RioCan Reports Third Quarter 2023 Results – Strong Core Business and Development Deliveries

• Superior property fundamentals generated record retail occupancy of 98.3%, new leasing spread of 21.0% and same-property NOI in excess of target range
• Development deliveries continued to add steady stream of new and diversified NOI

TORONTO–(BUSINESS WIRE)–RioCan Real Estate Investment Trust (“RioCan” or the “Trust”) (TSX: REI.UN) announced today its financial results for the three and nine months ended September 30, 2023 (the “Third Quarter”).

“RioCan had a strong quarter as extensive demand for our space drove leasing velocity, standout leasing spreads and record occupancy. Our performance reflects the quality of our locations as well as the track-record and cycle-tested experience of RioCan’s team,” said Jonathan Gitlin, President and CEO of RioCan. “We are perfectly positioned to benefit from Canada’s favourable retail real estate landscape that will continue to be strong due to the limited supply of quality space. RioCan continues to actively manage risk, improve our balance sheet and further strengthen our foundation to drive future growth and value creation.”

FFO per Unit and Net Income

• FFO per unit for the Third Quarter was $0.45, which was $0.01 per unit higher than the same period last year.
  • Same Property NOI¹ growth of 3.7% contributed a $0.02 increase in FFO per unit.
  • FFO from completed developments and residential rental ramp up drove FFO per unit higher by $0.02.
  • Higher interest expense decreased FFO per unit by $0.02.
  • The reduction in FFO per unit from properties sold was partially offset by accretion from prior year unit buybacks, resulting in a net reduction of $0.01 per unit.
• Net loss for the Third Quarter of $73.5 million compared to $3.2 million of net income last year. The decrease was mainly due to fair value losses of $199.5 million on investment properties in the current quarter compared to $118.8 million in Q3 2022, primarily from increasing capitalization rates to reflect current market conditions resulting from rising interest rates.
• Our FFO Payout Ratio¹ of 60.4%, Liquidity¹ of $1.6 billion, Unencumbered Assets¹ of $8.5 billion, floating rate debt at 7.9%¹ of total debt and staggered debt maturities, all contribute to our financial flexibility and balance sheet strength.
• For 2023, we anticipate FFO per unit to be within the range of $1.77 to $1.80, SPNOI growth of 3%, and an FFO Payout Ratio of between 55% to 65%. Development Spending¹ is expected to be between $400 million to $450 million.

Operation Highlights

• Strong leasing velocity continues to be a dominant theme as RioCan’s high-quality, necessity-based retail portfolio continued to generate strong activity, spreads, occupancy and operating results in the Third Quarter. Same Property NOI grew by 3.7%, driven by increases in rent growth from contractual rent steps, rent upon renewal and the recovery of past pandemic-related provisions.
• Retail committed occupancy improved to an all-time high of 98.3% and in-place retail occupancy of 97.6% increased 70 basis points sequentially.
• A robust blended leasing spread of 12.9% resulted from new and renewal leasing spreads of 21.0% and 11.2%, respectively.
• New leasing in the Third Quarter generated average net rent per square foot of $27.02, well above the average net rent per occupied square foot of $21.39.
• Our strong demographic profile with a population and household income of 260,000 and $140,000, respectively within a five kilometre radius of the Trust’s properties continues to attract strong and stable tenants which comprise 87.4% of annualized net rent.

RioCan Living Update ¹

• Of the 13 RioCan Living™ buildings in operation 11 are stabilized and 97.5% leased as at November 2, 2023. Total NOI generated from our residential rental operations for the Third Quarter was $5.6 million, an increase of $1.8 million or 46.3% over the same period last year. An increase of approximately 8% in average monthly rent per occupied square foot on a same property basis contributed to the year-over-year improvement.
• Occupancy commenced at FourFifty The Well™ on August 1, 2023. Construction of 236 units was completed in the quarter. The remaining 356 units will be completed in phases through Q4 2023 and early 2024. Pre-leasing commenced in March 2023 and units are leasing at a healthy velocity and at rates in-line or above expectations.
• The 2,605 condominium and townhouse units that are under construction as of September 30, 2023, are expected to generate combined sales revenue of over $800.0 million between 2023 and 2026 that can be redeployed to productive uses such as paying down debt or development. Of RioCan’s six active condominium construction projects, 86% of the total units have been pre-sold, representing 95% of pro-forma total revenues.

Development Highlights

• In the quarter, 151,000 square feet of NLA was completed, comprised mainly of 72,000 square feet of purpose-built rental at FourFifty The Well and 63,000 square feet of commercial space at The Well™. For the full year, we expect to complete 630,200 square feet of GFA of development. We expect these development completions to contribute $25.5 million of stabilized NOI that will ramp up over the course of 2023 and 2024.
• As at November 2, 2023, approximately 96% of the total commercial space at The Well is leased with approximately 89% or 1,323,000 square feet (at 100% ownership interest) in tenant possession. The retail component is 91% leased with another 2% in late stage negotiations. New additions to the tenant roster, such as Lululemon and Sephora, further enhance the retail mix at The Well. The retail at The Well has been physically opening in phases, and the majority of tenants are expected to be open by the end of 2023.
• Zoning approvals for 1.2 million square feet of residential inventory were obtained in the quarter comprised of 83 Bloor Street West, located in the prestigious Yorkville neighbourhood in downtown Toronto, and East Hills South Block in Calgary. Completion of zoning is a significant step in the value creation process. RioCan continues to revisit zoning applications to optimize density and use in order to improve project economics. As cost and financing conditions persist, RioCan does not intend on commencing any material new physical construction in the near term.
• Total zoned square footage of 16.8 million includes 1.7 million square feet of projects under construction and 1.5 million square feet of shovel ready projects, which can be commenced or delayed at RioCan’s discretion.

Investing and Capital Recycling

• On September 28, 2023, RioCan entered into an agreement which resulted in 11YV project becoming an equity-accounted joint venture where RioCan subsequently reduced its 50.0% ownership interest to 39.6%. The resulting $10.1 million gain in the quarter was mainly attributable to the value of the underlying residential inventory. Subsequent to quarter end, RioCan sold an additional 2.1% interest reducing its interest to 37.5% in the underlying 11YV project.
• As of November 2, 2023, closed and firm dispositions of non-core assets totalled $295.2 million at a weighted average capitalization rate of 6.92%, including closed dispositions of $140.2 million. Closed dispositions include an enclosed centre in Winnipeg, Manitoba and a movie theatre anchored centre in Gatineau, Quebec, both of which were sold subsequent to quarter end. Disposition of these non-core assets continued the Trust’s program to continually improve asset quality.
• Year-to-date, Total Acquisitions¹ were $110.1 million including the purchase of residential rental properties, certain land assemblies for development and the purchase of an income producing parking lot lease at a Focus Five² project to remove a significant encumbrance.

Capital Management Update

• On September 29, 2023, RioCan issued $300.0 million of Series AI senior unsecured debentures. These debentures were issued at a coupon rate of 6.488% per annum and will mature on September 29, 2026. RioCan will have the option to repay Series AI debentures at par, in whole or in part, on or after September 29, 2024. RioCan also redeemed, in full, its $300.0 million, 3.210% Series AA unsecured debentures upon maturity.
• The Trust’s limited exposure to floating rate debt at 7.9% of total debt serves to mitigate short-term interest rate volatility. The proportion of floating rate debt increased when compared to last quarter mainly due to the timing of refinancing and hedging activities. We expect to reduce our exposure to floating rate debt by year end.

Balance Sheet Strength

• As at September 30, 2023, the Trust had $1.6 billion of Liquidity in the form of a $1.1 billion undrawn revolving line of credit, $0.4 billion undrawn construction lines and other bank loans and $0.1 billion cash and cash equivalents. A new credit facility for the construction of the Queen & Ashbridge™ condominium component was executed in the quarter.
• Pursuant to the terms of its credit agreement, the Trust has an option to increase the commitment under its revolving line of credit by $250 million.
• RioCan’s Unencumbered Assets of $8.5 billion, which can be used to obtain secured financing to provide additional liquidity at lower interest rates than unsecured debt, generated 60.0% of Annual Normalized NOI¹ and provided 2.11x coverage over Unsecured Debt¹. When compared to Q2 2023, Unencumbered Assets decreased by $81.8 million mainly from decrease in fair values.
• Adjusted Debt to Adjusted EBITDA was 9.45x on a proportionate share basis as at September 30, 2023, compared to 9.51x as at the end of 2022. The decrease was primarily due to higher Adjusted EBITDA, partially offset by higher Average Total Adjusted Debt balances.

Conference Call and Webcast

Interested parties are invited to participate in a conference call with management on Friday, November 3, 2023 at 10:00 a.m. (ET). Participants will be required to identify themselves and the organization on whose behalf they are participating.

To access the conference call, click on the following link to register at least 10 minutes prior to the scheduled start of the call: Pre-registration link. Participants who pre-register at any time prior to the call will receive an email with dial-in credentials including a login passcode and PIN to gain immediate access to the live call. Those that are unable to pre-register may dial-in for operator assistance by calling 1-833-950-0062 and entering the access code: 176245.

For those unable to participate in the live mode, a replay will be available at 1-866-813-9403 with access code: 613637.

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

About RioCan

RioCan is one of Canada’s largest real estate investment trusts. RioCan owns, manages and develops retail-focused, increasingly mixed-use properties located in prime, high-density transit-oriented areas where Canadians want to shop, live and work. As at September 30, 2023, our portfolio is comprised of 192 properties with an aggregate net leasable area of approximately 33.6 million square feet (at RioCan’s interest) including office, residential rental and 10 development properties. To learn more about us, please visit www.riocan.com.

Basis of Presentation and Non-GAAP Measures

All figures included in this News Release are expressed in Canadian dollars unless otherwise noted. RioCan’s unaudited interim condensed consolidated financial statements (“Condensed Consolidated Financial Statements”) are prepared in accordance with International Financial Reporting Standards (IFRS). Financial information included within this News Release does not contain all disclosures required by IFRS, and accordingly should be read in conjunction with the Trust’s Condensed Consolidated Financial Statements and MD&A for the three and nine months ended September 30, 2023, which are available on RioCan’s website at www.riocan.com and on SEDAR at www.sedar.com.

Consistent with RioCan’s management framework, management uses certain financial measures to assess RioCan’s financial performance, which are not in accordance with generally accepted accounting principles (GAAP) under IFRS. Funds From Operations (“FFO”), FFO per unit, Net Operating Income (“NOI”), Same Property NOI, Development Spending, Total Acquisitions, Ratio of floating rate debt to total debt, Liquidity, Adjusted Debt to Adjusted EBITDA, Total Adjusted Debt to Total Adjusted Assets, RioCan’s Proportionate Share, Unencumbered Assets to Unsecured Debt and Percentage of Normalized NOI Generated from Unencumbered Assets, as well as other measures that may be discussed elsewhere in this News Release, do not have a standardized definition prescribed by IFRS and are, therefore, unlikely to be comparable to similar measures presented by other reporting issuers. RioCan supplements its IFRS measures with these Non-GAAP measures to aid in assessing the Trust’s underlying performance and reports these additional measures so that investors may do the same. Non-GAAP measures should not be considered as alternatives to net income or comparable metrics determined in accordance with IFRS as indicators of RioCan’s performance, liquidity, cash flow, and profitability. For full definitions of these measures, please refer to the “Non-GAAP Measures” section in RioCan’s MD&A for the three and nine months ended September 30, 2023.

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

RioCan’s Proportionate Share

The following table reconciles the consolidated balance sheets from IFRS to RioCan’s proportionate share basis as at September 30, 2023 and December 31, 2022:

The following tables reconcile the consolidated statements of income (loss) from IFRS to RioCan’s proportionate share basis for the three and nine months ended September 30, 2023 and 2022:

NOI and Same Property NOI

The following table reconciles operating income to NOI and Same Property NOI to NOI for the three and nine months ended September 30, 2023 and 2022:

Contacts

RioCan Real Estate Investment Trust

Dennis Blasutti

Chief Financial Officer

416-866-3033 | www.riocan.com

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