RioCan Reports Fourth Quarter and Year End 2023 Results - FFO per Unit Growth Enables Annualized Distributions Increase of 2.8% to $1.11 Per Unit

RioCan Real Estate Investment Trust ("RioCan" or the "Trust") (TSX: REI.UN) announced today its financial results for the three months and year ended December 31, 2023.

"RioCan continued to capitalize on Canada's short supply of quality space and robust retailer demand, generating some of the best operational results we have ever seen, and achieved our financial objectives for 2023," said Jonathan Gitlin, President and CEO of RioCan. "Our performance speaks to the reliability and quality of our open air retail, prime locations, and foundation of necessity-based retailers. As we celebrate our 30th anniversary, we cement our position as a valuable long-term investment and Canada's premier REIT. RioCan's third consecutive annual distribution increase to Unitholders reflects our confidence in delivering continued operational excellence and meaningful value creation."

• Full year FFO per unit was $1.77, an increase of $0.06 per unit or 3.5% over the prior year.
  • Commercial Same Property NOI¹ grew by 4.8%, contributing a $0.09 increase in FFO per unit.
  • NOI from completed commercial developments drove FFO per unit higher by $0.05.
  • Residential NOI¹ accounted for $0.03 per unit of the FFO per unit increase.
  • Reduced NOI from the sale of commercial properties resulted in a $0.10 reduction in FFO per unit.
  • Higher interest expense, which was partially insulated by hedges, debt reduction impact of property sales proceeds, and higher investment and interest income, resulted in a net $0.05 decrease in FFO per unit.
  • Accretion from Normal Course Issuer Bid activity resulted in an increase of $0.03 FFO per unit while all other combined variances accounted for the remaining $0.01 increase in FFO per unit.
• Net income for the year of $38.8 million was $198.0 million lower than the prior year due to a fair value loss on investment properties of $450.4 million compared to a $241.1 million fair value loss in 2022. The fair value loss in 2023 was driven by increased capitalization rate assumptions, partially offset by higher stabilized NOI.
• Our FFO Payout Ratio¹ of 60.5%, Liquidity¹ of $2.0 billion, Unencumbered Assets¹ of $8.1 billion, floating rate debt at 6.8%¹ of total debt and staggered debt maturities, all contribute to our financial flexibility and balance sheet strength.

Distribution Increase and Outlook

• RioCan's Board of Trustees approved a 2.8% increase to the monthly distribution to Unitholders from $0.09 to $0.0925 per unit commencing with the February 2024 distribution, payable on March 7, 2024 to Unitholders of record as at February 29, 2024. This brings RioCan's annualized distribution to $1.11 per unit and is the third consecutive annual distribution increase as we provide sustainable distribution growth to Unitholders while maintaining our payout ratio targets.
• For 2024, we anticipate FFO per unit to be within the range of $1.79 to $1.82, Commercial SPNOI growth of ~ 3%, and an FFO Payout Ratio of between 55% to 65%. Development Spending¹ on mixed-use projects is expected to be between $250 million to $300 million and spending for the construction of retail projects of $50 million to $60 million.
• The Trust continuously reviews its longer-term targets in the context of ever-evolving macroeconomic and business environments. Refer to the Outlook section of the MD&A for more information.

Operation Highlights (i)

• Commercial Same Property NOI grew by 4.8%, driven by contractual rent steps, strong leasing and recovery of provisions for credit losses. The impact of net provision reversals during 2023 contributed 1.2% to this SPNOI growth.
• A record high 98.4% retail committed occupancy increased by 50 basis points over last year, underscoring the demand for well-located retail space. When compared to Q3 2023, retail in-place occupancy increased by 40 basis points to 98.0%.
• The blended leasing spread of 10.7% in 2023 was comprised of new and renewal leasing spreads of 14.7% and 9.8%, respectively. Excluding fixed-rate renewals, the renewal leasing spread would be 11.4% for the year, reflective of the strong leasing environment. New leasing in 2023 generated average net rent per square foot of $27.75, well above the average net rent per occupied square foot of $21.51.
• Our strong demographic profile with a population and household income of 260,000 and $140,000, respectively, within a five kilometre radius of the Trust's properties, continues to attract strong and stable tenants which comprise 87.5% of annualized net rent and strengthen the quality of the tenant mix.

RioCan Living Update ¹

• Continued strong performance and leasing environment for our stabilized properties drove Residential Same Property NOI² growth of 13.8% in 2023.
• Total NOI generated from our residential rental operations for 2023 was $21.5 million, an increase of $7.9 million or 57.7% over the prior year.
• RioCan Living^TM has 13 buildings in operation, representing 2,738 residential units. 11 of these buildings are stabilized and 96.5% leased as at February 13, 2024.
• Occupancy commenced at FourFifty The Well^TM on August 1, 2023. As at February 13, 2024, 45.8% of the units are leased at rents above expectations.
• The 2,573 condominium and townhouse units that are under construction are expected to generate combined sales revenue of over $780.0 million between 2024 and 2026. Of RioCan's six active condominium construction projects, 86% of the total units have been pre-sold, representing 95% of pro-forma total revenues.

Development Highlights

• For the full year, 599,000 square feet of property under development were completed which are expected to contribute $27.2 million of stabilized cash NOI. Rental income has commenced in 2023 and is expected to ramp up over the course of 2024. Completions include 460,000 square feet related to The Well, comprised of 123,000 square feet of purpose-built rental residential and 337,000 square feet of commercial space. In addition, 32 U.C. Towns 2 townhouse units were completed and sold in the quarter, generating a $4.8 million inventory gain.
• As at February 13, 2024, approximately 96% of the total commercial space at The Well is leased with approximately 91% or 1,352,000 square feet (at 100% ownership interest) in tenant possession. The retail component is 93% leased, with more than half of the space open and operating. The remaining retail tenants will open steadily over the first half of 2024.
• Zoning approvals for 4.0 million square feet of residential inventory were obtained in 2023 including for RioCan Scarborough Centre (Golden Mile Phase One & Two) in Toronto, RioCan Hall in the entertainment district in downtown Toronto, 83 Bloor Street West located in the prestigious downtown Toronto neighbourhood of Yorkville and East Hills South Block in Calgary. As cost of financing conditions persist, RioCan does not intend to commence new physical construction of mixed-use properties in 2024.
• Total zoned square footage of 17.4 million at Q4 2023 compares to 15.0 million at Q4 2022, an increase of 2.4 million as newly zoned projects were partially offset by development deliveries. Zoned square footage includes 1.2 million square feet of projects under construction and 1.7 million square feet of shovel ready projects. Value recognized in the Trust's properties under development balance for zoned projects, excluding those under construction, is $31.04 per square foot.

Investing and Capital Recycling

• During 2023, and including the subsequent event period, RioCan executed on capital recycling activities that improved portfolio quality and the balance sheet, summarized as follows:
  • Dispositions: Closed $295.4 million of investment property dispositions, all of which were unencumbered assets, and provided $6.0 million vendor take-back financing.
  • Acquisitions: Closed $263.1 million of Total Acquisitions to February 13, 2024¹, which included both debt assumed of $119.6 million, at an average contractual interest rate of 2.68% and a weighted average term of 5.3 years, and a $40.9 million deferred payment.
  • Lending Program: Issued $84.1 million of new loans receivable offset by $74.6 million of loans repaid. With the weighted average interest rate on new loans at 11.1% we expect our lending program to be accretive to FFO, and help partially offset the impact of higher interest rates.
  • Net cash raised from the above capital recycling activities was $177.3 million.
• Dispositions improved our portfolio quality through reducing exposure to secondary markets, enclosed malls and certain tenant categories, including:
  • An enclosed mall in Winnipeg, Manitoba;
  • Three cinema-anchored centres in Surrey, British Columbia; Gatineau, Quebec and Orillia, Ontario; and
  • A non-grocery-anchored centre in Calgary, Alberta.
• In addition, the Trust sold a 12.5% interest in the 11YV project, thereby reducing its interest in the project to 37.5%. The resulting gain of $12.1 million was mainly attributable to the value of the underlying residential inventory. Subsequent to year end, RioCan further reduced its interest in the project to 25.0% by selling an additional 12.5% interest.
• Subsequent to year end, the Trust also entered into firm deals to dispose full or partial interests in a number of properties totalling $31.1 million including two secondary market assets, one of which is cinema-anchored, and a piece of non-core development land.
• Strategic acquisitions added to our major market portfolio including new stock residential assets and an urban, grocery-anchored retail asset with development upside. Strategic acquisitions included the following previously announced transactions:
  • A multi-phase residential rental asset in Quebec, which included in-place Canada Mortgage and Housing Corporation (CMHC) debt;
  • Land assemblies for development; and
  • Purchase of a parking lot lease at a Focus Five² project to remove a significant encumbrance to development.
  • Two acquisitions closed subsequent to year end:
    • 50.0% ownership in an operating and stabilized rental residential property in Calgary, Alberta for $52.9 million, which included $32.7 million of in-place debt at a weighted average contractual interest rate of 1.97%; and
    • A 50.0% managing interest in an urban grocery-anchored centre in Toronto, Ontario which is currently undergoing re-zoning to create additional density. The Trust will manage the property and the development process, earning fees for these activities. The purchase was settled with $13.2 million cash, the assumption of $46.1 million of in-place debt at a weighted average contractual interest rate of 3.20%, and agreed upon future consideration for density, estimated to be $40.9 million, to be paid as various development milestones are met.
• The above capital recycling activities are representative of our on-going strategy to rotate capital away from lower quality, higher risk assets to premium quality retail and residential assets in the best markets in Canada. This process, which began a number of years ago, has positioned our portfolio to perform well in any economic environment.

Capital Management Update

• During 2023, the Trust issued $800.0 million of senior unsecured debentures, including $300.0 million of Series AI debentures at a coupon rate of 6.488%, which can be repaid at par on or after September 29, 2024. This feature allows the Trust to refinance these debentures in the near-term with longer-term debt at lower interest rates and provides the Trust with additional flexibility in the current volatile interest rate environment.
• The Trust settled a total of $500.0 million of bond forward contracts during 2023 in conjunction with the issuance of $200.0 million Series AG and $300.0 million Series AH senior unsecured debentures on March 6, 2023 and June 26, 2023, respectively. Inclusive of $16.8 million of realized gains from these contracts, the combined weighted average hedged interest rate for these debentures is 5.244% with a combined weighted average term of 5.6 years.
• Since Q3 reporting on November 2, 2023 to February 13, 2024, the Trust arranged $608.0 million in permanent financing at a weighted average interest rate of 5.4%, across various financing types including debentures, commercial mortgages and CMHC mortgages.
• Included in that permanent financing were $300.0 million Series AJ senior unsecured debentures issued on February 12, 2024. These debentures were issued at a coupon rate of 5.470% per annum and will mature on March 1, 2030. The proceeds were used to repay, in full, the $300.0 million, 3.29% Series W unsecured debentures upon maturity on February 12, 2024.

Balance Sheet Strength

• As at December 31, 2023, the Trust had $2.0 billion of Liquidity. The Trust has full availability of its $1.3 billion revolving line of credit in addition to $0.6 billion in undrawn construction lines and other bank loans and $0.1 billion cash and cash equivalents. Liquidity increased by $415.8 million when compared to the prior year, providing greater flexibility in debt refinancing strategies.
• Pursuant to the terms of its credit agreement, the Trust has an option to increase the commitment under its revolving line of credit by $250.0 million.
• RioCan's Unencumbered Assets of $8.1 billion, which can be used to obtain secured financing to provide additional liquidity at lower interest rates than unsecured debt, generated 55.8% of Annual Normalized NOI¹.
• Adjusted Debt to Adjusted EBITDA improved to 9.28x on a proportionate share basis as at December 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.
• As at December 31, 2023, the Trust's weighted average term to maturity on a proportionate share basis was 2.97 years. However, inclusive of financing activities completed in early 2024, the weighted average term to maturity as at February 13, 2024 was extended to approximately 3.5 years.
• The Trust's exposure to floating rate debt was 6.8% of total debt as at December 31, 2023. Excluding construction loans, floating rate exposure was 3.5%.

Conference Call and Webcast

Interested parties are invited to participate in a conference call with management on Wednesday, February 14, 2024 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: 218112.

For those unable to participate in the live mode, a replay will be available at 1-866-813-9403 with access code: 539726.

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 December 31, 2023, our portfolio is comprised of 188 properties with an aggregate net leasable area of approximately 32.6 million square feet (at RioCan's interest) including office, residential rental and 9 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 annual audited consolidated financial statements ("2023 Annual 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 2023 Annual Consolidated Financial Statements and MD&A for the three months and year ended December 31, 2023, which are available on RioCan's website at www.riocan.com and on SEDAR+ at www.sedarplus.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, Commercial Same Property NOI, Residential Same Property NOI, Development Spending, Total Acquisitions to February 13, 2024, Ratio of floating rate debt to total debt, Liquidity, Adjusted Debt to Adjusted EBITDA, RioCan's Proportionate Share, Unencumbered Assets 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 and year ended December 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 December 31, 2023 and December 31, 2022:

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

NOI and Same Property NOI

The following table reconciles operating income to NOI and Same Property NOI to NOI for the three months and years ended December 31, 2023 and 2022:

FFO

The following table reconciles net income (loss) attributable to Unitholders to FFO for the three months and years ended December 31, 2023 and 2022:

Development Spending

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

Total Acquisitions

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

Total Contractual Debt

The following table reconciles total debt to Total Contractual Debt as at December 31, 2023 and December 31, 2022:

Floating Rate Debt and Fixed Rate Debt

The following table summarizes RioCan's Ratio of floating rate debt to total debt as at December 31, 2023 and December 31, 2022:

Liquidity

As at December 31, 2023, RioCan had approximately $2.0 billion of Liquidity as summarized in the following table:

Adjusted EBITDA

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

Adjusted Debt to Adjusted EBITDA Ratio

Adjusted Debt to Adjusted EBITDA is calculated as follows:

Unencumbered Assets

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

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 can generally 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 and year ended December 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.