RioCan's Strong First Quarter 2023 Results Reinforces Confidence in FFO/Unit Growth Target for the Year


  • Net income of $118.0 million and FFO per unit 1 of $0.44
  • Blended leasing spread of 12.3% driven by new leasing spread of 14.8%
  • The retail component of The Well reaches 82% leased

TORONTO, May 10, 2023 (GLOBE NEWSWIRE) -- RioCan Real Estate Investment Trust (“RioCan" or the "Trust”) (TSX: REI.UN) announced today its financial results for the three months ended March 31, 2023 (the "First Quarter").

“RioCan had a solid start to 2023 with strong first quarter results. Our occupancy, retention rates and leasing spreads remain high as demand continues to intensify for quality retail space that is short in supply. This operating strength drove same-property NOI while contributions from completed developments also added to our growth,” said Jonathan Gitlin, President and CEO of RioCan. “As always, we are prudently managing risk, and maintaining a healthy balance sheet with strong liquidity and access to various financing channels. The quality of our properties and tenants, along with our operational excellence, provides us with growing income that supports our asset values, outweighing the volatile macro-economic environment and reinforcing our confidence to reaffirm our FFO/unit growth guidance for the year."

Financial Highlights     
(in millions, except where otherwise noted, and per unit values)     
Three months ended March 31  2023   2022
      
FFO 1 $131.3  $130.6
FFO per unit - diluted 1 $0.44  $0.42
Net income $118.0  $160.1
Weighted average Units outstanding - diluted (in thousands)  300,547   310,114
      
      
As at March 31, 2023  December 31, 2022
      
Net book value per unit $25.83  $25.73
      

1. A non-GAAP measurement. For definitions, reconciliations and the basis of presentation of RioCan's non-GAAP measures, refer to the Basis of Presentation and Non-GAAP Measures section in this News Release.

FFO per Unit and Net Income

  • FFO per unit was $0.44, $0.02 per unit or 4.8% higher than the same period last year.
    • Same Property NOI1 growth of 3.4% contributed a $0.02 increase in FFO per unit.
    • Additional FFO increases, predominantly from completed commercial developments and residential rental operations, drove FFO per unit higher by $0.02.
    • Higher lease cancellation fees increased FFO by an additional $0.01 per unit.
    • Higher interest expense, net of higher interest income, decreased FFO by $0.01.
    • The reduction in FFO per unit from properties sold was partly offset by FFO per unit accretion from prior year unit buybacks, a net reduction of $0.02 per unit.
  • Net income for the First Quarter of $118.0 million was $42.1 million lower than the comparable period last year mainly due to a fair value loss on investment properties of $17.4 million compared to a $35.4 million fair value gain in 2022.
  • Our FFO Payout Ratio1 of 59.3%, Liquidity1 of $1.7 billion, Unencumbered Asset1 pool of $8.3 billion, floating rate debt at 5.4% of total debt and staggered debt maturities, all contribute to our financial flexibility and balance sheet strength.
  • For 2023, we anticipate FFO per unit to be within the range of $1.77 to $1.80, SPNOI growth of 3%, and an FFO Payout Ratio of between 55% to 65%. Development Spending1 is expected to be between $400 million to $450 million.

1. A non-GAAP measurement. For definitions, reconciliations and the basis of presentation of RioCan's non-GAAP measures, refer to the Basis of Presentation and Non-GAAP Measures section in this News Release.

Operation Highlights

Three months ended March 31 2023   2022 
Operation Highlights (i)     
Occupancy - committed (ii) 97.4%  97.0%
Retail occupancy - committed (ii) 98.0%  97.4%
Blended leasing spread 12.3%  8.9%
New leasing spread 14.8%  13.5%
Renewal leasing spread 11.6%  6.7%
      

(i) Includes commercial portfolio only.
(ii) Information presented as at respective periods then ended.

  • Our core retail portfolio continues to produce solid operating results. Same Property NOI grew by 3.4%, driven by increases in rent growth from contractual rent steps, rent upon renewal and occupancy.
  • A strong blended leasing spread of 12.3% resulted from new leasing and renewal leasing spreads of 14.8% and 11.6%, respectively. A retention ratio of 91.2% was achieved in the quarter.
  • Average net rent per occupied square foot of $21.13 improved 4.4% over the same period last year while new leasing in the First Quarter generated average net rent per square foot of $28.57.
  • Retail committed occupancy increased by 10 basis points to 98.0% when compared to the previous quarter.
  • As at May 10, 2023, 10 of the 13 Bed, Bath and Beyond leases have been sold as a result of court ordered liquidation resulting in those leases continuing without modification or downtime. With respect to the three leases that were not sold, we have one unit with a completed lease and two leases in final stages of negotiation. While Bed, Bath and Beyond's bankruptcy was not material to RioCan, we highlight this activity as it reaffirms the demand for our well-located retail space.

RioCan Living Update 1

  • As at May 10, 2023, eight of the 10 RioCan Living™ buildings are stabilized and are 96.5% leased. Lease-up at the two remaining buildings is tracking ahead of expectations as leasing velocity continues to be robust. Total NOI generated from our residential rental operations for the First Quarter was $4.3 million, an increase of $1.9 million or 81.7% over the same period last year.
  • Pre-leasing of the 592 rental residential units at FourFifty The Well™ started in March 2023 in anticipation of the phased completion in the second half of 2023 through to early 2024.
  • As of March 31, 2023, 2,575 condominium and townhouse units are under construction and are expected to generate combined sales revenue of over $860.0 million between 2023 and 2026 that can be redeployed to fund our development pipeline. Of RioCan’s six active condominium construction projects, 86% of the total units have been pre-sold, representing 96% of pro-forma revenues.

1. Units at 100% ownership interest.

Development Highlights

(in millions except square feet)     
Three months ended March 31  2023   2022
      
Development Highlights     
Development Completions - sq. ft. in thousands (i)  66.0   145.0
Development Spending $88.3  $91.9
Development Projects Under Construction - sq. ft. in thousands (ii)  1,890.0   2,206.0
      

(i) At RioCan's ownership. Represents net leasable area (NLA) of property under development completions. Excludes NLA of residential inventory completions.
(ii) Information presented as at the respective periods then ended, includes properties under development and residential inventory, equity-accounted joint ventures and represents gross floor area of the respective projects.

  • During the First Quarter, 66,000 square feet of NLA was completed, comprised mainly of office space at The Well™.
  • As at May 10, 2023, approximately 1,280,000 square feet (at 100% ownership interest) of commercial space at The Well is in tenant possession and 12 tenants are now operating in their respective units. Approximately 94% of the total commercial space is leased. The retail component is 82% leased, as compared with 72% as at our prior quarterly release, with another 6% in late stage negotiations.
  • Our total zoned square footage was 13.9 million at the end of March 31, 2023, including 1.9 million square feet of projects under construction and 1.5 million square feet of shovel ready development sites.

Investing and Capital Recycling

  • As of May 10, 2023, closed or firm dispositions totalled $66.4 million, including $42.1 million of completed dispositions during the quarter at a weighted average capitalization rate of 7.2%. Completed dispositions included the sale of a non-core asset located in Calgary, Alberta, consistent with our strategy to improve portfolio quality.
  • In the First Quarter, Total Acquisitions1 totalled $28.8 million including the acquisition of a parking lease at RioCan Hall, which removed a significant encumbrance in advancing the redevelopment of this Focus Five project2 and also provides interim recurring operating income.
  • Subsequent to quarter end, the Trust entered into a firm purchase agreement to acquire a 100% interest in three phases of a four phase new build residential rental complex in Montreal, Quebec for the gross purchase price of $55.3 million. Phases One and Two consist of 124 units and Phase Four consists of vacant land that is zoned residential. Closing is expected to occur at the end of May 2023, subject to customary closing conditions. As part of the purchase, RioCan will assume $42.3 million of pre-existing debt at a blended contractual interest rate of 2.64%. The Trust also has entered into an agreement to acquire a 100% interest in Phase Three, which consists of 60 units, and will be closed no later than March 2026, upon satisfaction of certain conditions and receipt of substantial notice of completion.

1. A non-GAAP measurement. For definitions, reconciliations and the basis of presentation of RioCan's non-GAAP measures, refer to the Basis of Presentation and Non-GAAP Measures section in this News Release.
2. Focus Five projects are large scale, transit-oriented, mixed-use developments in the Greater Toronto Area that the Trust is currently advancing through zoning and the site plan approval process.

Capital Management Update

  • On January 31, 2023, RioCan refinanced its $200 million non-revolving unsecured credit facility with two Schedule I financial institutions, with a weighted average annual all-in fixed rate of 4.93% through interest rate swaps and a maturity date of February 3, 2025, with an option to extend to January 30, 2026. All other terms were similar to the matured facility.
  • On March 6, 2023, RioCan issued $200.0 million of Series AG senior unsecured debentures. These debentures were issued at a coupon rate of 5.611% per annum and will mature on October 6, 2027. Inclusive of the benefit of bond forward hedges, the all-in rate is 5.184%.
  • On March 6, 2023, in conjunction with the offering of the Series AG debenture, the Trust settled $200.0 million of bond forward contracts entered into on November 24, 2022, resulting in a total realized gain of $6.5 million, of which $3.9 million of the gain was applied to the all-in rate of the above-noted debenture. A hedge ineffectiveness gain of $2.6 million, arising from issuing a debenture with less tenor than the underlying bond was recorded to other income during the First Quarter.
  • On March 13, 2023, the Trust entered into bond forward contracts to sell on September 15, 2023 $300.0 million Government of Canada Bonds due June 1, 2030 with an effective bond yield of 2.629%, to hedge its exposure to movements in underlying risk-free interest rates.
  • On April 18, 2023, RioCan redeemed, in full, its $200.0 million, 3.725% Series T unsecured debenture upon maturity.
  • During the quarter, RioCan, along with its partner Context Development, closed on a $126.0 million ($63.0 million at RioCan’s share) construction (converting to term upon stabilization) loan provided by the Canada Mortgage and Housing Corporation for the rental component of its Queen & Ashbridge development in Toronto. The interest rate on both the construction advances and the term component was fixed at 3.07%, the term of the loan is 10 years and the amortization period upon conversion to a term loan is 50 years.
  • On May 4, 2023, the Trust extended the maturity on its operating line of credit by a year to May 31, 2028. All other terms and conditions remained the same.
  • In addition to the bond forward hedging, the Trust's limited exposure to floating rate debt at 5.4% of total debt, serves to mitigate short-term interest rate volatility.

Balance Sheet Strength

(in millions except percentages)
As at
March 31, 2023
  December 31, 2022 
      
Balance Sheet Strength Highlights     
Liquidity (i) 1 $1,728   $1,548 
Adjusted Debt to Adjusted EBITDA (i) 1  9.48x   9.51x
Total Adjusted Debt to Total Adjusted Assets (i) 1  45.4%   45.2%
Unencumbered Assets (i) 1 $8,275   $8,257 
Unencumbered Assets to Unsecured Debt (i) 1  215%   218%
      

(i) At RioCan's proportionate share.

  • As at March 31, 2023, the Trust had $1.7 billion of Liquidity in the form of a $1.3 billion undrawn revolving line of credit, $0.4 billion undrawn construction lines and other bank loans and $0.1 billion cash and cash equivalents. Subsequent to quarter end, Liquidity was reduced by $137.8 million to $1.6 billion due to the redemption of $200.0 million Series T senior unsecured debentures and the receipt of $62.2 million cash from funds held in trust for a loan receivable repayment. 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 million.
  • RioCan’s unencumbered asset pool of $8.3 billion, which can be used to obtain secured financing, to provide additional liquidity at generally lower interest rates than unsecured debt, generated 57.5% of Annual Normalized NOI1 and provided 2.15x coverage over Unsecured Debt1.
  • Adjusted Debt to Adjusted EBITDA was 9.48x on a proportionate share basis, as at March 31, 2023, compared to 9.51x as at the end of 2022. The decrease was primarily due to higher Adjusted EBITDA, partially offset by higher Average Total Adjusted Debt balances.

1. A non-GAAP measurement. For definitions, reconciliations and the basis of presentation of RioCan's non-GAAP measures, refer to the Basis of Presentation and Non-GAAP Measures section in this News Release.

Conference Call and Webcast

Interested parties are invited to participate in a conference call with management on Thursday, May 11, 2023 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: 895958.

For those unable to participate in the live mode, a replay will be available at 1-866-813-9403 with access code 642360.

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, 2023, our portfolio is comprised of 191 properties with an aggregate net leasable area of approximately 33.5 million square feet (at RioCan's interest) including office, residential rental and 11 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, 2023, which are available on RioCan's website at www.riocan.com and on SEDAR at www.sedar.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, Development Spending, Total Acquisitions, Liquidity, Adjusted Debt to Adjusted EBITDA, Total Adjusted Debt to Total Adjusted Assets, RioCan's Proportionate Share, Unencumbered Assets to Unsecured Debt 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, 2023.

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, 2023 and December 31, 2022:

As atMarch 31, 2023 December 31, 2022
(in thousands of dollars)IFRS basisEquity-
accounted
investments
 RioCan's
proportionate
share
 IFRS basisEquity-
accounted
investments
 RioCan's
proportionate
share
Assets      
Investment properties$13,874,919$400,031 $14,274,950 $13,807,740$398,701 $14,206,441
Equity-accounted investments 373,339 (373,339)   364,892 (364,892) 
Mortgages and loans receivable 206,668   206,668  269,339   269,339
Residential inventory 289,556 228,416  517,972  272,005 214,536  486,541
Assets held for sale 23,500   23,500  42,140   42,140
Receivables and other assets 313,998 38,531  352,529  259,514 37,779  297,293
Cash and cash equivalents 97,133 11,852  108,985  86,229 8,001  94,230
Total assets$15,179,113$305,491 $15,484,604 $15,101,859$294,125 $15,395,984
       
Liabilities      
Debentures payable$3,141,869$ $3,141,869 $2,942,051$ $2,942,051
Mortgages payable 2,721,509 173,758  2,895,267  2,659,180 172,100  2,831,280
Lines of credit and other bank loans 952,425 96,331  1,048,756  1,141,112 89,187  1,230,299
Accounts payable and other liabilities 605,383 35,402  640,785  630,624 32,838  663,462
Total liabilities$7,421,186$305,491 $7,726,677 $7,372,967$294,125 $7,667,092
       
Equity      
Unitholders’ equity 7,757,927   7,757,927  7,728,892   7,728,892
Total liabilities and equity$15,179,113$305,491 $15,484,604 $15,101,859$294,125 $15,395,984

The following tables reconcile the consolidated statements of income from IFRS to RioCan's proportionate share basis for the three months ended March 31, 2023 and 2022:

 Three months ended March 31, 2023 Three months ended March 31, 2022 
(in thousands of dollars)IFRS basis Equity-
accounted
investments
 RioCan's
proportionate
share
 IFRS basis Equity-
accounted
investments
 RioCan's
proportionate
share
 
Revenue      
Rental revenue$274,681 $7,404 $282,085 $272,131 $6,938 $279,069 
Residential inventory sales   2,363  2,363  15,969  936  16,905 
Property management and other service fees 4,819    4,819  5,882    5,882 
  279,500  9,767  289,267  293,982  7,874  301,856 
Operating costs      
Rental operating costs      
Recoverable under tenant leases 98,808  880  99,688  100,122  622  100,744 
Non-recoverable costs 7,449  647  8,096  6,056  588  6,644 
Residential inventory cost of sales   1,126  1,126  13,936  422  14,358 
  106,257  2,653  108,910  120,114  1,632  121,746 
Operating income 173,243  7,114  180,357  173,868  6,242  180,110 
Other income (loss)      
Interest income 7,041  601  7,642  4,061  570  4,631 
Income from equity-accounted investments 5,514  (5,514)   4,090  (4,090)  
Fair value (loss) gain on investment properties, net (17,365) 621  (16,744) 35,432  (790) 34,642 
Investment and other income (loss) 2,887  (336) 2,551  (185) (58) (243)
  (1,923) (4,628) (6,551) 43,398  (4,368) 39,030 
Other expenses      
Interest costs, net 47,983  2,495  50,478  41,766  1,842  43,608 
General and administrative 15,618  10  15,628  11,463  16  11,479 
Internal leasing costs 2,725    2,725  2,985    2,985 
Transaction and other costs 388  (19) 369  1,175  16  1,191 
  66,714  2,486  69,200  57,389  1,874  59,263 
Income before income taxes$104,606 $ $104,606 $159,877 $ $159,877 
Current income tax recovery (13,398)   (13,398) (181)   (181)
Net income $118,004 $ $118,004 $160,058 $ $160,058 

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, 2023 and 2022:

(thousands of dollars)  
Three months ended March 31 2023  2022 
Operating Income $173,243 $173,868 
Adjusted for the following:  
Property management and other service fees (4,819) (5,882)
Residential inventory gains   (2,033)
Operational lease revenue from ROU assets 1,858  1,346 
NOI$170,282 $167,299 


(thousands of dollars)  
Three months ended March 31 2023 2022
Same Property NOI$151,790$146,760
NOI from income producing properties:  
Acquired (i) 149 93
Disposed (i) 477 9,619
  626 9,712
NOI from completed properties under development 6,006 4,187
NOI from properties under de-leasing under development 2,460 2,495
Lease cancellation fees 4,562 883
Straight-line rent adjustment 573 915
NOI from residential rental 4,265 2,347
NOI $170,282$167,299

(i) Includes properties acquired or disposed of during the periods being compared.   

Same Property NOI including completed properties under development (PUD)

(thousands of dollars, except where otherwise noted)   
Three months ended March 31 2023 2022% change
Same Property NOI$151,790$146,7603.4%
Add:   
NOI from completed PUD 6,006 4,187 
Same Property NOI including completed PUD$157,796$150,9474.5%

Adjusted Same Property NOI

(thousands of dollars,except where otherwise noted)   
Three months ended March 31 2023  2022 % change
Same Property NOI$151,790 $146,760 3.4%
Add (exclude):   
Same property provision for credit losses 86  20  
CAM/property tax settlements (929) (381) 
Adjusted Same Property NOI$150,947 $146,399 3.1%

FFO

The following table reconciles net income attributable to Unitholders to FFO for the three months ended March 31, 2023 and 2022:

(thousands of dollars, except where otherwise noted)  
Three months ended March 31 2023  2022 
Net income attributable to Unitholders$118,004 $160,058 
Add back/(Deduct):  
Fair value losses (gains), net 17,365  (35,432)
Fair value (gains) losses included in equity-accounted investments (621) 790 
Internal leasing costs 2,725  2,985 
Transaction (gains) losses on investment properties, net (i) (64) 384 
Transaction costs on sale of investment properties 167  600 
ERP implementation costs 3,954   
Change in unrealized fair value on marketable securities 986   
Current income tax recovery (13,398) (181)
Operational lease revenue from ROU assets 1,354  946 
Operational lease expenses from ROU assets in equity-accounted investments (12) (11)
Capitalized interest on equity-accounted investments (ii) 877  436 
FFO$131,337 $130,575 
Add back:   
Restructuring costs 613  609 
FFO Adjusted$131,950 $131,184 
   
FFO per unit - basic$0.44 $0.42 
FFO per unit - diluted$0.44 $0.42 
FFO Adjusted per unit - diluted$0.44 $0.42 
Weighted average number of Units - basic (in thousands) 300,362  309,837 
Weighted average number of Units - diluted (in thousands) 300,547  310,114 
   
FFO for last 4 quarters$525,440 $531,521 
Distributions paid for last 4 quarters$311,603 $304,433 
FFO Payout Ratio 59.3% 57.3%

(i) Represents net transaction gains or losses connected to certain investment properties during the period.
(ii) This amount represents the interest capitalized to RioCan's equity-accounted investment in WhiteCastle New Urban Fund 2, LP, WhiteCastle New Urban Fund 3, LP, WhiteCastle New Urban Fund 4, LP, WhiteCastle New Urban Fund 5, LP, RioCan-Fieldgate JV, RC (Queensway) LP, RC (Leaside) LP- Class B and PR Bloor Street LP. This amount is not capitalized to properties under development under IFRS, but is allowed as an adjustment under REALPAC’s definition of FFO.

Development Spending
Total Development Spending for the three months ended March 31, 2023 and 2022 is as follows:

(thousands of dollars)  
Three months ended March 31 2023 2022
Development expenditures on balance sheet:  
Properties under development$66,911$61,165
Residential inventory 17,551 28,345
RioCan's share of Development Spending from equity-accounted joint ventures 3,885 2,374
Total Development Spending $88,347$91,884

Total Acquisitions

Total Acquisitions for the three months ended March 31, 2023 and 2022 are as follows:

(thousands of dollars)  
Three months ended March 31 2023 2022
   
Income producing properties$$89,948
Properties under development 28,847 11,946
Residential inventory  19,440
RioCan's share of acquisitions from equity-accounted joint ventures  66,497
Total Acquisitions$28,847$187,831

Total Adjusted Debt and Total Contractual Debt

The following tables reconcile total debt to Total Adjusted Debt, total assets to Total Adjusted Assets, and total debt to Total Contractual Debt as at March 31, 2023 and December 31, 2022:

As atMarch 31, 2023December 31, 2022


(thousands of dollars, except where otherwise noted)
IFRS basis Equity-
accounted
investments
RioCan's
proportionate
share
 IFRS basis Equity-
accounted
investments
RioCan's
proportionate
share
 
Debentures payable$3,141,869 $$3,141,869 $2,942,051 $$2,942,051 
Mortgages payable 2,721,509  173,758 2,895,267  2,659,180  172,100 2,831,280 
Lines of credit and other bank loans 952,425  96,331 1,048,756  1,141,112  89,187 1,230,299 
Total debt$6,815,803 $270,089$7,085,892 $6,742,343 $261,287$7,003,630 
Cash and cash equivalents 97,133  11,852 108,985  86,229  8,001 94,230 
Total Adjusted Debt$6,718,670 $258,237$6,976,907 $6,656,114 $253,286$6,909,400 
       
Total assets$15,179,113 $305,491$15,484,604 $15,101,859 $294,125$15,395,984 
Cash and cash equivalents 97,133  11,852 108,985  86,229  8,001 94,230 
Total Adjusted Assets$15,081,980 $293,639$15,375,619 $15,015,630 $286,124$15,301,754 
       
Total Adjusted Debt to Total Adjusted Assets 44.5%  45.4% 44.3%  45.2%


As atMarch 31, 2023December 31, 2022


(thousands of dollars)
IFRS basis Equity-
accounted
investments
 RioCan's
proportionate
share
 IFRS basis Equity-
accounted
investments
 RioCan's
proportionate
share
 
Total debt$6,815,803 $270,089 $7,085,892 $6,742,343 $261,287 $7,003,630 
Less:      
Unamortized debt financing costs, premiums and discounts on origination and debt assumed, and modifications (18,327) (631) (18,958) (15,634) (690) (16,324)
Total Contractual Debt 6,834,130  270,720  7,104,850  6,757,977  261,977  7,019,954 

Liquidity

As at March 31, 2023, RioCan had approximately $1.7 billion of liquidity as summarized in the following table:

As atMarch 31, 2023December 31, 2022


(thousands of dollars)
IFRS basis Equity-
accounted
investments
RioCan's
proportionate
share
 IFRS basisEquity-
accounted
investments
RioCan's
proportionate
share
Undrawn revolving unsecured operating line of credit$1,250,000 $$1,250,000 $1,116,351$$1,116,351
Undrawn construction lines and other bank loans 306,641  61,892 368,533  267,562 70,094 337,656
Cash and cash equivalents 97,133  11,852 108,985  86,229 8,001 94,230
Liquidity$1,653,774 $73,744$1,727,518 $1,470,142$78,095$1,548,237
Increase (Decrease) subsequent to quarter end from:      
Debenture redemption (200,000)  (200,000)   
Cash from funds held in trust for a loan receivable repayment 62,155   62,155    
Proforma Liquidity$1,515,929 $73,744$1,589,673    

Adjusted EBITDA

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

  
Twelve months endedMarch 31, 2023December 31, 2022
(thousands of dollars)IFRS basis Equity-
accounted
investments
 RioCan's
proportionate
share
 IFRS basisEquity-
accounted
investments
 RioCan's
proportionate
share
Net income attributable to Unitholders$194,718 $ $194,718 $236,772$ $236,772
Add (deduct) the following items:      
Income tax expense (recovery):      
Current (12,296)   (12,296) 921   921
Fair value losses on investment properties, net 293,925  14,797  308,722  241,128 16,208  257,336
Change in unrealized fair value on marketable securities (i) 4,769    4,769  3,783   3,783
Internal leasing costs 11,944    11,944  12,204   12,204
Non-cash unit-based compensation expense 9,269    9,269  9,056   9,056
Interest costs, net 186,582  8,895  195,477  180,365 8,242  188,607
Restructuring costs 4,293    4,293  4,289   4,289
ERP implementation costs 3,954    3,954     
Depreciation and amortization 4,461    4,461  4,774   4,774
Transaction losses on the sale of investment properties, net (ii) 576    576  1,024   1,024
Transaction costs on investment properties 5,305    5,305  5,734 3  5,737
Operational lease revenue (expenses) from ROU assets 4,494  (47) 4,447  4,086 (46) 4,040
Adjusted EBITDA$711,994 $23,645 $735,639 $704,136$24,407 $728,543

(i) The fair value gains and losses on marketable securities may include both the change in unrealized fair value and realized gains and losses on the sale of marketable securities. By adding back the change in unrealized fair value on marketable securities, RioCan effectively continues to include realized gains and losses on the sale of marketable securities in Adjusted EBITDA and excludes unrealized fair value gains and losses on marketable securities in Adjusted EBITDA.
(ii) Includes transaction gains and losses realized on the disposition of investment properties.

Adjusted Debt to Adjusted EBITDA Ratio
Adjusted Debt to Adjusted EBITDA is calculated as follows:

  
Twelve months endedMarch 31, 2023December 31, 2022
(thousands of dollars, except where otherwise noted)IFRS basis Equity-
accounted
investments
 RioCan's
proportionate
share
 IFRS basis Equity-
accounted
investments
 RioCan's
proportionate
share
 
       
Adjusted Debt to Adjusted EBITDA      
Average total debt outstanding$6,797,665 $263,022 $7,060,687 $6,756,628 $251,888 $7,008,516 
Less: average cash and cash equivalents (78,746) (9,339) (88,085) (74,871) (8,791) (83,662)
Average Total Adjusted Debt$6,718,919 $253,683 $6,972,602 $6,681,757 $243,097 $6,924,854 
Adjusted EBITDA (i)$711,994 $23,645 $735,639 $704,136 $24,407 $728,543 
Adjusted Debt to Adjusted EBITDA 9.44   9.48  9.49   9.51 

(i) Adjusted EBITDA is reconciled in the immediately preceding table above.

Unencumbered Assets

The tables below summarize RioCan's Unencumbered Assets to Unsecured Debt and Percentage of Normalized NOI Generated from Unencumbered Assets as at March 31, 2023 and December 31, 2022:

As at March 31, 2023December 31, 2022
(thousands of dollars, except where otherwise noted)Targeted
Ratios
IFRS
basis
 Equity-
accounted
investments
RioCan's
proportionate
share
 IFRS
basis
 Equity-
accounted
investments
RioCan's
proportionate
share
 
Unencumbered Assets $8,218,961 $56,132$8,275,093 $8,200,280 $56,228$8,256,508 
Total Unsecured Debt $3,850,000 $$3,850,000 $3,783,649 $$3,783,649 
Unencumbered Assets to Unsecured Debt> 200% 213%  215% 217%  218%
        
Annual Normalized NOI - total portfolio (i) $652,844 $22,700$675,544 $646,540 $23,488$670,028 
Annual Normalized NOI - Unencumbered Assets (i) $385,088 $3,444$388,532 $370,804 $3,440$374,244 
Percentage of Normalized NOI Generated from Unencumbered Assets> 50.0% 59.0%  57.5% 57.4%  55.9%

(i) Annual Normalized NOI are reconciled in the table below. 

 Three months ended
March 31, 2023
Three months ended
December 31, 2022
(thousands of dollars)IFRS basis Equity-
accounted
investments
RioCan's
proportionate
share
 IFRS basis Equity-
accounted
investments
RioCan's
proportionate
share
 
NOI (i)$170,282 $5,675$175,957 $166,062 $5,872$171,934 
Adjust the following:      
Miscellaneous revenue (1,035)  (1,035) (802)  (802)
Percentage rent (1,474)  (1,474) (3,234)  (3,234)
Lease cancellation fees (4,562)  (4,562) (391)  (391)
Normalized NOI - total portfolio$163,211 $5,675$168,886 $161,635 $5,872$167,507 
Annual Normalized NOI - total portfolio(ii)$652,844 $22,700$675,544 $646,540 $23,488$670,028 
       
NOI from unencumbered assets$98,065 $861$98,926 $94,957 $860$95,817 
Adjust the following for Unencumbered Assets:       
Miscellaneous revenue (519)  (519) (518)  (518)
Percentage rent (1,244)  (1,244) (1,430)  (1,430)
Lease cancellation fees (30)  (30) (308)  (308)
Normalized NOI - Unencumbered Assets$96,272 $861$97,133 $92,701 $860$93,561 
Annual Normalized NOI - Unencumbered Assets (ii)$385,088 $3,444$388,532 $370,804 $3,440$374,244 

(i) Refer to the NOI and Same Property NOI table of this section for reconciliation from NOI to operating income.
(ii) Calculated by multiplying Normalized NOI by a factor of 4.

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 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 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, 2023 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.

Contact Information
RioCan Real Estate Investment Trust
Dennis Blasutti

Chief Financial Officer
416-866-3033 | www.riocan.com