TORONTO, Feb. 12, 2019 (GLOBE NEWSWIRE) -- RioCan Real Estate Investment Trust (“RioCan" or the "Trust”) today announced its financial results for the three months and year ended December 31, 2018.
"In 2018, RioCan accelerated its transformation into a REIT focused on Canada’s major markets and an expanding transit-oriented mixed-use residential portfolio. We are pleased with our year end results which report stronger same property NOI growth and continued FFO per unit growth even as we made significant progress on our secondary market dispositions,” said Edward Sonshine, Chief Executive Officer of RioCan. “The quality of our portfolio, income and liquidity has never been better than it is today. We are also pleased with the development completions scheduled for 2019 and 2020 and the yields we are achieving, adding to our optimism about RioCan's next several years. As we deliver on transit-oriented mixed-use residential developments, further optimize our retail tenant mix and drive operational efficiency, the transformed portfolio will be poised to deliver higher FFO and net asset value per unit growth for our unitholders."
|Three months endedDecember 31||Year ended December 31|
|(in millions except percentages, square feet and per unit values)||2018||2017||2018||2017|
|Weighted average units outstanding - diluted (in thousands)||306,295||326,155||314,024||326,929|
|FFO per unit – diluted (i)||$||0.45||$||0.44||$||1.85||$||1.79|
|Same property NOI growth - overall portfolio (i)(ii)||2.1||%||2.9||%||2.2||%||2.1||%|
|Same property NOI growth - major markets (i)(ii)||2.2||%||3.0||%||2.6||%||2.2||%|
|Six major markets - % of total annualized revenue (iv)||85.4||%||76.1||%||85.4||%||76.1||%|
|Greater Toronto Area - % of total annualized revenue (iii) (iv)||46.8||%||40.9||%||46.8||%||40.9||%|
|Occupancy - committed (iv)||97.1||%||96.6||%||97.1||%||96.6||%|
|Occupancy - committed six major markets (iv)||97.7||%||97.6||%||97.7||%||97.6||%|
|Renewal retention ratio||91.2||%||87.5||%||91.2||%||91.1||%|
|Development completions - sq ft in thousands||298.0||117.0||799.0||849.0|
|Development expenditures (v)||$||151.3||$||110.5||$||473.4||$||355.1|
|Properties held for development as a percentage of consolidated gross book value of assets (maximum permitted: 15%) (iv)||8.5||%||8.5||%|
|Balance Sheet Strength Highlights|
|Debt to Adjusted EBITDA – RioCan’s proportionate share (i)||7.88||x||7.57||x||7.88||x||7.57||x|
|Ratio of total debt to total assets – RioCan’s proportionate share (i) (iv)||42.1||%||41.4||%||42.1||%||41.4||%|
|Unencumbered assets (iv)||$||7,966||$||7,663||$||7,966||$||7,663|
|Unencumbered assets to unsecured debt (iv)||231||%||226||%||231||%||226||%|
|(i)||A Non-GAAP measurement. For definitions and basis of presentation of RioCan's Non-GAAP measures, refer to the Presentation of Financial Information and Non-GAAP Measures section in RioCan's Management's Discussion and Analysis (MD&A) for the year ended December 31, 2018.|
|(ii)||Refers to same property NOI growth on a year-over-year basis. Prior periods as reported; not restated to reflect current period categories.|
|(iii)||The Greater Toronto Area (GTA) extends north to Barrie, ON; west to Hamilton, ON; and east to Oshawa, ON. The GTA definition has been extended from Burlington to Hamilton effective January 1, 2018.|
|(iv)||Information presented as at December 31.|
|(v)||Includes costs incurred for various properties under development and for residential inventory in respective reporting periods.|
FFO Per Unit Growth and Capital Recycling
RioCan's development program is a significant component of its growth strategy to unlock the intrinsic value of its existing properties and deliver strong net asset value ("NAV") growth to its unitholders. Development expenditures were higher in 2018 than in 2017 primarily due to progress and substantial completion of several large mixed-use projects as noted below. The number of residential units and net leasable area (NLA) square footage stated here are at 100%.
For the five projects that are complete or near completion (ePlace, Bathurst College Centre and King Portland Centre in Toronto, Frontier in Ottawa, and Sage Hill in Calgary), the Trust estimates the average development yield to be 5.7% based on estimated stabilized NOI, which leads to an estimated $204.5 million incremental value creation for the projects' commercial and residential rental components plus an additional $26.5 million of residential inventory gains on the sale of condominium units at two projects, bringing the total incremental value creation to $231.0 million. As of December 31, 2018, approximately $165.4 million of incremental value creation has been recognized through property fair market value, applicable interim and fee income, and applicable gains on sale of condo units.
These yield and value creation estimates take into account the Trust's purchase of our partner's 50% non-managing interest in Sage Hill subsequent to the year end and the expected purchase of the remaining 50% interest in the residential rental and retail portions of ePlace in 2019 based on agreements in place.
Balance Sheet Strength
RioCan continued to exercise sound capital management in 2018 and maintained a strong balance sheet. Debt to Adjusted EBITDA at RioCan's proportionate share was at 7.88x as at December 31, 2018, below the Trust's 8.0x target despite substantial secondary market asset dispositions completed. Debt to total assets at RioCan's proportionate share was 42.1%, as at December 31, 2018, in line with our leverage target. The Trust continued to maintain a large unencumbered asset pool of $8.0 billion as of December 31, 2018, which provided 231% coverage over its unsecured debt, well above its 200% target.
Subsequent to the year end, the Trust extended the maturity date of its $150.0 million non-revolving unsecured credit facility from December 27, 2019 to June 27, 2024 and fixed the all-in annual interest rate at 3.43% through an interest rate swap. The Trust also fixed the annual all-in interest rate for $125.0 million of its other non-revolving unsecured credit facility maturing on January 31, 2023 at 3.38% through an interest rate swap. Further, the Trust entered into a $350.0 million five-year non-revolving unsecured credit facility with three financial institutions and has fully drawn on the credit facility to repay certain debt and for general trust purposes. This credit facility matures on February 7, 2024 and, through an interest rate swap, bears an annual all-in fixed interest rate of 3.34%. These transactions demonstrate the Trust's credit worthiness and access to multiple sources of capital, extend the average term to maturity of the Trust's total debt, and reduce the Trust's floating interest rate debt exposure.
Conference Call and Webcast
Interested parties are invited to participate in a conference call with management on February 12, 2019 at 10:00 a.m. (ET). You will be required to identify yourself and the organization on whose behalf you are participating.
In order to participate, please dial 647-427-3230 or 1-877-486-4304. If you cannot participate in the live mode, a replay will be available. To access the replay, please dial 1-855-859-2056 and enter passcode 5298637#.
For a copy of the slides to be used for the conference call or, to access the simultaneous webcast, visit RioCan’s website at http://investor.riocan.com/investor-relations/events-and-presentations/ and click on the link for the webcast.
RioCan is one of Canada’s largest real estate investment trusts with a total enterprise value of approximately $13.2 billion as at December 31, 2018. 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. Our portfolio is comprised of 233 properties, including 16 development properties, with an aggregate net leasable area of approximately 38.7 million square feet. 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 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 annual audited consolidated financial statements ("2018 Annual Consolidated Financial Statements") and MD&A for the three months and year ended December 31, 2018, which is 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. The following measures Funds From Operations (“FFO”), Same Property NOI, Debt to Adjusted EBITDA, RioCan's Proportionate Share, Unencumbered Assets to Unsecured Debt and Total Enterprise Value, 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 earnings 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 “Presentation of Financial Information and Non-GAAP Measures” section in RioCan’s MD&A for the year ended December 31, 2018.
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 year ended December 31, 2018 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. General economic conditions, including interest rate fluctuations, may also have an effect on RioCan’s results of operations. 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 historically low interest costs; a continuing trend toward land use intensification, including residential development in urban markets; access to equity and debt capital markets to fund, at acceptable costs, future capital requirements and to enable our refinancing of debts as they mature; the availability of investment opportunities for growth in Canada; and the timing and ability for RioCan to sell certain properties, the valuations to be realized on property sales relative to current IFRS values, and the Trust's ability to utilize the capital gain refund mechanism. 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.
Our U.S. subsidiary qualified as a REIT for U.S. income tax purposes up to May 25, 2016, subsequent to the closing date of the sale of our U.S. property portfolio. For U.S. income tax purposes, the subsidiary distributed all of its U.S. taxable income and is entitled to deduct such distributions against its taxable income. The subsidiary’s qualification as a REIT depends on the REIT’s satisfaction of certain asset, income, organizational, distribution, unitholder ownership and other requirements up until May 25, 2016. Our U.S. subsidiary was subject to a 30% or 35% withholding tax on distributions of its U.S. taxable income to Canada. We did not distribute any withholding taxes paid or payable to our unitholders related to the disposition. Should RioCan’s U.S. subsidiary no longer qualify as a U.S. REIT for U.S. tax purposes prior to May 25, 2016, certain statements contained in this News Release or the MD&A for the year ended December 31, 2018 may need to be modified.
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.
RioCan Real Estate Investment Trust
Senior Vice President and Chief Financial Officer
416-866-3033 | www.riocan.com
Source: RioCan Real Estate Investment Trust