TORONTO--(BUSINESS WIRE)--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.
- 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.
- 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.
- 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.
- Units at 100% ownership interest.
- 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%.
- 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
| 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) | $ | 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.
Contacts
RioCan Real Estate Investment Trust
Dennis Blasutti
Chief Financial Officer
416-866-3033 | www.riocan.com
