RioCan Reports Second Quarter Results – Strong Demand Continues to Drive Rents and Occupancy Higher, Preserving Stability and Fueling Growth for the Long-term

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

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.

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

Outlook

• For 2024, we anticipate FFO per unit to be within the range of $1.79 to $1.82 and an FFO Payout Ratio of between 55% to 65%. Development Spending¹ on mixed-use projects is expected to be between $250 million to $300 million.
• Due to a purposeful approach to tenant selection, Commercial Same Property NOI excluding provision¹ growth is expected to be between 2.0% and 2.5%, for the full year 2024. Following previously disclosed tenant vacancies, we used the opportunity to replace transitional tenants with more relevant and resilient retailers at higher rents. The time required to build out space for this type of user is longer than we had assumed in our original guidance impacting this metric in the current year while our Commercial SPNOI growth target for future years remains at 3%.
• Spending for the retail in-fill projects is now expected to be between $30 million to $40 million compared with the $50 million to $60 million range disclosed in Q1 2024 as a result of timing delays related to the municipal permitting processes.

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

Operational Highlights (i)

	Three months ended June 30									Twelve months ended June 30
		2024				2023				2024				2023
Occupancy – committed (ii)		97.5	%			97.4	%			97.5	%			97.4	%
Retail occupancy – committed (ii)		98.3	%			98.0	%			98.3	%			98.0	%
Blended leasing spread		23.4	%			9.0	%			14.5	%			9.3	%
New leasing spread		52.5	%			11.3	%			29.8	%			13.2	%
Renewal leasing spread		10.7	%			8.2	%			10.4	%			8.4	%
(i) Includes commercial portfolio only.
(ii) Information presented as at respective periods then ended.

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

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

RioCan Living Update ¹

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

1. Units at 100% ownership interest.
2. A non-GAAP measurement. For definitions, reconciliations and the basis of presentation of RioCan’s non-GAAP measures, refer to the Basis of Presentation and Non-GAAP Measures section in this News Release.

Development Highlights

	Three months ended June 30									Six months ended June 30
(in millions except square feet)			2024				2023				2024				2023
Development Completions – sq. ft. in thousands (i)			53.0				110.0				107.0				176.0
Development Spending		$	102.9			$	103.0			$	192.3			$	191.3
Development Projects Under Construction – sq. ft. in thousands (ii)			1,074.0				1,850.0				1,074.0				1,850.0
(i) At RioCan’s ownership. Represents net leasable area (NLA) of property under development completions. Excludes NLA of residential inventory completions.
(ii) Information presented as at the respective periods then ended, includes properties under development and residential inventory, equity-accounted joint ventures and represents gross floor area of the respective projects.

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

Investing and Capital Recycling

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

Capital Management Update

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

Balance Sheet Strength

(in millions except percentages) As at						June 30, 2024				December 31, 2023
Liquidity (i) 1							$	1,523			$	1,964
Adjusted Debt to Adjusted EBITDA (i) 1							9.18x				9.28x
Unencumbered Assets (i) 1							$	8,132			$	8,090
(i) At RioCan’s proportionate share.

• Adjusted Debt to Adjusted EBITDA of 9.18x on a proportionate share basis as at June 30, 2024, compared to 9.28x as at the end of 2023 and 9.49x as at Q2 2023. The decrease was primarily due to higher Adjusted EBITDA, partially offset by higher Average Total Adjusted Debt balances. We expect to reach the high end of the 8.0x – 9.0x long-term target range by the end of this year.
• Weighted average term to maturity was 3.61 years, compared to 2.97 years as at December 31, 2023.
• As at June 30, 2024, Liquidity of $1.5 billion included $1.0 billion of revolving line of credit available and $0.4 billion in undrawn construction lines and other bank loans. Liquidity decreased by $440.6 million when compared to the prior year end, returning to more typical levels, mainly due to timing of capital recycling, investment and financing activities.
• Pursuant to the terms of its credit agreement, the Trust has an option to increase the commitment under its revolving line of credit by $250.0 million.
• RioCan’s Unencumbered Assets of $8.1 billion generated 57.5% of Annual Normalized NOI¹.
• The Trust’s exposure to floating rate debt was 8.1% of total debt as at June 30, 2024. Excluding construction loans, floating rate exposure was 4.3%.

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

Conference Call and Webcast

Interested parties are invited to participate in a conference call with management on Friday, August 9, 2024 at 10:00 a.m. (ET). Participants will be required to identify themselves and the organization on whose behalf they are participating.

To access the conference call, click on the following link to register at least 10 minutes prior to the scheduled start of the call: Pre-registration link. Participants who pre-register at any time prior to the call will receive an email with dial-in credentials including a login passcode and PIN to gain immediate access to the live call. Those that are unable to pre-register may dial-in for operator assistance by calling 1-833-950-0062 and entering the access code: 684427.

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

To access the simultaneous webcast, visit RioCan’s website at Events and Presentations and click on the link for the webcast.

About RioCan

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

Basis of Presentation and Non-GAAP Measures

All figures included in this News Release are expressed in Canadian dollars unless otherwise noted. RioCan’s unaudited interim condensed consolidated financial statements (“Condensed Consolidated Financial Statements”) are prepared in accordance with International Financial Reporting Standards (IFRS). Financial information included within this News Release does not contain all disclosures required by IFRS, and accordingly should be read in conjunction with the Trust’s Condensed Consolidated Financial Statements and MD&A for the three and six months ended June 30, 2024, which are available on RioCan’s website at www.riocan.com and on SEDAR+ at www.sedarplus.com.

Consistent with RioCan’s management framework, management uses certain financial measures to assess RioCan’s financial performance, which are not in accordance with generally accepted accounting principles (GAAP) under IFRS. Funds From Operations (“FFO”), FFO per unit, Net Operating Income (“NOI”), Same Property NOI, Commercial Same Property NOI (“Commercial SPNOI”), Commercial Same Property NOI excluding provision, Residential Same Property NOI (“Residential SPNOI”), Development Spending, Ratio of floating rate debt to total debt, Liquidity, Adjusted Debt to Adjusted EBITDA, RioCan’s Proportionate Share, Unencumbered Assets and Percentage of Normalized NOI Generated from Unencumbered Assets, as well as other measures that may be discussed elsewhere in this News Release, do not have a standardized definition prescribed by IFRS and are, therefore, unlikely to be comparable to similar measures presented by other reporting issuers. RioCan supplements its IFRS measures with these Non-GAAP measures to aid in assessing the Trust’s underlying performance and reports these additional measures so that investors may do the same. Non-GAAP measures should not be considered as alternatives to net income or comparable metrics determined in accordance with IFRS as indicators of RioCan’s performance, liquidity, cash flow, and profitability. For full definitions of these measures, please refer to the “Non-GAAP Measures” section in RioCan’s MD&A for the three and six months ended June 30, 2024.

The reconciliations for non-GAAP measures included in this News Release are outlined as follows:

RioCan’s Proportionate Share

The following table reconciles the consolidated balance sheets from IFRS to RioCan’s proportionate share basis as at June 30, 2024 and December 31, 2023:

As at	June 30, 2024							December 31, 2023
(thousands of dollars)	IFRS basis		Equity-accounted investments			RioCan’s proportionate share		IFRS basis		Equity-accounted investments			RioCan’s proportionate share
Assets
Investment properties	$	13,847,439	$	409,997		$	14,257,436	$	13,561,718	$	411,811		$	13,973,529
Equity-accounted investments		384,161		(384,161	)		—		383,883		(383,883	)		—
Mortgages and loans receivable		394,713		(5,337	)		389,376		289,533		(6,707	)		282,826
Residential inventory		266,677		382,178			648,855		217,186		407,946			625,132
Assets held for sale		8,850		—			8,850		19,075		—			19,075
Receivables and other assets		269,900		55,069			324,969		246,652		50,681			297,333
Cash and cash equivalents		50,789		7,321			58,110		124,234		14,506			138,740
Total assets	$	15,222,529	$	465,067		$	15,687,596	$	14,842,281	$	494,354		$	15,336,635
Liabilities
Debentures payable	$	3,689,225	$	—		$	3,689,225	$	3,240,943	$	—		$	3,240,943
Mortgages payable		2,806,952		159,960			2,966,912		2,740,924		158,292			2,899,216
Lines of credit and other bank loans		645,092		215,015			860,107		879,246		231,963			1,111,209
Accounts payable and other liabilities		562,727		90,092			652,819		543,398		104,099			647,497
Total liabilities	$	7,703,996	$	465,067		$	8,169,063	$	7,404,511	$	494,354		$	7,898,865
Equity
Unitholders’ equity		7,518,533		—			7,518,533		7,437,770		—			7,437,770
Total liabilities and equity	$	15,222,529	$	465,067		$	15,687,596	$	14,842,281	$	494,354		$	15,336,635

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

	Three months ended June 30, 2024								Three months ended June 30, 2023
(thousands of dollars)	IFRS basis		Equity-accounted investments			RioCan’s proportionate share			IFRS basis			Equity-accounted investments			RioCan’s proportionate share
Revenue
Rental revenue	$	275,863	$	8,089		$	283,952		$	270,913		$	9,982		$	280,895
Residential inventory sales		12,866		6,914			19,780			—			517			517
Property management and other service fees		3,469		(348	)		3,121			5,139			—			5,139
		292,198		14,655			306,853			276,052			10,499			286,551
Operating costs
Rental operating costs
Recoverable under tenant leases		91,021		806			91,827			93,622			905			94,527
Non-recoverable costs		7,889		638			8,527			3,594			451			4,045
Residential inventory cost of sales		7,600		5,412			13,012			—			261			261
		106,510		6,856			113,366			97,216			1,617			98,833
Operating income		185,688		7,799			193,487			178,836			8,882			187,718
Other income (loss)
Interest income		10,839		438			11,277			5,701			665			6,366
Income from equity-accounted investments		2,115		(2,115	)		—			5,830			(5,830	)		—
Fair value gain (loss) on investment properties, net		5,887		(1,810	)		4,077			(10,594	)		(1,072	)		(11,666	)
Investment and other income (loss)		609		(1,378	)		(769	)		1,657			123			1,780
		19,450		(4,865	)		14,585			2,594			(6,114	)		(3,520	)
Other expenses
Interest costs, net		64,393		2,867			67,260			49,974			2,724			52,698
General and administrative		14,611		24			14,635			14,846			20			14,866
Internal leasing costs		3,092		—			3,092			3,018			—			3,018
Transaction and other costs		679		43			722			1,594			24			1,618
		82,775		2,934			85,709			69,432			2,768			72,200
Income before income taxes	$	122,363	$	—		$	122,363		$	111,998		$	—		$	111,998
Current income tax expense		—		—			—			31			—			31
Net income	$	122,363	$	—		$	122,363		$	111,967		$	—		$	111,967

	Six months ended June 30, 2024									Six months ended June 30, 2023
(thousands of dollars)	IFRS basis			Equity-accounted investments			RioCan’s proportionate share			IFRS basis			Equity-accounted investments			RioCan’s proportionate share
Revenue
Rental revenue	$	564,243		$	16,262		$	580,505		$	545,594		$	17,432		$	563,026
Residential inventory sales		23,334			77,931			101,265			—			2,880			2,880
Property management and other service fees		8,008			(597	)		7,411			9,958			—			9,958
		595,585			93,596			689,181			555,552			20,312			575,864
Operating costs
Rental operating costs
Recoverable under tenant leases		202,220			1,731			203,951			192,430			1,786			194,216
Non-recoverable costs		16,640			1,343			17,983			11,043			1,145			12,188
Residential inventory cost of sales		14,622			62,934			77,556			—			1,387			1,387
		233,482			66,008			299,490			203,473			4,318			207,791
Operating income		362,103			27,588			389,691			352,079			15,994			368,073
Other income (loss)
Interest income		19,786			1,075			20,861			12,742			1,268			14,010
Income from equity-accounted investments		18,821			(18,821	)		—			11,344			(11,344	)		—
Fair value gain (loss) on investment properties, net		9,138			(2,202	)		6,936			(27,959	)		(451	)		(28,410	)
Investment and other income (loss)		3,639			(1,831	)		1,808			4,544			(213	)		4,331
		51,384			(21,779	)		29,605			671			(10,740	)		(10,069	)
Other expenses
Interest costs, net		125,832			5,902			131,734			97,957			5,218			103,175
General and administrative		28,527			25			28,552			30,464			31			30,495
Internal leasing costs		6,685			—			6,685			5,743			—			5,743
Transaction and other costs		2,278			(118	)		2,160			1,982			5			1,987
		163,322			5,809			169,131			136,146			5,254			141,400
Income before income taxes	$	250,165		$	—		$	250,165		$	216,604		$	—		$	216,604
Current income tax recovery		(794	)		—			(794	)		(13,367	)		—			(13,367	)
Net income	$	250,959		$	—		$	250,959		$	229,971		$	—		$	229,971

NOI and Same Property NOI

The following table reconciles operating income to NOI and Same Property NOI to NOI for t

Contacts

RioCan Real Estate Investment Trust

Dennis Blasutti

Chief Financial Officer

416-866-3033 | www.riocan.com

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