MANAGEMENT INVESTOR PRESENTATION First Quarter June 22, 2018

Transcription

1 MANAGEMENT INVESTOR PRESENTATION First Quarter 2018 June 22, 2018

2 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 Proportionate Share (or Interest), Funds From Operations ( FFO ), Net Operating Income ( NOI ), Adjusted Earnings before interest, taxes, depreciation and amortization ( Adjusted EBITDA ), Debt to Adjusted EBITDA, Same Property NOI, Interest Coverage, Debt Service Coverage, Fixed Charge Coverage, and Total Enterprise Value as well as other measures discussed 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 period 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. PEER DATA PRESENTATION FORWARD LOOKING INFORMATION 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 most recent 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. RioCan data and statistics are based on March 31, 2018 information. Peer group included published results where provided from First Capital Realty Corp. (FCR), SmartCentres REIT (SRU.UN), Choice Properties REIT (CHP.UN), CT REIT (CRT.UN), and Crombie REIT (CRR.UN). Certain slides contain a peer comparison that was based on the respective issuer s reported information as at March 31,

3 ABOUT RIOCAN GROWTH DRIVEN BY INSIGHT Enterprise Value BC Quick Facts One of Canada s largest REITs, focused on the ownership, management and development of high quality, necessity based retail, increasingly mixed-use properties in Canada s six major markets Founded in year track record Robust 26.2 M sf development pipeline, 12.2 M sf or nearly 50% already approved for zoning mostly mixed-use Diversified and evolving tenant mix $13.7 B Number of Properties 284 Net Leasable Area (NLA) 43.3M sf Same Property NOI 2.6% Major Market Same Property NOI 3.3% Committed Occupancy 96.6% Major Market Committed Occupancy 97.9% GTA Focus - % of Annualized Rental Revenue 43.7% Peer Average % Revenue from National Tenants 84.6% Average Net Rent $17.93 Renewal Spread Q % Rated BBB with stable outlook by S&P and BBB (high) by DBRS 1. Source: company reports; Peers: FCR, CHP, CRT; no data on CRR and SRU Annualized Revenue from Six Major Market: 80.0% Vancouver 5.0% ON RioCan NLA 5.0% Edmonton Calgary 8.8% 11.9% Ottawa RioCan NLA including incremental NLA from Development* Montreal Toronto 5.6% 43.7% Robust Development Program Tremendous source of future NAV growth 22.2M incremental NLA or 54% of existing NLA M existing IPP NLA 2. Includes incremental NLA of 22.2M sf plus 4.0M sf that is currently income producing. Assumes all development projects per the MD&A for the period ended March 31, 2018 are completed and assumes no additional development, acquisitions, or dispositions

4 VALUE PROPOSITION AND FOUR STRATEGIC PILLARS REAL VISION, SOLID GROUND CANADA S MAJOR MARKET PORTFOLIO High quality, necessity based retail, and increasingly mixed-use major markets portfolio Diversified, strong national tenant base Significant upside on rent growth Base for significant NAV growth tremendous intrinsic value to be unlocked Strong executive bench with wealth of experience and proven track record DRIVING ORGANIC GROWTH UNLOCKING INTRINSIC VALUE STRATEGIC ACQUISITIONS STRONG BALANCE SHEET Evolving tenant mix and revenue growth Improving operating efficiency and cost structure Redeveloping prime assets Optimize pads by adding additional GLA Drive ancillary revenues Continuous portfolio pruning Focusing on transitoriented urban intensification in major markets Mostly mixed-use with residential rental and/or condo development Strategic alliances to mitigate risk and create steady fee stream Robust and growing pipeline of well located sites with substantial zoning approved Acquire only the best locations in the six major markets Opportunities to acquire partners interests in today s tight market Highly selective acquisitions of development sites, leveraging existing properties Low leverage Low cost of debt Laddered debt maturity and mostly fixed rate Access to multiple sources of capital Large unencumbered assets pool generating 58.4% of annualized NOI 4

5 CANADA S MAJOR MARKET PORTFOLIO WHERE CANADIANS SHOP, LIVE AND WORK CANADA S MAJOR MARKET PORTFOLIO High quality, necessity based retail, and increasingly mixed-use major markets portfolio CANADA S MAJOR MARKET PORTFOLIO Diversified, strong national tenant base Significant upside on rent growth Base for significant NAV growth tremendous intrinsic value to be unlocked Strong executive bench with wealth of experience and proven track record 5

6 CANADA S SIX MAJOR MARKETS WHERE THE POPULATION GROWTH IS Cumulative Population Growth 2006 as Base Year 64.6% 26.2% 8.7% 3.7% 8.1% 17.8% Forecast Six Major Markets Secondary markets Cumulative population growth between 2006 and: Forecast Six major markets 26.2% 64.6% Secondary markets 8.1% 17.8% By 2036, more than half of Canadians will live in Canada s six major markets 2006, 2017 Data: Statistics Canada 2036 Data: Statistics Canada, Provincial and Municipal population forecasts 6

7 CANADA S MAJOR MARKET PORTFOLIO WHERE CANADIANS SHOP, LIVE AND WORK Disposition Progress as of June 22, 2018 Transaction type Value (M) Closed and Firm $656.3 Conditional $204.3 Total to Date $860.6 Weighted Average Cap Rate 6.29% Sale prices to-date are in line with IFRS value $861M progress since the October 2017 announcement representing approximately 43% of the $2.0B disposition target Dispositions span a broad range of secondary markets 7

8 DISPOSITION UPDATE BUYER PROFILE REITs Strategic buyers, such as CT REIT, who are looking to acquire assets where their retail banner is already a tenant. They know these assets well and recognize the advantage of controlling properties in which their associate retail banners operate. Geographically focused REITs looking to expand footprint in a particular region. Small cap REITs looking for growth and accretive acquisitions, which would otherwise be unavailable in major markets. Private Individual Buyers Objectives include capital preservation and stable, risk-adjusted returns. These buyers have local expertise or presence in particular secondary markets, and therefore covet these assets. Private Equity and Investment Managers Objectives include deploying a robust supply of capital in a low-interest rate environment. Increasingly looking at secondary markets in the core to value-add risk range due to limited supply of product in primary markets. 8

9 CANADA S MAJOR MARKET PORTFOLIO WHERE CANADIANS SHOP, LIVE AND WORK Major Market Revenue 80.0% >90% GTA Revenue Focus 43.7% >50% Avg. Age Portfolio (yrs.) Q Vision Q Vision Q Vision Higher concentration of revenue from the fastest growing markets in Canada Higher concentration of revenue from the GTA, Canada s largest and most important financial market Resilience to the changing retail environment Enhanced growth profile Improved cost structure 9

10 GREATER TORONTO AREA (GTA) FOCUS PERCENTAGE OF RENT FROM THE GTA EXCEEDS OUR PEERS REI Peer Average 41.9% 42.8% 41.7% 41.7% 40.9% 43.7%* 34.6% 36.8% 32.0% 24.0% CONSISTENTLY ABOVE 95% 25.2% 25.6% 22.0% 23.1% 23.3% 23.2% Q Source: company reports; Peers: FCR, CHP, CRT; no data on CRR and SRU * Effective Jan , the Trust includes Hamilton in the GTA as the Trust believes that Hamilton is a high growth market that forms part of the contiguous urban region and has strong rapid transit connections to Toronto. Excluding Hamilton, the Trust s GTA revenue % would have been 41.6%. Strong, consistent, industry leading presence in the Greater Toronto Area, which has one of the highest population and economic growth profiles in the country 10

11 GREATER TORONTO AREA (GTA) FOCUS INDUSTRY LEADING PRESENCE IN THE TORONTO CORE AND GTA RioCan First Capital SmartCentre REIT 11

12 CANADA S MAJOR MARKET PORTFOLIO WHERE CANADIANS SHOP, LIVE AND WORK Avg. Income (5km radius) Avg. Population (5km radius) ~$102k ~$111k ~$120k ~157k ~205k ~212k All Markets Major Markets All Markets Major Markets 2020 Higher concentration (~30% increase in average population density) of a more desirable demographic with stronger household income Improved portfolio quality; operating efficiencies, newer assets, and less capex * Vision represents the average population and average income within a 5km radius of RioCan properties after completion of the Trust s over $2.0B disposition targets. The 2017 data are based on RioCan s portfolio as at December 31, Source: Environics Analytics. 12

13 CONSISTENT GROWTH IN FUNDS FROM OPERATIONS FROM CONTINUING OPERATIONS 3-Year CAGR for Continuing Operations FFO/Unit*: 9.9% $2.50 Well-timed exit from U.S. retail market $2.00 $1.65 $1.94 $1.68 $1.79 $1.50 $1.00 $0.50 $1.34 Includes $88.3M (or $0.28/unit) Target Settlement $1.62 $1.53 $1.78 $ Continuing Operations FFO/Unit Discontinued Operations FFO/Unit (US) * Continuing and discontinued operations FFO per unit is calculated based on disclosed total continuing and discontinued operations FFO, respectively, divided by the weighted average number of units (diluted) for the respective years. 13

14 OPTIMIZING PORTFOLIO FOR CURRENT MARKET ENVIRONMENT GROWING EVOLVING Home Furnishings, Food, Fitness, Beauty and Value Retailers continue to be bright spots in the retail landscape, with numerous brands adding additional physical locations Small format service-oriented retail performing well, numerous tenants expanding Continued urban centre growth from national gym operators and expansion of smaller, boutique-type operators. Quick Service Restaurants aggressively growing Value retailers such as Winners, Marshalls, Dollarama, etc. are rapidly expanding New specialty grocers are appearing and others, such as Nations and Farm Boy are expanding Shifting demand for large formats Some pressure from the larger format tenants upon renewal as they have options to relocate and right-size their existing boxes Relocations open up opportunities for large format, value retailers who are aggressively growing (e.g. TJX and Lowe s) DECLINING Full price fashion continues to struggle Department stores reporting soft fashion sales Bankruptcies continue both north and south of the border Small format fashion retailers not opening new locations 14

15 CHANGING TRENDS IN HOUSEHOLD SPENDING Source: GWL Realty What is driving change in the retail sector beyond online shopping March 14,

16 EVOLVING & RESILIENT TENANT MIX ADAPTING TO THE EVER CHANGING RETAIL ENVIRONMENT Retailer Category % of Rent Q Change since 2007 Key Brands Grocery/ Pharmacy Liquor/ Restaurant 27.8% 3.3% Personal Services 20.3% 4.2% Value Retailers 15.1% 2.5% Specialty Retailers 10.1% 0.0% Furniture and Home 10.0% 1.6% Department Stores/ Apparel 8.8% (7.5%) Entertainment and Hobby 3.3% (2.4%) Movie Theatres 4.6% (1.7%) 16

17 STAGGERED LEASE MATURITY WITH RENT GROWTH OPPORTUNITY LEASE MATURITY AND EXPIRING RENT $22.00 $20.00 $18.00 $19.90 $18.74 Lease Maturity $17.91 Expiring Rent $18.55 $ % 25.0% 20.0% $16.00 $ % 11.7% 11.9% 10.1% 15.0% 10.0% $ % 5.0% $ remainder % Favorable expiry profile that balances stability with opportunity for growth on renewal Average lease term for Top 30 tenants 7.4 years 17

18 CONSISTENTLY HIGH OCCUPANCY COUPLED WITH STRONG RENT GROWTH 110.0% Target Departure Sears Closures % 90.0% 97.4% 97.6% 97.4% 96.9% 97.0% 94.0% 95.6% 96.6% 96.6% $17.59 $ $ % $ $ % $ % $ % $14.82 $ % % 20.0% Q Committed Occupancy Average Net Rent Average net rent growth also reflects the improvements in the overall quality of the portfolio as RioCan increased its major market focus over time 18

19 STRONG RETENTION RATIO OUTPERFORMING AND WIDENING THE GAP RELATIVE TO PEERS REI Peers - Weighted Average 88.1% 89.7% 86.2% 84.8% 85.7% 85.8% 91.1% 87.0% 78.5% 75.9% CONSISTENTLY ABOVE 95% 72.5% 61.7% Q Source: company reports; Peers: CHP and SRU (no data for FCR, CRR, CRT) Peer average calculation is weighted by square feet renewed RioCan has maintained a consistent strong retention rate and continues to broaden the gap with our peers Strong track record of tenant retention averaging 87.9 % since 2013 relative to 76.6%* for the peer average * Average to March 31,

20 WELL DIVERSIFIED NATIONAL TENANT BASE NO SINGLE TENANT OVER-EXPOSURE As at March 31, 2018 Top 10 Tenant Name Annualized Rental Revenue Number Of Locations NLA (Sq. Ft. in '000s) Weighted Avg Remaining Lease Term (Yrs) % 79 2, % 27 3, % 78 1, % 28 1, % 72 1, % 49 1, % % 13 1, % % TOTAL 31.3% , Peer Average (iii) 67.6%* (i) Loblaws includes Shoppers Drug Mart, No Frills, Fortinos, Zehrs and Maxi. (ii) Canadian Tire Corporation includes Canadian Tire/PartSource/Mark s/sport Mart/ Sport Chek/Sports Experts/National Sports/Atmosphere. (iii) Source: company reports; Peers: FCR, CHP, CRT, CRR and SRU as at March 31,

21 LEADERSHIP TEAM EXPERIENCE, INTEGRITY AND FORESIGHT Strong executive bench with a wealth of experience and proven track record Ed Sonshine O.Ont., Q.C. Founder and CEO Jonathan Gitlin*, SVP Investments & Residential 18 years in Real Estate Rags Davloor*, President and COO 25 years in Real Estate, Operations & Finance Jeff Ross, SVP Leasing & Tenant Coordination 30 years in Real Estate Qi Tang, SVP and CFO 20 years in Finance & Real Estate John Ballantyne, SVP Asset Management 24 years in Real Estate Fully integrated REIT with all disciplines in-house including: Investments Leasing Asset Management Development & Construction Property Management Finance, Legal and Human Resources Trusted and respected, with deep industry knowledge and relationships Andrew Duncan SVP Developments 18 years in Development, 12 years in Real Estate Danny Kissoon SVP Operations 32 years in Real Estate Jennifer Suess SVP General Counsel & Corporate Secretary 16 years in Law with a focus on Real Estate * As announced on June 18, 2018, Rags Davloor will resign as President & COO effective July 31, Jonathan Gitlin has been promoted to COO effective August 1,

22 STRATEGIC PILLAR ONE: DRIVING ORGANIC GROWTH OPTIMIZING AND FUTURE PROOFING OUR PORTFOLIO CANADA S MAJOR MARKET PORTFOLIO DRIVING ORGANIC GROWTH Evolving tenant mix and revenue growth Improving operating efficiency and cost structure Redeveloping prime assets Optimize pads and add additional GLA Drive ancillary revenues Continuous portfolio pruning 22

23 DRIVING ORGANIC GROWTH CASE STUDY Burlington Mall, Burlington Ontario 2018 $65M redevelopment and renovation of this iconic centre in Canada s Best Mid-Sized City (voted five years in a row) Rebranded to Burlington Centre Renovated food court Strategically remerchandised (former Target location): Confirmed new tenancies include Indigo, Denninger s Foods of the World, Sportchek and Winners Metric NOI will increase by 42% At Acquisition (2013) Capital Invested Anticipated Stabilized Value $206.5M $55M $287.5 M NOI $9.9M - $14.1M 23

24 DRIVING ORGANIC GROWTH CASE STUDY RIOCAN YONGE EGLINTON CENTRE, TORONTO Intersection: Yonge St. and Eglinton Avenue East Ownership: 100% Total GLA: 1,056,285 sf Property Concept: Mixed-use Project Completion: 2016 Surfacing Value: Purchase Price (2007): $223 million Capital Invested $110 million Current Value: $574 million NOI at acquisition: $13 million Value Stabilized NOI: $26 million 73% increase in value over costs Strategically evolved tenant mix to meet consumer needs Incremental revenue through leasing of the digital screens on the building interior and exterior 24

25 CAPITALIZING ON RE-LEASING OPPORTUNITIES TARGET RE-LEASING & SEARS UPDATE Target Re-leasing Re-leasing of former Target space 1.7 M sf Substantially completed Q Annual net rent revenue from releasing tenants: $14.0 M Annual rent revenue paid by Target of $10.6 million Annual net rent increase over Target rent: $3.4 million or 32.1% Significant capital recovered by way of settlement with Target of $88.3M (at RioCan s interest) Greater customer appeal and traffic Stronger, more diversified tenants Sears Update Sears departure left 381,000 sf of space to re-lease at RioCan s interest (vs. Target 1.7M sf) Completed leases, conditional leases or leases in advanced negotiations to replace 133% of the net revenue and while only representing 85% of the former Sears GLA Leasing is much less complex than leasing former Target spaces Replacement tenants will be stronger and more diversified Properties will have broader customer appeal and replacement tenants will drive incremental traffic 25

26 COMPLETED DEVELOPMENTS CASE STUDY SAGE HILL CROSSING, CALGARY AB Location Located in a growing residential suburbs in Northwestern Calgary Ownership Structure 50% (JV with KingSett) Property Type New format retail Substantially completed in Q ,000 sf Walmart and Loblaws anchored centre The first Loblaws City Market banner in Calgary Excellent mix of strong national tenants: London Drugs, Dollarama, Scotiabank, McDonalds, Royal Bank of Canada Demographics in 5km radius: Population: 95k Average household income: $145k 26

27 ENVIRONMENTAL SOCIAL AND GOVERNANCE AT RIOCAN EMBEDDING SUSTAINABILITY Well defined sustainability policy and sustainability governance structure Participation in the Global Real Estate Sustainability Benchmark ("GRESB") Survey Inclusion of a new performance indicator for management RioCan was recently included in the MSCI Canada IMI Women s Leadership Select Index Employee survey was conducted to collect feedback on sustainability drivers Establishment of a baseline for sustainability: energy, water and Greenhouse Gas ("GHG") emissions Establishment of sustainability standards for our income producing properties and development projects Pursuing Toronto Green Standard (TGS) Tier II for The Well and Sunnybrook Plaza projects, and LEED Gold & TGS Tier II for its Yonge Sheppard Centre project Extension of Enwave s existing Deep Lake Water Cooling network via a new 12 million-litre energy storage facility at The Well (see image) to provide a low-carbon, resilient cooling and heating option for the property and Proposed the surrounding communities Geothermal energy system for heating and cooling to be incorporated at RioCan s Gloucester project in Ottawa Proposed 27

28 STRATEGIC PILLAR TWO: UNLOCKING INTRINSIC VALUE REALIZING THE POTENTIAL OF OUR CORE ASSETS CANADA S MAJOR MARKET PORTFOLIO UNLOCKING INTRINSIC VALUE Focusing on transit-oriented urban intensification in major markets Mostly mixed-use with residential rental and/or condo development Strategic alliances to mitigate risks and create steady fee stream Robust and growing pipeline of well located sites with substantial zoning approved Strong development team with a wealth of experience in mixed-use residential development projects from planning, design to completion 28

29 SOURCES OF TREMENDOUS NAV GROWTH ROBUST DEVELOPMENT PIPELINE 22.2M incremental NLA 1 or 54% of existing NLA M existing IPP NLA RioCan NLA RioCan NLA including incremental NLA from Development* Strong, major market, urban focused development pipeline with high quality projects in prime locations, predominantly transit oriented Risk mitigation via staggered development starts and the use of strategic alliances Maintain a disciplined approach to capital allocation and maintain leverage in the 38%-42% debt to asset range, although leverage as of a quarter end may temporarily exceed the upper target due to NCIB and disposition timing 1. Total development pipeline of 26.2M sf includes incremental NLA of 22.2M sf plus 4.0M sf that is currently income producing 2. Assumes all development projects per the MD&A for the period ended March 31, 2018 are completed and assumes no additional development, acquisitions, or dispositions 29

30 TREMENDOUS SOURCES OF CASH FLOW & NAV GROWTH PIPELINE IS EXPECTED TO CONTINUE TO GROW Total Pipeline by Zoning Status (26.2M* sf) Total Pipeline by Project Type Future est. density, 8.5m sf, 32.4% Zoned, 12.2m sf, 46.5% Mixed-Use Residential 25.2m sf, 96.1% Residential & Air Rights 17.2m sf, Commercial 7.0m sf, Application submitted, 5.5m sf, 21.1% Commercial 1.0m sf, 3.9% Residential Inventory 1.0m sf Nearly 50% or 12.2M sf with zoning approved and nearly 100% is located in the six major markets Particularly valuable in today s more challenging regulatory environment Uncertainty in Ontario regarding transition to the newly implemented Local Planning Appeal Tribunals given that its mandate is unclear * Includes 22.2M sf of incremental NLA and 4.0M sf of NLA which is currently income producing. All data at RioCan s interest. 30

31 INTENSIFICATION STRATEGY DEVELOPMENT PROCESS FOR EXISTING INCOME PRODUCING PROPERTY Project Evaluation and Market Research Leasing Strategy Development Planning Zoning, Design, Planning Development & Construction Income Producing Asset Until Development Commences Year 1 Year 2-3 Year 4-5 Year

32 TREMENDOUS SOURCES OF CASH FLOW & NAV GROWTH SELECTED DEVELOPMENT COMPLETIONS OVER THE NEXT THREE YEARS Bathurst College Centre Gloucester Phase I (Frontier) The Well Phased completion King Portland Centre (Kingly) Yonge & Eglinton Northeast Corner (ecentral) Brentwood Village (Brio) At RioCan s Interest 2018 Q2-Q Est. Completed NLA ( 000s sf) Est. PUD Completions (millions) 2 $367 $435 $190 Annualized stabilized NOI from active projects with detailed costs estimates to be completed between Q and end of 2020, including Expansion & Redevelopment projects, is expected to be in the $50 million to $55 million range at RioCan's interest. The annualized stabilized NOI of a project is an estimate of stabilized NOI following completion of a project on a full year basis. NOI to be reported for the remainder of 2018 to 2020 will be different from this range, due to the partial year effect in a given year as a result of project completion timing and the effect of property lease up period. 1. Estimated NLA completions are NLA transferred to IPP upon projects completion in each period, which are estimated as 90% of gross floor area (GFA) 2. Estimated PUD cost completions are fully loaded IFRS costs including land that are to be transferred to IPP upon projects completion in each period, net of land and air rights sales for active projects with detailed cost estimates 32

33 DEVELOPMENT TEAM DEVELOPMENT TEAM STRONG EXPERIENCED AND CAPABLE TEAM OF PROFESSIONALS Balanced, experienced talented team Established strong industry relations Identify opportunities in robust pipeline of urban, transit-oriented sites 33 team members Planners, Engineers, Construction Managers, Analysts Three office locations Toronto, Calgary, Montreal Planning & Zoning Process Design Analytics Residential Construction 33

34 DEVELOPMENT TEAM DEVELOPMENT TEAM CROSS FUNCTIONAL COORDINATION ACROSS VARIOUS DISCIPLINES Investments & Residential Product Development Acquisitions/Dispositions/Joint Ventures Branding Marketing Initial planning and concept Preliminary pro-forma development Land entitlement Developments RioCan Mixed-Use Development Team Leasing De-leasing initiatives Tenant relations Prospective tenant engagement 3 rd Party Property Management, at the current state Asset Management / Operations Commercial reporting, if Partner involved Day-to-day management of commercial component Liasing with Partner 34

35 UNLOCKING THE VALUE OF TRANSIT-ORIENTED ASSETS URBAN TORONTO HIGHLIGHTS: SELECTED HIGH DENSITY, LOCATIONS Demographics, 5km radius Dense population*: 481,000 people Desirable demographic*: HH Income: $130,000+ Post-secondary education: 65%+ 7 Selected Urban Toronto RioCan Developments '000s sf (100%) Yonge-Sheppard Centre College 108 King Portland Centre 420 Yonge & Eglinton 707 The Well & Building 6 2, Dupont 180 Sunnybrook Plaza 316 Queensway 614 Dufferin Plaza 582 RioCan Leaside Centre 1,307 Lawrence Square 94 RioCan Hall College 24 Bathurst College Centre 139 SELECTED URBAN TORONTO 8,577 Legend Under Development Future Development Potential TTC Existing TTC Under Development TTC Station Planned Rapid Transit Line *Average demographics within a 5km radius of RioCan Urban Toronto development sites 35

36 UNLOCKING THE VALUE OF TRANSIT-ORIENTED ASSETS BRAMPTON/MISSISSUAGA HIGHLIGHTS: SELECTED HIGH DENSITY LOCATIONS Selected Brampton/Mississauga RioCan Future Development Potential '000s sf (100%) Shoppers World Brampton 4,200 RioCan Sandalwood Square (Ph. I) 180 RioCan Grand Park 330 Selected Brampton/Mississauga TOTAL 4,710 With three shopping centres and approximately 82 acres of land on this LRT line, RioCan is uniquely positioned to take advantage of future intensification opportunities 2 Demographics, 5km radius Dense population*: 270,000 people+ Desirable demographic*: HH Income: $100,000+ Post-secondary education: 50%+ 3 *Average demographics within a 5km radius of selected RioCan Brampton/Mississauga development sites 36

37 UNLOCKING THE VALUE OF TRANSIT-ORIENTED ASSETS CALGARY HIGHLIGHTS: SELECTED HIGH DENSITY LOCATIONS Selected Calgary RioCan Future Development Potential '000s sf (100%) Brentwood Village (Phase I) th & Third East Village 755 Southland Crossing 972 Selected Calgary TOTAL 1,872 Demographics, 5km radius Dense population*: 170,000 people+ Desirable demographic*: HH Income: $137,000+ Post-secondary education: ~60% *Average demographics within a 5km radius of selected RioCan Calgary development sites 37

38 UNLOCKING THE VALUE OF TRANSIT-ORIENTED ASSETS OTTAWA HIGHLIGHTS: SELECTED HIGH DENSITY LOCATIONS 2 1 Selected Ottawa RioCan Development Potential 1 2 '000s sf (100%) Gloucester/Frontier 667 Lincoln Fields 1,000 SELECTED OTTAWA POTENTIAL TOTAL Legend 1,667 Under Development Future Development Potential Demographics, 5km radius Dense population*: 150,000 people+ Desirable demographic*: HH Income: ~ $100,000 Post-secondary education: ~60% *Average demographics within a 5km radius of selected RioCan Ottawa development sites 38 38

39 UNLOCKING INTRINSIC VALUE RESIDENTIAL INTENSIFICATION GLOUCESTER RESIDENTIAL PHASE I, OTTAWA Location: Located on a 7.1 acre portion of RioCan's Gloucester Silver City Shopping Centre along new Confederation LRT line at the Blair Station in Ottawa Ownership: 50% (JV with Killam Apartment REIT) Property Type: Rental Residential, Phase I contains a 23 storey tower with 222 units (at 100%) Zoning status: Zoned Project Completion: 2019 Estimated PUD Costs (RioCan s interest): $41.9M Surfacing Value: Zoning approved for three additional residential towers containing the potential for up to 840 units Transitioned use from 77,000 sf of struggling fashion retail to a 23 story desirable rental residential building. Retail mix at our adjacent shopping centre was evolved and now includes a strong, diverse mix of tenants including Cineplex theatre, Indigo, Goodlife and numerous restaurants Proposed Demographics in a 5km radius: Population: 450k Daytime population: 457k Average household income: $164k+ Adjacent to CSIS headquarters: 2,000+ employees Leading edge development that will maximize efficiency via a geothermal energy system for heating and cooling 39

40 UNLOCKING INTRINSIC VALUE RESIDENTIAL INTENSIFICATION, GLOUCESTER OTTAWA (Including future phases) Proposed Zoning approved for four residential towers containing the potential for up to 840 units on a 7.1 acre portion of RioCan's Gloucester Silver City Shopping Centre 40

41 UNLOCKING INTRINSIC VALUE RESIDENTIAL INTENSIFICATION 740 DUPONT AVE., TORONTO, ON Location Toronto, Ontario Property Type Mixed-use retail and residential. 9-storey project with 210 rental units and 31,000 square feet of retail GLA. Firm lease with Farm Boy (23,000sf) to anchor the retail portion of the site. Ownership - 50% (JV with Woodbourne) Zoning status: Zoned Project Start / Anticipated Completion 2017 / 2021 Estimated PUD Costs (RioCan s interest): $69.9M Surfacing Value Site was acquired in 2010, formerly occupied by Grand Touring automobile until November 2017 Well located along a busy thoroughfare in a densely populated area of Toronto. A short walk to the Bloor- Danforth subway line Proposed Demographics in 5km radius: Population: ~700k Average household income: ~ $120k 41

42 UNLOCKING INTRINSIC VALUE RESIDENTIAL INTENSIFICATION BRENTWOOD VILLAGE, CALGARY, AB Location Located along the Northwest LRT line and adjacent to the Crowchild Parkway in Northwestern Calgary in close proximity to the University of Calgary Property Type Mixed-use retail residential, 12-storey, 165 rental units with approximately 10,000sf of retail GLA Ownership - 50% (JV with Boardwalk REIT) Zoning status: Zoned Project Start / Anticipated Completion 2018 / 2020 Estimated PUD Costs (RioCan s interest): $38.1M Surfacing Value Extracting additional value through the redevelopment of an underutilized retail portion of the site to include additional residential uses RioCan will retain a 100% interest in the remainder of the shopping centre Proposed Demographics in 5km radius: Population: ~160k Average household income: $141k+ Well located with easy access to downtown Calgary, the University of Calgary, McMahon Stadium and Foothills Hospital 42

43 UNLOCKING INTRINSIC VALUE RESIDENTIAL INTENSIFICATION YONGE & EGLINTON NORTHEAST CORNER, TORONTO, ON Location: At the heart of one of Toronto s busiest and most popular intersections. Unparalled access to the Yonge subway and new Eglinton Crosstown LRT Property Type: Mixed-use with retail, residential tower with 466 units and condominium tower with 623 units Ownership: 50% (JV with Metropia and Bazis) Leasing/Sales: All 623 condominium units have been presold. Retail is 88% leased (anchored by TD Bank) Proposed Rental Residential Units: 466 Units Zoning Status: Zoned Anticipated Completion: 2018 & 2019 Estimated PUD Costs (RioCan s interest): $118.1M Surfacing Value Agreement in place to acquire the partners 50% interest in the 466 unit rental residential tower at cost plus $10M Agreement in place to acquire partner s 50% interest in the retail NLA at a 7% capitalization rate upon completion of the project Demographics in 5km radius: Population: 495k Daytime population: 489k Average household income: $156k+ Condo portion of the project is 100% pre-sold Proposed 43

44 UNLOCKING INTRINSIC VALUE RESIDENTIAL INTENSIFICATION KING PORTLAND CENTRE, TORONTO, ON Location: Prime location in trendy Toronto s downtown west with direct access to transit Property Type: Mixed-use with office, retail and condominiums Leasing/Sales: 132 condominium units fully sold out ahead of price expectations. New office 256,000 sf (at 100%) 100% leased to Shopify and Indigo: retail all but 7,000 sf leased. Existing 55,000 sf of office space adjacent to the building is 100% leased with substantial rent upside upon project completion Ownership: 50% (JV with Allied Properties REIT) Incremental Commercial NLA: 163,000 sf at RioCan s Interest Zoning Status: Zoned Project Start / Anticipated Completion: 2016/ Late 2018 Estimated PUD Costs (RioCan s interest): $83.2M Demographics in 5km radius: Daytime population: 823k Average household income: $115k+ Office tower is targeted LEED platinum Proposed 44

45 UNLOCKING INTRINSIC VALUE RESIDENTIAL INTENSIFICATION SUNNYBROOK PLAZA, TORONTO, ON Location: Located on new Eglinton LRT in an affluent neighbourhood in midtown Toronto Ownership: 50% (JV with Concert Properties) Property Type: Mixed-use with one 16 storey and one 11 storey rental residential towers (approx. 427 units) Commercial NLA: 22,000 sf at RioCan s Interest Project Start / Anticipated Completion: 2020/2023 Surfacing Value: Concert paid RioCan $26.3 million in June 2017 for a 50% interest in the development. RioCan acquired the centre in 2007 for $22.8 million (100%) More than doubled the value in ten years, before significant value creation upon this project s completion. Demographics in 5km radius: Population: 450k Daytime population: 457k Average household income: $164k+ Proposed 45

46 UNLOCKING INTRINSIC VALUE RESIDENTIAL INTENSIFICATION YONGE SHEPPARD CENTRE, TORONTO, ON Location: Located at the thriving intersection Yonge & Sheppard, with access to 2 subway lines and highway 401 Property Type: Mixed-use with incremental 156k sf retail, as well as 258k sf of rental residential Ownership: 50% (JV with KingSett Capital) Zoning Status: Zoned Phased Completion: Retail 2019 Residential 2020 Estimated PUD Costs (RioCan s interest): $249.1M Surfacing Value Renovation and expansion of retail space Intensification through the addition of a new 39 storey residential tower containing 258,000 square feet of residential rental space Retail anchored by Longo s, LA Fitness, Shoppers Drug Mart, Winners, and three major banks Proposed Demographics in 5km radius: Proposed Population: 340k Daytime population: 489k Average household income: $133k+ 49,000 people pass through the site as part of their daily commute $250M (at RioCan s interest) renovation underway 46

47 STRATEGIC PILLAR FOUR: STRATEGIC ACQUISITIONS SELECTIVELY SEIZING OPPORTUNITIES CANADA S MAJOR MARKET PORTFOLIO Acquire only the best locations in the six major markets Opportunities to acquire partners interests in today s tight market Highly selective acquisitions of development sites, leveraging existing properties STRATEGIC ACQUISITIONS 47

48 STRATEGIC ACQUISITIONS ACQUISITIONS OF PARTNERS INTERESTS HAVE BEEN A KEY SOURCE OF GROWTH POST SALE OF US PORTFOLIO Over $1.5 Billion of Acquisitions from Partners Acquisitions from other partners, $0.2B Acquisitions from CPPIB of $0.3B Acquisitions from Kimco of $0.9B Proposed Acquired more than $1.5 Billion of assets predominantly in major markets that would otherwise not be available in the market at a weighted average capitalization rate of 5.8% Acquisition from Kimco involved the purchase of a non-managing interest from a motivated seller seeking to re-focus their portfolio in the United States. 48

49 STRATEGIC ACQUISITIONS MIXED-USE DEVELOPMENT THE WELL TORONTO, ON Proposed 49

50 STRATEGIC ACQUISITIONS MIXED-USE DEVELOPMENT THE WELL, TORONTO, ON Location: 7.7 acre site situated at the gateway to downtown Toronto, at Front and Spadina. Transit oriented adjacent to the site of a proposed intercity GO Train stop. Ownership Structure: Commercial: 50% (J.V. with Allied Properties REIT Residential: 40% (J.V. Allied Properties REIT and WNUF2*) Residential Building 6: 50% (J.V. with Woodbourne ) Property Type: Mixed-use with ~500,000 sf retail, 1.1 M sf office and ~1,800 residential units (condo and rental) at 100% Zoning Status: Zoned Estimated project completion: Commercial , Residential Building Estimated PUD Costs (RioCan s interest): $675.9M** Building 6: $129.5M Proposed Demographics 5KM radius: Population: 485k Average household income: $114k+ Innovative, amenity rich design including a European inspired food hall Office is targeted LEED platinum Teaming with Enwave for the first low-carbon resilient cooling and heating option for the property and surrounding community *WNUF2 holds a 20% interest in the residential portion until the sale of air rights to Tridel and Woodbourne upon completion of the underground and podium structures. ** Project costs estimated as $600.3M net of sales proceeds from air rights sales 50

51 STRATEGIC ACQUISITIONS MIXED-USE DEVELOPMENT THE WELL, TORONTO ON Surfacing Value RioCan and its partners acquired the former Globe and Mail head office and surrounding land for $170 million in 2012 and 2013 Agreement in place to sell 1.1M sf of air rights to Residential partners Tridel and Woodbourne for approximately $180 million upon completion of the underground and podium structures Upon completion, an estimated 10,000 people will live and work at the property A comprehensive signage master plan agreement has been approved by the city. Interior and exterior digital signage will generate significant ancillary revenue Proposed Proposed 51

52 STRATEGIC ACQUISITIONS MIXED-USE DEVELOPMENT YORKVILLE, TORONTO, ON Location: Transit oriented and in the heart of prestigious Yorkville, one of Toronto s most high-end shopping and residential areas. Property Type: Mixed-use with potential for 0.5M sf of luxury condominium and retail uses and up to up to 82 rental units Ownership: 50/25/25 joint venture among RioCan, Metropia and Capital Developments Zoning Status: Preparing application for ZBA Zoning Bylaw Amendment Project Start/Anticipated Completion: TBD Surfacing Value: As of February 2018 the partners have completed acquisitions of adjacent properties substantially required for the intensification project RioCan has agreed to purchase the partners interest in the retail portion upon completion at a 6% cap rate and has the right of first opportunity to acquire the residential rental units Demographics in 5 km radius: Population: 450k Daytime population: 457k Average household income: $164k+ 52

53 STRATEGIC ACQUISITIONS MIXED-USE DEVELOPMENT BATHURST COLLEGE CENTRE, TORONTO Location: Situated in the western downtown corridor in Toronto, at Bathurst Street and College Avenue. Directly across street from Toronto General Hospital Ownership Structure: 100% Property Type: 139,000 sf mixed-use office and retail Leasing status: 79% pre-leased Anchor Tenants: University Health Network (UHN), Fresh Co (Sobeys), Winners Zoning status: Zoned Estimated project completion: 2019 Estimated PUD Costs (RioCan s interest): $108.0M Proposed Proposed 53

54 STRATEGIC ACQUISITIONS MIXED-USE DEVELOPMENT 5th & THIRD, CALGARY, AB Location: Well located in the East Village area of downtown Calgary with direct access to the LRT Ownership Structure: 100% retail, Residential air rights sold to Embassy BOSA Property Type: Mixed-use with 158,000 sf of retail and 597,000 sf residential sold as air rights Lead Tenants : Loblaw s City Market, Shoppers Drug Mart Leasing status: 70% pre-leased Zoning status: Zoned Estimated project completion: 2021 Estimated PUD Costs (RioCan s interest): $128.9M Proposed Proposed 54

55 STRONG BALANCE SHEET THE FINANCIAL RESOURCES TO FUEL GROWTH AND WEATHER MARKET TURMOIL CANADA S MAJOR MARKET PORTFOLIO Low leverage Low cost of debt STRONG BALANCE SHEET Laddered debt maturity and mostly fixed rate Access to multiple sources of capital Large unencumbered assets pool generating 58.4% of annualized NOI Multiple Capital Sources Low Leverage Strong Growth 55

56 MEASURED APPROACH TO DEVELOPMENT Properties Under Development ( PUD ) & Inventory Max. Permitted As at Mar. 31, 2018 Target - $1.4 B N/A PUD and Inventory as % of Gross Assets per Line of Credit Covenant 15% 9.6% ~ 10%* Investment in Greenfield Development and Inventory as % of Unitholder Equity - per Declaration of Trust 15% 4.5% N/A $1.4 Billion $300M - $400M $300M - $600M <$1.5 Billion* * In 2018 and 2019, PUD and Inventory balance may exceed the target range of 10% of gross assets or over $1.5B on a quarterly basis before a few large projects (such as YENE condo and rental towers, Kingly, Bathurst & College) are completed in late 2018 and early

57 SELF FUNDING DEVELOPMENT NOT DEPENDENT ON EQUITY OFFERINGS OR INCREASING LEVERAGE Sources of Funding for Development: Disposition net proceeds Sales proceeds from condominium/townhouse developments or air rights sales Strategic alliances to CONSISTENTLY reduce capital requirements ABOVE 95% and mitigate risks Excess operating cash flows Sale of marketable securities 57

58 PRUDENT MANAGEMENT OF DEVELOPMENT RISKS Laddered development Pre-leasing requirement for commercial development and sound market studies for residential development Well-established internal control process for development approvals and construction management Strategic alliances to reduce capital requirements and mitigate risks Dedicated and experienced development team but not over-staffed o No overhead pressure to take on projects CONSISTENTLY ABOVE 95% o Residential property management currently outsourced until we reach scale Already own the assets, which are income producing o We can better control development starts especially in today s environment of rising construction costs Limited condominium development 58

59 STRONG BALANCE SHEET PRUDENT CAPITAL MANAGEMENT & FLEXIBLE CAPITAL STRUCTURE Capital Structure Metrics Target Q1 2018* Leverage 38% - 42% 42.4% Debt/EBITDA <8.0x 7.63x Interest Coverage >3.0x 3.85x Debt Service Coverage >2.25x 3.12x Fixed Coverage CONSISTENTLY ABOVE >1.10x 95% 1.18x Unencumbered Assets N/A $8.1B Unencumbered Assets to Unencumbered Debt >2.0x 2.20x NOI % from Unencumbered Assets >50% 58.4% Unsecured vs. Secured Debt 60%/40% 59%/41% FFO Payout Ratio <80% 78.0% * Coverage and payout ratios calculated on a rolling 12 month basis 59

60 INDUSTRY LEADING FINANCIAL PROFILE 42.4% Leverage 47.6% Debt to EBITDA 7.6x 8.7x Debt Service Coverage 3.1x 2.6x Interest Coverage 3.9x 3.1x Source: company reports; Peers: Mar. 31, FCR, CHP, CRR, CRT, SRU 60

61 INDUSTRY LEADING FINANCIAL PROFILE CAPITAL STRUCTURE PROFILE: CANADA VS. U.S. Historical Background and Stronger Demand for Yield: o Canadian REITs have a shorter history and higher demand for yield o US Retail REITs have much higher institutional ownership (~86%*) Less Risky Retail Operating Environment o o o Less retail space per capita in Canada Stricter development regulations and municipal bylaws in Canada Retail in Canada has less competition, more financially stable anchor tenants More Conservative Lending Practices CONSISTENTLY ABOVE 95% o o o Canada: recourse borrowing and higher proportion of secured financing U.S.: Non-recourse borrowing and more reliance on unsecured financing Canadian financial institutions have more conservative, on-balance sheet lending practices 61

62 CAPITAL MANAGEMENT STRATEGY PRUDENT CAPITAL MANAGEMENT & FLEXIBLE CAPITAL STRUCTURE Maintain strong balance sheet with leverage in the 38% - 42% range Maximize unit repurchases under NCIB subject to our leverage target Self-fund development Balance unsecured and secured debt ratio in the ~60/40 split range Maintain financial flexibility by managing revolving line of credit utilization and balance between debenture issuance and line of credit utilization CONSISTENTLY ABOVE 95% Balance debt maturities and limit variable rate debt to manage interest rate risk Maintain and develop lender relationships and continue to utilize diversified funding sources Utilize CMHC funding for mixed-use residential properties 62

63 STAGGERED DEBT MATURITY AND LOW COST OF DEBT LESS IMPACTED BY RISING INTEREST RATES Scheduled principal amortization Floating Rate Mortgages and Lines of Credit Mortgages payable Debentures payable $ 000s Weighted average interest rate 2,400 2,000 1,600 1, % 3.62% 3.57% 3.48% 3.23% 3.03% , , Thereafter 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% Weighted Avg. Interest Rate on Maturing Debt 63

64 CONTACT INFORMATION Proposed Contact Information RioCan Yonge Eglinton Centre 2300 Yonge Street P.O. Box 2386 Toronto, ON M4P 1E4 (T) or (416) Proposed 64