RioCan Real Estate Investment Trust (“RioCan” or the “Trust”) (TSX: REI.UN) announced today its financial results for the three and nine months ended September 30, 2022 (the “Third Quarter”).

“The strength of our results is a reflection of our strategically curated portfolio and tenant mix that provide the resiliency to perform in any business environment,” said Jonathan Gitlin, President and CEO of RioCan. “With little supply available, retail real estate like RioCan’s, in major market locations with attractive demographics that facilitate last kilometre delivery, is in high demand. Our predominantly open air, grocery anchored and mixed-use portfolio is driving strong new tenant demand, and maintaining favourable pricing power, even in the current inflationary environment. We have the balance sheet, the team and the longstanding reputation to continue to draw tenants to our best-in-class offerings. At the same time, we continue to enhance the quality of our portfolio and income as we recycle capital from lower growth assets to higher return uses, all of which should lead to greater free cash flow and visible earnings growth.”

  Three months endedSeptember 30   Nine months endedSeptember 30
(in millions, except where otherwise noted, and per unit values)     2022       2021       2022       2021
Financial Highlights                      
FFO 1   $ 134.8     $ 126.9     $ 397.0     $ 360.5
FFO per unit - diluted 1   $ 0.44     $ 0.40     $ 1.29     $ 1.13
Net income   $ 3.2     $ 137.6     $ 241.7     $ 389.6
Weighted average Units outstanding - diluted (in thousands)     304,005       317,961       307,534       317,818
                       

FFO per Unit and Net Income

  • FFO per unit of $0.44 for the Third Quarter was $0.04 per unit or 10% higher than the same period last year. Strong operational performance drove Same Property NOI1 growth which contributed $0.02 to the increase in FFO per unit. Higher residential rental NOI contributed an additional $0.01 per unit, while residential inventory gains and fee income combined contributed another $0.03 per unit. The accretion benefit of NCIB activity over the last 12 months increased FFO per unit by $0.02. These increases were partially offset by the impact of assets sold, $0.02 per unit, and lower straight-line rent and higher interest costs of $0.01 per unit each. The FFO Payout Ratio1 of 56.7% was in-line with the long-term target range of 55% to 65%.
  • Our major market, necessity-based portfolio continued to prove resilient, generating strong operating results. Our FFO Payout Ratio of 56.7%, ample Liquidity1 of $1.6 billion, sizable Unencumbered Asset1 pool of $9.0 billion, low proportion of floating rate debt at 7.9% of total debt and staggered debt maturities, all contribute to the Trust’s financial flexibility and balance sheet strength.
  • RioCan reaffirms 2022 FFO per unit growth guidance of 5% to 7% and is expecting to be at the higher end of the range.
  • Development Spending1 for 2022 is anticipated to be at the lower end of the $425 million to $475 million range.
  • Net income for the Third Quarter of $3.2 million, was $134.4 million lower than the same period last year mainly due to a net fair value loss on investment properties of $118.8 million compared to a $20.0 million fair value gain. The weighted average portfolio capitalization rate increased by 4 basis points from last quarter from increased capitalization rates on certain assets, net of the impact of the disposition of certain properties valued at relatively higher capitalization rates. Higher stabilized NOI on certain properties due to strong operational and leasing activity offset, in part, the fair value impact of the higher weighted average portfolio capitalization rate.
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 endedSeptember 30   Nine months endedSeptember 30
    2022       2021       2022       2021  
                       
Operation Highlights (i)                      
Occupancy - committed (ii)   97.3 %     96.4 %     97.3 %     96.4 %
Blended leasing spread   7.9 %     7.5 %     9.0 %     6.8 %
New leasing spread   15.9 %     7.2 %     12.4 %     10.5 %
Renewal leasing spread   6.6 %     7.6 %     8.2 %     5.5 %
                       
(i) Includes commercial portfolio only.
(ii) Information presented as at respective periods then ended.
   
  • Same Property NOI grew by 5.1% in the Third Quarter when compared to the same period last year and was driven by increases in occupancy, rent growth from contractual rent steps, increases in rent upon renewal and a lower pandemic-related provision, net of certain 2021 favourable items which did not recur in 2022. Adjusted Same Property NOI1 growth was 3.9% after adjusting for the impact of the pandemic-related provision and legal and CAM/property tax settlements.
  • Committed occupancy for the commercial portfolio increased to 97.3%, driven by improved retail committed occupancy, which increased by 20 basis points to 97.8% as compared to the second quarter of this year. Occupancy improvements resulted from strong tenant retention and robust leasing activity from high tenant demand for high quality, well-located retail space that is in short supply.
  • New and renewed leases generated a blended leasing spread of 7.9%. New leasing of 0.3 million square feet was completed at new leasing spreads of 15.9%. Renewed leases of 1.1 million square feet representing a retention ratio of 90.9% were completed at leasing spreads of 6.6%.
  • At The Well approximately 91% of the total commercial space including office and retail has been leased, or 94% including retail leases nearing finalization and in advanced negotiations. Achieved average rent per square foot has exceeded pro forma. Subsequent to the Third Quarter, a long-term agreement for indoor and outdoor digital advertising was executed with a premier global advertising company enhancing the property revenue stream and enabling digital activation on site.
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 Update1

  • As of November 3, 2022, the RioCan Living™ residential rental portfolio is comprised of 2,005 purpose-built completed units across nine buildings located in Toronto, Montreal, Ottawa and Calgary. Seven buildings are stabilized and are 96.8% leased. Two additional completed buildings, Latitude™ and Luma™, are currently in lease-up.
  • In the Third Quarter, the leasing velocity was very robust across the portfolio given increased demand and constrained supply in major markets. An additional 214 units at Rhythm, which are currently in lease-up, are scheduled to be completed in Q4 2022. The 592 units at FourFifty The Well™ will be completed in phases starting in mid-2023, through to early-2024.
  • RioCan Living condominium and townhouse developments generated residential inventory gains of $7.8 million in the Third Quarter.
  • As of November 3, 2022, 2,692 condominium and townhouse units are either under construction or in the process of interim closing and an additional 386 units are in pre-sale. Between 2022 and 2026, these 3,078 units combined are expected to generate $816.1 million of proceeds and residential inventory gains in the $209.0 million to $222.0 million range, including $11.8 million in inventory gains at U.C. Tower recognized during the first three quarters of 2022. Of RioCan’s six active construction projects, 95% of the total units have been sold while 99% of our pro-forma revenues have been achieved.
1. Units at 100% ownership interest.  

Development Highlights

  Three months endedSeptember 30   Nine months endedSeptember 30
(in millions except square feet)     2022       2021       2022       2021
                       
Development Highlights                      
Development Completions - sq. ft. in thousands     179.0       97.0       393.0       157.0
Development Spending (i)   $ 81.0     $ 136.6     $ 312.5     $ 342.5
Under Active Development - sq. ft. in thousands (ii) (iii)     2,152.0       2,318.0       2,152.0       2,318.0
                       
(i) Effective Q1 2022, the definition of total Development Spending was revised to include RioCan’s share of Development Spending from equity-accounted joint ventures, accordingly, the comparative periods have been restated.
(ii) Information presented as at the respective periods then ended and includes properties under development and residential inventory.
(iii) As at September 30, 2022, excludes a total of 0.6 million square feet of completed phases and includes 0.8 million square feet of residential inventory (September 30, 2021 - 1.4 million square feet and 0.5 million square feet, respectively).
   
  • RioCan’s in-house development team delivered 393,000 square feet of completions during the first three quarters of 2022 including 173,000 square feet across three residential rental buildings and 141,000 square feet at The Well. The total embedded development potential within the Trust’s portfolio is 42.4 million square feet.
  • Our development pipeline includes 16.7 million square feet of entitled projects, of which 2.2 million square feet are currently under development. Construction at our largest development project, The Well, continued to progress during the Third Quarter. Approximately 875,000 square feet (at 100% ownership interest) is undergoing tenant fixturing and six tenants are now operating in their respective units. Cash rents are expected to ramp up during the remainder of the year.
  • In 2022, the Trust expects the Value of Development Deliveries1, including properties under development and residential inventory, to be between $700 million to $750 million, the largest annual Value of Development Deliveries since the inception of this development program. To the end of the Third Quarter, the Value of Development Deliveries is $415.0 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.

Balance Sheet Strength

(in millions except percentages)As at September 30, 2022   December 31, 2021
           
Balance Sheet Strength Highlights          
Total assets   $ 15,324       $ 15,177  
Total debt   $ 6,842       $ 6,611  
Liquidity (i) 1   $ 1,587       $ 1,010  
Adjusted Debt to Adjusted EBITDA (i) 1   9.28x       9.59x  
Total Adjusted Debt to Total Adjusted Assets (i) 1     45.3%         43.9%  
Ratio of Unsecured Debt and Secured Debt (i) 1   57.1% / 42.9%       59.4% / 40.6%  
Unencumbered Assets (i) 1   $ 8,969       $ 9,392  
Unencumbered Assets to Unsecured Debt (i) 1     220%         231%  
           
(i) At RioCan’s proportionate share.
   
  • The Trust had $1.6 billion of Liquidity in the form of a $1.1 billion undrawn revolving line of credit, $0.4 billion undrawn construction lines and other bank loans and $0.1 billion cash and cash equivalents. Pursuant to the terms of its credit agreement, the Trust has a $250 million option to increase its commitment under the revolving line of credit.
  • RioCan’s unencumbered asset pool of $9.0 billion, which can be used to obtain secured financing to provide additional liquidity, generated 60.8% of Annual Normalized NOI1 and provided 2.20x coverage over Unsecured Debt1.
  • Adjusted Debt to Adjusted EBITDA1 was 9.28x on a proportionate share basis, as at September 30, 2022, compared to 9.59x as at the end of 2021. The decrease was primarily due to higher Adjusted EBITDA partially offset by higher average Total Adjusted Debt balances.
  • The Trust’s Total Adjusted Debt to Total Adjusted Assets at RioCan’s proportionate share increased from December 31, 2021 mainly due to higher Total Adjusted Debt resulting from the timing of debt draws for capital deployment activities.
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 October 3, 2022, RioCan redeemed, in full, its $300.0 million, 2.83% Series Y unsecured debenture upon maturity. The repayment was primarily funded through six mortgages for a combined total of $295.5 million at a weighted average hedged interest rate of 3.67%. Two mortgages totalling $86.0 million were funded in September 2022 at a weighted average hedged interest rate of 4.22%, and the remaining mortgages funded in October 2022 at a weighted average hedged interest rate of 3.44%.
  • In conjunction with the above-mentioned mortgage financing, during the Third Quarter the Trust settled the remaining $250.0 million of bond forward contracts entered into on December 14, 2021, as it had locked interest rates for these new mortgages. As at September 30, 2022, the Trust has no bond forward contracts outstanding. During 2022, the Trust settled a total of $500 million of bond forward contracts, which resulted in a weighted average interest rate reduction of 109 bps or a weighted average hedged interest rate of 3.68% for $507.5 million of 7-year debt.
  • After factoring in the mortgage financing and the redemption of the $300.0 million Series Y debentures completed subsequent to quarter end, the unencumbered asset pool fell to $8.6 billion and its coverage over Unsecured Debt rose to 2.22x.
  • During the Third Quarter, the Trust renewed its Base Shelf Short Form Prospectus which provides for the issuance of up to $3.0 billion in debt securities, Trust Units and preferred units up to September 30, 2024.
  • As announced on November 3, 2022, RioCan renewed its Normal Course Issuer Bid (the 2022/2023 NCIB), to acquire up to a maximum of 30,247,803 Units, subject to a current daily maximum of 207,826. The 2022/2023 NCIB expires on November 6, 2023.

Investing and Capital Recycling

  • As of November 3, 2022, closed, firm or conditional dispositions totaled $702.1 million at a weighted average capitalization rate of 6.8%, including $219.6 million of completed dispositions during 2022 and $175.6 million of firm deals. These dispositions are comprised of several non-core and secondary market assets, including an enclosed mall in Newfoundland, which improves our portfolio quality while bringing in capital that can be recycled into more productive uses.

Conference Call and Webcast

Interested parties are invited to participate in a conference call with management on Friday, November 4, 2022 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 ten minutes prior to the scheduled start of the call: https://www.netroadshow.com/events/login?show=4de18b7b&confId=42138. Participants who pre-register at any time prior to the call will receive an email with dial-in credentials including 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: 420623.

For those unable to participate in the live mode, a replay will be available at 1-866-813-9403 with access code 457633.

To access the simultaneous webcast, visit RioCan’s website at http://investor.riocan.com/investor-relations/events-and-presentations/ and click on the link for the webcast.

About RioCan

RioCan is one of Canada’s largest real estate investment trusts. RioCan owns, manages and develops retail-focused, increasingly mixed-use properties located in prime, high-density transit-oriented areas where Canadians want to shop, live and work. As at September 30, 2022, our portfolio is comprised of 198 properties with an aggregate net leasable area of approximately 34.8 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 nine months ended September 30, 2022, 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, FFO Adjusted per unit, Net Operating Income (“NOI”), Same Property NOI, Adjusted Same Property NOI, Development Spending, Liquidity, Adjusted Debt to Adjusted EBITDA, Total Adjusted Debt to Total Adjusted Assets, RioCan’s Proportionate Share, Ratio of Unsecured Debt to Total Contractual Debt, Ratio of Secured Debt to Total Contractual Debt, 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 three and nine months ended September 30, 2022.

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 sheet from IFRS to RioCan’s proportionate share basis as at September 30, 2022 and December 31, 2021:

As at September 30, 2022 December 31, 2021
(in thousands) IFRS basis Equity-accounted investments RioCan’s proportionate share IFRS basis Equity-accounted investments RioCan’s proportionate share
Assets            
Investment properties $ 13,903,934 $ 406,664   $ 14,310,598 $ 14,021,338 $ 409,794   $ 14,431,132
Equity-accounted investments   371,121   (371,121 )     327,335   (327,335 )  
Mortgages and loans receivable   242,788       242,788   237,790       237,790
Residential inventory   263,306   213,930     477,236   217,043   121,291     338,334
Assets held for sale   178,059       178,059   47,240       47,240
Receivables and other assets   311,713   37,141     348,854   248,959   35,367     284,326
Cash and cash equivalents   53,315   9,184     62,499   77,758   9,113     86,871
Total assets $ 15,324,236 $ 295,798   $ 15,620,034 $ 15,177,463 $ 248,230   $ 15,425,693
             
Liabilities            
Debentures payable $ 3,241,405 $   $ 3,241,405 $ 2,990,692 $   $ 2,990,692
Mortgages payable   2,461,982   170,153     2,632,135   2,334,016   166,368     2,500,384
Lines of credit and other bank loans   1,138,848   96,526     1,235,374   1,285,910   48,049     1,333,959
Accounts payable and other liabilities   604,753   29,119     633,872   655,501   33,813     689,314
Total liabilities $ 7,446,988 $ 295,798   $ 7,742,786 $ 7,266,119 $ 248,230   $ 7,514,349
             
Equity            
Unitholders’ equity   7,877,248       7,877,248   7,911,344       7,911,344
Total liabilities and equity $ 15,324,236 $ 295,798   $ 15,620,034 $ 15,177,463 $ 248,230   $ 15,425,693

The following tables reconcile the consolidated statements of income from IFRS to RioCan’s proportionate share basis for the three and nine months ended September 30, 2022 and 2021:

  Three months ended September 30, 2022 Three months ended September 30, 2021
(in thousands) IFRS basis Equity-accounted investments RioCan’s proportionate share IFRS basis Equity-accounted investments RioCan’s proportionate share
Revenue            
Rental revenue $ 265,895   $ 7,405   $ 273,300   $ 260,193 $ 6,982   $ 267,175
Residential inventory sales   33,812         33,812       2,358     2,358
Property management and other service fees   5,553         5,553     3,945       3,945
    305,260     7,405     312,665     264,138   9,340     273,478
Operating costs            
Rental operating costs            
Recoverable under tenant leases   89,405     769     90,174     87,537   554     88,091
Non-recoverable costs   7,318     627     7,945     8,631   573     9,204
Residential inventory cost of sales   26,045         26,045       964     964
    122,768     1,396     124,164     96,168   2,091     98,259
Operating income   182,492     6,009     188,501     167,970   7,249     175,219
Other income (loss)            
Interest income   5,684     581     6,265     3,570   564     4,134
Income from equity-accounted investments   958     (958 )       4,086   (4,086 )  
Fair value (loss) gain on investment properties, net   (118,783 )   (3,537 )   (122,320 )   20,002   (1,386 )   18,616
Investment and other income (loss)   (519 )   162     (357 )   1,705   (381 )   1,324
    (112,660 )   (3,752 )   (116,412 )   29,363   (5,289 )   24,074
Other expenses            
Interest costs, net   46,620     2,201     48,821     42,356   1,836     44,192
General and administrative   13,729     19     13,748     9,946   14     9,960
Internal leasing costs   3,088         3,088     3,206       3,206
Transaction and other costs   2,346     37     2,383     3,736   110     3,846
    65,783     2,257     68,040     59,244   1,960     61,204
Income before income taxes $ 4,049   $   $ 4,049   $ 138,089 $   $ 138,089
Current income tax expense   834         834     479       479
Net income $ 3,215   $   $ 3,215   $ 137,610 $   $ 137,610
  Nine months ended September 30, 2022 Nine months ended September 30, 2021
(in thousands) IFRS basis Equity-accounted investments RioCan’s proportionate share IFRS basis Equity-accounted investments RioCan’s proportionate share
Revenue            
Rental revenue $ 805,328   $ 21,703   $ 827,031   $ 799,663 $ 19,765   $ 819,428
Residential inventory sales   84,786     936     85,722     28,107   5,059     33,166
Property management and other service fees   17,546         17,546     10,851       10,851
    907,660     22,639     930,299     838,621   24,824     863,445
Operating costs            
Rental operating costs            
Recoverable under tenant leases   281,656     2,053     283,709     273,951   1,502     275,453
Non-recoverable costs   18,895     1,789     20,684     31,734   1,935     33,669
Residential inventory cost of sales   69,838     422     70,260     26,060   1,975     28,035
    370,389     4,264     374,653     331,745   5,412     337,157
Operating income   537,271     18,375     555,646     506,876   19,412     526,288
Other income (loss)            
Interest income   14,630     1,726     16,356     9,824   1,594     11,418
Income from equity-accounted investments   6,213     (6,213 )       12,686   (12,686 )  
Fair value (loss) gain on investment properties, net   (125,621 )   (7,803 )   (133,424 )   51,797   (2,595 )   49,202
Investment and other income (loss)   (2,082 )   (44 )   (2,126 )   3,440   (316 )   3,124
    (106,860 )   (12,334 )   (119,194 )   77,747   (14,003 )   63,744
Other expenses            
Interest costs, net   132,045     5,849     137,894     129,118   5,208     134,326
General and administrative   41,592     50     41,642     39,476   44     39,520
Internal leasing costs   8,898         8,898     8,825       8,825
Transaction and other costs   5,038     142     5,180     10,564   157     10,721
Debt prepayment costs, net               7,018       7,018
    187,573     6,041     193,614     195,001   5,409     200,410
Income before income taxes $ 242,838   $   $ 242,838   $ 389,622 $   $ 389,622
Current income tax recovery   1,105         1,105     9       9
Net income $ 241,733   $   $ 241,733   $ 389,613 $   $ 389,613

NOI and Same Property NOI

The following table reconciles operating income to NOI and Same Property NOI to NOI for the three and nine months ended September 30, 2022 and 2021:

(thousands of dollars) Three months endedSeptember 30 Nine months endedSeptember 30
  2022     2021     2022     2021  
Operating Income $ 182,492   $ 167,970   $ 537,271   $ 506,876  
Adjusted for the following:        
Property management and other service fees   (5,553 )   (3,945 )   (17,546 )   (10,851 )
Residential inventory gains   (7,767 )       (14,948 )   (2,047 )
Operational lease revenue and (expenses) from ROU assets   1,419     1,209     4,149     3,536  
NOI $ 170,591   $ 165,234   $ 508,926   $ 497,514  
  Three months endedSeptember 30 Nine months endedSeptember 30
(thousands of dollars)   2022     2021   2022   2021
Same Property NOI $ 157,531   $ 149,887 $ 464,548 $ 442,572
NOI from income producing properties:        
Acquired (i)   151       454   82
Disposed (i)   1,664     6,717   8,796   26,557
    1,815     6,717   9,250   26,639
NOI from completed properties under development   3,814     2,282   12,060   6,009
NOI from properties under de-leasing under development   2,598     2,688   7,658   8,159
Lease cancellation fees   1,175     119   4,729   6,063
Straight-line rent adjustment   (196 )   2,544   1,078   5,878
NOI from residential rental   3,854     997   9,603   2,194
NOI $ 170,591   $ 165,234 $ 508,926 $ 497,514
(i) Includes properties acquired or disposed during the periods being compared.
   

Same Property NOI including completed properties under development (PUD)

  Three months endedSeptember 30 Nine months endedSeptember 30
(thousands of dollars,except where otherwise noted)   2022   2021 % change   2022   2021 % change
Same Property NOI $ 157,531 $ 149,887 5.1 % $ 464,548 $ 442,572 5.0 %
Add:            
NOI from completed properties under development   3,814   2,282     12,060   6,009  
Same Property NOI including completed PUD $ 161,345 $ 152,169 6.0 % $ 476,608 $ 448,581 6.2 %

Adjusted Same Property NOI

  Three months endedSeptember 30 Nine months endedSeptember 30
(thousands of dollars,except where otherwise noted)   2022     2021   % change   2022     2021   % change
Same Property NOI $ 157,531   $ 149,887   5.1 % $ 464,548   $ 442,572   5.0 %
Add (exclude):            
Same property pandemic-related provision (recovery)   356     2,766       (126 )   13,316    
Legal and CAM/property tax settlements   (351 )   (1,083 )     (1,701 )   (6,648 )  
Adjusted Same Property NOI $ 157,536   $ 151,570   3.9 % $ 462,721   $ 449,240   3.0 %

FFO

The following table reconciles net income attributable to Unitholders to FFO for the three and nine months ended September 30, 2022 and 2021:

  Three months ended September 30 Nine months endedSeptember 30
(thousands of dollars, except where otherwise noted)   2022     2021     2022     2021  
Net income attributable to Unitholders $ 3,215   $ 137,610   $ 241,733   $ 389,613  
Add back/(Deduct):        
Fair value losses (gains), net   118,783     (20,002 )   125,621     (51,797 )
Fair value losses included in equity-accounted investments   3,537     1,386     7,803     2,595  
Internal leasing costs   3,088     3,206     8,898     8,825  
Transaction (gains) losses on investment properties, net (i)   (270 )   234     465     (500 )
Transaction costs on sale of investment properties   1,769     2,751     3,084     8,067  
Change in unrealized fair value on marketable securities   1,999         3,400      
Current income recovery   834     479     1,105     9  
Operational lease revenue from ROU assets   1,035     834     2,964     2,421  
Operational lease expenses from ROU assets in equity-accounted investments   (12 )   (11 )   (34 )   (30 )
Capitalized interest on equity-accounted investments (ii)   825     421     1,994     1,259  
FFO $ 134,803   $ 126,908   $ 397,033   $ 360,462  
Add back:        
Debt prepayment costs, net               7,018  
One-time compensation costs               6,057  
Restructuring costs           3,779      
FFO Adjusted $ 134,803   $ 126,908   $ 400,812   $ 373,537  
         
FFO per unit - basic $ 0.44   $ 0.40   $ 1.29   $ 1.13  
FFO per unit - diluted $ 0.44   $ 0.40   $ 1.29   $ 1.13  
FFO Adjusted per unit - diluted $ 0.44   $ 0.40   $ 1.30   $ 1.18  
Weighted average number of Units - basic (in thousands)   303,912     317,768     307,332     317,763  
Weighted average number of Units - diluted (in thousands)   304,005     317,961     307,534     317,818  
         
FFO for last 4 quarters     $ 543,556   $ 484,565  
Distributions paid for last 4 quarters     $ 308,221   $ 355,882  
FFO Payout Ratio       56.7%     73.4%  
(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, LP, WhiteCastle New Urban Fund 2, LP, WhiteCastle New Urban Fund 3, LP, WhiteCastle New Urban Fund 4, LP, WhiteCastle New Urban Fund 5, LP, RioCan-Fieldgate JV, RC (Queensway) LP, RC (Leaside) LP- Class B and PR Bloor Street LP. This amount is not capitalized to properties under development under IFRS, but is allowed as an adjustment under REALPAC’s definition of FFO.
   

Development Spending

Total Development Spending for the three and nine months ended September 30, 2022 and 2021 are as follows:

  Three months endedSeptember 30 Nine months endedSeptember 30
(thousands of dollars)   2022   2021   2022   2021
Development expenditures on balance sheet:        
Properties under development $ 62,856 $ 118,136 $ 220,127 $ 285,664
Residential inventory   15,258   17,900   78,966   48,021
RioCan’s share of Development Spending from equity-accounted joint ventures   2,913   573   13,423   8,838
Total Development Spending (i) $ 81,027 $ 136,609 $ 312,516 $ 342,523
(i) Beginning in Q1 2022, the definition of total Development Spending was revised to include RioCan’s share of Development Spending from equity-accounted joint ventures accordingly, the comparative period has been restated.
   

Value of Development Deliveries

Total Value of Development Deliveries for the three and nine months ended September 30, 2022 and 2021 are as follows:

  Three months endedSeptember 30 Nine months endedSeptember 30
(thousands of dollars)   2022   2021   2022   2021
         
Transfers PUD to IPP at fair value IFRS basis $ 159,410 $ 39,356 $ 330,197 $ 103,119
Revenue from residential inventory sales IFRS basis   33,812     84,786   28,107
Total Value of Development Deliveries $ 193,222 $ 39,356 $ 414,983 $ 131,226

Total Adjusted Debt and Total Contractual Debt

The following tables reconcile total debt to Total Adjusted Debt, total assets to Total Adjusted Assets, and total debt to Total Contractual Debt as at September 30, 2022 and December 31, 2021:

As at September 30, 2022 December 31, 2021
(thousands of dollars, except where otherwise noted) IFRS basis Equity-accounted investments RioCan’s proportionate share IFRS basis Equity-accounted investments RioCan’s proportionate share
Debentures payable $ 3,241,405   $ $ 3,241,405   $ 2,990,692   $ $ 2,990,692  
Mortgages payable   2,461,982     170,153   2,632,135     2,334,016     166,368   2,500,384  
Lines of credit and other bank loans   1,138,848     96,526   1,235,374     1,285,910     48,049   1,333,959  
Total debt $ 6,842,235   $ 266,679 $ 7,108,914   $ 6,610,618   $ 214,417 $ 6,825,035  
Cash and cash equivalents   53,315     9,184   62,499     77,758     9,113   86,871  
Total Adjusted Debt $ 6,788,920   $ 257,495 $ 7,046,415   $ 6,532,860   $ 205,304 $ 6,738,164  
             
Total assets $ 15,324,236   $ 295,798 $ 15,620,034   $ 15,177,463   $ 248,230 $ 15,425,693  
Cash and cash equivalents   53,315     9,184   62,499     77,758     9,113   86,871  
Total Adjusted Assets $ 15,270,921   $ 286,614 $ 15,557,535   $ 15,099,705   $ 239,117 $ 15,338,822  
             
Total Adjusted Debt to Total Adjusted Assets   44.5%       45.3%     43.3%       43.9%  
As at September 30, 2022 December 31, 2021
(thousands of dollars) IFRS basis Equity-accounted investments RioCan’s proportionate share IFRS basis Equity-accounted investments RioCan’s proportionate share
Total debt $ 6,842,235   $ 266,679   $ 7,108,914   $ 6,610,618   $ 214,417   $ 6,825,035  
Less:            
Unamortized debt financing costs, premiums and discounts on origination and debt assumed, and modifications   (15,915 )   (701 )   (16,616 )   (16,414 )   (386 )   (16,800 )
Total Contractual Debt $ 6,858,150   $ 267,380   $ 7,125,530   $ 6,627,032   $ 214,803   $ 6,841,835  

Liquidity

As at September 30, 2022, RioCan had approximately $1.6 billion of Liquidity as summarized in the following table:

As at September 30, 2022 December 31, 2021
(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
Undrawn revolving unsecured operating line of credit $ 1,132,000   $ $ 1,132,000   $ 634,080   $ $ 634,080  
Undrawn construction lines and other bank loans   296,952     95,678   392,630     241,883     47,641   289,524  
Cash and cash equivalents   53,315     9,184   62,499     77,758     9,113   86,871  
Liquidity $ 1,482,267   $ 104,862 $ 1,587,129   $ 953,721   $ 56,754 $ 1,010,475  
Total Contractual Debt $ 6,858,150   $ 267,380 $ 7,125,530   $ 6,627,032   $ 214,803 $ 6,841,835  
Liquidity as percentage of Total Contractual Debt   21.6%       22.3%     14.4%       14.8%  

Unsecured Debt and Secured Debt

The following table reconciles total Unsecured Debt and Secured Debt to Total Contractual Debt as at September 30, 2022 and December 31, 2021:

As at September 30, 2022 December 31, 2021
(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 Unsecured Debt $ 4,068,000   $ $ 4,068,000   $ 4,065,920   $ $ 4,065,920  
Total Secured Debt   2,790,150     267,380   3,057,530     2,561,112     214,803   2,775,915  
Total Contractual Debt $ 6,858,150   $ 267,380 $ 7,125,530   $ 6,627,032   $ 214,803 $ 6,841,835  
             
Percentage of Total Contractual Debt:            
Unsecured Debt   59.3%       57.1%     61.4%       59.4%  
Secured Debt   40.7%       42.9%     38.6%       40.6%  

Adjusted EBITDA

The following table reconciles consolidated net income attributable to Unitholders to Adjusted EBITDA:

  12 months ended
As at September 30, 2022 December 31, 2021
(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 $ 450,509 $   $ 450,509 $ 598,389   $   $ 598,389  
Add (deduct) the following items:            
Income tax expense (recovery):            
Current   1,037       1,037   (59 )       (59 )
Fair value losses (gains) on investment properties, net   53,366   6,321     59,687   (124,052 )   1,113     (122,939 )
Change in unrealized fair value on marketable securities (i)   3,400       3,400            
Internal leasing costs   11,880       11,880   11,807         11,807  
Non-cash unit-based compensation expense   8,729       8,729   12,546         12,546  
Interest costs, net   174,448   7,667     182,115   171,521     7,026     178,547  
Debt prepayment costs, net   3,896       3,896   10,914         10,914  
One-time cash compensation costs           1,932         1,932  
Restructuring costs   3,779       3,779            
Depreciation and amortization   5,050       5,050   4,022         4,022  
Transaction losses on the sale of investment properties, net (ii)   1,367       1,367   402         402  
Transaction costs on investment properties   9,379   29     9,408   14,363     28     14,391  
Operational lease revenue and expenses from ROU assets   3,851   (46 )   3,805   3,308     (42 )   3,266  
Adjusted EBITDA $ 730,691 $ 13,971   $ 744,662 $ 705,093   $ 8,125   $ 713,218  
(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:

  12 months ended
As at September 30, 2022 December 31, 2021
(thousands of dollars) 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 $ 6,756,065   $ 241,176   $ 6,997,241   $ 6,773,147   $ 192,804   $ 6,965,951  
Less: average cash and cash equivalents   (78,168 )   (8,346 )   (86,514 )   (119,400 )   (5,639 )   (125,039 )
Average Total Adjusted Debt $ 6,677,897   $ 232,830   $ 6,910,727   $ 6,653,747   $ 187,165   $ 6,840,912  
Adjusted EBITDA $ 730,691   $ 13,971   $ 744,662   $ 705,093   $ 8,125   $ 713,218  
Adjusted Debt to Adjusted EBITDA   9.14       9.28     9.44       9.59  

Unencumbered Assets

The tables below summarize RioCan’s Unencumbered Assets to Unsecured Debt and Percentage of Normalized NOI Generated from Unencumbered Assets as at September 30, 2022 and December 31, 2021:

As at   September 30, 2022 December 31, 2021
(thousands of dollars, except where otherwise noted) Targeted Ratios IFRS basis Equity-accounted investments RioCan’s proportionate share IFRS basis Equity-accounted investments RioCan’s proportionate share
Unencumbered Assets   $ 8,910,392   $ 58,583 $ 8,968,975   $ 9,332,833   $ 59,433 $ 9,392,266  
Total Unsecured Debt   $ 4,068,000   $ $ 4,068,000   $ 4,065,920   $ $ 4,065,920  
Unencumbered Assets to Unsecured Debt > 200%   219%       220%     230%       231%  
               
Subsequent to quarter end:              
Decrease in Unencumbered Assets     (384,379 )     (384,379 )      
Repayment of Unsecured Debt     (209,500 )     (209,500 )      
Unencumbered Assets as of November 3, 2022   $ 8,526,013   $ 58,583 $ 8,584,596        
Total Unsecured Debt as of November 3, 2022   $ 3,858,500   $ $ 3,858,500        
Unencumbered Assets to Unsecured Debt as of November 3, 2022     221%       222%        
               
Annual Normalized NOI - total portfolio (i)   $ 664,632   $ 23,228 $ 687,860   $ 649,208   $ 22,688 $ 671,896  
Annual Normalized NOI - Unencumbered Assets (i)   $ 414,968   $ 3,440 $ 418,408   $ 432,820   $ 3,440 $ 436,260  
Percentage of Normalized NOI Generated from Unencumbered Assets > 50.0%   62.4%       60.8%     66.7%       64.9%  
(i) Annual Normalized NOI are reconciled in the table below.
  Three months ended September 30, 2022 Three months ended December 31, 2021
(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
NOI (i) $ 170,591   $ 5,807 $ 176,398   $ 165,798   $ 5,672 $ 171,470  
Adjust the following:            
Miscellaneous revenue   (821 )     (821 )   (540 )     (540 )
Percentage rent   (2,437 )     (2,437 )   (2,562 )     (2,562 )
Lease cancellation fees   (1,175 )     (1,175 )   (394 )     (394 )
Normalized NOI - total portfolio $ 166,158   $ 5,807 $ 171,965   $ 162,302   $ 5,672 $ 167,974  
Annual Normalized NOI - total portfolio(ii) $ 664,632   $ 23,228 $ 687,860   $ 649,208   $ 22,688 $ 671,896  
             
NOI from unencumbered assets $ 106,991   $ 860 $ 107,851   $ 110,517   $ 860 $ 111,377  
Adjust the following for Unencumbered Assets:            
Miscellaneous revenue   (550 )     (550 )   (253 )     (253 )
Percentage rent   (1,556 )     (1,556 )   (1,852 )     (1,852 )
Lease cancellation fees   (1,143 )     (1,143 )   (207 )     (207 )
Normalized NOI - Unencumbered Assets $ 103,742   $ 860 $ 104,602   $ 108,205   $ 860 $ 109,065  
Annual Normalized NOI - Unencumbered Assets (ii) $ 414,968   $ 3,440 $ 418,408   $ 432,820   $ 3,440 $ 436,260  
(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 generally can be identified by the use of forward-looking terminology such as “outlook”, “objective”, “may”, “will”, “would”, “expect”, “intend”, “estimate”, “anticipate”, “believe”, “should”, “plan”, “continue”, or similar expressions suggesting future outcomes or events. Such forward-looking information reflects management’s current beliefs and is based on information currently available to management. All forward-looking information in this News Release is qualified by these cautionary statements. Forward-looking information is not a guarantee of future events or performance and, by its nature, is based on RioCan’s current estimates and assumptions, which are subject to numerous risks and uncertainties, including those described in the “Risks and Uncertainties” section in RioCan’s MD&A for the three and nine months ended September 30, 2022 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. General economic conditions, including interest rate fluctuations, may also have an effect on RioCan’s results of operations. Material factors or assumptions that were applied in drawing a conclusion or making an estimate set out in the forward-looking information may include, but are not limited to: a gradual recovery and growth of the retail environment; a rising interest rate environment; a continuing trend toward land use intensification at reasonable costs and development yields, including residential development in urban markets; the Trust’s ability to redevelop, sell or enter into partnerships with respect to the future incremental density it has identified in its portfolio, access to equity and debt capital markets to fund, at acceptable costs, future capital requirements and to enable our refinancing of debts as they mature; the availability of investment opportunities for growth in Canada; the timing and ability of RioCan to sell certain properties; the valuations to be realized on property sales relative to current IFRS values; and the Trust’s ability to utilize the capital gain refund mechanism. 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.

Contact Information
RioCan Real Estate Investment Trust
Dennis Blasutti

Chief Financial Officer
416-866-3033 | www.riocan.com 
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