b disposition program jonathan gitlin€¦ · • redeveloping prime assets • optimize pads by...
TRANSCRIPT
RioCan’s consolidated financial statements are prepared in accordance with IFRS. Consistent with RioCan’s management framework, management uses certain
financial measures to assess RioCan’s financial performance, which are not generally accepted accounting principles (GAAP) under IFRS.
The following measures, RioCan’s Proportionate Share (or Interest), Funds From Operations (“FFO”), Net Operating Income (“NOI”), Adjusted Earnings
before interest, taxes, depreciation and amortization (“Adjusted EBITDA”), Debt to Adjusted EBITDA, Same Property NOI, Interest Coverage, Debt Service
Coverage, Fixed Charge Coverage, and Total Enterprise Value as well as other measures discussed in this presentation, do not have a standardized definition
prescribed by IFRS and are, therefore, unlikely to be comparable to similar measures presented by other reporting issuers.
Non-GAAP measures should not be considered as alternatives to net earnings or comparable metrics determined in accordance with IFRS as indicators of RioCan’s
performance, liquidity, cash flow, and profitability. For a full definition of these measures, please refer to the “Non-GAAP Measures” in RioCan’s Management’s
Discussion and Analysis for the period ended December 31, 2017. RioCan uses these measures to better assess the Trust’s underlying performance and provides
these additional measures so that investors may do the same.
2
NON-GAAP MEASURES
FORWARD LOOKING INFORMATION
Certain information included in this presentation contains forward-looking statements within the meaning of applicable securities laws including, among others,
statements concerning our objectives, our strategies to achieve those objectives, as well as statements with respect to management's beliefs, plans, estimates,
and intentions, and similar statements concerning anticipated future events, results, circumstances, performance or expectations that are not historical facts.
Certain material factors, estimates or assumptions were applied in drawing a conclusion or making a forecast or projection as reflected in these statements and
actual results could differ materially from such conclusions, forecasts or projections.
Additional information on the material risks that could cause our actual results to differ materially from the conclusions, forecast or projections in these statements
and the material factors, estimates or assumptions that were applied in drawing a conclusion or making a forecast or projection as reflected in the forward-looking
information can be found in our most recent annual information form and annual report that are available on our website and at www.sedar.com.
Except as required by applicable law, RioCan undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new
information, future events or otherwise.
TODAY’S AGENDA
3
A Opening Remarks Ed Sonshine
B Disposition Program Jonathan Gitlin
C
The Current Operating Environment
• RioCan’s Strategic & Operational Advantages
• Operations – Driving Organic Growth
• Leasing Market & Supporting RioCan’s Strategic Growth Platform
Rags Davloor, John
Ballantyne, & Jeff Ross
D
Development Program Overview & RioCan Living
• Development Expertise & Approach
• Residential Growth Strategy
Andrew Duncan &
Jonathan Gitlin
E Capital Structure and Financing Strategy Qi Tang
F Closing Remarks Ed Sonshine
G Q&A
4
OPENING REMARKS
Ed Sonshine
Founder and CEO
CANADA’S MAJOR MARKET PORTFOLIO• High quality, necessity based retail, and increasingly mixed-use major markets portfolio
• Diversified, strong national tenant base
• Significant upside on rent growth
• Base for significant NAV growth – tremendous intrinsic value to be unlocked
• Strong executive bench with wealth of experience and proven track record
• Focusing on transit-
oriented urban
intensification in major
markets
• Mostly mixed-use with
residential rental
and/or condo
development
• Strategic alliances to
mitigate risk and
create steady fee
stream
• Robust and growing
pipeline of well located
sites with substantial
zoning approved
UNLOCKING INTRINSIC VALUE
STRATEGIC ACQUISITIONS
• Acquire only the best
locations in the six
major markets
• Opportunities to
acquire partners’
interests in today’s
tight market
• Highly selective
acquisitions of
development sites,
leveraging existing
properties
DRIVING ORGANIC GROWTH
• Evolving tenant mix
and revenue growth
• Improving operating
efficiency and cost
structure
• Redeveloping prime
assets
• Optimize pads by
adding additional
GLA
• Drive ancillary
revenues
• Continuous portfolio
pruning
• Low leverage
• Low cost of debt
• Laddered debt
maturity and mostly
fixed rate
• Access to multiple
sources of capital
• Large
unencumbered
assets pool
generating 56.7% of
annualized NOI
STRONG BALANCE SHEET
RIOCAN’S VALUE PROPOSITION AND FOUR STRATEGIC PILLARSREAL VISION, SOLID GROUND
5
UNMATCHED PORTFOLIO OF URBAN MIXED-USE DEVELOPMENT PROPERTIES
eCentral at ePlace King Portland Centre (Kingly)
Yonge Sheppard Centre (Pivot) Gloucester Residential Phase I
(Frontier)
Sunnybrook Plaza
6
LEADERSHIP TEAM
• Strong executive bench with a
wealth of experience and
proven track record
• Trusted and respected, with
deep industry knowledge and
relationships
EXPERIENCE, INTEGRITY AND FORESIGHT
Andrew Duncan
SVP Developments
18 years in
Development,
12 years in Real
Estate
Danny Kissoon
SVP Operations
32 years in Real
Estate
Ed Sonshine O.Ont.,
Q.C. Founder and
CEO
Jeff Ross,
SVP Leasing &
Tenant Construction
30 years in Real
Estate
Jennifer Suess
SVP General Counsel
& Corporate
Secretary
16 years in Law with a
focus on Real Estate
John Ballantyne,
SVP Asset
Management
24 years in Real
Estate
Jonathan Gitlin,
SVP Investments
& Residential
18 years in
Real Estate
Qi Tang,
SVP and CFO
20 years in Finance
& Real Estate
Rags Davloor
President and COO
25 years in Real
Estate, Operations
& Finance
7
8
DISPOSITION PROGRAM UPDATE
Jonathan Gitlin
Senior Vice President, Investments
and Residential
PROGRESS TO DATE
9
• Sale prices to-date and cap rates achieved have been in line with IFRS value
• $612M progress to-date in six months since the October 2017 announcement representing
approximately 31% of the $2.0B disposition target
Disposition Progress as of March 29, 2018
Transaction type Value ($m)
Closed and Firm $537.3
Conditional $74.7
Total to Date $612.0
Weighted Average Cap Rate 6.22%
DISPOSITION UPDATE
10
MAP OF FIRM OR CLOSED DISPOSITIONS TO DATE
The properties disposed to date span a broad
geographical range of secondary markets
DISPOSITION UPDATE
11
REITs
• Strategic buyers, such as CT REIT, who are looking to acquire assets where
their retail banner is already a tenant. They know these assets well and
recognize the advantage of controlling properties in which their associate
retail banners operate.
• Geographically focused REITs looking to expand footprint in a particular
region.
• Small cap REITs looking for growth and accretive acquisitions, which would
otherwise be unavailable in major markets.
BUYER PROFILE
DISPOSITION UPDATE
12
Private Individual Buyers
• Objectives include capital preservation and stable, risk-adjusted returns.
• These buyers have local expertise or presence in particular secondary
markets, and therefore covet these assets.
Private Equity and Investment Managers
• Objectives include deploying a robust supply of capital in a low-interest rate
environment.
• Increasingly looking at secondary markets in the core to value-add risk range
due to limited supply of product in primary markets.
BUYER PROFILE
13
THE CURRENT OPERATING ENVIRONMENT
CONSISTENTLY ABOVE 95%
Rags Davloor
President & COO
RIOCAN’S STRATEGIC & OPERATIONAL ADVANTAGES
Rags Davloor
Asset Management
Asset Management Operations Marketing Sustainability
Leasing
Leasing Tenant Construction
Development
Planning/Zoning Permitting/ Permissions
Design and Development
Construction
DRIVEN BY INSIGHTEXPERIENCE, INTEGRITY AND FORESIGHT
• Best in class management team
• Widely integrated cross functional management approach
14
CANADA’S MAJOR MARKET PORTFOLIOWHERE CANADIANS SHOP, LIVE AND WORK
CANADA’S MAJOR MARKET PORTFOLIO
• High quality, necessity based retail, and increasingly mixed-use major markets portfolio
• Diversified, strong national tenant base
• Significant upside on rent growth
• Base for significant NAV growth – tremendous intrinsic value to be unlocked
• Strong executive bench with wealth of experience and proven track record
15
CANADA’S MAJOR MARKET PORTFOLIO
76.1%
>90%
2017 Vision
Major Market Revenue
40.9%
>50%
2017 Vision
GTA Revenue Focus
WHERE CANADIANS SHOP, LIVE AND WORK
24
19
2017 Vision
Avg. Age Portfolio (yrs.)
16
GREATER TORONTO AREA (GTA) FOCUS
17
INDUSTRY LEADING PRESENCE IN THE TORONTO CORE AND…
RioCan
First Capital
SmartCentre REIT
CANADA’S MAJOR MARKET PORTFOLIOWHERE CANADIANS SHOP, LIVE AND WORK
~157k
~205k~212k
2017 - All Markets 2017 - MajorMarkets
2020
Avg. Population(5km radius)
~$102k~$111k
~$120k
2017 - All Markets 2017 - MajorMarkets
2020
Avg. Income (5km radius)
• Improved operating efficiencies, newer assets, and less capex
• Improved portfolio demographics – higher population growth, more disposable income
Source: Based on Environics data 18
SOURCES OF TREMENDOUS NAV GROWTH
• Strong, major market, urban focused development pipeline
• High quality projects in prime locations, predominantly transit oriented
ROBUST DEVELOPMENT PIPELINE
0
10
20
30
40
50
60
70
RioCan NLA RioCan NLA including Incremental NLA fromDevelopment*
1. Total development pipeline of 26.3M sf includes incremental NLA of 22.2M sf plus 4.1M sf that is currently income producing
2. Assumes all development projects per the MD&A for the period ended December 31, 2017 are completed and assumes no
additional development, acquisitions, or dispositions
22.2M incremental
NLA1 or 53% of
existing NLA2
Millions sf.
41.8M existing
IPP NLA
19
TREMENDOUS SOURCES OF CASH FLOW & NAV GROWTH
Zoned, 12.3m sf, 46.7%
Application submitted, 5.3m sf, 20.1%
Future est. density, 8.7m sf, 33.2%
Total Pipeline by Zoning Status(26.3M* sf)
Commercial1.1m sf,
4.4%
Residential & Air Rights17.2m sf,65.3%
Commercial, 7.0m sf, 27.8%
Residential Inventory1.0m sf,3.9%
Mixed-Use Residential25.1m sf,
95.6%
Total Pipeline by Project Type
* Includes 22.2M sf of incremental NLA and 4.1M sf of NLA which is currently income producing. All data at RioCan’s interest.
• Nearly 50% or 12.3M sf with zoning approved and 100% is located in the six major markets
• Uncertainty in Ontario regarding transition to the newly implemented Local Planning Appeal
Tribunals given that its mandate is unclear, which makes zoned density more valuable
PIPELINE IS EXPECTED TO CONTINUE TO GROW
20
TREMENDOUS SOURCES OF CASH FLOW & NAV GROWTHSELECTED DEVELOPMENT COMPLETIONS OVER THE NEXT THREE YEARS
At RioCan’s Interest 2018 2019 2020
Annual Completed NLA 693,000 813,000 1,302,000
Cumulative NLA 693,000 1,506,000 2,808,000
% of NLA* 1.7% 3.6% 6.7%
Number of Rental Units 0 688 799
NOI (millions) $23.9 $16.8 $13.6
Completions of 2.8M sf through 2020 are expected to generate approx. $54M of annualized NOI at RioCan’s interest
21* Income producing NLA of 41,807k sf as at December 31, 2017
INTENSIFICATION STRATEGYDEVELOPMENT PROCESS FOR EXISTING INCOME PRODUCING PROPERTY
Project Evaluation and Market Research
Leasing Strategy
Development Planning Zoning, Design, Planning
Development & Construction
Income Producing Asset Until Development Commences
Year 1 Year 2 - 3 Year 4-5 Year 6-7
22
ORGANIC GROWTH
CONSISTENTLY ABOVE 95%
John Ballantyne
Senior Vice President, Asset Management
OPERATIONS AND ASSET MANAGEMENT OVERVIEW
23
Strategically manage and position each
asset for its highest and best use
• Experienced Asset Management
team with diversified strength in
retail, development and residential
• Best in class Operations team that
provides local management for 280+
properties
FOCUSSED ON DRIVING SAME PROPERTY NOI (SPNOI) & FFOLEVERAGING SCALE, EXPERIENCE AND OUR MAJOR MARKET PORTFOLIO
1
2
3
Operational
efficiencies
Capital planning
Strategic asset
repositioning &
redevelopment
24
DRIVING SPNOI, FFO & NAV
Drive SPNOI and FFO and leverage
scale through:
• Occupancy and rent growth
• Operational efficiency:o Concentrate maintenance contracts
with national major market vendors
o Sustainable business practices
• Ancillary revenueo Digital signage
o Pop up stores and activations
o Sponsorships
o Cell tower income
• Fee generation
25
PORTFOLIO CAPITAL PLANNING & OPTIMIZATIONVALUE ADDED CAPEX
Leverage capital to strategically redevelop and
reposition assets to tap into their highest and best
use
• Rebrand and redevelop assets to differentiate and
resonate with the communities they serve
o Expanded food courts
o Improved common areas and amenities
• Drive experience, engagement and reasons
to visit
o Experiential offerings
o Technology (wifi, charging stations)
• Maximize FFO pre-development
26
27
DRIVING ORGANIC GROWTHCASE STUDY – BURLINGTON MALL
BURLINGTON MALL, BURLINGTON, ON
Location: On of the busiest intersections in Burlington
(Canada’s best mid-sized city 5 years in a row). Three GO
train stations within a 10 KM radius and easily accessible
from the QEW
Acquisition: 2013
Ownership: 50%
Total GLA: 738,000 sf
Property Concept: Enclosed Shopping Centre
Project Completion: 2018
Demographics (5km radius):
Population 138KAvg. Household Income $116K
Redevelopment and rebranding to “Burlington
Centre”
DRIVING ORGANIC GROWTHCASE STUDY – BURLINGTON MALL
• Strategic repositioning as the
destination for locals to find
everything the want, need and love
in Burlington
• Remerchandised with a compelling
tenant mix with strong convenience
offering
• Expanded food court with stronger
food offering
• Upgraded washrooms
28
DRIVING ORGANIC GROWTHCASE STUDY – BURLINGTON MALL
29
DRIVING ORGANIC GROWTHCASE STUDY – BURLINGTON MALL
Metric
At
Acquisition
(2013)
Capital
Invested
Anticipated
Stabilized
Value $206.5M $55M $287.5 M
NOI $9.9M - $14.1M
NOI will increase by 42%
30
DRIVING ORGANIC GROWTHCASE STUDY – YONGE EGLINTON CENTRE
31
YONGE EGLINTON CENTRE,
TORONTO
Intersection: Yonge St. and Eglinton Avenue East
Acquisition: 2007
Ownership: 100%
Total GLA: 1,056,285 sf
Property Concept: Mixed-use
Project Completion: 2016
Demographics (5km radius):
Population 138KAvg. Household Income $116K+
Strategically transitioned the property into a destination centre that
better aligns to the community needs
DRIVING ORGANIC GROWTHCASE STUDY – YONGE EGLINTON CENTRE
32
DRIVING ENGAGEMENTANCILLARY REVENUE AND EXPERIENTIAL MARKETING
33
DRIVING ORGANIC GROWTHCASE STUDY – YONGE EGLINTON CENTRE
34
Metric
At
Acquisition
(2007)
Capital
Invested
Stabilized
(2017)
Value $223M $110M $574M
NOI $13M - $26M
Avg. net
rent PSF$12.73 - $17.76
73% increase in value over total costs
35
ORGANIC GROWTH & STRATEGIC DEVELOPMENT
CONSISTENTLY ABOVE 95%
Jeff Ross
Senior Vice President, Leasing
and Tenant Construction
LEASING MARKET & SUPPORTING RIOCAN’S STRATEGIC GROWTH PLATFORM
LEASING PLATFORM & TEAM
36
Leasing Team
• Dedicated team with specialized sub leasing groups with expertise in their
segment
• Supporting organic growth and finding new sources of cash flow through smaller
intensification opportunities
Unenclosed
RetailFood &
Beverage
Lifestyle &
FitnessEnclosed Mall Intensification
$19.22 $19.61
2016 2017
New Leasing
Completed 2.0 million square feet of new leasing in
2017 at $19.61 per square foot
DRIVING ORGANIC GROWTH2017 LEASING RESULTS
37
Renewal Leasing
Renewed 4.5 million square feet in 2017 at $18.99
per square foot, an increase of 5.8% compared to
2016
85.8%91.1%
2016 2017
38
RETAILERS ADAPTING TO CURRENT MARKET ENVIRONMENT
• Retailers are still adapting to
find right mix of e-commerce
and bricks & mortar strategy
• Consumers have more
access to information than
ever before
• The successful retailers will
be the ones that merge the
Physical World with the
Digital World
EVOLVING & RESILIENT TENANT MIX
Retailer Category% of Rent
2017
Change
since
2007
Key Brands
Grocery/ Pharmacy
Liquor/
Restaurant27.8% 3.3%
Personal Services 20.3% 4.2%
Value Retailers 15.2% 2.6%
Specialty Retailers 10.2% 0.1%
Furniture and Home 9.9% 1.5%
Department Stores/
Apparel8.9% (7.4%)
Entertainment and Hobby 3.1% (2.6%)
Movie Theatres 4.6% (1.7%)
ADAPTING TO THE EVER CHANGING RETAIL ENVIRONMENT
39
40
LANDLORDS MUST ADAPTING ALSO THE RIGHT SETTING – EXPERIENCE, ENGAGEMENT & CONVENIENCE
• Providing tenants with space where they can
provide experiential environments
• Restaurant growth is strong
• Shopping centres will become more of a social
gathering place than ever before
THE “NEW” RETAIL ENVIRONMENT
41
Provide flexible space as retailers find
the right tenant mix for our properties
- Lifestyle/Restaurants/Leisure
- Pop-up retail
- Omni channel
Case Study: Lululemon Pop-Up to
long term lease at Georgian Mall
• Provided a short term storefront
as a test location
• The successful launch translated
into a long term lease
42
WELL DIVERSIFIED NATIONAL TENANT BASENO SINGLE TENANT OVER-EXPOSURE
Top 10 Tenant NameAnnualized Rental
Revenue
Number Of
Locations
NLA (Sq. Ft. in
'000s)
Weighted Avg
Remaining Lease
Term (Yrs)
1 4.8 % 80 2,067 7.5
2 4.3 % 82 2,050 4.8
3 4.2 % 29 3,607 9.3
4 3.9 % 27 1,443 7.4
5 3.9 % 72 1,942 6.8
6 3.4 % 49 1,999 6.7
7 1.8 % 104 504 7.0
8 1.8 % 13 1,517 10.4
9 1.6 % 83 760 6.3
10 1.6 % 25 898 8.4
TOTAL 31.3% 564 16,789 7.3
(i) Loblaws includes Shoppers Drug Mart, No Frills, Fortinos, Zehrs and Maxi.
(ii) Canadian Tire Corporation includes Canadian Tire/PartSource/Mark’s/Sport Mart/ Sport Chek/Sports Experts/National Sports/Atmosphere.
Top Ten Tenants are all
sound operators and
leaders in their segments
Majority are growing –
especially value focused
tenants
Largely resilient to e-
commerce disruption
LEVERAGING CURRENT RELATIONSHIPS AND FORGING NEW ONESWITH CANADA’S MAJOR MARKET PORTFOLIO WE CAN DELIVER
43
• Major Market focus and presence to offer an avenue to introduce new concepts across a variety of
retail formats
• Able to support the full range of tenant opportunities
Toronto, ON Ottawa, ON Montreal, QC
44
Vancouver, ON Calgary, AB Edmonton, AB
LEVERAGING CURRENT RELATIONSHIPS AND FORGING NEW ONESWITH CANADA’S MAJOR MARKET PORTFOLIO WE CAN DELIVER
• Major Market focus and presence to offer an avenue to introduce new concepts across a variety of
retail formats
• Able to support the full range of tenant opportunities
45
DEVELOPMENT AND RESIDENTIAL INITIATIVE
Andrew Duncan
Senior Vice President, Developments
UNLOCKING THE INTRINSIC VALUE
CANADA’S MAJOR MARKET PORTFOLIO
UNLOCKING INTRINSIC VALUEREALIZING THE FULL POTENTIAL OF OUR CORE ASSETS
• Focusing on transit-oriented urban intensification
in major markets
• Mostly mixed-use with residential rental and/or
condo development
• Strong residential team with a wealth of experience
capable of managing complex development projects
from design to completion
• Strategic alliances to mitigate risks and create
steady fee stream
• Robust and growing pipeline of well located sites
with substantial zoning approved
UNLOCKING INTRINSIC VALUE
46
DEVELOPMENT TEAM
47
• Balanced, experienced talented team
• Established strong industry relations
• Identify opportunities in robust pipeline of urban, transit-oriented sites
• 33 team members – Planners, Engineers, Construction Managers, Analysts
• Three office locations – Toronto, Calgary, Montreal
Planning Design Analytics Residential Construction
DEVELOPMENT HAS BEEN INSTRUMENTAL TO LONG TERM GROWTH
• Development has been an internalized
function for RioCan since 2003
• Increased RioCan’s presence in
Canada’s six major markets
• Grown in expertise to handle mixed-
use retail and residential development
• Added strength to handle complex
development in urban locations
48
UNMATCHED EXPERTISE AND DEPTH
49
• Mixed-use projects include:
o Strada (College & Manning, Toronto)
o Litho. (740 Dupont, Toronto)
o Frontier (Gloucester, Ottawa)
o Brio (Brentwood Village, Calgary)
o The Well (Front & Spadina, Toronto)
• Forged strong strategic relationships
with leading industry participants –
Allied, Boardwalk, Killam, Concert,
and others
HEALTHY PIPELINE
50
• Constantly analyze portfolio
for sites near transit
infrastructure
• Pursuing site plan approvals
or development permits in
GTA, Ottawa and Calgary
• Perfectly positioned to
execute on RioCan’s
long-term growth strategy
OTTAWA CALGARY
GTA
INNOVATION AT THE WELL
51
• RioCan continues to
pursue innovative design
elements in its projects
• The Well will utilize deep
water lake cooling that
harnesses Lake Ontario’s
capacity for its heating
and cooling system
INNOVATION AT GLOUCESTER (FRONTIER)
52
• Frontier will employ a geothermal system
for its heating and cooling system that
capitalizes on its location above a
geothermal source which reduces
operating costs
RESIDENTIAL PROJECTS
53
Litho. – 740 Dupont
• Interior design and amenities pay homage to a
neighbourhood steeped in craftsmanship, history
and creativity
• Clean design, natural materials such as concrete,
infused with bold pop of colour throughout
common spaces
• Retail Design:
o Structural design suitable for retail use,
with a grocery tenant focus
o Loading efficiencies captured for grocery
logistics
o Integration with below-grade parking
and retail circulation
UNLOCKING INTRINSIC VALUERESIDENTIAL INTENSIFICATION – YONGE SHEPPARD CENTRE
54
YONGE SHEPPARD CENTRE, TORONTO, ON
Location: Located at the thriving intersectionYonge & Sheppard, with access to 2 subway lines and highway 401
Property Type: Mixed-use with incremental 156k sf retail, as well as 258k sf of rental residential
Ownership: 50% (JV with KingSett Capital)
Zoning Status: Zoned
Phased Completion: Retail – 2019
Residential - 2020
UNLOCKING INTRINSIC VALUERESIDENTIAL INTENSIFICATION
55
Proposed
Pivot – Yonge Sheppard CentrePIVOT (YONGE SHEPPARD CENTRE),
TORONTO, ON
• Renovation and expansion of retail
space
• Intensification through the addition of
a new 36 storey residential tower
containing 361 residential rental units
• Adding 100,000 square feet of
additional retail space
• Adding new retail uses in Longo’s
and LA Fitness
• Required considerable effort and
expertise to achieve project’s
success
56
DEVELOPMENT AND RESIDENTIAL INITIATIVEUNLOCKING THE INTRINSIC VALUE
Jonathan Gitlin
Senior Vice President, Investments
and Residential
Building Property/City/Province Rental Units Condo Units
Yonge & Eglinton, Toronto, Ontario 466 623
King & Portland, Toronto, Ontario - 134
Gloucester, Ottawa 222 -
Brentwood Village, Calgary 163 -
Yonge Sheppard Centre, Toronto, Ontario 361 -
740 Dupont, Toronto, Ontario 210 -
College & Manning, Toronto, Ontario 65 -
The Well, Toronto, Ontario 584 -
Total 2,071 757
TOTAL ALL 2,828
57
DEVELOPMENT AND RESIDENTIAL INITIATIVECURRENT ACTIVE RESIDENTIAL PROJECTS
58
URBAN TORONTO HIGHLIGHTS: SELECTED HIGH DENSITY, LOCATIONS
*Average demographics within a 5km radius of RioCan Urban Toronto development sites
UNPARALLELED MAJOR MARKET PIPELINE
Demographics, 5km radiusDense population*:
• 481,000 people
Desirable demographic*:
• HH Income: $130,000+
• Post-secondary education: 65%+
1
2
3
4
5
6
7
13 14
8
10
11
12
9
Selected Urban Toronto
RioCan Developments'000s sf
(100%)
Yonge-Sheppard Centre 412
555 College 113
King Portland Centre 425
Yonge & Eglinton 707
The Well & Building 6 2,938
740 Dupont 181
Sunnybrook Plaza 316
Queensway 614
Dufferin Plaza 582
RioCan Leaside Centre 1,307
Lawrence Square 94
RioCan Hall 736
491 College 24
Bathurst College Centre 139
SELECTED URBAN
TORONTO8,588
59
URBAN HIGHLIGHTS: SELECTED HIGH DENSITY, LOCATIONS
UNPARALLELED MAJOR MARKET PIPELINE
RIOCAN LIVING
60
Each RioCan Living project is supported by:
• Impeccable management backed by the
proven track record of RioCan.
• Easy access to major commuter routes.
• Best in class architecture in iconic locations.
• Animated, community-focused event
programming.
• Best in class communal amenities that cater
to you.
• Retail experiences curated by the retail
experts.
61
RIOCAN MIXED-USE DEVELOPMENT TEAMCROSS-FUNCTIONAL COORDINATION ACROSS VARIOUS DISCIPLINES
RioCan Mixed-Use
Development Team
Investments & Residential
Leasing
Asset Management /
Operations
Developments
3rd Party Property
Management, at
the current state
• Product Development
• Acquisitions/Dispositions/Joint
Ventures
• Branding
• Marketing
• De-leasing initiatives
• Tenant relations
• Prospective tenant
engagement
• Commercial reporting, if Partner
involved
• Day-to-day management of
commercial component
• Liasing with Partner
• Initial planning and
concept
• Preliminary pro-forma
development
• Land entitlement
BRENTWOOD SHOPPING CENTRE
62
SITE CONTEXT
• 2008: Air right sale to residential
condominium developer (533,000
sq. ft.) for University City project
(727 residential units)
• 2016: RioCan achieved zoning
approval for an additional 1.1M
sq. ft. of density (655,000 sq. ft.
of residential, 445,000 sq. ft. of
commercial)
• 2017: Development permits issued
for BRIO (phase 1 of Brentwood
development) - 145,000 sq. ft. of
mixed-use density (135,000 sq. ft.
of residential, 10,000 sq. ft. of
commercial)
• RioCan planning future phase
adjacent to BRIO
University City
Brentwood
C Train -
Calgary LRT
University of
Calgary
SA Institute of
Technology
Foothills
Hospital
Property Boundary
BRIO
Brentwood Village
BRIO
63
PROJECT RENDERS
• BRIO is a joint-venture project
between Boardwalk REIT and
RioCan
• 12 storey, 163 unit residential
rental building with retail at
grade
• Construction underway,
expected completion in 2020
• Contemporary design,
premium living, and condo-
style amenities
• Redefining Brentwood Village
into a vibrant mixed-use
community complementing
neighbouring institutional uses
CURATED COMMUNITIES
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RioCan enhances the living experience of its residents through:
• Impeccable management
backed by the proven track
record of RioCan.
• Easy access to major
commuter routes.
• Best in class architecture in
iconic locations.
• Animated, community-
focused event programming.
• Best in class communal
amenities that cater to
our tenants.
• Retail experiences curated by
the retail experts.
PARTNERSHIPS TO LEVERAGE EXPERTISE AND MITIGATE RISKS
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Carefully selected partners in specific regions
BEST IN CLASS PARTNERS AND IMPECCABLE MANAGEMENT
Frontier - Gloucester Brio – Brentwood Village Litho. – 740 Dupont
EXAMPLE OF CURATED COMMUNITIES: STRADA
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Strada – College & Manning• Classic red-brick façade at street level and interior design details
and amenities that fit into the Italian heritage of Toronto’s Little Italy
• Exposed brick details, smoked mirror and antique architectural
details found throughout common spaces
• Classic Italian suite finishes:
o Open-kitchen designs with butcher-block details
o Marble tiles laid in timeless herringbone patterns
o Stainless steel chimney hood fans
• Technology Forward
o Connectivity and Security
o CRM software & solutions
• Amenities curated to appeal to a target who is known to enjoy
spending discretionary income upholding their lifestyle and social
life:
o Speakeasy
o Party Room and rooftop lounge
o Fitness room
RESIDENTIAL PROJECTS
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Litho. – 740 Dupont• Interior design and amenities pay homage to a neighbourhood
steeped in craftsmanship, history and creativity
• Clean design, natural materials such as concrete, infused with
bold pop of colour throughout common spaces
• Modern suite design with industrial touches:
o Black hardware and sliding doors
o Exposed metal-leg island detail
o Stainless steel appliances
• Ensure selected features and finishes are durable
• Amenities curated to appeal to the young, urban, creative class:
o Community Room
o Creative Studio
o Fitness Centre
o Private Dining/Boardroom
STRATEGIC ACQUISITIONS AND PARTNERSHIPS
CANADA’S MAJOR MARKET PORTFOLIO
• With the best locations in the six major markets
• Creates opportunities for partners to contribute to the project
o Expertise – development and managing partners on the residential side
proved the opportunity for RioCan to learn best practise and acquire
management expertise in a new asset class
o Capital/Risk Management – through the sale of interests in projects
RioCan is able to develop more projects than it could on its own and
spreads risk across projects and multiple partners
SELECTIVE ACQUISITIONS WITH PARTNERS
SEIZING OPPORTUNITIES AND MANAGING RISK
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STRATEGIC ACQUISITIONS AND PARTNERSHIPS
Sunnybrook
Participant(s)
JV Timing Post-Zoning, Pre-Construction
Crystalizing Value of Zoned Density and
Premier Purpose-Built Rental Developer
Gloucester City Centre
Participant(s)
JV Timing Post-Zoning, Under
Construction
One of the Largest Residential Landlords
and Local Expertise
The Well
Participant(s)
JV Timing Initial Acquisition
Risk Mitigation and Partner Expertise
Through strategic acquisitions and partnerships, RioCan owns the best locations in the six major
markets, and utilizes best-in-class partner expertise to maximize value for Unitholders
COMBINING THE BEST IN RETAIL WITH BEST IN CLASS PARTNERS TO CREATE LANDMARK COMMUNITIES
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STRATEGIC ACQUISITIONSYORKVILLE
Location: Transit oriented and in the heart of
prestigious Yorkville, one of Toronto’s most high-end
shopping and residential areas.
Property Type: Mixed-use with potential for up to
0.5M sf of luxury condominium and retail uses and
up to 82 rental units
Ownership: 50/25/25 joint venture among RioCan,
Metropia and Capital Developments
Zoning Status: Zoning Bylaw Amendment (ZBA)
submitted April 2018
Surfacing Value:
• The partners have completed acquisitions of
adjacent properties substantially required for the
intensification project
• RioCan has agreed to purchase the partners’
interest in the retail portion upon completion at a
6% cap rate and has the right of first opportunity to
acquire the residential rental units
18 Cumberland
17 Yorkville
11 Yorkville
19 Yorkville
16 Cumberland21 Yorkville
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CAPITAL STRUCTURE AND FINANCING STRATEGY
Qi Tang
Senior Vice President and CFO
Max.
Permitted
As at
Dec. 31, 2017Target
Properties Under Development (“PUD”) & Inventory - $1.2 B $1B +/- $200M
PUD and Inventory as % of Gross Assets – per Line of Credit Covenant 15% 8.5% ~ 10%
Investment in Greenfield Development and Inventory as % of Unitholder Equity
- per Declaration of Trust15% 3.3% N/A
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MEASURED APPROACH TO DEVELOPMENT
$1.2 Billion
$300M - $400M$300M - $600M
$1.0 Billion
+/-$200M
Current PUD &
Inventory Balance
Annual Development
Spending
Annual Development
Completions
Annual PUD
Balance
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SELF FUNDING DEVELOPMENTNOT DEPENDENT ON EQUITY OFFERINGS OR INCREASING LEVERAGE
Sources of Funding for Development:
• Disposition net proceeds
• Sales proceeds from condominium/townhouse developments or air rights sales
• Strategic alliances to reduce capital requirements and mitigate risks
• Excess operating cash flows
• Sale of marketable securities
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PRUDENT MANAGEMENT OF DEVELOPMENT RISKS
• Laddered development
• Pre-leasing requirement for commercial development and sound market studies for residential
development
• Well-established internal control process for development approvals and construction management
• Strategic alliances to reduce capital requirements and mitigate risks
• Dedicated and experienced development team but not over-staffed
o No overhead pressure to take on projects
o Residential property management currently outsourced until we reach scale
• Already own the assets, which are income producing
o We can better control development starts especially in today’s environment of rising construction costs
• Limited condominium development
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CONSISTENTLY ABOVE 95%
Capital Structure Metrics
Target 2017
Leverage 38% - 42% 41.4%
Debt/EBITDA <8.0x 7.57x
Interest Coverage >3.0x 3.84x
Debt Service Coverage >2.25x 3.06x
Fixed Coverage >1.10x 1.17x
Unencumbered Assets N/A $7.7B
Unencumbered Assets to Unencumbered Debt >2.0x 2.26x
NOI % from Unencumbered Assets >50% 56.7%
Unsecured vs. Secured Debt 60%/40% 57%/43%
FFO Payout Ratio <80% 78.8%
STRONG BALANCE SHEETCONTINUE TO MAINTAIN PRUDENT CAPITAL MANAGEMENT & FLEXIBLE CAPITAL STRUCTURE
41.4%46.0%
3.1x
2.6x
7.6x8.3x
Debt Service Coverage
Leverage
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INDUSTRY LEADING FINANCIAL PROFILERIOCAN VS. PEERS
Source: company reports; Peers: FCR, SRU, CHP, CRR, CRT
3.9x
3.1x
Interest Coverage
Debt to EBITDA
INDUSTRY LEADING FINANCIAL PROFILECAPITAL STRUCTURE PROFILE: CANADA VS. U.S.
Historical Background and Stronger Demand for Yield:
o Canadian REITs have a shorter history and higher demand for yield
o US Retail REITs have much higher institutional ownership (~86%*)
Less Risky Retail Operating Environment
o Less retail space per capita in Canada
o Stricter development regulations and municipal bylaws in Canada
o Retail in Canada has less competition, more financially stable anchor tenants
More Conservative Lending Practices
o Canada: recourse borrowing and higher proportion of secured financing
o U.S.: Non-recourse borrowing and more reliance on unsecured financing
o Canadian financial institutions have more conservative, on-balance sheet lending practices
*Source: RBC Capital Markets
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CAPITAL MANAGEMENT STRATEGY
• Maintain strong balance sheet with leverage in the 38% - 42% range
• Maximize unit repurchases under NCIB subject to our leverage target
• Self-fund development
• Balance unsecured and secured debt ratio in the 60/40 split range
• Maintain financial flexibility by managing revolving line of credit utilization
and balance between debenture issuance and line of credit utilization
• Balance debt maturities and limit variable rate debt to manage interest rate risk
• Maintain and develop lender relationships and continue to utilize diversified funding sources
• Utilize CMHC funding for mixed-use residential properties
STRONG BALANCE SHEET
CANADA’S MAJOR MARKET PORTFOLIO
• Low leverage
• Low cost of debt
• Laddered debt maturity and mostly fixed rate
• Access to multiple sources of capital
• Large unencumbered assets pool generating
56.7% of annualized NOI
STRONG BALANCE SHEET
Strong Growth
Multiple Capital
Sources
Low Leverage
THE FINANCIAL RESOURCES TO FUEL GROWTH AND WEATHER MARKET TURMOIL
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CLOSING REMARKS
Ed Sonshine
Founder and CEO
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Q&A