TORONTO, ONTARIO--(Marketwired - Feb. 13, 2014) - RioCan Real Estate Investment Trust (TSX:REI.UN) -
HIGHLIGHTS for the year ended December 31, 2013:
All figures in Canadian dollars unless otherwise noted. RioCan's results are prepared in accordance with International Financial Reporting Standards ("IFRS").
RioCan Real Estate Investment Trust ("RioCan") today announced its financial results for the year ended December 31, 2013.
"I am very pleased with RioCan's results this past year, in which RioCan celebrated the milestone of twenty years of operation. The Trust assumed the operations of nearly all of our US properties and RioCan opened its first two offices outside of Canada, in New Jersey and Texas," said Edward Sonshine, Chief Executive Officer of RioCan. "RioCan's portfolio has been streamlined and enhanced through the disposition of many of our lower growth assets. The Trust's development pipeline, which we expect will be a significant driver of future growth, has expanded and contains a number of high profile projects across Canada including, Urban Retail, Mixed Use, Outlet Shopping Centres and New Format Retail Centre developments. Our recently announced development plans for a visionary new neighbourhood to be known as "The Well" have been filed with the city, and we expect that this truly exciting development will be a unique and welcoming gathering place in Toronto's rapidly expanding city centre where people can live, work and shop well."
Financial Highlights
In millions except percentages and per unit values
Three months ended December 31, |
Year ended December 31, |
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2013 | 2012 | % change | 2013 | 2012 | % change | |
Operating FFO | $124 | $116 | 7% | $492 | $440 | 12% |
Operating FFO per Unit | $0.41 | $0.39 | 5% | $1.63 | $1.52 | 7% |
In $ millions | Three months ended December 31, |
Year ended December 31, |
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2013 | 2012 | 2013 | 2012 | |
Net earnings attributable to common and preferred unit holders | $265 | $468 | $709 | $1,344 |
Net earnings before taxes and fair value adjustment | $129 | $146 | $492 | $490 |
In $ millions. As at | December 31, 2013 |
December 31, 2012 |
Total enterprise value (1) | $13,794 | $14,274 |
Total assets - at RioCan's interest(1) | $13,554 | $12,888 |
Debt (mortgages and debentures payable - at RioCan's interest) (1) | $5,988 | $5,717 |
(1) Based on RioCan's proportionate share including joint ventures accounted for under the equity method of accounting. |
Operating FFO for the Fourth Quarter was $124 million ($0.41 per unit) compared to $116 million ($0.39 per unit) in the Fourth Quarter of 2012. The primary reason for this increase was a $10 million increase in net operating income ("NOI"), which was due to acquisitions net of dispositions, same store growth of 2.7% in Canada and 1.7% in the US, and the completion of greenfield developments, partially offset by lower lease cancelation fees.
Operating FFO for the year ended December 31, 2013 was $492 million ($1.63 per unit) compared to $440 million ($1.52 per unit) in 2012. The primary reasons for this increase were: a $54 million increase in net operating income ("NOI"), which was due to same store growth of 1.7% in Canada and 1.2% in the US, acquisitions net of dispositions and the completion of greenfield developments, partly offset by lower lease cancellation fees. Operating FFO also benefited from $3 million of increased other revenue due to higher fees related to increases in development activity. These gains were partially offset by higher general and administrative costs of $5 million mainly due to higher unit-based compensation and a favourable sales tax recovery in 2012 that did not recur in the current period.
Same Store and Same Property NOI
Canada | Three months ended December 31, 2013 Year over Year |
Year ended December 31, 2013 Year over Year |
Sequential quarter over quarter |
Same Store Growth | 2.7% | 1.7% | 1.9% |
Same Property Growth | 2.2% | 1.3% | 1.8% |
United States | |||
Same Store & Property Growth | 1.7% | 1.2% | 0.4% |
Overview of Development Activities
As at December 31, 2013, RioCan had ownership interests in 16 properties under development that will, upon completion, comprise approximately 11 million square feet (5 million square feet at RioCan's interest). In addition to its development projects, RioCan continues its urban intensification activities, primarily in the Toronto, Ontario market. Going forward, substantial activity and growth will be seen through a variety of formats in development and redevelopment of existing properties. Overall development spending, at RioCan's interest, in the next five to seven years will range from $100 to $200 million per year.
On January 29, 2014 RioCan and its partners, Allied Properties REIT and Diamond Corporation, announced The Well development project located on the lands previously referred to as the Downtown West Lands. The combined 7.74-acre site is currently the home of The Globe & Mail newspaper and is located on part of a large city block bounded by Spadina Avenue, Front Street, Draper Street and Wellington Street in downtown Toronto. The site is in close proximity to Toronto's downtown office corridor and adjacent to a large and growing residential population.
On February 11, 2014, RioCan and its partners have submitted an application for rezoning with the City of Toronto. The property will be redeveloped as a mixed-use development that will include approximately 570,000 square feet of retail space, 1.1 million square feet of office space and 1.5 million square feet of residential space that will become a landmark destination to live, work and shop in Toronto. It is expected that the residential portion of the development will include both rental and condominium units.
The Well will be a new neighbourhood that will be one of the few truly integrated mixed use projects under review by the city offering a meaningful mix of residential, retail and office space. The Well will extend the revitalization of Toronto's Downtown West, south of King Street and west of Spadina Avenue.
Development acquisitions completed during the Fourth Quarter
During the three months ended December 31, 2013, RioCan did not acquire any development properties.
Subsequent to year end RioCan purchased a 100% interest in 1860 Bayview Avenue in Toronto, Ontario. 1860 Bayview Avenue is a development site located at the northwest corner of Bayview Avenue and Broadway Avenue in the Leaside area of Toronto. KingSett Capital and Trinity Development Group are currently developing a grocery-anchored centre on the site. RioCan acquired the site on a forward purchase basis in phases for a purchase price on completion of approximately $58 million, which equates to a capitalization rate of 5.4% with the remaining portion to be paid on an earn-out basis upon completion of the project. Once completed, the centre will consist of approximately 83,000 square feet of retail space and will be anchored by a 52,500 square foot Whole Foods grocery store.
Development Property Acquisitions under Contract
RioCan currently has two development sites in Canada under firm contract where conditions have been waived that, if completed, represent acquisitions of $20 million at RioCan's interest.
RioCan is currently in discussions with Trinity to acquire their 25% interest in each of Stockyards, Toronto and McCall Landing, Calgary, as well as Trinity's 10% interest in East Hills, Calgary. If completed, these transactions are targeted to close during Q1 2014. It is also the Trust's intention, pending certain approvals, to take over as development manager for each of these development sites over the remainder of 2014.
Additionally, RioCan has $10 million of development sites in Canada (at RioCan's interest) under contract where conditions have not yet been waived. Included in these development sites is a parcel that, if acquired, will expand the footprint of the northern portion of the development located at the North East corner of Yonge and Eglinton, which will be used for additional rental residential development. These transactions are in various stages of due diligence and while efforts will be made to complete these transactions, no assurance can be given.
Leasing and Operational Highlights:
Various operating and leasing metrics over the last eight quarters are as follows: | ||||||||||
2013 | 2012 | |||||||||
(thousands of square feet, millions of dollars except PSF amounts) | Fourth quarter |
Third quarter |
Second quarter |
First quarter |
Fourth quarter |
Third quarter |
Second quarter |
First quarter |
||
Committed occupancy | 96.9% | 97.0% | 96.7% | 97.0% | 97.4% | 97.3% | 97.4% | 96.9% | ||
Economic occupancy | 95.8% | 95.5% | 95.4% | 95.8% | 95.9% | 95.5% | 95.5% | 95.7% | ||
NLA leased but not paying rent | 542 | 716 | 642 | 615 | 711 | 855 | 871 | 542 | ||
Annualized rental impact | $14 | $17 | $15 | $15 | $15 | $18 | $18 | $12 | ||
Retention rate - Canada (i) | 97.0% | 91.1% | 95.9% | 68.3% | 94.3% | 84.8% | 89.9% | 91.2% | ||
% increase in average net rent per sq ft - Canada | 8.8% | 11.2% | 12.0% | 13.4% | 18.4% | 12.9% | 13.4% | 10.0% | ||
Retention rate - US | 98.2% | 98.4% | 92.0% | 98.8% | 87.6% | 96.3% | 84.2% | 83.1% | ||
% increase in average net rent per sq ft - US | 4.8% | 3.8% | 4.3% | 2.3% | 5.1% | 6.0% | 7.3% | 7.2% | ||
Average in place rent (PSF) | $16.08 | $16.07 | $15.77 | $15.77 | $15.70 | $15.85 | $15.33 | $15.37 | ||
Same store growth (ii) - Canada | 2.7% | 2.2% | 0.6% | 0.1% | 0.2% | 0.0% | 1.5% | 1.5% | ||
Same store growth (ii) - US | 1.7% | 0.9% | 1.4% | 1.4% | 1.9% | (0.3% | ) | 1.3% | (0.6% | ) |
(i) - The first quarter of 2013 includes impact of the vacancy of Zellers totalling 188,000 sq ft at 100% (100,500 sq ft at RioCan's interest) during the quarter. The first quarter of 2013 retention rate excluding Zellers was 81.1%. | ||||||||||
(ii) - Refers to the growth in same store on a year over year basis. | ||||||||||
Highlights:
Portfolio Activity - Acquisition and Disposition Pipeline
During the Fourth Quarter, RioCan completed acquisitions of interests in 16 income producing properties (two in Canada and 14 in the U.S.) at an aggregate purchase price of $274 million, at RioCan's interest (calculated taking into account the U.S. dollar transactions at an average exchange rate of 1.035), with a weighted average capitalization rate of 6.5%.
Canada
United States
Acquisitions Under Contract (Firm)
In the United States, RioCan has waived conditions pursuant to a purchase and sale agreement with respect to one U.S. property, as follows:
Acquisitions Pipeline
RioCan is currently in discussions regarding a property acquisition in Canada that, if completed, represent approximately $3 million of additional acquisitions at RioCan's interest. This transaction is under negotiation and while efforts will be made to conclude these discussions, no assurance can be given.
Disposition Pipeline
As referenced above under the heading "Portfolio Activity and AcquisitionPipeline", on October 1, 2013, RioCan completed its previously announced dissolution of its joint venture with RPAI. Pursuant to this transaction, RioCan conveyed its 80% interest in the following five properties located in Texas to RPAI for a purchase price of $103 million: Coppell Town Centre, Southlake Corners, Cypress Mill, Sawyer Heights, and New Forest Crossing. RPAI assumed RioCan's portion of the mortgage financing on these five properties of US$54 million.
As a further means of raising capital and optimizing capital utilization, RioCan evaluates the sale of selected assets as part of a process of actively managing the portfolio and a means of increasing the portfolio weighting to urban markets in Canada.
During the Fourth Quarter, RioCan completed five dispositions in Canada at an aggregate sale price of $226 million, as follows:
Dispositions Under Contract (Firm)
RioCan currently has one property in Canada under contract to sell where conditions have been waived that, if completed, represents a disposition of $5 million, as follows:
Liquidity and Capital
Quarter ended | Rolling 12 months ended | ||
December 31, 2013 |
December 31, 2013 |
December 31, 2012 |
|
Interest Coverage - RioCan's interest | 3.10x | 2.83x | 2.69x |
Debt Service Coverage - RioCan's interest | 2.26x | 2.10x | 1.98x |
Fixed Charge Coverage - RioCan's interest | 1.10x | 1.06x | 1.04x |
Net debt to adjusted EBITDA - RioCan's interest | 7.85x | 7.56x | 7.29x |
Net operating debt to adjusted operating EBITDA - RioCan's interest | 7.49x | 7.24x | 7.09x |
Unencumbered assets (millions) | $2,068 | $1,353 | |
Unencumbered assets to unsecured debt | 142% | 104% |
Financing Highlights for the Fourth Quarter
Credit Facilities
In the fourth quarter of 2013 and to date, RioCan renegotiated the terms of its operating lines by increasing the capacity of the facilities, extending the maturity dates, and reducing the interest rate spreads associated with these facilities. In addition, one new operating line was added. As of the date hereof, RioCan's operating lines are as follows:
Operating Line as of Sept. 30, 2013 (millions) |
Spread* | Maturity | Operating Line as of Feb. 12, 2014 (millions) |
Revised Spread* |
Revised Maturity |
$125 | BA's/LIBOR +150 bps | Dec. 2013 | $185 | BA's/LIBOR +125 bps | Dec. 2016 |
$200 | BA's/LIBOR +150 bps | Nov. 2014 | $250 | BA's/LIBOR +125 bps | Nov. 2016 |
$100 | BA's/LIBOR +150 bps | June 2014 | $130 | BA's/LIBOR +125 bps | June 2017 |
$0 | N/A | - | $75 | BA's/LIBOR +125 bps | June 2017 |
Total $425 | Total $640 |
* Lines are available in Canadian or US Dollars. Canadian draws are priced off of BA's and US draws are priced off of LIBOR. |
Unencumbered Assets
As at December 31, 2013, RioCan's unencumbered asset pool was comprised of 103 assets with an aggregate fair value of $2.1 billion.
Trust Units
On July 25, 2013, RioCan announced the TSX approval of its notice of intention to make a normal course issuer bid ("NCIB") for a portion of its Units as appropriate opportunities arise from time to time. During the Fourth Quarter RioCan did not acquire any units. For the year ended December 31, 2013 RioCan acquired and cancelled 917,700 units at an average price per unit of $24.03 through the NCIB program.
RioCan's Consolidated Financial Statements, Management's Discussion and Analysis and a Supplemental Information Package for the three months ended December 31, 2013 are available on RioCan's website at www.riocan.com.
Conference Call and Webcast
Interested parties are invited to participate in a conference call with management on Thursday, February 13, 2014 at 9:00 a.m. eastern time. You will be required to identify yourself and the organization on whose behalf you are participating.
In order to participate, please dial 416-340-2218 or 1-866-226-1793. If you cannot participate in the live mode, a replay will be available until March 13, 2014. To access the replay, please dial 905-694-9451 or 1-800-408-3053 and enter passcode 7545823#.
Scheduled speakers include Edward Sonshine, O.Ont. Q.C., Chief Executive Officer, Fred Waks, President and Chief Operating Officer and Rags Davloor, Executive Vice President and Chief Financial Officer. Management's presentation will be followed by a question and answer period. To ask a question, press "star 1" on a touch-tone phone. The conference call operator will be notified of all requests in the order in which they are made, and will introduce each questioner.
Alternatively, to access the simultaneous webcast, go to the following link on RioCan's website http://investor.riocan.com/Investor-Relations/Events-Webcasts/default.aspx and click on the link for the webcast. The webcast will be archived 24 hours after the end of the conference call and can be accessed for 120 days.
About RioCan
RioCan is Canada's largest real estate investment trust with a total capitalization of approximately $13.8 billion as at December 31, 2013. It owns and manages Canada's largest portfolio of shopping centres with ownership interests in a portfolio of 340 retail properties containing approximately 82 million square feet, including 47 grocery anchored and new format retail centres containing 13 million square feet in the United States as at December 31, 2013. RioCan's portfolio also includes 16 properties under development in Canada. For further information, please refer to RioCan's website at www.riocan.com.
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 Interest, Funds From Operations ("FFO"), Operating Funds From Operations ("Operating FFO"), Net Operating Income ("NOI"), Adjusted Earnings before interest, taxes, depreciation and amortization ("Adjusted EBITDA"), Adjusted Unit holders Equity, Same Store NOI, and Same Property NOI, as well as other measures discussed elsewhere in this 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. 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 "Use of Non-GAAP Measures" in RioCan's fourth quarter and year ended December 31, 2013. RioCan uses these measures to better assess the Trust's underlying performance and provides these additional measures so that investors may do the same.
Forward-Looking Information
This news release contains forward-looking statements within the meaning of applicable securities laws. These statements include, but are not limited to, statements made in this News Release (including the sections entitled "Highlights for 2013", "Financial Highlights", "Overview of Development Activities" "Portfolio Stability", "Portfolio Activity - Acquisition and Disposition Pipeline", and "Liquidity and Capital"), and other statements concerning RioCan's objectives, its 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. Forward-looking statements generally can 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 statements reflect management's current beliefs and are based on information currently available to management. All forward-looking statements in this News Release are qualified by these cautionary statements.
These forward-looking statements are not guarantees of future events or performance and, by their nature, are based on RioCan's current estimates and assumptions, which are subject to risks and uncertainties, including those described under "Risks and Uncertainties" in RioCan's Management's Discussion and Analysis for the period ended December 31, 2013 and in RioCan's annual information form dated March 28, 2013, which could cause actual events or results to differ materially from the forward-looking statements contained in this News Release. Those risks and uncertainties include, but are not limited to, those related to: liquidity and general market conditions, tenant concentrations, occupancy levels and defaults, access to debt and equity capital, interest rates, joint ventures/partnerships, the relative illiquidity of real property, unexpected costs or liabilities related to acquisitions, construction, environmental matters, legal matters, reliance on key personnel, unitholder liability, income taxes, United States of America ("US") investment and currency risk, and RioCan's qualification as a real estate investment trust for tax purposes. Material factors or assumptions that were applied in drawing a conclusion or making an estimate set out in the forward-looking information may include, but are not limited to: a stable retail environment; relatively low and stable interest costs; a continuing trend toward land use intensification in high growth markets; access to equity and debt capital markets to fund, at acceptable costs, the future growth program to enable the Trust to refinance debts as they mature; the availability of purchase opportunities for growth in Canada and the US; and the impact of accounting principles adopted by the Trust effective January 1, 2012 under International Financial Reporting Standards ("IFRS"). 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 these forward-looking statements. Certain statements included in this News Release may be considered "financial outlook" for purposes of applicable securities laws, and such financial outlook may not be appropriate for purposes other than this News Release.
The Income Tax Act (Canada) contains provisions which potentially impose tax on publicly traded trusts (the "SIFT Provisions"). However, the SIFT Provisions do not impose tax on a publicly traded trust which qualifies as a real estate investment trust ("REIT"). RioCan currently qualifies as a REIT and intends to continue to qualify for future years. Should this not occur, certain statements contained in this News Release may need to be modified.
Except as required by applicable law, RioCan under takes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.
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