TRANSFORMING. RIOCAN INVESTOR PRESENTATION Second Quarter 2013 August 27, 2013

Transcription

1 TRANSFORMING RIOCAN INVESTOR PRESENTATION Second Quarter 2013 August 27, 2013

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 348 retail properties in Canada & U.S. 83 million sqft total portfolio 53 million sqft owned $ 7.6 billion market cap $ 13.8 billion enterprise value ~7,900 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 acquisition activity and development pipeline Experienced, performance driven management team 4

5 Property Portfolio BC GTA AB SA MB QC NFLD ON QC NB 298 retail properties 44 million sqft 85.9% annualized rental revenue 50 retail properties 8.9 million sqft 14.1% annualized rental revenue PA VA MA CT TX As at June 30, 2013 at RioCan s interest 5

6 Property Portfolio Canada Annualized Rental Revenue by Major Market Rest of Canada, 27.9% Major markets combined, 72.1% BC 3.8% 6.0% AB 3.6% Edmonton QC 8.8% Vancouver Calgary ON 8.5% 41.3% Ottawa Montreal Toronto 6

7 Property Portfolio U.S. Regional Market Strategy & Focus Annualized Rental Revenue by State Proforma RPAI & Dunhill Transactions 46 retail properties 9.0 million sqft TX 57.1% 2.7% 20.4% WV PA 2.0% VA NY MD NJ NH MA CT 2.2% RI 2.6% 2.0% 6.4% 0.8% 3.1% 0.7% 7

8 Strong Tenant Relationships 8

9 Strong Tenant Relationships Top 10 Canada & US Combined As at June 30, 2013 Top 10 Tenant Name Annualized Rental Revenue Number Of Locations Total Area Occupied (Sq. Ft. In 000s) Weighted Avg Remaining Lease Term (Yrs) 1 Walmart 3.7% 32 3, Canadian Tire Corporation (i) 3.5% 96 2, Cineplex/Galaxy Cinemas 3.2% 30 1, Metro/Super C/Loeb/Food Basics 3.2% 58 2, Winners/HomeSense/Marshalls 2.6% 73 1, Loblaws/No Frills/Fortinos/Zehrs/Maxi 2.5% 32 1, Target Corporation 1.8% 24 2, Staples/Business Depot 1.7% 54 1, Shoppers Drug Mart 1.6% Future Shop/Best Buy 1.5% (i) Canadian Tire Corporation includes Canadian Tire/PartSource/Mark's Work Wearhouse/Sport Mart/Sport Chek/Sports Experts/National Sports/Atmosphere 9

10 Strong Tenant Relationships Top 10 Canada & US Combined Pro Forma Recently announced Transactions Top 10 1 Tenant Name Loblaws/No Frills/Fortinos/Zehrs/Maxi/ Shoppers Drug Mart (i) 2 Walmart 3 Canadian Tire Corporation 4 Cineplex/Galaxy Cinemas (ii) 5 Metro/Super C/Loeb/Food Basics 6 Winners/HomeSense/Marshalls 7 Target Corporation 8 Staples/Business Depot 9 Sobey s / Safeway (iii) 10 Future Shop/Best Buy The following pro forma rankings assume the successful closings of all the deals mentioned below: (i) Loblaws has entered into an agreement to purchase Shoppers Drug Mart which is scheduled to close in the fourth quarter of Loblaws would be RioCan s largest tenant by gross revenue. (ii) Cineplex has entered into an agreement to purchase certain theatre locations from Empire Co., including two locations within the RioCan portfolio. This transaction is anticipated to close during the third quarter of 2013, and upon closing, Cineplex would become RioCan s 4 th largest tenant as measured by gross revenue. (iii) Sobeys has entered into an agreement to purchase Safeway Canada, scheduled to close in the fall of Sobeys would be RioCan s 9 th largest tenant by gross revenue. 10

11 Strong Tenant Relationships Top 10 U.S. As at June 30, 2013 Top 10 Tenant Name Annualized Rental Revenue Number Of Locations Total Area Occupied (Sq. Ft. In 000s) Weighted Avg Remaining Lease Term (Yrs) 1 Giant Food Stores/ Stop & Shop (Royal Ahold) 9.8% 20 1, Best Buy 3.8% PetSmart 3.0% Walmart 2.4% Michael s 2.2% Ross Dress for Less 1.9% Staples 1.6% Bed Bath & Beyond 1.4% Lowes 1.3% Market Street 1.3%

12 Lease Rollover Profile Broadly Distributed Lease Expiries Canadian Portfolio As at June 30, s Square Feet % Square Feet expiring / portfolio NLA 4,869 4,040 4,156 3,878 1, % 10.1% 10.3% 12.1% 9.6% U.S. Portfolio As at June 30, s Square Feet % % 5.4% 6.8% 5.1%

13 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% 96.7% Q As at June 30,

14 Financial Highlights Q2 2013

15 Financial Highlights Revenues (in millions of $ except per unit amounts) 1,128 Operating FFO* Operating FFO* Per Unit Years ended December 31st * Note: FFO reported under IFRS for 2010 onwards, excludes trading gain income 15

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

17 Financial Highlights Net Operating Income (in millions of $) 713 Net Operating Income* Q Q Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q * At RioCan s interest 17

18 Financial Highlights Distributions to Unitholders (in millions) Distributions to Unitholders per Unit * * * annualized Distributions to Unitholders net of DRIP Distributions per Unit net of DRIP 18

19 Financial Highlights RioCan s Operating FFO increased by 14% to $121 million for the three months ending June 30, 2013 ( Second Quarter ) compared to $106 million in the second quarter of On a per unit basis, Operating FFO increased 8% to $0.40 per unit from $0.37 per unit in the same period of 2012; RioCan s Operating FFO increased by 17% to $245 million for the six months ended June 30, 2013 compared to $209 million for the same period in On a per unit basis, Operating FFO increased 9% to $0.81 per unit from $0.74 per unit for the same period in 2012; RioCan s concentration in Canada s six major markets has increased to 72.1% from 67.5% at December 31, 2012; Overall occupancy was 96.7% at June 30, 2013, compared to 97.4% at December 31, The decline in occupancy was largely due to five Zellers stores totalling 466,000 square feet that were returned to RioCan on April 1, 2013; During the Second Quarter, RioCan acquired interests in seven income properties in Canada and the US aggregating 1.1 million square feet at an aggregate purchase price of approximately $460 million at RioCan s interest at a weighted average capitalization rate of 5.2%; During the quarter RioCan sold four properties located in secondary markets aggregating 1.6 million square feet at a total sale price of $364 million at a weighted average cap rate of 6.0%; 19

20 Financial Highlights During the quarter, RioCan redeemed its $150 million Series M debentures that carried an interest rate of 5.65% and issued $200 million Series T ten year senior unsecured debentures at an interest rate of 3.725%; During the quarter, RioCan entered into an agreement to dissolve its joint venture arrangement with Retail Properties of America, Inc. ("RPAI"). Under the terms of the dissolution, RPAI will convey its 20% managing interest in eight properties to RioCan. RioCan will, in turn, convey its 80% interest in the remaining five properties to RPAI. The transaction is expected to close on October 1, 2013; RioCan entered into agreements to dissolve its joint venture agreements with Dunhill Partners, Inc. ( Dunhill ) after the quarter end. Under the terms of the dissolution, RioCan will acquire Dunhill s interests in six properties at a total purchase price of $83.5 million, which equates to a capitalization rate of 6.4%. The transaction is expected to close in phases during the third and fourth quarters of 2013; In addition to its office in the northeastern US, RioCan is in the process of establishing a second US office to be located in Dallas Texas, and intends to assume the management duties for its Texas portfolio; and On July 25, 2013, RioCan announced the TSX approval of its notice of intention to make a normal course issuer bid ( NCIB ) for a portion of its Units as appropriate opportunities arise from time to time. 20

21 Financial Summary (in millions of $ except per unit amounts) % Change 2013 vs Period Ended June 30, Total Revenues - consolidated 8.59% $278 $256 Total Revenues at RioCan s interest 9.77% $292 $266 Operating FFO 14.15% $121 $106 Operating FFO per Unit 8.11% $0.40 $0.37 Distributions to unitholders 6.00% $106 $100 Distributions to unitholders per Unit (annualized) 2.17% $1.41 $1.38 Distributions to unitholders net of distribution reinvestment plan (DRIP) 8.22% $79 $73 Distributions to unitholders net of DRIP per Unit (past 12 months) -3.81% $1.01 $1.05 Unit issue proceeds under distribution reinvestment plan 0.00% $27 $27 Distribution reinvestment plan participation rate -7.01% 25.20% 27.10% As at % Change June 30, 2013 December 31, 2012 Total assets - consolidated 2.47% $12,931 $12,619 Total assets at RioCan s interest 2.38% $13,195 $12,888 Debt consolidated 2.35% $5,579 $5,451 Debt at RioCan s interest 2.34% $5,851 $5,717 Debt to Total Assets (at RioCan s interest) % 43.60% Debt Service Coverage (at RioCan s interest)* 5.05% 2.08x 1.98x Market capitalization -7.56% $7,646 $8,271 Total capitalization (incl. Preferred Units) -3.50% $13,774 $14,274 *Coverage figures calculated on a twelve month rolling basis 21

22 Occupancy and Leasing Profile (thousands of square feet, millions of dollars) Financial Summary Second quarter First quarter Fourth quarter Third quarter Second quarter First quarter Fourth quarter Third quarter Committed occupancy 96.7% 97.0% 97.4% 97.3% 97.4% 96.9% 97.6% 97.5% Economic occupancy 95.4% 95.8% 95.9% 95.5% 95.5% 95.7% 96.6% 96.3% NLA leased but not paying rent Annualized rental impact $15.00 $15.00 $15.00 $18.00 $18.00 $12.00 $11.00 $12.00 Retention rate - Canada 95.9% 68.3% 94.3% 84.8% 89.9% 91.2% 90.5% 88.9% % increase in average net rent per sq ft - Canada 12.0% 13.4% 18.4% 12.9% 13.4% 10.0% 14.5% 7.2% Retention rate - US 92.0% 98.8% 87.6% 96.3% 84.2% 83.1% 95.7% 89.9% % increase in average net rent per sq ft - US 4.3% 2.3% 5.1% 6.0% 7.3% 7.2% 8.9% 6.4% Average in place rent $15.77 $15.77 $15.70 $15.85 $15.33 $15.37 $15.14 $15.09 Same store growth - Canada 0.6% 0.1% 0.2% 0.0% 1.5% 1.5% 1.9% 1.3% Same store growth - US 1.4% 1.4% 1.9% -0.3% 1.3% -0.6% 1.3% 1.0% 22

23 Net Operating Income Canadian Portfolio (thousands of dollars) Three Months Ended June 30, 2013 Net Operating Income Financial Summary Increase (decrease) Same store 1 $138,209 $137, % Land use intensification $1,191 $1,371 nm Same properties 2 $139,400 $138, % Acquisitions & Dispositions $13,205 $3,688 nm Greenfield development $3,358 $2, % NOI before adjustments $155,963 $145, % Lease cancellation fees $209 $709 nm Straight-lining of rents $1,253 $ % NOI At RioCan s interest $157,425 $147, % 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. 23

24 Financial Summary Net Operating Income US Portfolio (thousands of dollars) Three Months ended June 30, Increase (decrease) Base rent US$ $22,817 $22, % Property tax and operating cost recoveries US$ 6,410 6, % Other US$ nm Rental revenue US$ 29,422 28, % Property operating costs US$ 8,089 7, % Same store and same properties 12 US$ $21,333 $21, % Foreign currency translation adjustment nm Same store and same properties 12 CDN$ 21,982 21, % Acquisitions 6,750 nm NOI before adjustments $28,732 $21, % Dispositions 1,086 nm Lease cancellation fee nm Straight-lining of rents nm NOI At RioCan s interest $29,515 $23, % 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.. 24

25 Conservative Debt Profile Debt to Total Assets of 44.2% at June 30, 2013; Total operating lines $429 million with approximately $391 million available at June 30, 2013 Unencumbered pool has a fair value of $1.9 billion Floating rate debt 6.3% of aggregate debt Strong coverage ratios in Q EBITDA interest coverage of 3.04x Debt service coverage of 2.19x and Fixed charge coverage of 1.08x * At RioCan s interest 25

26 RioCan Capital Structure 100% Total Assets $13.2 Billion 100% Total Enterprise Value* $13.7 Billion 75% 52.6% 75% 55.5% 50% 25% 0% 2.1% 11.2% 34.2% Book Value* 50% 25% 0% 2.0% 10.5% 32.0% Market Value Common Units million units outstanding, $7.6 billion market capitalization Preferred Units - $277 million market capitalization Debentures - $1.5 billion Mortgages & Lines of Credit - $4.4 billion * At RioCan s interest 26

27 Conservative Debt Structure Growth in Asset vs Debt 27

28 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 3.0x 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% 44.2% Q * At RioCan s interest 28

29 Debt Maturity Schedule $ Millions 3,000 2,500 2,000 1,500 1, % 129 Scheduled principal amortization Mortgages payable 4.6% 4.6% 4.7% , % 2, % 7.00% 6.00% 5.00% 4.00% 3.00% Weighted Avg. Interest Rate on Maturing Debt Thereafter Long term, staggered debt maturity profile 4.5% Overall WAIR and 4.7 Year weighted avg. term to maturity at RioCan s interest Low floating rate debt exposure (6.3% of total debt) at RioCan s interest 29

30 Leverage and Coverage Ratios & Targets 3 Months Rolling 12 Months Targeted Ratios June June 30/ /13 June Dec. 30/13 31/12* Dec. 31/12 Interest coverage ratio 1 >2.75x 3.04x 2.79x 2.81x 2.69x 2.69x Debt service coverage ratio 2 >2.25x Fixed charge coverage ratio 3 >1.1x Net operating debt to adjusted operating EBITDA <6.5x ratio 4 Unencumbered Assets ($millions) Unsecured Debentures ($millions) Unencumbered Assets to Unsecured Debt $1,863 $1,353 $1,455 $1,299 >130% 128% 104% (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 Adjusted Operating EBITDA is defined as: the average debt outstanding (net of cash) for the period less debt related to property under development divided by Adjusted EBITDA excluding amounts related to property under development (5) Adjusted to exclude interest capitalized. * Restated on same basis as June 30, 2013 * At RioCan s interest 30

31 Growth Strategy

32 Future Growth Drivers Acquisitions Organic Growth Development Pipeline Future Growth Drivers Institutional Relationships Land Use Intensification 32

33 Square Feet ( 000s) Rent PSF Canadian Portfolio Organic Growth Ability to add growth through rental renewals with 47% of leases renewing over next five years. In Q achieved renewal rent increases of 12% or $2.14 psf with an average renewal rate of $ Retention rate of 95.9%. 4,900 4,200 3,500 2,800 2,100 1, RioCan Lease Maturity Schedule and Renewal History ytd 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 40,200 1,786 4,040 4,155 4,869 3,878 Square Feet expiring/portfolio NLA 4.4% 10.1% 10.3% 12.1% 9.6% Total average net rent psf $16.14 $18.87 $16.83 $16.53 $16.71 $

34 Zellers update Leasing of the Zellers stores not taken by Target should, in aggregate provide an opportunity for RioCan to generate additional rental income going forward, as the lease income previously generated by Zellers was considerably below current market rental rates. RioCan has nine locations leased by Zellers that were not selected by Target comprising approximately 727,000 square feet (640,000 square feet at RioCan s interest) contributing $6.6 million of annual gross revenue ($6 million at RioCan s interest). Average base rent on this space of $5.28 per square foot contributing $6.6 million of annual gross revenue ($6 million at RioCan s interest). RioCan received a lease termination fee on these five remaining Zellers locations of $9.3 million. RioCan has negotiated firm leases and conditional LOI s for 395,000 square feet or 62% of the former Zeller s space (at RioCan s ownership interest) accounting for $6.1MM of gross revenue or 102% of the gross rent formerly paid by Zellers (at RioCan s ownership interest). The average base rent on the re-leased space is $10.21 per square foot compared to the $5.28 per square foot formerly received from Zellers representing a 93% increase. Given the significant amount of work required to redevelop and reposition the properties, RioCan estimates that the construction and tenant fixturing period will average approximately one year. 34

35 U.S. Portfolio Organic Growth Ability to add growth through rental renewals with 28% of leases renewing over next five years. In Q achieved renewal rent increases of 4.3% or $0.60 psf with an average renewal rental rate of $14.48 Maintained a retention rate of 92.0% 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 8, Square Feet expiring/portfolio NLA 2.9% 7.6% 5.4% 5.1% 6.8% 35

36 Acquisitions Annual Acquisitions Canada & US Purchase price at RioCan s interest (millions) $986 $1,100 $926 $479 Total $3.49 Billion H1 36

37 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 5.2% 471 United States 6.4% 8 Q1 & Q % $479 Grand Total 2011-Q % $2,478 37

38 Dissolution of JV with Retail Properties of America, Inc. ( RPAI ) and Dunhill Partners

39 Transaction Highlights - RPAI RioCan and RPAI have agreed to dissolve their joint venture arrangement formed in 2010; RPAI to acquire from RioCan a 80% interest in 5 properties to increase their ownership to 100%. When completed, RioCan will own 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 exceptional grocery anchored or shadow anchored centres in Houston and Dallas. The additional 20% interest will provide RioCan with a 100% ownership interest for 2.5 million square feet of RioCan s 4.3 million square foot portfolio in Texas. 39

40 Transaction Highlights - RPAI The gross purchase price for the 8 properties is $96.6 million, representing a capitalization rate of 6.9%. Under the terms, RioCan will assume RPAI s share of the current in place mortgage financing of $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 is $53.7 million. RioCan will sell its 80% ownership in five assets at a gross purchase price of $102.8 million ($45.6 million net of financing and mark to market adjustment on debt). RioCan s US portfolio is composed of 26 properties containing 4.6 million square feet in the Northeastern US and 4.3 million square feet in 24 properties (19 properties containing 4.3 million square feet on completion) in Texas. 40

41 Transaction Highlights - RPAI High quality assets with a focus towards grocery anchored centres 41

42 Transaction Highlights - RPAI Assets to be Acquired Property Name Location NLA Occupancy Major Tenants 1890 Ranch Austin 486, % Alamo Ranch San Antonio 465, % 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 92, % 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 921, % 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. 2,530, % 42

43 Transaction Highlights - Dunhill Dunhill Partners Inc. (Dunhill) RioCan has entered into an agreement to dissolve its joint venture agreement with Dunhill. Under the terms of the dissolution, RioCan will acquire 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. Under the terms of the transaction, RioCan will assume 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. The properties to be acquired have an average occupancy of 97.1%. The transaction is expected to close on a property by property basis over the third and fourth quarters of

44 Transaction Highlights - Dunhill Assets to be 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 470, % Walmart, JC Penny TOTAL / W.A. 2,003, % 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, 44

45 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 February 2013, RioCan sold its entire position of 9.4 million shares of Cedar for $48 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. Figures in US dollars 45

46 Recent Enclosed Mall Acquisitions Burlington Mall, Burlington, Ontario Georgian Mall, Barrie, Ontario Oakville Place, Oakville, Ontario 46

47 Recent Enclosed Mall Acquisitions Impact on Property Type Mix RioCan plans to actively increase its presence in two sectors; 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% June 30, 2013 Office, 5.0% Urban Retail, 8.6% Urban Retail, 8.0% New Format Retail, 48.7% Enclosed Shopping Centre, 15.1% New Format Retail, 44.8% Enclosed Shopping Centre, 18.3% Non-Grocery Anchor, 5.0% Grocery Anchored Centre, 18.3% Non-Grocery Anchor, 5.1% Grocery Anchored Centre, 18.8% 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 centers such as Yonge Eglinton Center, Sheppard Center, Lawrence Square, Shoppers World Brampton and the Globe and Mail lands 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. 47

48 RioCan Primaris 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. 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. RioCan also acquired a third asset, South Cambridge Centre from H&R REIT at a purchase price of $35 million at a cap rate of approximately 6.7%. Burlington Mall, Burlington, Ontario Oakville Place, Oakville, Ontario 48

49 Recent Acquisitions Georgian Mall In Q3 2012, RioCan purchased Georgian Mall in Barrie, Ontario for $318 million at a 5.4% cap rate Obtained first mortgage financing of $185 million at a 3.1% interest rate RioCan s largest single acquisition by dollar amount A dominant regional mall in a quickly growing market with solid demographics 49

50 Extracting Value by Recycling Capital RioCan had dispositions of $364 million during the quarter and dispositions of $374 million during the six months ended June 30, Subsequent to the quarter end, RioCan sold one property in Canada at a sale price of $4 million. RioCan has two property dispositions in Canada under firm contract where conditions have been waived pursuant to a purchase and sale agreement at a sale price of $13 million. Additionally, RioCan has two property dispositions under conditional contract where conditions have not yet been waived pursuant to purchase and sale agreements at an aggregate sale price of $9 million. RioCan is also in the process of marketing for sale two other properties in Canada. Current asset sales plan involves selling centres in lower growth and tertiary 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 70% (Year end %) Capital from asset sales redeployed into enclosed mall acquisitions. 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. 50

51 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. 72.1% 65.9% 67.5% Jun-13 51

52 Pipeline NLA 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 greenfield program consists of 15 development projects that are expected to add 7.9 million square feet (3.5 million square feet at RioCan s interest) over the next seven years million square feet is already income producing Key component of RioCan s organic growth strategy Focused on well located urban and suburban developments in Canada s six major markets Committed Non-committed * Subject to preleasing and market conditions 52

53 Development Activity - Current Portfolio Property Type as a % of Development Portfolio Development Portfolio by Geographic Diversification 1% 19% 11% 69% New Brunswick 5% Alberta 14% Ontario 81% Ottawa 12%* Suburban GTA 38%* Toronto 13%* Other Ontario 18%* Power Centre Convenience Retail Main Street/Urban Excess Land * % of total portfolio 53

54 Development Activity Development Pipeline Greenfield developments through in house capabilities and with partners, such as Trinity, Allied Properties, KingSett Capital, and Canada Pension Plan Investment Board (CPPIB) At June 30, 2013 Total developments comprise 11.0 million square feet, including shadow anchors (7.9 million square feet included in Greenfield developments and 3.1 million square feet of Urban intensification projects). RioCan s interest consists of 3.5 million square feet of Greenfield development and 1.5 million square feet of Urban intensification projects Total estimated development spending of $46 million for the balance of 2013 on Greenfield and Urban intensification activities. Expected to increase to over $100 million per year. RioCan s committed active development pipeline totals approximately $349 million, with an additional $184 million of Non-committed development costs projected. Generate unlevered yield between 7% to 11%, at a weighted average of 8.0% to 9.0% Recent Urban Development acquisitions include 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 across Canada RioCan, Allied Properties and Diamond Corp entered into a joint venture arrangement and have acquired two parcels which comprise the Globe and Mail site in downtown Toronto 54

55 In millions of square feet NLA 100% Development Activity Estimated NLA Summary by Development Category NLA RioCan% Income producing Greenfield Development Urban Intensification Expansion & Redevelopment Total (i) - Construction financing relates to greenfield Development and Urban Intensification activities 55

56 Development Activity Properties Under Development at June 30, 2013 PUD Balance: Active Committed Non-Committed Non-active Total Greenfield Development $207 $56 - $263 Urban Intensification Expansion and Redevelopment Excess Density Other (i) Total $349 $184 $48 $581 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. 56

57 Development Activity Estimated Spending Summary by Development Category In millions Future Development Total Greenfield Development $42.6 $25.5 $11.0 $327.0 $406.1 Urban Intensification Construction Financing (i) (4.5) (7.0) (3.8) (521.2) (536.5) Expansion & Redevelopment Total Construction Expenditures $548.9 Mezzanine Financing Total RioCan Financing $101.4 $122.0 $140.9 $239.2 $603.5 (i) - Construction financing relates to greenfield Development and Urban Intensification activities 57

58 Development Pipeline RioCan & Allied Properties REIT 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. Globe & Mail Lands Acquired at a purchase price of $136 million (at 100%). Second parcel (highlighted in red) acquired at a purchase price of $37 million (at 100%). Project is expected to be mixed use retail, office and residential. 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 Source: RBC 58

59 Development Pipeline RioCan & Allied Properties REIT Joint Venture RioCan and Allied Properties announced in July 2012 that they had entered into a joint venture arrangement to acquire sites in the urban areas of major Canadian cities that are suitable for mixed use intensification King Street 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. 59

60 Development Activity Target will open 24 locations in RioCan s portfolio First 15 locations, Eight have opened year to date The majority to open throughout the remainder of 2013 Target will be the anchor tenant at RioCan s St Clair and Weston road project Stockyards Canada s first purpose built Target location opening spring 2014 RioCan employing an extensive capital improvement program for those locations where it feels the cash flow can be improved RioCan expects to spend approximately $18 million to upgrade existing shopping center infrastructure and aesthetics 60

61 Development Pipeline St. Clair & Weston, Toronto 555,000 sqf. two storey retail Projected Completion 2014 Anchor Tenant - Target Development Partners: Trinity and Canada Pension Plan Investment Board ( CPPIB ) 61

62 Development Pipeline Calgary East Village 2.8 acre site located in the East Village area of downtown Calgary, Alberta. The site was acquired on a 50/50 joint venture basis with KingSett Capital at a purchase price of $20 million. The joint venture is contemplating the development of 526,000 square feet of mixed use retail and office space. Development is anticipated to commence in the spring of

63 Development Pipeline Sage Hill, Calgary RioCan has completed the acquisition of Sage Hill Crossing, a 34 acre greenfield development site in Northwest Calgary. The purchase price for the lands, which will be serviced and zoned at the time of closing, will be $32 million ($16 million at RioCan s interest). RioCan will own the development on a 50/50 basis with KingSett Capital. Once completed, the anticipated gross leasable area is 378,000 square feet of retail use. A letter of intent is in place with Walmart for a land lease and a binding offer to lease has been executed with Loblaws for a 45,000 square foot store. Development is expected to commence in Windfield Farms, Oshawa This 160 acre site located in Oshawa, Ontario is currently being developed into a 1.2 million square foot regional new format retail centre. RioCan acquired its partners interests in July RioCan now owns 100% of this development site. 63

64 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. 64

65 Development Pipeline Cookstown Outlet Mall Purchased in December 2011 with Tanger Factory Outlet Centers. 161,000 square foot outlet centre with the potential to add a further 160,000 square feet of retail space Ground breaking ceremonies on expansion were held in Q

66 Development Pipeline West Kanata Lands On April 23, 2013 RioCan and Tanger purchased the West Kanata Lands 52.5 acre site, approximately 20 kilometres west of Ottawa To be developed into a 347,000 square foot outlet centre Ground breaking ceremonies on expansion were held in Q

67 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 67

68 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 68

69 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 69

70 Densifying existing urban locations Yonge Eglinton Centre - Toronto, Ontario RioCan s acquired the property for $223 million launched revitalization and expansion plan to capitalize on area s residential intensification significant increases in NOI and occupancy 70

71 Creating New Cash Flow Sources RioCan Yonge Eglinton Centre The Cube Today Location: Toronto, Ontario Intersection: Yonge & Eglinton Total Proposed GLA: 45,000 square feet Design Concept: Urban Retail Construction Start: Q Proposed 71

72 Creating New Cash Flow Sources The Sheppard Centre, Toronto Today Location: Intersection: Total Proposed GLA: Design Concept: Toronto, Ontario Yonge & Sheppard 672,854 square feet Urban Retail Potential for both retail and residential expansion Proposed Fast growing area of North Toronto 72

73 Creating New Cash Flow Sources NE Yonge Eglinton - Toronto, Ontario Location: Toronto, Ontario Intersection: Yonge & Eglinton Total Proposed GLA: 54,000 square feet Design Concept: Urban Retail Anticipated Completion: 2017 Today Proposed 73

74 740 Dupont - Toronto, Ontario Creating New Cash Flow Sources Location: Toronto, Ontario Intersection: 740 Dupont Street Total Proposed GLA: 184,000 square feet Design Concept: Urban Retail Anticipated Completion:

75 420 Bathurst Street, Toronto Creating New Cash Flow Sources Location: Toronto, Ontario Intersection: Bathurst & Dundas Total Proposed GLA: 126,000 square feet Design Concept: Urban Retail Anticipated Completion:

76 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 76

77 Urban Intensification Completed Projects Queen & Portland, Toronto, ON Location: Toronto, Ontario Intersection: Portland & Queen Total Proposed GLA: 91,000 square feet Design Concept: Mixed use facility Construction Completed: 2011 After Before 77

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

79 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 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 Globe and Mail lands at Front Street and Spadina in downtown Toronto. 79

80 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 80

81 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 1.3 million sq. ft. of completed regional power centres and approximately 3.0 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 81

82 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 rezoning for 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 Expected completion in first half of

83 CPPIB Strategic Alliance East Hills Strong Institutional Relationships 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. 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. 83

84 TRANSFORMING RioCan Yonge Eglinton Centre 2300 Yonge Street, Suite 500 PO Box 2386 Toronto, Ontario M4P 1E4