RIOCAN INVESTOR PRESENTATION First Quarter 2014 May 30, 2014

Transcription

1 RIOCAN INVESTOR PRESENTATION First Quarter 2014 May 30, 2014

2 Forward Looking Statements 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. 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 annual information form and annual report that are available on our website and at 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. 2

3 One of North America s Largest Retail REITS 340 retail properties in Canada & U.S. 82 million sqft total portfolio 55 million sqft owned $ 8.1 billion market cap $ 14.5 billion enterprise value ~7,600 tenancies ~86% revenue generated by national and anchor tenants 3

4 Core Strengths Dominant platform, geographically diversified Conservative balance sheet / financial strength Strong, reliable distribution yield provided to investors Stable, diversified portfolio of national retail tenants Disciplined growth strategy in Canada and U.S. Positioned to benefit from robust development pipeline and acquisitions Experienced, performance driven management team 4

5 Property Portfolio BC GTA AB SA MB QC NFLD ON QC NB 293 retail properties 45 million sqft 84% annualized rental revenue 47 retail properties 9.9 million sqft 16% annualized rental revenue PA VA MA CT TX As at March 31, 2014 at RioCan s interest 5 5

6 Property Portfolio Canada Annualized Rental Revenue by Major Market Rest of Canada, 27.8% Major markets combined, 72.2% BC 3.9% 6.2% AB 3.7% Edmonton QC 7.2% Vancouver Calgary ON 8.7% 42.5% Ottawa Montreal Toronto 6 6

7 Property Portfolio U.S. Regional Market Strategy & Focus Annualized Rental Revenue by State 2.2% 2.5% 47 retail properties 9.9 million sqft 55.3% 2.6% 20.6% WV PA VA NY MD NJ NH MA CT RI 3.0% 0.7% 2.0% 6.7% 1.8% TX 2.6% As at March 31, 2014 at RioCan s interest 7 7

8 Strong Tenant Relationships 8 8

9 (i) (ii) Strong Tenant Relationships Top 10 Canada & US Combined As at March 31, 2014 Top 10 Tenant Name Annualized Rental Revenue Number Of Locations Total Area Occupied (Sq. Ft. In 000s) Weighted Avg Remaining Lease Term (Yrs) 1 Loblaws/No Frills/Fortinos/Zehrs/Maxi/Shoppers Drug Mart (i) 4.1% 82 1, Walmart 3.7% 33 3, Canadian Tire Corporation (ii) 3.4% 86 1, Metro/Super C/Loeb/Food Basics 3.2% 57 2, Cineplex/Galaxy Cinemas 3.0% 29 1, Winners/HomeSense/Marshalls 2.6% 73 1, Target Corporation 2.1% 27 2, Staples/Business Depot 1.6% Cara/Prime Restaurants 1.6% Sobey's Inc. 1.6% Loblaws has completed it's acquisition of Shoppers Drug Mart. Upon closing, Loblaws became RioCan s largest tenant by gross revenue. Canadian Tire Corporation includes Canadian Tire/PartSource/Mark s/sport Mart/ Sport Chek/Sports Experts/National Sports/Atmosphere. 9 9

10 Lease Rollover Profile Broadly Distributed Lease Expiries Canadian Portfolio As at March 31, s Square Feet % Square Feet expiring / portfolio NLA 4,153 4,643 4,470 3,072 3, % 11.9% 9.2% 11.4% 7.9% U.S. Portfolio As at March 31, s Square Feet % 4.8% 5.0% 7.4% 1, %

11 Occupancy since 1996 Historical Occupancy Rates 1996 to Q % 95.0% 95.0% 95.4% 96.1% 95.6% 95.8% 96.3% 96.3% 97.7% 97.6% 97.4% 97.4% 97.6% 97.4% 97.1% 96.9% 96.9% 96.8% Q

12 Financial Highlights

13 Financial Highlights Revenues (at RioCan s interest in millions of $ except per unit amounts) 12% CAGR ,195 1, Operating FFO* 15% CAGR Operating FFO* Per Unit 7.5% CAGR Years ended December 31st * Note: FFO reported under IFRS for 2010 onwards, excludes trading gain income 13

14 Revenues* (in millions of $ except per unit amounts) Quarterly Financial Highlights Operating FFO Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q Operating FFO Per Unit Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q * At RioCan s interest 14

15 Financial Highlights Net Operating Income* (in millions of $) Net Operating Income* Q Q Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q * At RioCan s interest, 2014 NOI adjusted for accrued property taxes under IFRIC

16 Financial Highlights Distributions to Unitholders (in millions) Distributions to Unitholders per Unit * * Distributions to Unitholders net of DRIP Distributions per Unit net of DRIP * annualized 16

17 Financial Highlights $ per unit Payout Ratio % Change Q Q Q Q Distribution 0.0% n/a n/a FFO 2.5% % 88.1% OFFO 2.4% % 86.0% AFFO 2.7% % 95.3% Canada United States Q Q Q Q Same Store NOI Growth 3.1% 0.1% 3.0% 1.4% Same Property NOI Growth 2.6% 0.3% 3.0% 1.4% 17

18 Financial Highlights On January 29, 2014, RioCan and its partners, Allied Properties REIT and Diamond Corporation, announced The Well. This mixed use development project is located at the corner of Front Street and Spadina Avenue in close proximity to downtown Toronto on a 7.7 acre site, and the partners have filed a rezoning application for up to 3.7 million square feet of retail, office and residential properties; RioCan renewed 1,282,000 square feet in the Canadian portfolio during the first quarter at an average rent increase of $1.02 per square foot, representing an increase of 7.0%; As at March 31, 2014, RioCan had ownership interests in 16 properties under development that will, upon completion, comprise approximately 10.8 million square feet (5.5 milion square feet at RioCan s interest), all located in major markets in Canada; During the first quarter, RioCan acquired interests in two income properties in Canada and the US at an aggregate purchase price of approximately $21 million at RioCan s interest at a weighted average capitalization rate of 6.7%; During the first quarter, RioCan sold three properties located in secondary markets aggregating 472,000 square feet at a total sale price of $51 million; and During the quarter, RioCan completed the offering of $150 million Series U debentures, which carry a coupon of 3.62% and maturity date of June 1, Subsequent to the quarter end, RioCan issued $150 million Series V debentures, which carry a coupon of 3.746% and maturity date of May

19 Financial Information (millions of dollars, except where otherwise noted, for definitions see RioCan s Q1 MD&A) % Change For the three months ended Q vs. Q March 31, 2014 Dec. 31, 2013 March 31, 2013 Total revenue - Consolidated 4.8% Total revenue - RioCan's interest 0.7% Adjusted EBITDA 0.5% FFO 3.3% FFO per Unit 2.5% Operating FFO 2.4% Operating FFO per Unit 2.4% AFFO 2.7% AFFO per Unit 2.7% Distributions as a percentage of AFFO -2.6% 92.8% 95.3% 95.3% Weighted average common Units outstanding - basic (in thousands) 1.4% 304, , ,735 Distributions to common Unitholders 1.9% Distributions to common Unitholders per Unit 0.0% Distributions per common Unit (annualized) 0.0% Distributions to common Unitholders net of distribution reinvestment plan 0.0% Distributions to common Unitholders net of distribution reinvestment plan per Unit 0.0% Common Unit issue proceeds under distribution reinvestment plan 7.1% Distribution reinvestment plan (DRIP) participation rate 5.7% 27.8% 25.6% 26.3% 19

20 Financial Information (millions of dollars, except where otherwise noted, for definitions see RioCan s Q1 MD&A) March 31, December 31, As at Total enterprise value 14,549 14,411 13,794 Total assets Consolidated 13,784 12,723 13,530 Total assets - RioCan's interest 13,820 12,993 13,554 Debt* Consolidated 6,094 5,477 5,959 Debt* RioCan's interest 6,124 5,748 5,988 Debt to total assets (net of cash) - Consolidated 44.1% 42.5% 43.9% Debt to total assets (net of cash) - RioCan's interest 44.2% 43.7% 44.0% Debt to total enterprise value - Consolidated 41.9% 38.0% 43.2% Debt to total enterprise value - RioCan's interest 42.1% 39.9% 43.4% Debt service coverage ratio - RioCan's interest Interest coverage ratio - RioCan's interest Fixed charge coverage ratio - RioCan's interest Net consolidated debt to Adjusted EBITDA Operating debt to adjusted operating EBITDA - RioCan's interest Total unitholders' equity 7,386 6,946 7,261 Common Units outstanding (in thousands) 305, , ,075 Closing market price per common Unit Common Units - market capitalization 8,147 8,374 7,532 Preferred Units, Series A outstanding (in thousands) 5,000 5,000 5,000 Closing market price per Preferred Unit, Series A Preferred Unit, Series C outstanding (in thousands) 5,980 5,980 5,980 Closing market price per Preferred Unit, Series C Preferred Units - market capitalization * Debt is defined as the sum of mortgages payable, lines of credit, and debentures payable. 20

21 Occupancy and Leasing Profile Financial Summary First quarter Fourth quarter Third quarter Second quarter First quarter Fourth quarter Third quarter Second quarter Committed occupancy 96.8% 96.9% 97.0% 96.7% 97.0% 97.4% 97.3% 97.4% Economic occupancy 95.7% 95.8% 95.5% 95.4% 95.8% 95.9% 95.5% 95.5% NLA leased but not paying rent (thousands of square feet) Annualized rental impact (millions) $13 $14 $17 $15 $15 $15 $18 $18 Retention rate Canada 91.2% 97.0% 91.1% 95.9% 68.3% 94.3% 84.8% 89.9% % increase in average net rent per sq ft Canada 7.0% 8.8% 11.2% 12.0% 13.4% 18.4% 12.9% 13.4% Retention rate US 86.4% 98.2% 98.4% 92.0% 98.8% 87.6% 96.3% 84.2% % increase in average net rent per sq ft US 8.3% 4.8% 3.8% 4.3% 2.3% 5.1% 6.0% 7.3% Average in place rent (psf) $16.01 $16.08 $16.07 $15.77 $15.77 $15.70 $15.85 $15.33 Same store growth Canada 3.1% 2.7% 2.2% 0.6% 0.1% 0.2% 0.0% 1.5% Same store growth US 3.0% 1.7% 0.9% 1.4% 1.4% 1.9% (0.3%) 1.3% 21

22 Net Operating Income Canadian Portfolio (thousands of dollars) Financial Summary Increase Three months ended March 31, (decrease) Same Store: Number of properties nm Committed occupancy 96.8% 97.1% (0.3%) Economic occupancy 95.6% 95.8% (0.2%) Net Operating Income: Same store (1) $ 141,355 $ 137, % Redevelopment and intensification 1,635 2,296 (28.8%) Same properties (2) 142, , % Acquisitions - IPP 7,801 nm Dispositions - IPP 9,866 nm Greenfield development 2,220 2, % NOI before adjustments 153, , % Lease cancellation fees, net 2,684 3,754 (28.5%) Straight line rent adjustment 731 1,477 (50.5%) Straight line lease write offs related to lease cancellations (339) (140) nm NOI from properties under development % NOI nm - RioCan s not meaningful. interest $ 157,060 $ 157,295 (0.1%) 1 Same store refers to those income properties that were owned by RioCan and had consistent leasable area in both periods. 2 Same properties refer to those income properties that were owned by RioCan throughout both periods. 22

23 Net Operating Income US Portfolio Financial Summary (thousands of dollars) Three months ended March 31, nm not meaningful. 1 Same store refers to those income properties that were owned by RioCan and had consistent leasable area in both periods. 2 Same properties refer to those income properties that were owned by RioCan throughout both periods.. Increase (decrease) Base rent US$ $ 27,843 $ 27, % Property tax and operating cost recoveries US$ 10,290 8, % Other US$ % Rental revenue US$ 38,406 36, % Property operating costs US$ 11,736 10, % Same store and same properties (i)(ii) - US$ 26,670 25, % Acquisitions IPP 4,789 nm Dispositions - IPP 1,647 nm NOI before adjustments 31,459 27, % Lease cancellation fee (48 ) 295 (116.3 %) Straight-lining of rents (28.3 %) NOI - US$ 32,049 28, % Foreign currency translation adjustment 3, nm NOI RioCan s interest $ 35,233 $ 29, % 23

24 Conservative Debt Profile Debt to Total Assets of 44.2% at March 31, 2014; Total operating lines $707.5 million Unencumbered pool has a fair value of $2.3 billion Floating rate debt 8.2% of aggregate debt Strong coverage ratios in Q excluding capitalized interest EBITDA interest coverage of 3.20x Debt service coverage of 2.34x and Fixed charge coverage of 1.12x * At RioCan s interest 24

25 RioCan Capital Structure 100% Total Assets* $13.8 Billion 100% Total Enterprise Value* $14.5 Billion 75% 52.7% 75% 56.0% 50% 25% 0% 2.0% 11.9% 33.5% Book Value* 50% 25% 0% 1.9% 11.0% 31.1% Market Value Common Units million units outstanding, $8.1 billion market capitalization Preferred Units - $278 million market capitalization Debentures - $1.6 billion Mortgages & Lines of Credit - $4.5 billion * At RioCan s interest 25

26 Conservative Debt Structure Growth in Asset vs Debt Debt Assets 12,888 13, ,886 10,767 CAGR % ,338 5, ,260 3,663 4,410 5,034 5, , CAGR %

27 Modest Leverage, Strong Interest Coverage RioCan has consistently adhered to a conservative debt policy even through periods of considerable growth 60% max permitted under covenant Interest coverage well in excess of the 1.65x maintenance covenant Leverage Interest Coverage 2.9x 2.9x 2.6x 2.6x 2.7x 2.8x 2.9x 2.7x 2.6x 2.2x 2.5x 2.5x 2.7x 2.8x 3.2x 47.3% 48.2% 51.9% 53.1% 53.8% 53.9% 56.6% 56.3% 54.9% 55.6% 49.1% 46.4% 43.5% 44.0% 44.2% Q * At RioCan s interest 27

28 Debt Maturity Schedule $ Millions 2,500 2,000 1,500 1, Scheduled principal amortization Mortgages payable Debentures payable Weighted average interest rate 2, % 4.2% 4.5% 4.6% 3.6% 3.6% 1, Thereafter* 6.00% 5.00% 4.00% 3.00% 2.00% 1.00% Weighted Avg. Interest Rate on Maturing Debt * Includes $150 million Series V debentures issued May 30, 2014 Long term, staggered debt maturity profile. 4.2% overall WAIR and 4.4 Year weighted avg. term to maturity at RioCan s interest. Low floating rate debt exposure (8.2% of total debt) at RioCan s interest. 28

29 Leverage and Coverage Ratios & Targets 3 Months 12 Months Targeted Ratios Mar. Mar. 31/14 31/14 5 Dec. 31/13 5 Mar. 31/13 Dec. 31/12 Interest coverage ratio 1 >2.75x 2.91x 3.20x 3.10x 2.85x 2.83x Debt service coverage ratio 2 >2.25x 2.19x 2.34x 2.26x 2.12x 2.10x Fixed charge coverage ratio 3 >1.1x 1.08x 1.12x 1.10x 1.06x 1.06x Net operating debt to operating EBITDA ratio 4 <6.5x 7.53x 7.53x 7.49x 7.49x 7.24x Unencumbered Assets ($millions) Unsecured Debentures ($millions) Unencumbered Assets to Unsecured Debt $2,278 $2,068 $1,611 $1,456 >130% 141% 142% (1) Interest coverage defined as: Adjusted EBITDA for the period, divided by total interest expense (including interest that has been capitalized). (2) Debt service coverage defined as: Adjusted EBITDA for the period, divided by total interest expense and scheduled mortgage principal amortization (including interest that has been capitalized). (3) Fixed charge coverage is defined as: Adjusted EBITDA for the period, divided by total interest expense (including interest that has been capitalized) and distributions to common and preferred unitholders. (4) Net operating debt to Operating EBITDA is defined as: the average debt outstanding (net of cash) for the period less debt related to property under development divided by Operating EBITDA (5) Adjusted to exclude interest capitalized. * At RioCan s interest 29

30 Growth Strategy

31 Future Growth Drivers Acquisitions Organic Growth Development Pipeline Future Growth Drivers Institutional Relationships Land Use Intensification 31

32 Canadian Portfolio Organic Growth Ability to add growth through rental renewals with 51% of leases renewing over next five years. In Q achieved renewal rent increases of 7% or $1.02 psf with an average renewal rate of $ In Q1, more than half of the space expiring was at fixed rate renewals with an average expiring rent of $11.83 psf and a renewal rate of $12.25 (3.6% increase). On RioCan s market renewal s it achieved an average renewal increase of 10% or $1.77 psf. Retention rate of 91.2% in Q ,000 4,500 4,000 3,500 3,000 2,500 2,000 1,500 1, RioCan Lease Maturity Schedule and Renewal History Q Square feet renewed/expiring (left axis) Achieved Renewal Rent PSF Expiring Rent PSF $20 $19 $18 $17 $16 $15 $14 $13 $12 Lease Expires (thousands except psf and % amounts Portfolio NLA Total 39,120 3,072 4,153 4,644 3,600 4,470 Square Feet expiring/portfolio NLA 7.9% 10.6% 11.9% 9.2% 11.4% Total average net rent psf $16.59 $17.44 $16.60 $16.93 $18.80 $

33 U.S. Portfolio Organic Growth Ability to add growth through rental renewals with 35% of leases renewing over next five years. In Q achieved renewal rent increases of 8.3% or $1.73 psf with an average renewal rental rate of $22.53 psf Maintained a retention rate of 86.4% in Q Square Feet expiring/portfolio NLA 100% 80% 60% 40% 20% 0% Leases Expiring Total Portfolio Cumulative Lease Expires (thousands except psf and % amounts Portfolio NLA Total 9, ,146 Square Feet expiring/portfolio NLA 6.4% 4.8% 4.9% 7.4% 11.5% 33

34 Acquisitions Annual Acquisitions Canada & US Purchase price at RioCan s interest (millions) $986 $1,073 $926 $849 Total $3.8 Billion

35 Acquisitions Track Record Acquisitions 2011 Q Location Cap Rate RioCan s Purchase Price (millions) Canada 6.4% 506 United States 6.9% Acquisitions 6.6% $1,073 Canada 5.7% 543 United States 6.8% Acquisitions 6.1% $926 Canada 5.3% 571 United States 6.6% Acquisitions 5.7% $849 Canada 5.5% 11 United States 8.0% Q1 Total 6.7% $21 Grand Total 2011-Q % $2,869 35

36 Dissolution of US JVs

37 Transaction Highlights RPAI & Dunhill In Q4 2013, RioCan acquired a 100% interest in eight high quality retail assets in Texas, including the dominant power centres in Austin and San Antonio. The portfolio includes four Target shadow anchored centres in Austin, San Antonio and Temple, as well as four grocery anchored or shadow anchored centres in Houston and Dallas. The gross purchase price for the 8 properties was US$96.6 million, representing a capitalization rate of 6.9%. Under the terms, RioCan assumed RPAI s share of the current in place mortgage financing of US$41.8 million, which carries an average interest rate of 3.7% and has an average term to maturity of 2.9 years. The purchase price for the 8 properties net of financing and mark to market adjustment on debt was US$53.7 million. RPAI acquired from RioCan its 80% ownership in five assets at a gross purchase price of US$102.8 million (US$45.6 million net of financing and mark to market adjustment on debt) to increase RPAI s ownership interest to 100% in these five properties. Dunhill Partners Inc. (Dunhill) RioCan has dissolved its joint venture agreement with Dunhill. RioCan acquired its partner s interests in six properties for a total purchase price of US$83.5 million, which equates to a capitalization rate of 6.4%. The six properties are; Arbor Park, Las Colinas Village, Las Palmas Marketplace, Lincoln Square, Louetta Central and Timber Creek Crossing. RioCan assumed Dunhill s share of the existing in place mortgage financing on the six properties aggregating to approximately US$42 million, which carries an average interest rate of 4.97% and has an average term to maturity of 8.2 years. 37

38 Transaction Highlights - RPAI High quality assets with a focus towards grocery anchored centres 38

39 Transaction Highlights - RPAI Assets Acquired Property Name Location NLA Occupancy Major Tenants 1890 Ranch Austin 486, % Alamo Ranch San Antonio 424, % Super Target (shadow), Ross Dress for Less, Beall s, PetSmart Super Target (shadow), Ross Dress for Less, Dick s Sporting Goods, PetSmart, Michaels Bear Creek Shopping Center Houston 87, % HEB Bird Creek Crossing Temple 124, % Great Southwest Crossing Dallas 168, % Target (Shadow), Home Depot (Shadow), PetSmart, Michaels, Office Max Sam s Club (shadow), Kroger (Shadow), PetSmart, Office Depot Riverpark Phase I,II Houston 253, % HEB, LA Fitness, Dollar Tree Southpark Meadows Austin 923, % Walmart (ground lease), Super Target (Shadow), Bed Bath & Beyond, Marshalls, Ross Dress for Less, Sports Authority Suntree Square Dallas 99, % Tom Thumb (Safeway), TOTAL / W.A. 2,567, % 39

40 Transaction Highlights - Dunhill Assets Acquired Property Name Dunhill s interest Location NLA Occupancy Major Tenants Arbor Park 15% San Antonio 139, % Ross Dress for Less, Office Max, Michaels Las Colinas Village 15% Irving (Dallas) 104, % Staples Las Palmas Marketplace 36.6% El Paso 637, % Lincoln Square 18.12% Arlington (Dallas) 471, % Louetta Central 15% Houston 179, % Timber Creek Crossing 20% Dallas 474, % Walmart, JC Penny TOTAL / W.A. 2,007, % Lowe s, Kohl s, Bed Bath & Beyond, Ross Dress for Less Best Buy, Ross Dress for Less, Stein Mart, Michaels Walmart (shadow), Kohl s, Ross Dress for Less, Michaels, 40

41 RioCan Cedar Dissolution Transaction Highlights In October 2012, RioCan and Cedar Realty Trust entered into an agreement to dissolve their joint venture formed in late RioCan acquired Cedar s 20% interest in 21 properties to increase its ownership to 100% and Cedar has acquired from RioCan an 80% interest in Franklin Village to increase its ownership to 100% in the property. The gross purchase price for the 21 properties was $120 million, representing a capitalization rate of 6.5%. Under the terms, RioCan assumed Cedar s share of the in place mortgage financing of $54.4 million, which carried an average interest rate of 5.2% and had an average term to maturity of 5.2 years. The purchase price for the 21 properties net of financing and mark to market adjustment on debt was $64.4 million. RioCan sold its 80% ownership in Franklin Village at a gross purchase price of $60.1 million ($25.4 million net of financing). Net cash investment by RioCan of approximately $39 million. In January 2013, RioCan opened a regional office in Mount Laurel, New Jersey and effective February 1, 2013 RioCan assumed property and asset management functions for its Northeast portfolio. In February 2013, RioCan sold its entire position of 9.4 million shares of Cedar for $48 million. Figures in US dollars 41

42 Recent Enclosed Mall Acquisitions Burlington Mall, Burlington, Ontario Total NLA 750,643 sf Major tenants: Target, Canadian Tire, Winners, The Bay (shadow anchor), HomeSense, SportChek, Shoppers Drug Mart, GoodLife Fitness Georgian Mall, Barrie, Ontario Total NLA 626,510 sf Major tenants: The Bay, Atmosphere, HomeSense, H&M, Sears (shadow), SportChek, Victoria s Secret Oakville Place, Oakville, Ontario Total NLA - 458,276 sf Major tenants: The Bay, Sears, H&M, Shoppers Drug Mart, Pusateri s (opening 2015) 42

43 Recent Enclosed Mall Acquisitions Impact on Property Type Mix RioCan plans to actively increase its presence in two sectors in Canada; enclosed regional malls and urban retail centers, as a means of leveraging its retail tenant base across the US and Canada. As at March 31, 2013 Office, 4.3% March 31, 2014 Office, 5.0% Urban Retail, 8.6% Urban Retail, 8.9% New Format Retail, 48.7% Enclosed Shopping Centre, 15.1% New Format Retail, 43.8% Enclosed Shopping Centre, 18.1% Non-Grocery Anchor, 5.0% Grocery Anchored Centre, 18.3% Non-Grocery Anchor, 4.7% Grocery Anchored Centre, 19.5% The 2012 purchase of Georgian Mall along with the acquisitions of Oakville Place and a 50% interest in Burlington Mall in April 2013, and the redevelopment and development of certain retail centres in urban markets such as Yonge Eglinton Centre, Sheppard Centre, Lawrence Square, Shoppers World Brampton and The Well complement RioCan s strategic goals to increase its presence in regional malls and urban retail centres. RioCan considers these sectors to have strong growth and value creation potential. There are additional opportunities for organic growth within the acquired shopping centres, which RioCan believes it can realize with its deep infrastructure and management strength. 43

44 Enclosed Mall Acquisitions RioCan completed the purchase of a 50% interest in Burlington Mall in Burlington, Ontario, and a 100% interest in Oakville Place in Oakville, Ontario in the second quarter of The gross purchase price for these two properties was approximately $362 million (at RioCan s interest) at a cap rate of approximately 5.0%. In connection with the purchase, RioCan assumed, at its interest, the in place mortgage financing of approximately $165 million. The purchase price was reduced by a mark-to-market adjustment on closing in consideration of the debt s above market interest rate, which was $9.8 million. Extends RioCan s retail reach to develop deeper relationships with fashion tenants and could create additional opportunities at RioCan s urban properties and Outlet Centres. Burlington Mall, Burlington, Ontario Oakville Place, Oakville, Ontario 44

45 Extracting Value by Recycling Capital RioCan continues to evaluate its portfolio in order to selectively dispose of assets as a means of recycling capital, and also to increase the portfolio weighting to the six major markets in Canada. Since the start of 2013 to May 31, 2014, the Trust disposed of $773 million of properties. As part of actively managing and improving the portfolio mix, RioCan will continue to identify properties for disposition. The pace of dispositions is expected to be reduced for the balance of 2014, but will continue. Current asset sales plan involves selling centres in lower growth and secondary markets; These asset sales will further enhance RioCan s strategy to be focused in Canada s high population, high growth markets; RioCan s concentration in Canada s six high growth markets exceeds 72% (Year end %) Capital from asset sales redeployed into enclosed mall acquisitions and development activities. RioCan s plan to recycle capital into higher growth assets will provide for enhanced returns to unitholders and a reduced need for access to public equity markets to raise capital. 45

46 Extracting Value by Recycling Capital Growth in Canada s 6 Major Markets RioCan s program of recycling capital is to shift the portfolio s geographic allocation away from low growth markets into Canada s six high growth major markets. Markets with highest population growth will outperform smaller markets with little growth or negative populations statistics. 72.2% 65.9% 67.5% Q

47 Development Activity Development Pipeline RioCan s development portfolio is expected to add considerable value to the overall investment property portfolio over the next 3-5 years. These assets are expected to generate higher yields than what can currently be achieved in the acquisition market. RioCan s development program consists of 16 projects that are expected to add 10.8 million square feet (5.5 million square feet at RioCan s interest) over the next six years. 1.1 million square feet is already income producing Key component of RioCan s organic growth strategy Pipeline NLA (000's Sq. Ft.) 1,200 1, Focused on well located urban and suburban developments in Canada s six major markets Committed Non-committed * Subject to preleasing and market conditions 47

48 Development Activity - Current Portfolio Property Type as a % of Development Portfolio 2% 3% Development Portfolio by Geographic Diversification 36% 59% New Brunswick 4% Alberta 20% Ontario 76% Ottawa* 10% Suburban GTA* 22% Toronto* 36% Other Ontario* 8% Outlet Centre Power Centre * % of total portfolio Main Street/Urban Convenience Retail 48

49 Development Pipeline Development Activity Greenfield developments through in house capabilities and with partners, such as Trinity, Allied Properties, KingSett Capital, and Canada Pension Plan Investment Board (CPPIB) At March 31, 2014 Total developments comprise 10.8 million square feet, including shadow anchors (7.3 million square feet included in Greenfield developments and 3.5 million square feet of Urban intensification projects). RioCan s interest consists of 3.9 million square feet of Greenfield development and 1.6 million square feet of Urban intensification projects. Total estimated development spending of $92 million for 2014 on Greenfield and Urban intensification activities. Overall development spending in the next five to seven years will range from $100 million to $200 million per year. RioCan s active development pipeline totals approximately $1.1 billion, with an additional $85 million of mezzanine funding commitments. Generate unlevered yield between 7% to 11%, at a weighted average of 8.0% to 9.0%. Recent Urban Development acquisitions include Spadina and Front Street, Yonge & Eglinton Northeast corner, Bathurst & College, and 740 Dupont in the GTA and Herongate Mall in Ottawa, ON. In July 2012, RioCan formed a JV with Allied Property REIT to develop sites in major markets on a non exclusive basis across Canada. RioCan, Allied Properties and Diamond Corp entered into a joint venture arrangement and have acquired two parcels which comprise The Well site in downtown Toronto, a 3.2 million square foot mixed use development. 49

50 Development Activity Estimated NLA Summary by Development Category In millions of square feet NLA 100% NLA RioCan% Income producing (i) Greenfield Development Urban Intensification Expansion & Redevelopment Total (i) Phases of the development that are currently income producing. 50

51 Development Activity Properties Under Development at March 31, 2014 PUD Balance: Active Committed Non-Committed Non-active Total Greenfield Development $268 $74 - $342 Urban Intensification Expansion and Redevelopment Excess Density Other (i) Total $423 $202 $49 $674 Greenfield Development: vacant land located in suburban markets. Urban Intensification: development or redevelopment projects located in urban markets. Expansion and Redevelopment: projects that will improve the property through demolition, renovation and/or the addition of density. Excess Density: leasable area identified and available for future development if and when the market demand exists. Active Committed: a property where the pro forma budget has been approved, all major planning issues have been resolved, tenants have been secured and construction is about to start or has started. Active Non committed: a property where the development team is creating the pro forma budget, all planning issues are being resolved, the leasing team is in the process of securing tenants, but construction has not started. Non active: a property that has future development potential. (i) Includes earnouts and other 51

52 Development Activity Estimated Spending Summary by Development Category In millions Future Development Total Greenfield Development $84 $55 $8 $252 $399 Urban Intensification Expansion & Redevelopment Total Construction Expenditures ,127 Mezzanine Financing Total RioCan Financing $182 $174 $119 $737 $1,212 52

53 Development Pipeline RioCan, Allied Properties REIT, & Diamond Corporation Joint Venture RioCan, Allied Properties and Diamond Corp announced in November 2012 that they had entered into a joint venture arrangement to acquire the Globe and Mail site in downtown Toronto. In April 2013, the partners also purchased an adjacent parcel. Project is expected to be 3.2 million square feet of mixed use including 570,000 square feet of retail, 1.1 million square feet of office and 1.5 million square feet of residential space that will be built out in phases. The joint venture will be structured on a 40/40/20 basis between RioCan, Allied and Diamond. RioCan and Allied would act as joint development and construction managers. Upon completion of any projects RioCan would act as property manager for any retail portion of the property and Allied would act as property manager for any office portion 53

54 Development Pipeline RioCan, Allied Properties REIT, & Diamond Corporation Joint Venture THE WELL Potential Layout and Vision Current vision for the site includes mix use of office retail and residential uses with inspiration drawn from other open air mixed retail properties in Europe. 54

55 Development Pipeline RioCan, Allied Properties REIT, & Diamond Corporation Joint Venture THE WELL Potential Layout and Vision 55

56 Development Pipeline RioCan, Allied Properties REIT, & Diamond Corporation Joint Venture THE WELL Potential Layout and Vision 56

57 Development Pipeline RioCan & Allied Properties REIT Joint Venture King & Portland RioCan and Allied Properties announced in July 2012 that they had entered into a joint venture arrangement on a non exclusive basis to acquire sites in the urban areas of major Canadian cities that are suitable for mixed use intensification. The joint venture is structured on a 50/50 basis between RioCan and Allied. RioCan and Allied would act as joint development and construction managers. Upon completion of any projects RioCan would act as property manager for any retail portion of the property and Allied would act as property manager for any office portion College and Manning First two sites to be developed are: College and Manning which will be developed into a mixed use complex with approx. 125,000 square feet and King and Portland which will be developed into a mixed use complex with approx. 400,000 square feet in Toronto, Ontario. 57

58 Development Pipeline Recent Completions The Stockyards - St. Clair & Weston, Toronto 555,000 sqf. two storey retail Opened Spring 2014 This unique site at the corner of St. Clair and Weston Road in Toronto, Ontario features Canada first purpose built Target Store; On March 31, 2014, RioCan acquired its partner Trinity s 25% interest in the site, as a result RioCan owns 50% of this landmark property. Development Partners: Trinity and Canada Pension Plan Investment Board ( CPPIB ) 58

59 Development Pipeline Recent Completions The Stockyards - St. Clair & Weston, Toronto 59

60 Development Pipeline Sage Hill, Calgary Sage Hill Crossing, a 32 acre greenfield development site in Northwest Calgary. RioCan owns the development on a 50/50 basis with KingSett Capital. Development commenced in Once completed, the anticipated gross leasable area is 389,000 square feet of retail use. The property is 71% preleased with Walmart and Loblaws slated to be the anchor tenants. Other major tenants include, RBC, Scotiabank, McDonalds, Liquor Depot and London Drugs. The property is expected to be completed in

61 Development Pipeline Calgary East Village 2.8 acre site located in the East Village area of downtown Calgary, Alberta. One of Calgary s few remaning privately owned blocks. The site was acquired on a 50/50 joint venture basis with KingSett Capital. Total development to be approximately 316,000 sf of retail with two residential towers above. Development is anticipated to be completed in Potential Design 61

62 Land Use Intensification and Urban Development Capitalize on trend in Canada s six high growth markets towards densifying existing urban locations, driven by: Prohibitive costs of expanding infrastructure beyond urban boundaries Environmental concerns Maximizing use of mass transit Generate high yields as land is already owned 62

63 Densifying existing urban locations Yonge Eglinton Centre - Toronto, Ontario RioCan acquired the property in 2007 and launched revitalization and expansion plan to capitalize on area s residential intensification significant increases in NOI and occupancy 63

64 Creating New Cash Flow Sources RioCan Yonge Eglinton Centre The Cube Today Proposed Location: Toronto, Ontario Intersection: Yonge & Eglinton Total Proposed GLA: 51,000 square feet Design Concept: Urban Retail Construction Start: Q Expected Completion: 2015 RioCan Interest: 100% 64

65 Creating New Cash Flow Sources The Sheppard Centre, Toronto Location: Toronto, Ontario Intersection: Yonge & Sheppard Total GLA: 678,000 square feet Design Concept: Urban Retail Expected Construction Start: Late 2014 Anticipated Completion: 2016 RioCan Interest 50% Potential Design Plans include substantial renovation of retail space including a new four storey retail addition fronting Sheppard Avenue and substantial upgrade to the interior retail space. When complete will add approximately 110,000 square feet of new retail space. Plans also contemplate the addition of a new 39 storey residential tower containing 300,000 square feet. Fast growing area of North Toronto Conditional agreements in place with: Longo s LA Fitness 65

66 Creating New Cash Flow Sources Yonge & Eglinton Northeast Corner - Toronto, Ontario Location: Toronto, Ontario Intersection: Yonge & Eglinton Total Proposed GLA: 54,000 square feet Design Concept: Urban Retail Anticipated Completion: 2017 RioCan Interest 50% 1.1 acre site has been approved for redevelopment by the city of Toronto with a 58 storey tower at corner of Yonge and Eglinton and a 36 storey tower fronting Roehampton Avenue (first street north of Eglinton). Condominium portion of the project is over 90% pre-sold. North tower to be developed as rental residential. Current plans are for 458 unit residential apartment building. Construction commenced in Q

67 Creating New Cash Flow Sources 740 Dupont - Toronto, Ontario Location: Toronto, Ontario Intersection: 740 Dupont Street Total Proposed GLA: 184,000 square feet Design Concept: Urban Retail Anticipated Completion: 2017 RioCan Interest 100% 67

68 Creating New Cash Flow Sources 420 Bathurst Street, Toronto Location: Toronto, Ontario Intersection: Bathurst & Dundas Total Proposed GLA: 148,000 square feet Design Concept: Urban Retail Anticipated Completion:

69 Urban Intensification RioCan has a number of Urban Intensification opportunities in the GTA market Sunnybrook Plaza, Toronto, ON Located at the busy intersection of Bayview Avenue and Eglinton Avenue in midtown Toronto The site benefits from excellent demographics and is a probable location for a stop along the proposed Eglinton subway line The property is an excellent location for a redevelopment project similar to what has been accomplished at 1717 Avenue Road Queensway Cineplex, Toronto, ON Located in Western Toronto at the corner of The Queensway and Islington Avenue with access to the Queen Elizabeth Way (QEW) The Currently anchored by Cineplex, which will be expanded to include VIP screens. This centre is an ideal property for additional density and potential redevelopment into a mixed use facility, in keeping with the trend of urban intensification 69

70 Urban Intensification Completed Queen & Portland, Toronto, ON Projects Location: Toronto, Ontario Intersection: Portland & Queen Total Proposed GLA: 91,000 square feet Design Concept: Mixed use facility Construction Completed: 2011 After Before 70

71 Urban Intensification Completed 1717 Avenue Road, Toronto, ON Projects Location: Toronto, Ontario Intersection: 1717 Avenue Road Total Proposed GLA: 91,000 square feet Design Concept: Mixed use facility Construction Completed:

72 Canadian Outlet Centre Development In 2011, RioCan entered into an exclusive joint venture for the acquisition, development and leasing of sites across Canada that are suitable for development or redevelopment as outlet shopping centres similar in concept and design to those within the existing Tanger U.S. portfolio. In December 2011, RioCan and Tanger acquired the Cookstown Outlet Mall, located about 45 minutes north of Toronto. A 161,000 square foot outlet centre with the potential to add a further 160,000 square feet of retail space, which broke ground during the second quarter of In November 2012, RioCan and Tanger acquired two sites in the Montreal area, Les Factoreries Saint-Sauveur, and Le Carrefour Champetre (Bromont Outlet Centre). The Montreal sites are existing centres which will be expanded and re-branded as Tanger Outlet Centers. The joint venture currently has a 52.5 acre site in Kanata, Ontario, which broke ground during the second quarter Currently have a site under contract in the Calgary market. 72

73 Development Pipeline Cookstown Outlet Mall Purchased in December 2011 with Tanger Factory Outlet Centers. 161,000 square foot outlet centre with the construction in progress to add a further 160,000 square feet of retail space. Construction on the expansion began in Q with completion expected in Q

74 Development Pipeline Tanger Outlets - Kanata On April 23, 2013 RioCan and Tanger purchased the West Kanata Lands 52.5 acre site, approximately 20 kilometres west of Ottawa Currently being developed into a 347,000 square foot outlet centre Development began in Q with completion expected in Q

75 Development Pipeline - Tanger Opportunities Les Factoreries, St-Sauveur Tanger Outlet Centre 116,000 square foot outlet centre with the potential to add a further 15,000 square feet of retail space Well established outlet centre in suburban Montreal 75

76 Development Pipeline - Tanger Opportunities Bromont Tanger Outlet Centre Bromont, Quebec 162,000 square foot outlet centre with the potential to add a further 89,000 square feet of retail space Established outlet centre located 85kms east of Montreal, near the eastern townships 76

77 Strong Institutional Relationships Through the years RioCan has developed strong institutional relationships Leverage RioCan s capital to enhance returns and increase scale of investments Generate additional revenue streams through property and asset management fees RioCan recently entered into a Joint Venture arrangement with KingSett Capital when it acquired the Sheppard Centre RioCan manages the property, acts as leasing manager for the property and will be the development manager in connection with any redevelopment of the property. Currently partnered with KingSett on the acquisition of the Sage Hill development site. Currently partnered with KingSett on the acquisition of Burlington Mall as part of the Primaris acquisition RioCan has also developed a strong relationship with Allied properties RioCan has partnered with Allied on the urban development sites of King & Portland and College street in Toronto. RioCan, Allied, and Diamond Corp. have entered into a joint venture to develop The Well (formerly the Globe and Mail lands) at Front Street and Spadina in downtown Toronto. 77

78 Strong Institutional Relationships RioKim Joint Venture RioCan REIT and Kimco Realty Corporation, a U.S. REIT listed on the NYSE which also focuses on the ownership of shopping centres, each have a 50% interest in RioKim joint venture. Invested over $1.2 billion in 45 properties since 2001 comprising over 9.3 million sq. ft. of GLA including a 10 property portfolio in central and eastern Canada purchased in September RioCan provides asset and property management, development and leasing services to RioKim in Canada. RioCan recently acquired an 80% interest in Montgomery Plaza in Fort Worth, Texas from Kimco, who remains a 20% owner in the property and provides property management and leasing services. Brentwood Village Tillicum Centre 78

79 Strong Institutional Relationships CPPIB Joint Venture RioCan Centre Burloak Before In October 2004, RioCan REIT and CPPIB announced an agreement to acquire premier regional power centres in Canada on a 50/50 basis as a core, long term holding strategy Today, RioCan and CPPIB are partners in over 1.8 million sq. ft. of completed regional power centres and approximately 3.2 million sq. ft. of planned development projects RioCan provides property and asset management, leasing, development and construction management services for the co ownership RioCan Centre Burloak After 79

80 Strong Institutional Relationships CPPIB Strategic Alliance Grandview Corners Acquired in December 2009 on a basis Unique asset located in the Greater Vancouver Area market of Surrey Diverse and strong tenant mix 529,827 sq. ft. anchored by a 217,278 sq. ft. Walmart St. Clair & Weston RioCan completed the its St. Clair and Weston Road development with Trinity and Canada Pension Plan Investment Board ( CPPIB ) in Toronto. Site work commenced in the fourth quarter of The development was completed in On March 31, 2014, RioCan acquired its partner Trinity s 25% interest in the site, as a result RioCan owns 50% of this landmark property. 80

81 Strong Institutional Relationships CPPIB Strategic Alliance East Hills RioCan has successfully completed the rezoning requirements for its East Hills development with Trinity, CPPIB and the original vendor in Calgary, Alberta. The East Hills development consists of three phases. Phase I and III comprise approximately 111 acres and Phase II comprises approximately 37 acres. Walmart opened in Q McCall Landing Jacksonport, located at 36th Street NE and Country Hills Boulevard NE in Calgary, is a 105 acre development site. Will be developed into a new format retail centre with CPPIB and Trinity Upon completion, the development is expected to feature approximately 1.1 million square feet of retail space. 81

82 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 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 first quarter ended March 31, RioCan uses these measures to better assess the Trust s underlying performance and provides these additional measures so that investors may do the same. 82