RioCan Real Estate Investment Trust outlines clear ambition and presents five-year growth targets at its 2022 Virtual Investor Day
TORONTO, Feb. 23, 2022 (GLOBE NEWSWIRE) -- Today, at its 2022 Virtual Investor Day, RioCan Real Estate Investment Trust (“RioCan” or the “Trust”) (TSX: REI.UN) will present “Quality & Growth”, its 2022–2026 strategic roadmap with new five-year financial growth targets.
“RioCan has a clear strategy to capitalize on our best-in-class properties, embedded development pipeline, and compelling growth prospects to deliver solid performance and maximize total unit holder returns,” said President and Chief Executive Officer, Jonathan Gitlin. “Our strategic initiatives are grounded in the strength of our foundation and are designed to further enhance the quality of our assets, our financial results, and ultimately, drive value creation. Through the combination of our insights-driven strategy and our exceptional and dynamic team, we are confident that we can execute against our strategy for the ongoing benefit of our unitholders.”
Strategic Plan Highlights
With an established and robust foundation, RioCan is executing from a position of strength. Its strategy is underpinned by:
a best-in-class, transit-oriented, major market portfolio of resilient assets;
a compelling near-term development pipeline with an average of 0.5 million square feet of development deliveries annually over the next five years; and
strong market drivers for its properties, including favourable surrounding demographics and tight residential market supply.
Four pillars fuel RioCan’s five-year plan to drive growth and net asset value creation.
Reimagine Retail: commit to, and continue to reimagine RioCan’s retail core. Continue to shape its portfolio with high return initiatives, actively evolve its retail tenant mix, and strategically invest in properties to enhance same-property net operating income (“SPNOI”) growth prospects.
Intelligently Diversify: diversify the Trust’s asset base, income streams and tenant mix. Intelligent diversification allows the Trust to capitalize on synergies between asset classes, accelerate net operating income (“NOI”) growth through its residential portfolio, expand fee income generation opportunities and introduce new intra-RioCan retail uses to its commercial properties.
Enhance Customer Centrism: deepen RioCan’s emphasis on customer-centricity by understanding and meeting the needs of RioCan’s tenants and partners to continue to build on its long-standing relationships, deploy technology and generate sustainable income through its platforms.
Responsible Growth: focus on enhancing RioCan’s culture, ESG leadership, and its long-standing principle of prudent and intentional capital management.
Outlook
Through the successful execution of its strategy, RioCan is targeting to generate a 5-to-7% annual increase in funds from operations (“FFO”) per unit (1) over the next five years. The increase in FFO per unit growth is driven by stable SPNOI growth and returns from its development and investment activities. Combined with a consistent FFO payout ratio, the Trust intends to offer attractive annual distribution yields and compelling total unitholder returns. For 2022, this targeted increase in FFO per unit translates to a range of $1.68 to $1.71 per unit, which compares to FFO per unit of $1.60 for the year ending December 31, 2021.
The Trust’s five-year plan FFO per unit growth targets noted above are based on:
Average annual SPNOI (1) growth of approximately 3% supported by the assumptions noted below.
Normalized committed occupancy rate of 97-to-98% by year-end 2026. This target range is in line with the pre-pandemic occupancy rate of 97.2% that was achieved as at year-end 2019.
Average annual blended leasing spreads (%) in the high single digits, which is comparable to blended leasing spread of 9.4% that was achieved prior to the pandemic for the year ended December 31, 2019.
Net rent per occupied square foot of approximately $22.50 for the commercial portfolio by year-end 2026. This increase from current levels of $20.16, as at December 31, 2021, is based on the combination of the above two assumptions as well as contractual rent increases.
Development and investment activity contributing 2-to-4% of average annual FFO per unit growth based on the assumptions noted below.
Total development deliveries over the next five years of approximately $3.0 billion, which reflects current IFRS cost plus anticipated future spending but excludes any potential fair value adjustments associated with these deliveries.
NOI (1) from residential rental properties is targeted to be an annual range from $55-to-60 million within the next five years.
Average annual Development Spending (1) of approximately $500 million.
Development largely self-funded with retained cash flow from operations of approximately $150 million per year, annual project leverage of $250 million and average annual capital recycling run rate of $100-to-200 million.
FFO payout ratio (1) of 55-to-65%, in line with the FFO payout ratio for the year ended December 31, 2021 of 62.6%.
Adjusted Debt to Adjusted EBITDA at RioCan’s proportionate share (1) of 8.0x – 9.0x, compared to 9.59x as at December 31, 2021.
The above represents forward-looking information. For a discussion of additional assumptions and key related risks, see “Forward-Looking Information” below.
(1) FFO per unit, FFO payout ratio, NOI, SPNOI, Development Spending and Adjusted Debt to Adjusted EBITDA at RioCan’s proportionate share are non-GAAP measurements. For definitions, quantitative reconciliations and the basis of presentation of RioCan's non-GAAP measures, refer to the "Non-GAAP Measures” section in RioCan’s MD&A for the three months and year ended December 31, 2021, available on www.sedar.com.
2022 Investor Day Event Details:
Through a series of presentations and panel discussions, RioCan leadership will discuss the Trust’s current operations, recent developments, and strategic outlook. The event will start at 1:00 p.m. ET. Interested parties may access the live webcast here or on the Events and Presentations page of the Trust’s website here. In addition to presentations, the event will include a live Q&A session for institutional investors and research analysts. An archived version of the event as well as the accompanying slide presentations will be available on the Trust’s website following the event.
Any questions regarding RioCan’s 2022 Investor Day may be addressed to RioCan’s Investor Relations team at ir@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, FFO per unit, FFO Payout Ratio, NOI, SPNOI, Development Spending, Adjusted Debt to Adjusted EBITDA at RioCan’s proportionate share, as well as other measures discussed in this press 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. For full definitions and quantitative reconciliations of these non-GAAP measures, refer to the "Non-GAAP Measures” section in RioCan’s MD&A for the three months and year ended December 31, 2021 available at www.sedar.com.
Forward-Looking Information
All information other than statements of current and historical fact included in this press release is forward-looking information within the meaning of applicable securities laws. Forward-looking information generally can be identified by the use of forward-looking terminology such as “target”, “outlook”, “objective”, “may”, “will”, “would”, “expect”, “intend”, “estimate”, “anticipate”, “believe”, “should”, “plan”, “continue”, “ambition”, or similar expressions or the negative thereof suggesting future outcomes or events. The forward-looking information contained herein is expressly qualified in its entirety by this cautionary statement. Forward-looking information in this press release includes, but is not limited to, statements regarding the growth and financial targets that RioCan aspires to achieve by the end of 2022 and 2026, RioCan’s business generally, future financial position and business strategy, and its plans and objectives, as well as our strategies to achieve those objectives. 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 gradual recovery and growth of the retail environment and the general economy over 2022; lease renewals and rental increases; the ability to re-lease or find new tenants; the timing and ability of RioCan to sell certain properties; project costs and timing; relatively historically low interest costs; a continuing trend toward land use intensification at reasonable costs and development yields, including residential development in urban markets; the Trust’s ability to redevelop, sell or enter into partnerships with respect to the future incremental density it has identified in its portfolio; 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; the timing and ability of RioCan to sell certain properties; the valuations to be realized on property sales relative to current IFRS values; the market price of the Trust’s units; and the Trust's ability to utilize the capital gain refund mechanism. Certain material factors, estimates or assumptions were applied in drawing a conclusion or making a forecast or projection as reflected in this presentation and actual results could differ materially from such conclusions, forecasts or projections.
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 the environment in which RioCan will operate in the future and its ability to achieve its goals. Although management believes that the expectations represented in such forward-looking information are reasonable, there can be no assurance that such expectations will prove to be correct. The future outcomes that relate to the forward-looking information may be influenced by many factors that could cause actual future results, conditions, actions or events to differ materially from the targets, expectations, estimates or intentions expressed in the forward-looking information, including the risks referred to under the heading “Risks and Uncertainties” in RioCan’s MD&A for the three months and year ended December 31, 2021 and in its most recent Annual Information Form, available at www.sedar.com and at www.riocan.com. RioCan cautions that such list of factors is not exhaustive and when relying on forward-looking information to make decisions with respect to RioCan, readers should carefully consider these factors, as well as other uncertainties and potential events, and the inherent uncertainty of forward-looking information.
There can be no assurance that forward-looking information will prove to be accurate, as actual results and future events could differ materially from those anticipated in such information. Accordingly, readers should not place undue reliance on forward-looking information. The forward looking information contained in this press release is made as of the date hereof. Except as required by applicable securities laws, RioCan undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.
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 December 31, 2021, our portfolio is comprised of 207 properties with an aggregate net leasable area of approximately 36.4 million square feet (at RioCan's interest) including office, residential rental and 13 development properties. To learn more about us, please visit www.riocan.com.
Contact Information
RioCan Real Estate Investment Trust
Kim Lee
Vice President, Investor Relations
(416) 646-8326
