rpt new net lease platform
TRANSCRIPT
NEW NET LEASE PLATFORM
UNLESS OTHERWISE INDICATED, ALL RPT FINANCIAL INFORMATION IS PRESENTED ON A CONSOLIDATED BASIS AND INCLUDING ITS PRO-RATASHARE OF UNCONSOLIDATED JOINT VENTURES AND IS AS OF OR FOR THE QUARTER ENDED DECEMBER 31, 2020. FOR IMPORTANT INFORMATIONREGARDING FORWARD-LOOKING STATEMENTS IN THIS PRESENTATION, SEE SLIDE 2.
This presentation contains forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as ended,
and Section 21E of the Securities Exchange Act of 1934, as
amended. These forward-looking statements represent our
expectations, plans or beliefs concerning future events and may
be identified by terminology such as “may,” “will,” “should,”
“believe,” “expect,” “estimate,” “anticipate,” “continue,” “predict” or
similar terms. Although the forward-looking statements made in
this document are based on our good faith beliefs, reasonable
assumptions and our best judgment based upon current
information, certain factors could cause actual results to differ
materially from those in the forward-looking statements. Many of
the factors that will determine the outcome of forward-looking
statements are beyond our ability to predict or control. Factors
which may cause actual results to differ materially from current
expectations include, but are not limited to: our success or failure
in implementing our business strategy; economic conditions
generally and in the commercial real estate and finance markets
specifically; the cost and availability of capital, which depends in
part on our asset quality and our relationships with lenders and
other capital providers; risks associated with bankruptcies or
FORWARD- LOOKING STATEMENTS
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insolvencies or general downturn in the businesses of tenants; the
potential adverse impact from tenant defaults generally or from
the unpredictability of the business plans and financial condition of
the Company's tenants, which are heightened as a result of the
COVID-19 pandemic; changes in governmental regulations, tax
rates and similar matters; and other factors detailed from time to
time in our filings with the Securities and Exchange Commission
("SEC"), including in particular those set forth under “Risk Factors”
in our latest annual report on Form 10-K, which you should
interpret as being heightened as a result of the numerous and
ongoing adverse impacts of COVID-19. Given these uncertainties,
you should not place undue reliance on any forward-looking
statements. Except as required by law, we assume no obligation
to update these forward-looking statements, even if new
information becomes available in the future.
TRANSACT ION OVERVIEW
RPT Realty, GIC Private Limited (“GIC”), Zimmer Partners (“Zimmer”) and Monarch AlternativeCapital LP (“Monarch”) formed a new net lease retail real estate platform (“RGMZ”) with equitycommitments totaling $470 million. RGMZ will target $1.2 to $1.3 billion of acquisitions ofessential, resilient and high credit tenants over the next three years subject to long-term, netleases.
Initial Portfolio• RGMZ is to be seeded with 42 single-tenant, net lease retail
assets that have been or will be created by RPT upon thesubdivision of certain of its existing shopping centers (“InitialPortfolio”)
• The Initial Portfolio was valued at $151 million andaccounted for ~6% of RPT’s 4Q20 annualized base rent
• The Initial Portfolio is expected to close in phases
Future Commitments & Capital Structure• RGMZ will have $410 million of remaining committed equity
after the closing of the Initial Portfolio• RGMZ will target 60-65% leverage• RGMZ received commitments for a $175 million secured
credit facility to fund acquisitions, including the InitialPortfolio, subject to final loan documentation
Equity Capital$ in millionsInvestor
Initial Portfolio
Future Commitments
Fully Deployed
% of Equity
GIC, Zimmer, Monarch1 $57 $383 $440 94%RPT 4 26 30 6%RGMZ $61 $410 $470 100%
RPT Preferred1 $9 $61 $70
Management & Governance• RPT will manage the day-to-day operations of RGMZ, source
acquisitions and receive management, constructionmanagement and leasing fees
• RPT will appoint a new Managing Director for RGMZ reportingdirectly to RPT’s CEO
• RGMZ will have a separate Board from RPT comprised ofDirectors from RPT, GIC, Zimmer and Monarch
• Material decisions, including future acquisitions, will require theunanimous approval of the Board
Totals may not add due to rounding
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F O R M A T I O N A C Q U I S I T I O N S F U L LY D E P L OY E D
Best-in-class, essential and high credit quality tenants
Targeted Tenant Mix Final Tenant MixInitial Tenant MixContinue to focus on an essential and high
credit quality tenant mix like wholesale clubs, dollar stores, grocers and QSRs
Diversified mix of essential and high credit quality tenants that provide a strong and
stable cash flow stream
RPT seeds RGMZ with $151 million of assets
Acquire ~$1+ billion of high-quality net lease retail properties
Option to retain, sell or IPO ~$1.2 to $1.3 billion portfolio1
RGMZ SNAPSHOT
>50% IG2
90% Essential2
19 Ground Leases
Focus on Essential and High Credit
Quality Tenants
Focus on Essential and High Credit
Quality Tenants
Managed by RPT
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STRATEGIC RATIONALE
OUR THES IS
Why Net Lease Retail Today
• Stable, predictable and scalable business model
• Historically wide cap rate spread to Treasuries of over 500 basis points
Why RGMZ Makes Sense
Why RPT is Well Positioned
• Creation of a transformational new platform with a small investment of RPT’s existing rents
• Multiple strategic and financial benefits with limited impact on RPT’s portfolio, paving the path for future growth
• Right time with the right expertise to enter a market with ample external growth opportunities involving essential and high credit quality tenants
• Synergistic partnership with complementary net lease strategy that enables RPT to unlock value in mispriced multi-tenant assets
• Operational expertise and best-in-class partners allows RPT to capitalize on a wide spectrum of strategic and opportunistic acquisitions
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WHY NET L EASE RETA I L TODAY
Leveraged net lease cash flows, combined with stable cap rates and near-record spreads toTreasuries has created an attractive investment opportunity.
Stability - One tenant, one credit, and visibility into unit-level four wall EBITDA make net lease a stable asset class
Predictability - Net lease structure requires minimal capital expense, management or brokerage fees or other expenses,making net lease a predictable asset class
Scalability - Low management and operational intensity allow landlords to scale with tenants, providing retailers withgrowth capital
Source: Real Capital Analytics, U.S. Department of Treasury, U.S. Census Bureau
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
16.0%
18.0%
4.0%4.5%5.0%5.5%6.0%6.5%7.0%7.5%8.0%8.5%9.0%
Q4 2006 Q4 2008 Q4 2010 Q4 2012 Q4 2014 Q4 2016 Q4 2018 Q4 2020
Single-tenant Cap Rates (%)
Single-Tenant Cap Rate (LHS) E-commerce % of Retail Sales (RHS)
0
100
200
300
400
500
600
700
Q4 2006 Q4 2008 Q4 2010 Q4 2012 Q4 2014 Q4 2016 Q4 2018 Q4 2020
Single-tenant Cap Rate Spread to 10-year Treasury
Single-Tenant Cap Rate Spread to 10-Yr Treasury (bps)
Stable cap rates in the face of retail disruption
Spreads near all-time highs
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TRANSFORMAT IONAL PLATFORM…
Strategic benefits to RPT Accelerates growth via attractively priced capital
from Initial Portfolio sale Complementary net lease strategy enables RPT to
unlock value in mispriced multi-tenant assets andmispriced tenant credits
RPT’s operational expertise expands investmentuniverse versus traditional net lease models
Alignment with real estate thought leaders withglobal reach across multiple disciplines
Potential $1.2 to $1.3 billion platform1 with multiple benefits for RPT.
RPT94.1%
Financial benefits to RPT Enhanced returns through cap rate arbitrage OFFO/sh accretion upon deployment of future
committed capital Lower long-term capex and higher NOI growth
potential G&A efficiencies from potential 60% increase in
RPT’s assets under management and fee income
Potential $1.2-$1.3 billion platform1
RGMZ6%
RPT94% Initial
Portfolio13%
Potential Future Acquisitions
87%
% of ABR
6% investment of existing ABR
% of Asset Value
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% of RPT’s 4Q20 ABR 100% 6% 94%
Top 40 MSAs(based on ABR) 96.4% 100.0% 96.2%
Small Shop Exposure 42.3% 40.7% 42.4%
Average ABR psf $15.41 $12.31 $15.66
3-Mile Household Income $102,706 $98,508 $102,970
3-Mile Population 77,167 76,573 77,204
RPT will make a 6% investment of ABR to seed RGMZ, with modest impacts on the portfolio.
RGMZ
…FOR A SMALL SEED INVESTMENT
Pro Forma
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AL IGNED AND BEST- IN -CLASS PARTNERS
Operational, financial and investment expertise
Proven asset management and redevelopment expertise
Deep retailer relationships
Long-term value focus
RGMZGIC / Zimmer /
Monarch
• Substantial growth opportunity
• Strong return profile
• High-quality portfolio positioned for an evolving retail landscape
• Enhanced acquisition opportunity set relative to
traditional net lease buyers
Extensive real estate experience across all property types
Recognized public real estate market expertise
Strong opportunistic, credit and retailer capabilities
Long-term value focus
RPT
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DIFFERENT IATED APPROACH TO NET L EASE INVEST ING
Platform and capital partners enable us to identify and invest in unique net lease opportunities.
Secondary Market Net Lease Opportunities
Acquisition of retail net lease assets in the secondary transaction market
Multi-Tenant / Single-Tenant Value Arbitrage
Essential and high credit quality net lease tenants embedded in strong multi-tenant centers
Direct Retailer Sale Leaseback Opportunities
Pursue direct sale leaseback opportunities with retailers
Traditional Net Lease with Upcoming Expirations
Ability to acquire shorter-term assets with a desirable mix of strong unit-level economics, corporate credit and real
estate fundamentals given operational expertise
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UNLOCKING VALUE IN M ISPR ICED MULT I - T ENANT ASSETS
Single-Tenant Net Lease Assets
$50M
Multi-Tenant Center$50M
Multi-Tenant Center$100M
Illustrative example of potential transaction between RPT and RGMZ
RPT buys center
Differentiated strategies, complementary platforms.
Key Benefits to RPT:• Reduces capital required, increases
effective acquisition cap rate andlowers cost basis of retained portion
• Enhances growth profile with a lowerongoing capex load for the retainedmulti-tenant center
• Retains management of sold parcelsand tenant synergies
• Earns management fees, therebyreducing net G&A load
Key Benefits to RGMZ:• Access to essential and high credit
quality tenants in attractive marketswith strong demographics
• Benefits from traffic of multi-tenantopen-air centers
• Stable cash flow with strong tenancyallows for target leverage of 60-65%
• Enhanced acquisition opportunity setrelative to traditional net lease buyersdue to partnership with RPT
+/- 200 basis point cap rate spread
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RPT has the operating expertise and the platform necessary for an evolving retail landscape.
WELL -POS I T IONED TO CAP I TAL I Z E ON D ISLOCAT IONS
Deep leasing, redevelopment and asset management experience
• Ability to acquire net lease assets with upcoming expirations at an attractive basis
• Increase competitiveness for multi-tenant shopping center acquisitions with a lower cost of capital through RGMZ
Direct relationships with retailers, shopping center / mall landlords and special servicers
• Multiple avenues to significantly grow assets under management:- New sale leaseback capital to support M&A, leveraged buy-out and
development opportunities for retailers- Subdivided units from shopping centers and malls- Value-add multi-tenant and single-tenant retail properties
Support from best-in-classpartners
• Validation of business through commitment of growth capital for strategic and opportunistic acquisitions
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RPT GOING FORWARD
THREE -PRONGED EXTERNAL GROWTH STRATEGY
Three different strategies with tailored capital structures to drive scale and outsized growth.
RGMZR2G
RPT Ownership 100.0% 51.5% 6.4%1
Gross Assets $2.3 billion2 $244 million3 $151 million4
Property Type Multi-tenanted shopping centers
Grocery-anchored shopping centers
Single-tenant assets
Lease Type Average lease lengths with value-creation opportunities
Average lease lengths with core-stabilized characteristics
Long-term net leases
Tenancy Diversified, high-quality tenants with balanced mix of anchor and shop tenants
Grocery-anchored in top MSAs
Resilient, investment grade quality tenants
Leverage Profile Targeting 5.5x-6.5x net debt-to-EBITDA
Targeting no leverage Ability to operate at higher target leverage levels of 60-65%
Dry Powder for Acquisitions
$600 million in cash and undrawn committed credit facility5
$412 million undrawn equity commitments
$410 million undrawn equity commitments, representing ~$1.0 to $1.2 billion of assets6
(Balance Sheet) (Existing GIC Joint Venture) (New Net Lease Platform)
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R2G$412
RGMZ$1,000
to$1,200
Total $1.4 to $1.6 billion
$0
$200
$400
$600
$800
$1,000
$1,200
$1,400
$1,600
Joint Venture Dry Powder
PAVING OUR OWN PATH TO GROWTH
Revolver Capacity
$350
Cash$99
RGMZ$151
Total $600 million
RPT Dry Powder
Charlotte Richmond
Raleigh
Boston
Phoenix Orlando
Targ
etEx
pans
ion
Miami Tampa
Nashville ColumbusAustin
Minneapolis
$ in millions, unless otherwise noted
1
Three unique and complementary platforms that allow RPT to accelerate its external growthactivity amidst today’s attractive private market conditions.
2
3
Targeting 5.5-6.5x leverage
RPT’s wholly-owned target and expansion markets
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KEY TAKEAWAYS
Transformational platform from a small seed investment
Differentiated net lease strategy utilizing our core competencies
Paving our own path to growth
Partnering with best-in-class investors
Unlocking value in mispriced multi-tenant assets
Complementary platforms to act upon retail dislocations
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ADVISORS AND DEBT CAP I TAL PROVIDERS
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FOOTNOTES
FOOTNOTES
SLIDE 31) Includes RPT preferred investments, which are a component of Zimmer and Monarch’s equity commitments that will earn a fixed return of 7% and are
not a direct obligation of RGMZ.
SLIDE 41) For illustrative purposes only, assumes 60-65% leverage on $470 million of committed equity capital.
2) As a percent of annualized base rent.
SLIDE 81) For illustrative purposes only, assumes 60-65% leverage on $470 million of committed equity capital.
SLIDE 151) Reflects RPT’s equity ownership only and does not contemplate RPT’s preferred investment.
2) Reflects total assets of $2.0 billion plus accumulated depreciation of $0.4 billion as reported on the Company’s Condensed Consolidated BalanceSheet for the year ended December 31, 2020. Totals may not add due to rounding.
3) Value of five assets contributed to R2G as reported in our press release dated December 10, 2019.
4) Value of 42 Initial Portfolio assets contributed to RGMZ as reported in the Company’s press release dated March 3, 2021.
5) Reflects cash, cash equivalents and restricted cash and unused revolver capacity as of December 31, 2020 of $461 million adjusted for subsequent$100 million revolver paydown and $151 million of gross proceeds from the Initial Portfolio sale adjusted for RPT’s share of RGMZ investments of $13million. Totals may not add due to rounding.
6) For illustrative purposes only, assumes 60-65% leverage on $410 million of committed equity capital, excluding the Initial Portfolio.
SLIDE 161) $211 million of cash, cash equivalents and restricted cash as of December 31, 2020, adjusted for the subsequent $100 million revolver payoff and
$13 million for RPT’s share of RGMZ equity and preferred investments associated with the Initial Portfolio. Totals may not add due to rounding.
2) $250 million of unused revolver capacity as of December 31, 2020, adjusted for the subsequent $100 million revolver payoff.
3) For illustrative purposes only, assumes 60-65% leverage on $410 million of committed equity capital, excluding the Initial Portfolio.
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