Q4 2018 Conference Call Presentation February 12, 2019
FORWARD LOOKING ADIVISORY & 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. The forward looking information contained in this presentation is made as of the date hereof. 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. NON-GAAP MEASURES 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 year ended December 31, 2018. RioCan uses these measures to better assess the Trust’s underlying performance and provides these additional measures so that investors may do the same. Q4 | RioCan | 01
FUNDS FROM OPERATIONS (“FFO”) & PAYOUT RATIO • FFO/unit increased $0.06 or 3.3% from 2017 to 2018 despite: o Nearly $1.0B asset sales in 2018 o $7.5M in severance costs • FFO/unit growth of 4.7% from 2017 to 2018 excluding severance costs • FFO/unit growth of 9.9% since 2016 FFO per Unit FFO Payout Ratio Target is to be below 80% $1.85 $1.79 83.6% $1.68 78.8% 77.9% 2016 2017 2018 2016 2017 2018 Q4 | RioCan | 02
OPERATIONAL HIGHLIGHTS SPNOI Growth Total Portfolio Major Markets 2.6% 2.2% 2.2% 2.1% 2017 2018 2017 2018 Committed Occupancy Total Portfolio Major Markets 97.7% 97.6% 97.1% 96.6% 2017 2018 2017 2018 Q4 | RioCan | 03
ACCELERATION OF MAJOR MARKET STRATEGY Disposition Progress as of December 31, 2018 • Sale prices to-date are materially in line with IFRS value Transaction type Value (M) • $1.5B progress since the October 2017 announcement Closed and Firm $1,265 represents approximately 73% of the $2.0B disposition target Conditional $191 • Dispositions span a broad range of secondary markets Total to Date $1,456 • 22.9M RioCan units purchased and cancelled since October 2017 at an average purchase price of $24.51 per unit for a Weighted Average Cap Rate 6.68% total cost of $561.2M % of Revenues % of Revenues from Major Markets from GTA >90% 85.4% 76.1% >50% 46.8% 40.9% 2017 2018 Vision 2017 2018 Vision Q4 | RioCan | 04
HIGH-PERFORMANCE PORTFOLIO High occupancy and strong net rent growth (8- year average net rent CAGR ─ 3.2% ) 100.0% $20.00 Average Net Rent Per Square Foot (PSF) $19.07 $19.00 $17.75 97.5% 97.2% 97.3% $17.59 97.0% 97.1% 96.9% Committed Occupancy 96.6% $18.00 95.6% $17.11 95.0% $16.69 $17.00 $16.63 94.0% $16.07 $16.00 Sears departure $15.21 Target departure $14.82 $15.00 90.0% $14.00 2010 2011 2012 2013 2014 2015 2016 2017 2018 PSF Committed Occupancy Average Net Rent Q4 | RioCan | 05
DEVELOPMENT PROGESSING WELL DEVELOPMENT PROGRESSING WELL 491 College St. W. - Completed King Portland Centre - Completed Key Statistics (2018) Development on the Balance Sheet $ 1.2B Development as a % of Total Assets 8.5% (Max permitted 15%) Development Completions: - NLA Completed (in SF) 799,000 ePlace - Near Completion Frontier Phase I - Near Completion - Costs Transferred $550.9M Development Expenditures $473.4M Bathurst College Centre - Near Completion Q4 | RioCan | 06
DEVELOPMENT YIELD AND VALUE CREATION • Estimates of development yield and value creation are as follows for five urban intensification and greenfield development projects that are complete or close to completion: Ownership Estimated Total Estimated Total Estimated Estimated Estimated Yield Estimated Future (For data in this Residential Incremental Net Project Costs Stabilized NOI on Total Costs Stabilized Value table) Inventory Gains Value Creation Yonge Eglinton Northeast Corner 100% $223.2M $11.8M 5.3% $327.3M $14.0M $118.1M (ePlace) 1 King Portland 50% $86.4M $5.5M 6.4% $129.9M $12.5M $56.0M Centre Bathurst 100% $109.4M $5.2M 4.8% $115.4M N/A $6.0M College Centre Gloucester 50% $34.1M $1.8M 5.3% $44.8M N/A $10.7M (Frontier) 2 Sage Hill 3 100% $120.8M $8.5M 7.0% $161.0M N/A $40.2M $573.9M $32.8M 5.7% $778.4M $26.5M $231.0M TOTAL 1. Total estimated project costs include estimated project costs for the Trust's current 50% interest, net of applicable interim and fee income during the development period, plus the cost of acquiring the remaining 50% interest in the residential rental tower at costs plus $10 million and the remaining 50% interest in the retail component based on stabilized retail NOI at a 7.0% capitalization rate pursuant to the existing agreements with our project partners. Both transactions are expected to close in 2019. 2. Total estimated net project costs include land costs for this phase one development. Excluding the cost of the phase one land which has been owned by the Trust since 1999 as part of the 7.1-acre shopping center, the estimated development yield would be 5.8%. 3. The estimated yield on the Trust's original 50% interest in this project is 8.4%. In February 2019 the Trust acquired the remaining 50% ownership interest for $70.4 million, which is higher than the estimated net project costs of the Trust's original 50% interest in the project. The blended yield on this project is therefore 7.0%. • As of December 31, 2018, $165.4 million of the incremental value creation has been recognized through property IFRS fair market values, applicable interim and fee income, and inventory gains Q4 | RioCan | 07
FUNDING DEVELOPMENT • RioCan is committed to self-funding its development program and maintaining a strong balance sheet As at Target Dec 31, 2018 Properties Under Development (“PUD”) & Residential Inventory $1.2B N/A PUD and Residential Inventory as % of Gross Assets – Per Line of ~ 10% 1 8.5% Credit and Credit Facilities Agreements Investment in Greenfield Development and Residential Inventory as 5.3% N/A % of Unitholder’s Equity – Per Declaration of Trust $400M-$500M $300M-$600M < $1.5B $1.2B Current PUD and Inventory Annual Development Spend Annual Development Target PUD and Inventory Balance Completions Balance * 1. Maximum permitted is 15%. RioCan targets this metric to be no more than 10% (except for short-term fluctuations as large projects are completed) Q4 | RioCan | 08
STRONG BALANCE SHEET PRUDENT CAPITAL MANAGEMENT & FLEXIBLE CAPITAL STRUCTURE Capital Structure Metrics 2018 1 Target Debt to Adjusted EBITDA <8.0x 7.88x Debt to Total Assets 38% - 42% 42.1% Interest Coverage >3.0x 3.63x Debt Service Coverage >2.25x 3.05x CONSISTENTLY ABOVE 95% Fixed Coverage >1.10x 1.15x Unencumbered Assets N/A $8.0B Unencumbered Assets to Unencumbered Debt >2.0x 2.31x NOI % from Unencumbered Assets >50% 59.1% Unsecured vs. Secured Debt 60% / 40% 58% / 42% FFO Payout Ratio <80% 77.9% Metrics are calculated based on RioCan’s proportionate share 1. Q4 | RioCan | 09
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