RioCan Reports First Quarter Results - Strong Leasing Results Driven by Accelerated Demand for High-Quality RioCan Space

RioCan Real Estate Investment Trust ("RioCan" or the "Trust") (TSX: REI.UN) announced today its financial results for the three months ended March 31, 2024.

"We continue to demonstrate the quality and resilience of RioCan's exceptional portfolio with strong leasing demand whenever units become available at our centres. Our ideal locations, superior demographics, and resilient tenant mix continue to attract and retain essential retailers," said Jonathan Gitlin, President and CEO of RioCan. "Our strategic leasing activity continues to enhance the strength of our portfolio and surface significant net asset value through an upgraded tenant base, improved income quality and higher average rents. The ongoing short supply and strong demand for quality retail space positions RioCan well for strong leasing results going forward."

• FFO per unit was $0.45, an increase of $0.01 per unit or 2.3% over the same period last year. FFO growth was driven by strong leasing performance, growth in residential NOI¹, benefits of development deliveries and higher residential inventory gains. These items were partially offset by the short-term impact on in-place occupancy of tenant vacancies, many of which have been re-leased at higher rents, lower NOI from prior periods' sale of commercial properties and higher interest expense.
• Net income of $128.6 million was $10.6 million higher than the same period last year. The increase was mainly due to the reasons described above, and a $3.3 million fair value gain on investment properties compared to a $17.4 million fair value loss in 2023 partially offset by a prior year tax recovery benefit that did not recur.
• Our FFO Payout Ratio¹ of 60.7%, Liquidity¹ of $1.5 billion, Unencumbered Assets¹ of $8.1 billion, floating rate debt at 8.6%¹ of total debt and staggered debt maturities, all contribute to our financial flexibility and balance sheet strength.

Outlook

• For 2024, we anticipate FFO per unit to be within the range of $1.79 to $1.82, Commercial SPNOI¹ growth of ~3%, and an FFO Payout Ratio of between 55% to 65%. Development Spending¹ on mixed-use projects is expected to be between $250 million to $300 million and spending for the construction of retail projects is expected to be between $50 million to $60 million.

Operational Highlights (i)

• Leased 1.3 million square feet including 482 thousand square feet of new leases driven by market dynamics where demand is outstripping supply.
• New and renewal leasing spreads of 19.7% and 11.5%, respectively resulted in a blended leasing spread of 14.0%.
• Strong and stable tenants comprised 87.9% of annualized net rent, improving by 40 basis points compared to Q4 2023 and 110 basis points year-over-year.
• Strategic leasing activity further improving the resiliency of our income and NAV growth included:
  • Two new grocery tenancies which transformed two assets into higher valued grocery-anchored centres;
  • An additional grocery tenant at RioCan Colossus Centre;
  • An executed lease with Costco at RioCan Centre Burloak, which is subject to certain closing conditions; and
  • Two additional grocery leases in final stages of negotiation which will create more grocery-anchored centres in the near term.
• Retail committed occupancy was 97.9%, compared to 98.0% as at the same period last year and 98.4% as at Q4 2023.
• As of May 7, 2024, the Trust re-leased six of the 10 locations that were vacated due to the two tenant failures discussed in the prior quarter. While these vacancies have a short-term impact, they have provided RioCan with the opportunity to back-fill its near capacity retail portfolio with higher quality retailers at higher rents.
  • The six new leases are to improved tenancies, including two of the aforementioned grocers, and are at significantly higher base rents, embed annual rent increases and contain fewer restrictions and exclusives.
  • Negotiations are underway for the remaining four locations.
  • The two failed tenants previously occupied the 10 locations or 261 thousand square feet and account for most of the occupancy decrease from Q4 2023.
• Commercial Same Property NOI¹ increased by 0.4%, lower than the prior quarter driven predominantly by lower in-place occupancy.

RioCan Living Update ¹

• Total NOI generated from our residential rental operations was $6.4 million, an increase of $2.1 million or 49.1% over the same period last year. On a Residential Same Property NOI² basis, growth was 6.5% in the First Quarter.
• RioCan Living^TM has 14 buildings or 3,072 residential units in operation, 12 of which are stabilized. When compared to Q4 2023 on a same property basis, occupancy decreased by 129 basis points. The decrease in occupancy is primarily attributed to short-term turnover of units in one Toronto building that are expected to be re-leased at market rents.
• Construction of 526 suites at FourFifty The Well^TM is complete and 55.9% of the units are leased at rents in-line with expectations as at May 7, 2024.

Development Highlights

• During the First Quarter, $62.9 million or 54,000 square feet of properties under development were transferred to income producing properties.
• As at May 7, 2024, 97% of the total commercial space at The Well^TM is leased with 92% or 1,372,000 square feet (at 100% ownership interest) in tenant possession. The retail component is 94% leased, with more than half of the space open and operating. The majority of the remaining retail tenants are expected to open over the next two quarters.
• Value recognized in the Trust's residential inventory and properties under development balances for zoned projects, excluding those under construction, is $31.34 per square foot and $19.83 per square foot for the total development pipeline.

Investing and Capital Recycling

• As of May 7, 2024, closed dispositions totalled $31.1 million. Closed investment property dispositions in the First Quarter included a cinema-anchored property and an open air centre for combined sales proceeds of $19.1 million. Non-core residential inventory development land was sold in Q2 2024 for sales proceeds of $12.0 million resulting in an anticipated inventory gain of approximately $5.2 million.
• In addition, the Trust sold a 12.5% interest in the 11YV project in the First Quarter, thereby reducing its interest in the project to 25.0%. The resulting gain of $12.2 million was mainly attributable to the value of the underlying residential inventory.
• Total Acquisitions¹ of $157.1 million, including those previously announced, closed in the First Quarter. Total contractual debt assumed was $78.8 million at an average contractual interest rate of 2.69% and the acquisition amount includes a $40.9 million deferred density payment, to be paid as various development milestones are met.
• As market conditions permit, RioCan provides mezzanine financing, earning interest income at attractive rates relative to its cost of capital. During Q1 2024, RioCan issued $68.0 million of new loans and $30.6 million of existing loans were repaid.

Capital Management Update

• On February 12, 2024, RioCan issued $300.0 million of Series AJ senior unsecured debentures. These debentures were issued at a coupon rate of 5.470% per annum and will mature on March 1, 2030. Inclusive of the benefit of bond forward hedges, the all-in rate is 5.452%. The proceeds were used to repay, in full, the $300.0 million, 3.287% Series W unsecured debentures upon maturity on February 12, 2024.
• On March 25, 2024 RioCan issued an additional $150.0 million of Series AJ senior unsecured debentures. These additional debentures have the same terms and conditions and constitute part of the same series as the existing $300.0 million in Series AJ debentures issued on February 12, 2024. Inclusive of the premium on issuance and the benefit of bond forward hedges, the all-in rate is 5.273%.

Balance Sheet Strength

• Adjusted Debt to Adjusted EBITDA improved to 9.17x on a proportionate share basis as at March 31, 2024, compared to 9.28x as at the end of 2023 and 9.48x as at Q1 2023. The decrease was primarily due to higher Adjusted EBITDA, partially offset by higher Average Total Adjusted Debt balances.
• As at March 31, 2024, the Trust had $1.5 billion of Liquidity. The Trust has $1.0 billion of its revolving line of credit available in addition to $0.5 billion in undrawn construction lines and other bank loans. Liquidity decreased by $418.2 million when compared to the prior year end, returning to more typical levels, mainly due to timing of capital recycling and financing activities.
• Pursuant to the terms of its credit agreement, the Trust has an option to increase the commitment under its revolving line of credit by $250.0 million.
• RioCan's Unencumbered Assets of $8.1 billion, which can be used to obtain secured financing to provide additional liquidity at lower interest rates than unsecured debt, generated 56.2% of Annual Normalized NOI¹.
• The Trust's exposure to floating rate debt was 8.6% of total debt as at March 31, 2024. Excluding construction loans, floating rate exposure was 5.2%.

Conference Call and Webcast

Interested parties are invited to participate in a conference call with management on Wednesday, May 8, 2024 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: 616433.

For those unable to participate in the live mode, a replay will be available at 1-866-813-9403 with access code: 851637.

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 March 31, 2024, our portfolio is comprised of 188 properties with an aggregate net leasable area of approximately 32.6 million square feet (at RioCan's interest) including office, residential rental and nine 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 months ended March 31, 2024, which are available on RioCan's website at www.riocan.com and on SEDAR+ at www.sedarplus.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, Commercial Same Property NOI ("Commercial SPNOI"), Residential Same Property NOI ("Residential SPNOI"), Development Spending, Total Acquisitions, Ratio of floating rate debt to total debt, Liquidity, Adjusted Debt to Adjusted EBITDA, RioCan's Proportionate Share, Unencumbered Assets 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 months ended March 31, 2024.

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 March 31, 2024 and December 31, 2023:

The following tables reconcile the consolidated statements of income from IFRS to RioCan's proportionate share basis for the three months ended March 31, 2024 and 2023:

NOI and Same Property NOI

The following table reconciles operating income to NOI and Same Property NOI to NOI for the three months ended March 31, 2024 and 2023:

FFO

The following table reconciles net income attributable to Unitholders to FFO for the three months ended March 31, 2024 and 2023:

Development Spending

Total Development Spending for the three months ended March 31, 2024 and 2023 is as follows:

Total Acquisitions

Total Acquisitions for the three months ended March 31, 2024 and 2023 are as follows:

Total Contractual Debt

The following table reconciles total debt to Total Contractual Debt as at March 31, 2024 and December 31, 2023:

Floating Rate Debt and Fixed Rate Debt

The following table summarizes RioCan's Ratio of floating rate debt to total debt as at March 31, 2024 and December 31, 2023:

Liquidity

As at March 31, 2024, RioCan had approximately $1.5 billion of Liquidity as summarized in the following table:

Adjusted EBITDA

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

Adjusted Debt to Adjusted EBITDA Ratio

Adjusted Debt to Adjusted EBITDA is calculated as follows:

Unencumbered Assets

The tables below summarize RioCan's Unencumbered Assets and Percentage of Normalized NOI Generated from Unencumbered Assets as at March 31, 2024 and December 31, 2023:

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 can generally 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 months ended March 31, 2024 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. 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.