RioCan Reports Second Quarter 2023 Results With Strong Core Business and Development Deliveries Driving Growth in FFO per unit

• Solid Property Fundamentals with Retail Occupancy of 98.0% and New Leasing Spread of 11.3%
• Achieved zoning for 2.0 million square feet at RioCan Scarborough Centre in Toronto’s Golden Mile

TORONTO–(BUSINESS WIRE)–August 1, 2023–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, 2023 (the “Second Quarter”).

“RioCan reported another quarter of operational excellence. Our quality portfolio maintained high occupancy and drove strong leasing spreads while our development completions continued to deliver new and diversified income,” said Jonathan Gitlin, President and CEO of RioCan. “The consistent strength of our operating results are evidence that our business is set up to succeed in any environment. The RioCan team remains focused on delivering growing and sustainable value for the long-term while we pro-actively manage risk and improve our balance sheet.”

Financial Highlights
	Three months ended June 30									Six months ended June 30
(in millions, except where otherwise noted, and per unit values)		2023				2022				2023				2022
FFO 1		$	131.6			$	131.7			$	263.0			$	262.2
FFO per unit – diluted 1		$	0.44			$	0.43			$	0.88			$	0.85
Net income		$	112.0			$	78.5			$	230.0			$	238.5
Weighted average Units outstanding – diluted (in thousands)			300,500				308,537				300,524				309,324
As at										June 30, 2023				December 31, 2022
Net book value per unit										$	26.00			$	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 Second Quarter was $0.44, $0.01 per unit higher than the same period last year.
  • Same Property NOI¹ growth of 5.2% contributed a $0.03 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, net of higher interest income, 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.
  • A number of other items combined for a net reduction of $0.01 in FFO per unit, including lower residential inventory gains, due to timing, and lower lease cancellation fees, partially offset by lower restructuring expenses and higher income from equity-accounted investments.
• Net income for the Second Quarter of $112.0 million exceeded the comparable period last year by $33.5 million, an increase of 42.7%, mainly due to lower fair value losses on investment properties in the current quarter.
• Our FFO Payout Ratio¹ of 59.7%, Liquidity¹ of $1.7 billion, Unencumbered Asset¹ pool of $8.6 billion, floating rate debt at 6.6%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

	Three months ended June 30									Six months ended June 30
		2023				2022				2023				2022
Operation Highlights (i)
Occupancy – committed (ii)		97.4	%			97.2	%			97.4	%			97.2	%
Retail occupancy – committed (ii)		98.0	%			97.6	%			98.0	%			97.6	%
Blended leasing spread		9.0	%			10.5	%			10.3	%			9.8	%
New leasing spread		11.3	%			6.8	%			12.5	%			11.1	%
Renewal leasing spread		8.2	%			11.2	%			9.6	%			9.3	%

(i)		Includes commercial portfolio only.
(ii)		Information presented as at respective periods then ended.

• In the context of strong fundamentals for our necessity-based retail portfolio, our team continued to deliver solid operating results in the Second Quarter. Same Property NOI grew by 5.2%, driven by increases in rent growth from contractual rent steps, rent upon renewal and a recovery of past pandemic-related provisions.
• A strong blended leasing spread of 9.0% resulted from new and renewal leasing spreads of 11.3% and 8.2%, respectively. Excluding fixed-rate renewals, the blended leasing spread would be 9.8% for the quarter and 11.1% for the year-to-date.
• Average net rent per occupied square foot of $21.34 improved 4.7% over the same period last year while new leasing in the Second Quarter generated average net rent per square foot of $26.90.
• Retail committed occupancy remained steady at 98.0%. In-place retail occupancy of 96.9% declined 40 basis points sequentially driven by temporary vacant units transitioning to new committed tenants taking physical occupancy in the coming quarters. We continue to improve quality of the tenant base with strong and stable tenants comprising 87.3% of annualized net rent, an increase of 50 basis points compared to the prior quarter.

RioCan Living Update ¹

• As at August 1, 2023, 11 of the 12 RioCan Living^TM buildings in operation are stabilized and are 99.0% leased. Total NOI generated from our residential rental operations for the Second Quarter was $5.1 million, an increase of $1.7 million or 50.8% over the same period last year. An increase of approximately 9% in average monthly rent per occupied square foot on a same property basis contributed to the year-over-year improvement.
• Approximately 20% of the 592 rental residential units at FourFifty The Well^TM are pre-leased as of August 1, 2023, at rates in-line with or above expectations. Pre-leasing commenced in March 2023 in anticipation of the phased completion beginning in August 2023 and continuing through to early 2024.
• As of June 30, 2023, 2,575 condominium and townhouse units are under construction and are expected to generate combined sales revenue of over $860.0 million between 2023 and 2026 that can be redeployed to fund our development pipeline. Of RioCan’s six active condominium construction projects, 86% of the total units have been pre-sold, representing 96% of pro-forma total revenues. There were no residential inventory gains recognized during the first half of the year due to the timing of condominium/townhouse sales. We expect residential inventory gains in the second half of the year.

1.

Units at 100% ownership interest.

Development Highlights

	Three months ended June 30									Six months ended June 30
(in millions except square feet)		2023				2022				2023				2022
Development Highlights
Development Completions – sq. ft. in thousands (i)			110.0				69.0				176.0				214.0
Development Spending		$	103.0			$	139.6			$	191.3			$	231.5
Development Projects Under Construction – sq. ft. in thousands (ii)			1,850.0				2,320.0				1,850.0				2,320.0

(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, 110,000 square feet of NLA was completed, comprised mainly of commercial space at The Well^TM. For the full year, we expect to complete 640,900 square feet of development, which we expect to contribute $25.6 million of stabilized NOI that will ramp up over the course of 2023 and 2024.
• As at August 1, 2023, approximately 1,229,000 square feet (at 100% ownership interest) of commercial space at The Well is in tenant possession with approximately 95% of the total commercial space leased. The retail component is 87% leased, as compared with 82% as at our prior quarterly release, with another 7% in late stage negotiations. The retail at The Well has been physically opening in phases and the majority of tenants are expected to be open by November 2023.
• During the Second Quarter, zoning was achieved for 2.0 million square feet for the first two phases at RioCan Scarborough Centre (Golden Mile) in Toronto, a Focus Five site and one of the premier development corridors in Toronto. Later phases of this site, an additional 2.3 million square feet, are expected to be zoned in the future. Completion of zoning is a significant value creation step. We will continue to exercise discipline as it relates to the commencement of physical construction.
• RioCan continues to revisit zoning applications to optimize density and use in order to improve project economics. We successfully amended zoning for 11YV during the quarter, resulting in an incremental three floors and expanding density to a site already underway.
• The 15.9 million of zoned square footage includes 1.9 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

• As of August 1, 2023, closed, firm or conditional dispositions totalled $302.3 million.
• Firm dispositions include a non-grocery anchored Open Air Centre in Surrey, B.C., at a capitalization rate of 4.99%, which is expected to close in December 2023.
• Closed dispositions for the first half of 2023 were $67.2 million at a weighted average capitalization rate of 7.69%, including the sale of non-core assets located in Calgary, Alberta and Orillia, Ontario, consistent with our strategy to improve portfolio quality.
• Year to date, Total Acquisitions¹ were $104.9 million.
• Total Acquisitions in the Second Quarter included three phases of Bellevue, a residential rental complex in Montreal, Quebec for a gross purchase price of $55.3 million. As part of this purchase, RioCan assumed $42.2 million of pre-existing contractual debt at a blended contractual interest rate of 2.64% and remaining weighted average term to maturity of 8.4 years. The acquisition included 124 income producing units and an adjacent parcel of vacant land for future development. We agreed to acquire an additional 60 units, which are under construction, upon satisfaction of certain conditions.
• The remaining acquisitions related to land assembly activity and retail pads at an existing property.

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.

Capital Management Update

• On April 18, 2023, RioCan redeemed, in full, its $200.0 million, 3.725% Series T unsecured debentures upon maturity.
• On June 26, 2023, RioCan issued $300.0 million of Series AH senior unsecured debentures. These debentures were issued at a coupon rate of 5.962% per annum and will mature on October 1, 2029. Inclusive of the benefit of bond forward hedges, the all-in rate is 5.284%.
• Over the last 12 months, the Trust has settled a total of $1.0 billion of bond forward contracts, for total realized gains of $57.3 million, which resulted in a weighted average interest rate reduction of 84 basis points or a weighted average hedged interest rate of 4.45% for $1.0 billion of debt with a weighted average term of 6.3 years.
• On May 4, 2023, the Trust extended the maturity on its operating line of credit by a year to May 31, 2028. All other terms and conditions remain the same.
• Subsequent to quarter end, we closed a $15.0 million, at our share, CMHC mortgage with a 4.29% fixed rate and a 10- year term relating to our Strada^TM residential rental property.
• In addition to the bond forward hedging, the Trust’s limited exposure to floating rate debt at 6.6% of total debt, serves to mitigate short-term interest rate volatility. Floating rate exposure increased sequentially, from 5.4% at the end of the first quarter of 2023, due to draws on our corporate revolving line of credit, which will fluctuate based on cash needs and timing of other financing activities. Excluding the balance of the revolving unsecured operating line of credit as at June 30, 2023, the majority of which was paid down subsequent to quarter end using proceeds from the Series AH debentures, the Ratio of floating rate debt to total debt¹ is 3.6%.

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.

Balance Sheet Strength

(in millions except percentages) As at						June 30, 2023				December 31, 2022
Balance Sheet Strength Highlights
Liquidity (i) 1							$	1,666			$	1,548
Adjusted Debt to Adjusted EBITDA (i) 1							9.49x				9.51x
Total Adjusted Debt to Total Adjusted Assets (i) 1								45.6%				45.2%
Unencumbered Assets (i) 1							$	8,631			$	8,257
Unencumbered Assets to Unsecured Debt (i) 1								207%				218%

(i)

At RioCan’s proportionate share.

• As at June 30, 2023, the Trust had $1.7 billion of Liquidity in the form of a $1.0 billion undrawn revolving line of credit, $0.4 billion undrawn construction lines and other bank loans and $0.3 billion cash and cash equivalents.
• 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 asset pool of $8.6 billion, which can be used to obtain secured financing to provide additional liquidity at lower interest rates than unsecured debt, generated 58.1% of Annual Normalized NOI¹ and provided 2.07x coverage over Unsecured Debt¹. Subsequent to quarter end, the revolving line of credit was repaid with cash proceeds from the Series AH debenture, improving the coverage over Unsecured Debt to 2.18x. When compared to Q1 2023, Unencumbered Assets increased by $356.1 million mainly from the repayment of mortgages payable.
• Adjusted Debt to Adjusted EBITDA was 9.49x on a proportionate share basis, as at June 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 Wednesday, August 2, 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: 836769.

For those unable to participate in the live mode, a replay will be available at 1-866-813-9403 with access code: 976025.

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 June 30, 2023, our portfolio is comprised of 193 properties with an aggregate net leasable area of approximately 33.5 million square feet (at RioCan’s interest) including office, residential rental and 11 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 six months ended June 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 six months ended June 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 June 30, 2023 and December 31, 2022:

As at	June 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	$	13,875,163		$	413,564		$	14,288,727		$	13,807,740		$	398,701		$	14,206,441
Equity-accounted investments		383,958			(383,958	)		—			364,892			(364,892	)		—
Mortgages and loans receivable		223,299			—			223,299			269,339			—			269,339
Residential inventory		327,596			238,732			566,328			272,005			214,536			486,541
Assets held for sale		155,000			—			155,000			42,140			—			42,140
Receivables and other assets		304,488			43,619			348,107			259,514			37,779			297,293
Cash and cash equivalents		253,944			13,324			267,268			86,229			8,001			94,230
Total assets	$	15,523,448		$	325,281		$	15,848,729		$	15,101,859		$	294,125		$	15,395,984
Liabilities
Debentures payable	$	3,241,201		$	—		$	3,241,201		$	2,942,051		$	—		$	2,942,051
Mortgages payable		2,643,007			182,941			2,825,948			2,659,180			172,100			2,831,280
Lines of credit and other bank loans		1,202,628			102,723			1,305,351			1,141,112			89,187			1,230,299
Accounts payable and other liabilities		626,624			38,814			665,438			630,624			32,838			663,462
Total liabilities	$	7,713,460		$	324,478		$	8,037,938		$	7,372,967		$	294,125		$	7,667,092
Equity
Unitholders’ equity		7,809,988			803			7,810,791			7,728,892			—			7,728,892
Total liabilities and equity	$	15,523,448		$	325,281		$	15,848,729		$	15,101,859		$	294,125		$	15,395,984

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, 2023 and 2022:

	Three months ended June 30, 2023									Three months ended June 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	$	270,913		$	9,982		$	280,895		$	267,302		$	7,363		$	274,665
Residential inventory sales		—			517			517			35,005			—			35,005
Property management and other service fees		5,139			—			5,139			6,112			—			6,112
		276,052			10,499			286,551			308,419			7,363			315,782
Operating costs
Rental operating costs
Recoverable under tenant leases		93,622			905			94,527			92,129			661			92,790
Non-recoverable costs		3,594			451			4,045			5,521			575			6,096
Residential inventory cost of sales		—			261			261			29,857			—			29,857
		97,216			1,617			98,833			127,507			1,236			128,743
Operating income		178,836			8,882			187,718			180,912			6,127			187,039
Other income (loss)
Interest income		5,701			665			6,366			4,885			574			5,459
Income from equity-accounted investments		5,830			(5,830	)		—			1,165			(1,165	)		—
Fair value loss on investment properties, net		(10,594	)		(1,072	)		(11,666	)		(42,270	)		(3,476	)		(45,746	)
Investment and other income (loss)		1,657			123			1,780			(1,379	)		(149	)		(1,528	)
		2,594			(6,114	)		(3,520	)		(37,599	)		(4,216	)		(41,815	)
Other expenses
Interest costs, net		49,974			2,724			52,698			43,659			1,807			45,466
General and administrative		14,846			20			14,866			16,400			16			16,416
Internal leasing costs		3,018			—			3,018			2,825			—			2,825
Transaction and other costs		1,594			24			1,618			1,517			88			1,605
		69,432			2,768			72,200			64,401			1,911			66,312
Income before income taxes	$	111,998		$	—		$	111,998		$	78,912		$	—		$	78,912
Current income tax expense		31			—			31			452			—			452
Net income	$	111,967		$	—		$	111,967		$	78,460		$	—		$	78,460

	Six months ended June 30, 2023									Six months ended June 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	$	545,594		$	17,432		$	563,026		$	539,433		$	14,301		$	553,734
Residential inventory sales		—			2,880			2,880			50,974			936			51,910
Property management and other service fees		9,958			—			9,958			11,993			—			11,993
		555,552			20,312			575,864			602,400			15,237			617,637
Operating costs
Rental operating costs
Recoverable under tenant leases		192,430			1,786			194,216			192,251			1,284			193,535
Non-recoverable costs		11,043			1,145			12,188			11,577			1,163			12,740
Residential inventory cost of sales		—			1,387			1,387			43,793			422			44,215
		203,473			4,318			207,791			247,621			2,869			250,490
Operating income		352,079			15,994			368,073			354,779			12,368			367,147
Other income (loss)
Interest income		12,742			1,268			14,010			8,946			1,144			10,090
Income from equity-accounted investments		11,344			(11,344	)		—			5,255			(5,255	)		—
Fair value loss on investment properties, net		(27,959	)		(451	)		(28,410	)		(6,838	)		(4,266	)		(11,104	)
Investment and other income (loss)		4,544			(213	)		4,331			(1,563	)		(207	)		(1,770	)
		671			(10,740	)		(10,069	)		5,800			(8,584	)		(2,784	)
Other expenses
Interest costs, net		97,957			5,218			103,175			85,425			3,648			89,073
General and administrative		30,464			31			30,495			27,863			31			27,894
Internal leasing costs		5,743			—			5,743			5,810			—			5,810
Transaction and other costs		1,982			5			1,987			2,692			105			2,797
		136,146			5,254			141,400			121,790			3,784			125,574
Income before income taxes	$	216,604		$	—		$	216,604		$	238,789		$	—		$	238,789
Current income tax (recovery) expense		(13,367	)		—			(13,367	)		271			—			271
Net income	$	229,971		$	—		$	229,971		$	238,518		$	—		$	238,518

Contacts

RioCan Real Estate Investment Trust

Dennis Blasutti

Chief Financial Officer

416-866-3033 | www.riocan.com

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