CONFERENCE CALL - August 5, 2021 - Seeking Alpha
←
→
Page content transcription
If your browser does not render page correctly, please read the page content below
ALWAYS ADAPTING
CONFERENCE CALL
LOOKING AHEAD
Q2 2021 August 5, 2021
NON-GAAP FORWARD-LOOKING
MEASURES INFORMATION
RioCan’s consolidated financial Certain information included in this presentation contains forward-looking statements within the meaning of applicable securities
statements are prepared in accordance laws including, among others, statements concerning our objectives, our strategies to achieve those objectives, as well as
with IFRS. Consistent with RioCan’s statements with respect to management's beliefs, plans, estimates, and intentions, and similar statements concerning anticipated
management framework, management future events, results, circumstances, performance or expectations that are not historical facts. Certain material factors, estimates
uses certain financial measures to or assumptions were applied in drawing a conclusion or making a forecast or projection as reflected in these statements and actual
assess RioCan’s financial performance, results could differ materially from such conclusions, forecasts or projections.
which are not generally accepted
accounting principles (GAAP) under Forward-looking information is not a guarantee of future events or performance and, by its nature, is based on RioCan’s current
IFRS. estimates and assumptions, which are subject to numerous risks and uncertainties. Such risks and uncertainties include, but are
not limited to, the effects of COVID-19 on the businesses, operations and financial positions of RioCan and its tenants, as well as
The following measures, Funds From on consumer behaviors and the economy in general, including the length, spread and severity of the pandemic; timing of the roll
Operations (“FFO”), FFO (excluding out and efficacy of the vaccines; the nature and length of the restrictive measures implemented or to be implemented by various
debenture prepayment costs), Net levels of governments in Canada; RioCan’s tenants' ability to pay rents as required under their leases; the availability of various
Operating Income (“NOI”), Adjusted support programs that are or may be offered by the various levels of government in Canada and worldwide; domestic and global
Earnings before interest, taxes, supply chains; timelines and costs related to the Trust’s development projects; the pace of property lease up and rents and yields
depreciation and amortization achieved upon development completion; potential changes in leasing activities, market rents and property valuations; the
(“Adjusted EBITDA”), Debt to availability and extent of rent deferrals offered or to be offered by the Trust; the introduction or extension of temporary or
Adjusted EBITDA, Same Property permanent rent control or other form of regulation or legislation that may limit the Trust’s ability or its extent to raise rents based on
NOI, Debt to Total Assets, Interest market conditions upon lease renewals or restrict existing landlord rights or landlords’ ability to reinforce such landlord rights;
Coverage, Debt Service Coverage, domestic and global credit and capital markets, and the Trust’s ability to access capital on favourable terms or at all, and its ability
Fixed Charge Coverage, and Total to maintain its current credit ratings; total market return and the dividend yield of the Trust’s Units; and the health and safety of our
Enterprise Value as well as other employees, tenants and people in the communities that our properties serve. For more information on other risks, uncertainties and
measures discussed in this presentation, assumptions that could cause the Trust's actual results to differ from current expectations, refer to the “Risks and Uncertainties”
do not have a standardized definition section in RioCan’s MD&A for the three and six months ended June 30, 2021 and in its most recent Annual Information Form,
prescribed by IFRS and are, therefore, available at www.sedar.com and at www.riocan.com.
unlikely to be comparable to similar
measures presented by other reporting The forward looking information contained in this presentation is made as of the date hereof. Except as required by applicable law,
issuers. RioCan undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new
information, future events or otherwise.
Q2 2021 Conference Call | RioCan | 2
642
King St.
Jonathan Gitlin, President & Chief Executive Officer
Q2 2021 Conference Call | RioCan | 3
BUSINESS OVERVIEW
Embedding best practices in everything we do
Select Q2 2021 Achievements
ESG Rating Upgrade by MSCI (1) Green Lease Leader
Silver recognition
Improving employee management
Strong commitment to high
programs and green building
performance and sustainability in
certificates
buildings, and best practice leasing
Canada’s Greenest Employer
A Top Ranked Real Estate Firm
Leadership in creating a culture of
Best 50 Corporate Citizens in environmental awareness
Canada by Corporate Knights
Inaugural DEI Policy DEI Scholarship Program
Advancing Diversity, Equity and Supporting students from
Inclusion within the workplace and historically disadvantage groups
the communities that RioCan serves through paid internship at RioCan
1) Morgan Stanley Capital International Q2 2021 Conference Call | RioCan | 4
Resilient rent collection (1)
Despite COVID-19 restrictive measures
100% 0.4%
1.8%
3.2% 3.8%
5.3% 3.4%
2.4%
0.5% 0.7% 1.8% 1.5%
95% 0.2% 0.1%
90%
85% 95.7% 95.1% 94.9% 94.7%
94.5%
80%
75%
Q3 2020 Q4 2020 Q1 2021 Q2 2021 July 2021
Remaining Rent To Be Collected Provision Deferred Rents Cash Collected
1) Latest four quarters as of August 4, 2021 Q2 2021 Conference Call | RioCan | 5
High performance growth-oriented portfolio
Building on a strong and stable foundation
Average Net Rent (PSF)
$22.82 PSF
~3.0% average rent of new leases
CAGR (1) signed in Q2 2021
$19.75 $19.80 $20.05
$19.07
$17.59 $17.75
2016 2017 2018 2019 2020 Q2 2021
1) Compound Annual Growth Rate Q2 2021 Conference Call | RioCan | 6
Well-positioned portfolio retains and attracts tenants
1.4 million square feet of new and renewal leases executed at robust leasing spreads
89.4% 90.9%
Renewal 4.6% 4.2% Retention
Leasing Ratios
Spreads
Q2 2020 Q2 2021 Q2 2020 Q2 2021
19.8%
New Blended
Leasing 9.2% Leasing 5.8% 5.4%
Spreads Spreads
Q2 2020 Q2 2021 Q2 2020 Q2 2021
Q2 2021 Conference Call | RioCan | 7
Second Quarter 2021 Results
Steadily increasing despite effects of COVID-19
FFO per Unit Same Property NOI
$0.40
(1)
$0.36
$0.35
Q2 2020 Q1 2021 Q2 2021
7.8%
-4.6%
Q2 2020 Q1 2021 Q2 2021 -10.8%
1) Excluding debenture prepayment costs Q2 2021 Conference Call | RioCan | 8
Positive trends in occupancy
Strengthens quality of income
Committed and In-Place Occupancy
Total Commercial Portfolio
96.4%
96.0% 96.1%
95.7% 95.8%
94.9% 95.1% 95.1%
Compared to Q1 2021 committed
occupancy at RioCan’s commercial
properties increased by 30 bps and
in-place was stable despite lockdowns
during the majority of the quarter.
Q2 2020 Q4 2020 Q1 2021 Q2 2021
Committed In-Place
Q2 2021 Conference Call | RioCan | 9
RioCan properties attract resilient tenants
Improving property and tenant mix in lockstep with consumer spending patterns
Property Mix* Tenant Mix*
70 bps
vs. YE 2020
Enclosed
8.8%
Mixed-Use/
Urban -40 bps
21.6% vs. YE
Open Air 2020
Centre
27.0%
Grocery
Anchored
Centre
42.6% 60 bps
vs. YE 2020
*Percentage of annualized rental revenue as of June 30, 2021 (i) Excludes Home Outfitters (included in Home and Furniture), Saks Off 5th (included in Value
Retailers) and Lawrence Allen Centre’s HBC Office
Q2 2021 Conference Call | RioCan | 10Value creation through mixed-use development
Transforming RioCan through excess density on existing income producing properties
Total Pipeline
by Zoning Status TOTAL ZONING
ENTITLEMENT
20.6M SF • ~100% located in Canada’s six major
13.7M SF
(33.9%)
markets(1)
39 projects
• ~75% located in the GTA(1)
6.9M SF
(17.0%)
40.6M 6 projects
SF • ~83% are residential developments(1)
• ~70% located on transit
19.9M SF
(49.1%)
15 projects
• Completed / In development by 2023 (2)
▪ ~4,178 residential rental units
▪ ~6,345 condo/townhouse units
Zoning Zoning Zoning
Approved Applications Pending
Submitted Application
1) % of total NLA
2) Number of units are based on 100% ownership Q2 2021 Conference Call | RioCan | 11RioCan Living - high quality rental residences
Growing source of income diversification and NAV expansion; 1,400+ units developed since 2019
eCentral, Toronto, ON Frontier, Ottawa, ON Brio, Calgary, AB Pivot, Toronto, ON Litho, Toronto, ON
• 466 unit, 36-storey • 228 unit, 23-storey • 163 unit, 12-storey • 361 unit, 36-storey • 210 unit, 8-storey
building building building building building
• ~ 88% leased (1) • ~ 97% leased and • ~ 94% leased (1) • ~ 45% leased (1) • ~ 13% leased (1)
• Sold 50% non-managing stabilized for Phase One (+20% since Q1 2021 (+24% since Q1 2021 • First Occupancy
interest in Q1/21 at 3.6% Frontier (1) report) report) targeted for Q3 2021
cap rate based on • Phase Two Latitude is • Launched in March 2020 • Launched in December
stabilized NOI under construction with 2020
expected completion • Agreement to sell 50%
Q1 2022 non-managing interest at
3.7% cap rate based on
stabilized NOI
Steady rent collection of ~ 99% for residential rental in Q2 2021
1) As of August 4, 2021 Q2 2021 Conference Call | RioCan | 12• 8-storey, 61 unit residential
rental
• ~6k sq. ft. of retail
• First Occupancy targeted
for Q4 2021
Toronto
STRADA Q2 2021 Conference Call | RioCan | 13• Latitude, Phase 2
◦ 20-storey, 209 unit residential rental
◦ First Occupancy targeted for Q1 2022
• Frontier, Phase 1 – 97% leased(1)
◦ 23-storey, 228 unit residential rental
1) As of August 4, 2021
Gloucester
FRONTIER AND LATITUDE Q2 2021 Conference Call | RioCan | 14Condo / Townhouse development and value creation
Alternate source of income and cash flow providing efficient capital recycling
Townhomes Condominiums Condominiums Condominiums
U.C. Uptowns U.C. Tower 11 YV Queen & Ashbridge
~92% Pre-Sold
Sales Sold Out Sold Out ~99% Pre-Sold (399 Units)
Status (1) (153 Units) (503 Units) (586 Units)
Date of Anticipated 2021-2022 2022 2024-2025 2025
Completion
Estimated $4.0 - $4.5 M $17.0 - $18.0 M $72.0 - $76.0 M $38.0 - $40.0 M (3)
Inventory Gains (2)
1) As of August 4, 2021
2) Estimated inventory gains are at RioCan’s interest
3) Queen & Ashbridge inventory gain is an estimate that is based on a very preliminary proforma which is currently under review by the partners. Q2 2021 Conference Call | RioCan | 15• First independent condo launch
under RioCan Living banner in
partnership with four investors
• Two towers of 545 residential
units
• Retail at grade
Toronto
• Pre-sales launched in July 2021
VERGE Q2 2021 Conference Call | RioCan | 16Capital recycling surfaces value
Strategic dispositions offering low cost of capital for mixed-use development
Dispositions
Closed as of Firm & Conditional (1) Weighted Average
Total
(in millions) August 4, 2021 Cap Rate
(2)
Income Producing Properties $334.4M $324.2M $658.6M 4.8%
PUD/ Residential Inventory $86.4M $96.6M $183.0M n/a
Total $420.8M $420.8M $841.6M 3.8%
Sale of 50% interest in Pivot, Sale of 80% Verge, Sale of remaining 50% interest in Charlottetown Mall
Toronto, ON Toronto, ON Charlottetown, PEI
1) Includes proceeds from air right sales from The Well project in Toronto (Building C&D)
2) Includes 5.4% weighted average cap rate for closed, and 4.2% weighted average capitalization rate for firm and conditional, income producing properties Q2 2021 Conference Call | RioCan | 17642
King St.
Jonathan Gitlin, President & Chief Executive Officer Q2 2021 Conference Call | RioCan | 18RioCan
Hall
Franca Smith, Interim Chief Financial Officer
FINANCIAL REVIEW Q2 2021 Conference Call | RioCan | 19Second Quarter 2021 Results
FFO per Unit
$0.40
(1)
$0.36
$0.35
Drivers of year-over-year change
• Lower pandemic-related provision;
• Higher residential inventory gains;
• Lower interest cost, partially offset by
• Forward purchase termination fee received in Q2 2020
Q2 2020 Q1 2021 Q2 2021
1) Excluding debenture prepayment costs Q2 2021 Conference Call | RioCan | 20Prudent approach to development
RioCan plans to primarily self fund development
through retained free cash flow, divestiture proceeds, strategic partnerships and faster capital recycle from
condo/townhouse development As at
June 30, 2021 Target
Properties Under Development (“PUD”) & Residential Inventory $1.7B N/A
PUD and Residential Inventory as % of Gross Assets – Per Line of Credit and Credit Facilities 10.9% ~ 10%
Agreements (maximum permitted is 15%)
Investment in Greenfield Development and Residential Inventory as % of Unitholder Equity - Per 4.0% N/A
Declaration of Trust
$425M to $475M $450M to $800M
$1.7BDisciplined and prudent balance sheet management
Ample liquidity bolstered by large pool of unencumbered assets
(1) (1)
Target Q1 2021 Q2 2021
Capital Structure Metrics
Liquidity N/A $1.3B $1.2B
(2)
Debt to Adjusted EBITDA 3.00x 2.99x 3.09x improved from
Q1 2021
Debt Service Coverage >2.25x 2.49x 2.54x
Fixed Charge Coverage >1.10x 1.05x 1.14x
Unencumbered Assets N/A $8.7B $8.5B
Unencumbered Assets to Unsecured Debt >2.0x 2.21x 2.24x
NOI % from Unencumbered Assets >50% 59.5% 57.2%
Unsecured vs. Secured Debt 70% / 30% 56% / 44% 54% / 46%
Ratio of Floating Rate Debt to Total Debt642
King St.
Jonathan Gitlin, President & Chief Executive Officer Q2 2021 Conference Call | RioCan | 2324
You can also read
