||||||||||||
Unitholders' equity | 7,656,928 | - | 7,656,928 | 7,728,892 | - | 7,728,892 | ||||||
Total liabilities and equity | $ | 15,086,403 | $ | 484,176 | $ | 15,570,579 | $ | 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 and nine months ended September 30, 2023 and 2022:
Three months ended September 30, 2023 | Three months ended September 30, 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 | $ | 269,001 | $ | 8,052 | $ | 277,053 | $ | 265,895 | $ | 7,405 | $ | 273,300 |
Residential inventory sales | - | 48,977 | 48,977 | 33,812 | - | 33,812 | ||||||
Property management and other service fees | 2,408 | - | 2,408 | 5,553 | - | 5,553 | ||||||
271,409 | 57,029 | 328,438 | 305,260 | 7,405 | 312,665 | |||||||
Operating costs | ||||||||||||
Rental operating costs | ||||||||||||
Recoverable under tenant leases | 87,274 | 884 | 88,158 | 89,405 | 769 | 90,174 | ||||||
Non-recoverable costs | 7,880 | 588 | 8,468 | 7,318 | 627 | 7,945 | ||||||
Residential inventory cost of sales | - | 38,972 | 38,972 | 26,045 | - | 26,045 | ||||||
95,154 | 40,444 | 135,598 | 122,768 | 1,396 | 124,164 | |||||||
Operating income | 176,255 | 16,585 | 192,840 | 182,492 | 6,009 | 188,501 | ||||||
Other income (loss) | ||||||||||||
Interest income | 5,988 | 672 | 6,660 | 5,684 | 581 | 6,265 | ||||||
Income from equity-accounted investments | 14,229 | (14,229) | - | 958 | (958) | - | ||||||
Fair value loss on investment properties, net | (199,528) | (167) | (199,695) | (118,783) | (3,537) | (122,320) | ||||||
Investment and other income (loss) | (502) | (99) | (601) | (519) | 162 | (357) | ||||||
(179,813) | (13,823) | (193,636) | (112,660) | (3,752) | (116,412) | |||||||
Other expenses | ||||||||||||
Interest costs, net | 52,051 | 3,012 | 55,063 | 46,620 | 2,201 | 48,821 | ||||||
General and administrative | 14,444 | - | 14,444 | 13,729 | 19 | 13,748 | ||||||
Internal leasing costs | 3,020 | - | 3,020 | 3,088 | - | 3,088 | ||||||
Transaction and other costs | 417 | (250) | 167 | 2,346 | 37 | 2,383 | ||||||
69,932 | 2,762 | 72,694 | 65,783 | 2,257 | 68,040 | |||||||
Income (loss) before income taxes | $ | (73,490) | $ | - | $ | (73,490) | $ | 4,049 | $ | - | $ | 4,049 |
Current income tax expense | 20 | - | 20 | 834 | - | 834 | ||||||
Net income (loss) | $ | (73,510) | $ | - | $ | (73,510) | $ | 3,215 | $ | - | $ | 3,215 |
Nine months ended September 30, 2023 | Nine months ended September 30, 2022 | |||||||||||
(in thousands) | IFRS basis | Equity-accounted investments | RioCan's proportionate share | IFRS basis | Equity-accounted investments | RioCan's proportionate share | ||||||
Revenue | ||||||||||||
Rental revenue | $ | 814,595 | $ | 25,485 | $ | 840,080 | $ | 805,328 | $ | 21,703 | $ | 827,031 |
Residential inventory sales | - | 51,857 | 51,857 | 84,786 | 936 | 85,722 | ||||||
Property management and other service fees | 12,366 | - | 12,366 | 17,546 | - | 17,546 | ||||||
826,961 | 77,342 | 904,303 | 907,660 | 22,639 | 930,299 | |||||||
Operating costs | ||||||||||||
Rental operating costs | ||||||||||||
Recoverable under tenant leases | 279,704 | 2,668 | 282,372 | 281,656 | 2,053 | 283,709 | ||||||
Non-recoverable costs | 18,923 | 1,733 | 20,656 | 18,895 | 1,789 | 20,684 | ||||||
Residential inventory cost of sales | - | 40,359 | 40,359 | 69,838 | 422 | 70,260 | ||||||
298,627 | 44,760 | 343,387 | 370,389 | 4,264 | 374,653 | |||||||
Operating income | 528,334 | 32,582 | 560,916 | 537,271 | 18,375 | 555,646 | ||||||
Other income (loss) | ||||||||||||
Interest income | 18,730 | 1,940 | 20,670 | 14,630 | 1,726 | 16,356 | ||||||
Income from equity-accounted investments | 25,573 | (25,573) | - | 6,213 | (6,213) | - | ||||||
Fair value loss on investment properties, net | (227,487) | (618) | (228,105) | (125,621) | (7,803) | (133,424) | ||||||
Investment and other income (loss) | 4,042 | (313) | 3,729 | (2,082) | (44) | (2,126) | ||||||
(179,142) | (24,564) | (203,706) | (106,860) | (12,334) | (119,194) | |||||||
Other expenses | ||||||||||||
Interest costs, net | 150,008 | 8,231 | 158,239 | 132,045 | 5,849 | 137,894 | ||||||
General and administrative | 44,908 | 32 | 44,940 | 41,592 | 50 | 41,642 | ||||||
Internal leasing costs | 8,763 | - | 8,763 | 8,898 | - | 8,898 | ||||||
Transaction and other costs | 2,399 | (245) | 2,154 | 5,038 | 142 | 5,180 | ||||||
206,078 | 8,018 | 214,096 | 187,573 | 6,041 | 193,614 | |||||||
Income before income taxes | $ | 143,114 | $ | - | $ | 143,114 | $ | 242,838 | $ | - | $ | 242,838 |
Current income tax (recovery) expense | (13,347) | - | (13,347) | 1,105 | - | 1,105 | ||||||
Net income | $ | 156,461 | $ | - | $ | 156,461 | $ | 241,733 | $ | - | $ | 241,733 |
NOI and Same Property NOI
The following table reconciles operating income to NOI and Same Property NOI to NOI for the three and nine months ended September 30, 2023 and 2022:
Three months ended September 30 | Nine months ended September 30 | |||||||
(thousands of dollars) | 2023 | 2022 | 2023 | 2022 | ||||
Operating Income | $ | 176,255 | $ | 182,492 | $ | 528,334 | $ | 537,271 |
Adjusted for the following: | ||||||||
Property management and other service fees | (2,408) | (5,553) | (12,366) | (17,546) | ||||
Residential inventory gains | - | (7,767) | - | (14,948) | ||||
Operational lease revenue from ROU assets | 1,650 | 1,419 | 5,079 | 4,149 | ||||
NOI | $ | 175,497 | $ | 170,591 | $ | 521,047 | $ | 508,926 |
Three months ended September 30 | Nine months ended September 30 | |||||||
(thousands of dollars) | 2023 | 2022 | 2023 | 2022 | ||||
Same Property NOI | $ | 153,808 | $ | 148,346 | $ | 457,539 | $ | 438,706 |
NOI from income producing properties: | ||||||||
Acquired (i) | 358 | 7 | 787 | 376 | ||||
Disposed (i) | 338 | 8,111 | 1,867 | 26,485 | ||||
696 | 8,118 | 2,654 | 26,861 | |||||
NOI from completed properties under development | 8,668 | 3,813 | 22,698 | 12,060 | ||||
NOI from properties under de-leasing (ii) | 4,586 | 5,481 | 14,683 | 15,889 | ||||
Lease cancellation fees | 442 | 1,175 | 5,183 | 4,729 | ||||
Straight-line rent adjustment | 1,660 | (196) | 3,260 | 1,078 | ||||
NOI from commercial properties | 15,356 | 10,273 | 45,824 | 33,756 | ||||
NOI from residential rental | 5,637 | 3,854 | 15,030 | 9,603 | ||||
NOI | $ | 175,497 | $ | 170,591 | $ | 521,047 | $ | 508,926 |
(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. |
FFO
The following table reconciles net income (loss) attributable to Unitholders to FFO for the three and nine months ended September 30, 2023 and 2022:
Three months ended September 30 | Nine months ended September 30 | |||||||
(thousands of dollars, except where otherwise noted) | 2023 | 2022 | 2023 | 2022 | ||||
Net income attributable to Unitholders | $ | (73,510) | $ | 3,215 | $ | 156,461 | $ | 241,733 |
Add back/(Deduct): | ||||||||
Fair value losses, net | 199,528 | 118,783 | 227,487 | 125,621 | ||||
Fair value losses included in equity-accounted investments | 167 | 3,537 | 618 | 7,803 | ||||
Internal leasing costs | 3,020 | 3,088 | 8,763 | 8,898 | ||||
Transaction (gains) losses on investment properties, net (i) | (77) | (270) | 35 | 465 | ||||
Transaction gains on equity-accounted investments | (69) | - | (69) | - | ||||
Transaction (recoveries) costs on sale of investment properties | (4) | 1,769 | 507 | 3,084 | ||||
ERP implementation costs | 2,121 | - | 8,530 | - | ||||
Change in unrealized fair value on marketable securities | 1,898 | 1,999 | 2,711 | 3,400 | ||||
Current income tax expense (recovery) | 20 | 834 | (13,347) | 1,105 | ||||
Operational lease revenue from ROU assets | 1,283 | 1,035 | 3,833 | 2,964 | ||||
Operational lease expenses from ROU assets in equity-accounted investments | (14) | (12) | (39) | (34) | ||||
Capitalized interest on equity-accounted investments (ii) | 1,059 | 825 | 2,902 | 1,994 | ||||
FFO | $ | 135,422 | $ | 134,803 | $ | 398,392 | $ | 397,033 |
Add back: | ||||||||
Restructuring costs | 720 | - | 1,344 | 3,779 | ||||
FFO Adjusted | $ | 136,142 | $ | 134,803 | $ | 399,736 | $ | 400,812 |
FFO per unit - basic | $ | 0.45 | $ | 0.44 | $ | 1.33 | $ | 1.29 |
FFO per unit - diluted | $ | 0.45 | $ | 0.44 | $ | 1.33 | $ | 1.29 |
FFO Adjusted per unit - diluted | $ | 0.45 | $ | 0.44 | $ | 1.33 | $ | 1.30 |
Weighted average number of Units - basic (in thousands) | 300,405 | 303,912 | 300,384 | 307,332 | ||||
Weighted average number of Units - diluted (in thousands) | 300,471 | 304,005 | 300,508 | 307,534 | ||||
FFO for last 4 quarters | $ | 526,035 | $ | 543,556 | ||||
Distributions paid for last 4 quarters | $ | 317,500 | $ | 308,221 | ||||
FFO Payout Ratio | 60.4% | 56.7% | ||||||
(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 and PR Bloor Street 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 and nine months ended September 30, 2023 and 2022 is as follows:
Three months ended September 30 | Nine months ended September 30 | |||||||
(thousands of dollars) | 2023 | 2022 | 2023 | 2022 | ||||
Development expenditures on balance sheet: | ||||||||
Properties under development | $ | 57,470 | $ | 62,856 | $ | 191,992 | $ | 220,127 |
Residential inventory | 51,052 | 15,258 | 100,243 | 78,966 | ||||
RioCan's share of Development Spending from equity-accounted joint ventures | 5,711 | 2,913 | 13,345 | 13,423 | ||||
Total Development Spending | $ | 114,233 | $ | 81,027 | $ | 305,580 | $ | 312,516 |
Total Acquisitions
Total Acquisitions for the three and nine months ended September 30, 2023 and 2022 are as follows:
Three months ended September 30 | Nine months ended September 30 | |||||||
(thousands of dollars) | 2023 | 2022 | 2023 | 2022 | ||||
Income producing properties | $ | 5,202 | $ | 1,072 | $ | 75,473 | $ | 91,020 |
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 | $ | 5,202 | $ | 1,072 | $ | 110,056 | $ | 188,903 |
Total Adjusted Debt and Total Contractual Debt
The following tables reconcile total debt to Total Adjusted Debt, total assets to Total Adjusted Assets, and total debt to Total
Contractual Debt as at September 30, 2023 and December 31, 2022:
As at | September 30, 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 | $ | 3,240,680 | $ | - | $ | 3,240,680 | $ | 2,942,051 | $ | - | $ | 2,942,051 |
Mortgages payable | 2,641,601 | 171,182 | 2,812,783 | 2,659,180 | 172,100 | 2,831,280 | ||||||
Lines of credit and other bank loans | 1,007,059 | 207,680 | 1,214,739 | 1,141,112 | 89,187 | 1,230,299 | ||||||
Total debt | $ | 6,889,340 | $ | 378,862 | $ | 7,268,202 | $ | 6,742,343 | $ | 261,287 | $ | 7,003,630 |
Cash and cash equivalents | 43,220 | 9,355 | 52,575 | 86,229 | 8,001 | 94,230 | ||||||
Total Adjusted Debt | $ | 6,846,120 | $ | 369,507 | $ | 7,215,627 | $ | 6,656,114 | $ | 253,286 | $ | 6,909,400 |
Total assets | $ | 15,086,403 | $ | 484,176 | $ | 15,570,579 | $ | 15,101,859 | $ | 294,125 | $ | 15,395,984 |
Cash and cash equivalents | 43,220 | 9,355 | 52,575 | 86,229 | 8,001 | 94,230 | ||||||
Total Adjusted Assets | $ | 15,043,183 | $ | 474,821 | $ | 15,518,004 | $ | 15,015,630 | $ | 286,124 | $ | 15,301,754 |
Total Adjusted Debt to Total Adjusted Assets | 45.5 % | 46.5 % | 44.3 % | 45.2 % | ||||||||
As at | September 30, 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 | ||||||
Total debt | $ | 6,889,340 | $ | 378,862 | $ | 7,268,202 | $ | 6,742,343 | $ | 261,287 | $ | 7,003,630 |
Less: | ||||||||||||
Unamortized debt financing costs, premiums and discounts on origination and debt assumed, and modifications | (23,797) | (547) | (24,344) | (15,634) | (690) | (16,324) | ||||||
Total Contractual Debt | $ | 6,913,137 | $ | 379,409 | $ | 7,292,546 | $ | 6,757,977 | $ | 261,977 | $ | 7,019,954 |
Floating Rate Debt and Fixed Rate Debt
As at | September 30, 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 | $ | 6,510,510 | $ | 181,982 | $ | 6,692,492 | $ | 6,301,054 | $ | 141,720 | $ | 6,442,774 |
Total floating rate debt | 378,830 | 196,880 | 575,710 | 441,289 | 119,567 | 560,856 | ||||||
Total debt | $ | 6,889,340 | $ | 378,862 | $ | 7,268,202 | $ | 6,742,343 | $ | 261,287 | $ | 7,003,630 |
Ratio of floating rate debt to total debt | 5.5% | 7.9% | 6.5% | 8.0% | ||||||||
Liquidity
As at September 30, 2023, RioCan had approximately $1.6 billion of Liquidity as summarized in the following table:
As at | September 30, 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 | $ | 1,139,000 | $ | - | $ | 1,139,000 | $ | 1,116,351 | $ | - | $ | 1,116,351 |
Undrawn construction lines and other bank loans | 251,907 | 190,416 | 442,323 | 267,562 | 70,094 | 337,656 | ||||||
Cash and cash equivalents | 43,220 | 9,355 | 52,575 | 86,229 | 8,001 | 94,230 | ||||||
Liquidity | $ | 1,434,127 | $ | 199,771 | $ | 1,633,898 | $ | 1,470,142 | $ | 78,095 | $ | 1,548,237 |
Adjusted EBITDA
The following table reconciles consolidated net income attributable to Unitholders to Adjusted EBITDA:
Twelve months ended | September 30, 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 | $ | 151,500 | $ | - | $ | 151,500 | $ | 236,772 | $ | - | $ | 236,772 |
Add (deduct) the following items: | ||||||||||||
Income tax (recovery) expense: | ||||||||||||
Current | (13,531) | - | (13,531) | 921 | - | 921 | ||||||
Fair value losses on investment properties, net | 342,994 | 9,023 | 352,017 | 241,128 | 16,208 | 257,336 | ||||||
Change in unrealized fair value on marketable securities (i) | 3,094 | - | 3,094 | 3,783 | - | 3,783 | ||||||
Internal leasing costs | 12,069 | - | 12,069 | 12,204 | - | 12,204 | ||||||
Non-cash unit-based compensation expense | 10,002 | - | 10,002 | 9,056 | - | 9,056 | ||||||
Interest costs, net | 198,328 | 10,624 | 208,952 | 180,365 | 8,242 | 188,607 | ||||||
Restructuring costs | 1,854 | - | 1,854 | 4,289 | - | 4,289 | ||||||
ERP implementation costs | 8,530 | - | 8,530 | - | - | - | ||||||
Depreciation and amortization | 2,712 | - | 2,712 | 4,774 | - | 4,774 | ||||||
Transaction losses (gains) on the sale of investment properties, net (ii) | 594 | (69) | 525 | 1,024 | - | 1,024 | ||||||
Transaction costs on investment properties | 3,162 | (1) | 3,161 | 5,734 | 3 | 5,737 | ||||||
Operational lease revenue (expenses) from ROU assets | 4,955 | (51) | 4,904 | 4,086 | (46) | 4,040 | ||||||
Adjusted EBITDA | $ | 726,263 | $ | 19,526 | $ | 745,789 | $ | 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:
Twelve months ended | September 30, 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 | $ | 6,875,311 | $ | 292,517 | $ | 7,167,828 | $ | 6,756,628 | $ | 251,888 | $ | 7,008,516 |
Less: average cash and cash equivalents | (106,768) | (10,343) | (117,111) | (74,871) | (8,791) | (83,662) | ||||||
Average Total Adjusted Debt | $ | 6,768,543 | $ | 282,174 | $ | 7,050,717 | $ | 6,681,757 | $ | 243,097 | $ | 6,924,854 |
Adjusted EBITDA (i) | $ | 726,263 | $ | 19,526 | $ | 745,789 | $ | 704,136 | $ | 24,407 | $ | 728,543 |
Adjusted Debt to Adjusted EBITDA | 9.32 | 9.45 | 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 to Unsecured Debt and Percentage of Normalized NOI Generated from Unencumbered Assets as at September 30, 2023 and December 31, 2022:
As at | September 30, 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 | ||||||
Unencumbered Assets | $ | 8,488,425 | $ | 60,958 | $ | 8,549,383 | $ | 8,200,280 | $ | 56,228 | $ | 8,256,508 | |
Total Unsecured Debt | $ | 4,061,000 | $ | - | $ | 4,061,000 | $ | 3,783,649 | $ | - | $ | 3,783,649 | |
Unencumbered Assets to Unsecured Debt | > 200% | 209 % | 211 % | 217 % | 218 % | ||||||||
Annual Normalized NOI - total portfolio (i) | $ | 683,240 | $ | 25,440 | $ | 708,680 | $ | 646,540 | $ | 23,488 | $ | 670,028 | |
Annual Normalized NOI - Unencumbered Assets (i) | $ | 421,432 | $ | 3,740 | $ | 425,172 | $ | 370,804 | $ | 3,440 | $ | 374,244 | |
Percentage of Normalized NOI Generated from Unencumbered Assets | > 50.0% | 61.7 % | 60.0 % | 57.4 % | 55.9 % | ||||||||
(i) | Annual Normalized NOI are reconciled in the table below. |
Three months ended
| Three months ended
| |||||||||||
(thousands of dollars) | IFRS basis | Equity-accounted investments | RioCan's proportionate share | IFRS basis | Equity-accounted investments | RioCan's proportionate share | ||||||
NOI (i) | $ | 175,497 | $ | 6,360 | $ | 181,857 | $ | 166,062 | $ | 5,872 | $ | 171,934 |
Adjust the following: | ||||||||||||
Miscellaneous revenue | (1,366) | - | (1,366) | (802) | - | (802) | ||||||
Percentage rent | (2,879) | - | (2,879) | (3,234) | - | (3,234) | ||||||
Lease cancellation fees | (442) | - | (442) | (391) | - | (391) | ||||||
Normalized NOI - total portfolio | $ | 170,810 | $ | 6,360 | $ | 177,170 | $ | 161,635 | $ | 5,872 | $ | 167,507 |
Annual Normalized NOI - total portfolio(ii) | $ | 683,240 | $ | 25,440 | $ | 708,680 | $ | 646,540 | $ | 23,488 | $ | 670,028 |
NOI from Unencumbered Assets | $ | 108,288 | $ | 935 | $ | 109,223 | $ | 94,957 | $ | 860 | $ | 95,817 |
Adjust the following for Unencumbered Assets: | ||||||||||||
Miscellaneous revenue | (795) | - | (795) | (518) | - | (518) | ||||||
Percentage rent | (1,943) | - | (1,943) | (1,430) | - | (1,430) | ||||||
Lease cancellation fees | (192) | - | (192) | (308) | - | (308) | ||||||
Normalized NOI - Unencumbered Assets | $ | 105,358 | $ | 935 | $ | 106,293 | $ | 92,701 | $ | 860 | $ | 93,561 |
Annual Normalized NOI - Unencumbered Assets (ii) | $ | 421,432 | $ | 3,740 | $ | 425,172 | $ | 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 and nine months ended September 30, 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.
Contacts
RioCan Real Estate Investment Trust
Dennis Blasutti
Chief Financial Officer
416-866-3033 | www.riocan.com
