RioCan Real Estate Investment Trust
TSX : REI.UN

RioCan Real Estate Investment Trust

August 10, 2012 07:30 ET

RioCan Real Estate Investment Trust Announces 14% Gain in Operating FFO for the Second Quarter 2012

TORONTO, ONTARIO--(Marketwire - Aug. 10, 2012) - RioCan Real Estate Investment Trust ("RioCan") (TSX:REI.UN)

HIGHLIGHTS for the Second Quarter of 2012:

All figures in Canadian dollars unless otherwise noted. RioCan's results are prepared in accordance with International Financial Reporting Standards ("IFRS").

  • RioCan's Operating FFO increased by 14% to $106 million for the three months ending June 30, 2012 ("Second Quarter") compared to $93 million in the second quarter of 2011. On a per unit basis, Operating FFO increased 3% to $0.37 per unit from $0.36 per unit in the same period of 2011;

  • RioCan's Operating FFO increased by 14% to $209 million for the six months ending June 30, 2012 compared to $183 million for the same period in 2011. On a per unit basis, Operating FFO increased 6% to $0.74 per unit from $0.70 per unit for the same period in 2011;

  • Overall occupancy improved to 97.4% at June 30, 2012 from 96.9% at March 31, 2012;

  • During the Second Quarter, RioCan acquired interests in 4 properties in Canada and the US aggregating 484,000 square feet at a purchase price of approximately $87 million at RioCan's interest at a weighted average cap rate of 6.7%;

  • RioCan renewed 867,000 square feet in the Canadian portfolio during the Second Quarter at an average rent increase of $2.29 per square foot, representing an increase of 13.4%, compared to 13.9% for the same period in 2011. During the quarter, RioCan had a retention rate of 89.9%.

  • RioCan renewed two million square feet in the Canadian portfolio during the first six months ended June 30, 2012 at an average rent increase of $1.81 per square foot, representing an increase of 11.6%, compared to 11.2% for the same period in 2011. During the six months ended June 30, 2012, RioCan had a retention rate of 90.6%.

  • During the Second Quarter, RioCan completed the offering of $150 million Series Q seven-year senior unsecured debentures having a coupon rate of 3.85%. The Series Q debentures were subsequently increased to $175 million after quarter end. The additional $25 million was issued at an effective rate of 3.61%;

  • Subsequent to the quarter end, RioCan announced a strategic joint venture with Allied Properties REIT to acquire sites in the urban areas of major Canadian cities that are suitable for mixed use intensification; and

  • Subsequent to the quarter end, RioCan announced that it agreed to purchase Georgian Mall in Barrie, Ontario for $318 million. This will be one of RioCan's largest and most prominent enclosed mall properties.

RioCan Real Estate Investment Trust today announced its financial results for the three and six months ended June 30, 2012.

"RioCan's operations have performed well in the first half of this year, the majority of the space vacated in the first quarter has been re-leased and we continue to achieve double digit rent growth on our lease renewals," said Edward Sonshine, Chief Executive Officer of RioCan. "In addition to RioCan's strong operations, the Trust continues to take advantage of its low cost of capital to source high quality acquisitions, such as Georgian Mall, and leverages its development expertise to source new opportunities across Canada."

Financial Highlights

Operating Funds from operations ("Operating FFO")

RioCan's Operating FFO is a non-GAAP measurement that represents the recurring cash flow generated through the ownership and management of income properties. Operating FFO excludes transactional gains as well as expenditures related to development activities that are no longer capitalized under IFRS. The primary difference between net earnings and Operating FFO is the fair value gain on investment properties.

Operating FFO for the Second Quarter was $106 million ($0.37 per unit) compared to $93 million ($0.36 per unit) in the second quarter of 2011. The primary reasons for this increase were: a $22 million increase in net operating income ("NOI"), which was due to acquisitions, along with same property growth of 1.6% in Canada and 1.3% in the US portfolio, and the completion of Greenfield developments. These increases to Operating FFO were partially offset by increased interest expense of $3 million, which included $2.3 million of costs associated with the early repayment of $90 million of secured debt (which carried an interest rate of 5.9%), increased preferred unit distributions of $2 million, as well as, higher general and administrative expenses of $1 million during the Second Quarter.

Operating FFO for the six months ended June 30, 2012 was $209 million ($0.74 per unit) compared to $183 million ($0.70 per unit) in the same period of 2011. The primary reasons for this increase were: a $45 million increase in net operating income ("NOI"), which was due to acquisitions, along with same property growth of 1.5% in Canada and the completion of Greenfield developments. These increases to Operating FFO were partially offset by increased interest expense of $7 million, which included $2.3 million of costs associated with the early repayment of $90 million of secured debt (which carried an interest rate of 5.9%), increased preferred unit distributions of $4 million, higher general and administrative expenses of $3 million, and lower fee and other income of $2 million during the first six months of 2012.

Net Earnings

RioCan reported net earnings attributable to unitholders for the Second Quarter of $409 million ($1.41 per common unit) compared to $117 million ($0.44 per common unit) for the same period in 2011, an increase of $292 million ($0.97 on a per common unit basis). The increase is primarily the result of higher fair value gains on investment properties of $315 million in the Second Quarter compared to $25 million in the second quarter of 2011. In addition, during the quarter a $12 million impairment charge was taken on RioCan's investment in Cedar Realty Trust ("Cedar"). Excluding the impact of fair value gains on investment properties and the $12 million impairment on RioCan's Cedar shares during the quarter, net earnings for the three months ended June 30, 2012 was $109 million as compared to $93 million during the same period in 2011.

RioCan reported net earnings attributable to unitholders for the six months ended June 30, 2012 of $751 million ($2.62 per common unit) compared to $464 million ($1.76 per common unit) for the same period in 2011, an increase of $287 million ($0.86 on a per common unit basis). The increase is primarily the result of higher fair value gains on investment properties of $558 million in the first six months of 2012 compared to $314 million in the same period of 2011. Excluding the impact of fair value gains on investment properties and taxes, net earnings for the six months ended June 30, 2012 was $203 million as compared to $157 million ($184 million excluding one-time costs related to the early repayment of debt) during the same period in 2011.

Same Store and Same Property NOI

Same store and same property NOI during the Second Quarter in Canada increased by 1.5% and 1.6% respectively, compared to the same period in 2011, due largely to new leasing which favourably impacted NOI by $4.3 million, renewal and fixed rent steps which increased NOI by $1.5 million, leasing of space vacated due to bankruptcy or lease cancellations, which increased NOI by $1.5 million and favourable tenant expense recoveries increased NOI by $0.7 million. The increases to same store and same property NOI were partially offset by reduced NOI due to vacancy caused by normal course turnover of $3.9 million, unanticipated vacancies that reduced NOI by $1.7 million vacancies and NOI was reduced by $0.5 million from lease buyouts that have occurred in the last 12 months.

Same store and same property NOI during for the six months ended June 30, 2012 in Canada increased by 1.5%, compared to the same period in 2011, due largely to new leasing which favourably impacted NOI by $9.4 million, renewal and fixed rent steps which increased NOI by $2.9 million, leasing of space vacated due to bankruptcy or lease cancellations which increased NOI by $2.1 million. The increases to same store and same property NOI were partially offset by reduced NOI due to vacancy caused by normal course turnover of $7.8 million, unanticipated vacancies that reduced NOI by $2.4 million and NOI was reduced by $0.7 million from lease buyouts that have occurred in the last 12 months.

Sequentially, same store and same property NOI in Canada increased by 0.6% and 0.7% respectively for the Second Quarter compared to the first quarter of 2012 primarily due to an increase in revenue of $1.5 million due to new, renewal leasing and fixed rent steps which positively impacted NOI by $0.4 million, leasing of space vacated due to bankruptcy or lease cancellations, which increased NOI by $0.3 million and favourable tenant expense recoveries increased NOI by $0.8 million. The increases to same store and same property NOI were partially offset by reduced NOI due to vacancy caused by normal course turnover of $1.2 million, unanticipated vacancies that reduced NOI by $0.8 million vacancies and NOI was reduced by $0.2 million from lease buyouts that have occurred in the last 12 months.

Excluding the impact of foreign exchange, the US same store and same property NOI during the Second Quarter increased by 1.3% when compared to the same period in 2011. On the same basis, same property NOI for the six months ended June 30, 2012 increased by 0.6% when compared to the same period in 2011 due to new and renewal leasing and fixed rent steps. Same store and same property NOI decreased 1.0% for the Second Quarter compared to the first quarter of 2012 primarily due to the timing of property tax and operating cost recoveries.

Portfolio Stability

As at June 30, 2012:

  • RioCan's Canadian occupancy rate increased to 97.3%, up 60 bps from 96.7% at March 31, 2012 as a number of the spaces vacated by Premier Fitness in the first quarter were re-leased during the Second Quarter;

  • RioCan's US occupancy rate was 97.8% as compared to 97.5% at March 31, 2012;

  • RioCan's overall occupancy rate was 97.4% an improvement from 96.9% at March 31, 2012 due to the backfilling of space vacated during the first quarter, and relatively flat compared to 97.5% as at June 30, 2011;

  • The portfolio economic occupancy rate represents the occupied net leaseable area for which tenants are paying rent. The portfolio economic occupancy rate was approximately 95.5% compared to 96.3% at June 30, 2011. There is approximately 871,000 square feet for which lease payments are scheduled to start at future dates. The annualized rental revenue for this space is expected to be $18 million, with 97% of this revenue expected to begin paying rent during the next three quarters;
  • In the Second Quarter, RioCan's retention ratio was 89.9% of expiring leases, compared to a retention ratio of approximately 92.1% in the second quarter of 2011. For the six months ended June 30, 2012, RioCan's retention ratio was 90.6% of expiring leases, an improvement from the retention ratio of approximately 89.3% in the same period of 2011;
  • RioCan renewed 867,000 square feet in the Canadian portfolio during the Second Quarter at an average rent increase of $2.29 per square foot, representing an increase of 13.4%, compared to 13.9% for the same period in 2011. RioCan renewed 2.0 million square feet in the Canadian portfolio during the six months ended June 30, 2012 at an average rent increase of $1.81 per square foot, representing an increase of 11.6%, compared to 11.2% for the same period in 2011;

  • RioCan renewed approximately 122,000 square feet of space in the US portfolio during the Second Quarter, at an average rent increase of $0.58 per square foot, representing an increase of 4.8%. The retention ratio for expiring leases was 84.2%. RioCan renewed approximately 267,000 square feet of space in the US portfolio for the six months ended June 30, 2012, at an average rent increase of $0.91 per square foot, representing an increase of 6.3%;

  • During the Second Quarter, at RioCan's interest, new vacancies were 173,000 square feet, (158,000 square feet in the second quarter of 2011). During the quarter, 240,000 square feet of vacant space was been leased to new tenants;

  • For the six months ended, at RioCan's interest, new vacancies were 677,000 square feet (427,000 square feet in the first half of 2011). During the first six months, approximately 331,000 square feet of vacant space was leased to new tenants;
  • The remaining nine Zellers locations owned by RioCan that were not selected by Target currently operate as Zellers stores. Four of the nine remaining stores will be returned to RioCan when the leases expire by January 2013. The stores comprise 261,000 square feet of gross leaseable area (174,000 at RioCan's interest) and contribute $2.1 million of gross income ($1.6 million at RioCan's interest) at an average net rental rate of $3.26 psf.

The remaining five locations which have a weighted average remaining lease term of approximately six years, comprise approximately 466,000 square feet (at 100% and RioCan's interest), and contribute $4.5 million of gross rental revenue at an average net rental rate $6.41psf. As a means to control its real estate and to maximize the potential revenue from the premises, RioCan has negotiated a lease termination on these five remaining Zellers locations. These five premises will be returned to RioCan on April 1, 2013 along with a termination fee of $9.3 million.

In total, RioCan will be in possession of nine former Zellers stores by April 2013 comprising approximately 727,000 square feet (640,000 square feet at RioCan's interest). Zellers paid an average base rental rate of $5.28 per square foot premises contributing $6.6 million of annual gross revenue ($6 million at RioCan's interest). RioCan is currently speaking to replacement tenants for the majority of the stores and fully expects to have firm commitments on most of the space by the second quarter of 2013.

  • RioCan's Canadian portfolio is concentrated in Canada's six high growth markets (consisting of Calgary, Edmonton, Montreal, Ottawa, Toronto and Vancouver). Assets in these markets contribute about 66.7% of RioCan's Canadian annualized rental revenue (65.9% at Dec. 31, 2011);
  • National and anchor tenants represented about 85.8% of RioCan's total annualized rental revenue at June 30, 2012, compared to 86.7% at June 30, 2011; and
  • No individual tenant comprised more than 4.5% of annualized rental revenue. At June 30, 2012, Walmart was RioCan's largest tenant.

Portfolio Activity and Acquisition Pipeline

During the Second Quarter, RioCan completed its acquisition of an interest in four income producing properties (two in Canada and two in the US) at an aggregate purchase price of $87 million, at RioCan's interest, with a weighted capitalization rate of 6.7%.

At June 30, 2012, RioCan's fair value of Investment Properties was $11.3 billion based on a weighted average cap rate of 6.15%, a decrease of 38 bps from December 31, 2011 ($10.4 billion based on a weighted average cap rate of 6.53%).

Acquisitions Completed During the Second Quarter

Canada

  • RioCan purchased a 100% interest in Chahko Mika Mall, a 173,100 square foot shopping centre in Nelson, BC. The property is 96% occupied and is anchored by Walmart and Save-On-Foods. Other major tenants at the property include, Marks Work Wearhouse, Shoppers Drug Mart, The Source, and Service Canada. The average lease term for the property is 8.5 years. The property was built in 1979 and recently renovated in 2011. The purchase price was $31.0 million at a capitalization rate of 6.7% and was acquired free and clear of financing.
  • RioCan purchased a 50% interest in 2453-2457 Yonge Street & 4-6 Erskine Avenue. The property is an 11,700 square foot freestanding building located on the northeast corner of Yonge Street and Erskine Avenue and has a weighted average remaining lease term of 2.2 years. The site was purchased in connection with RioCan's planned development at the NE corner of Yonge & Eglinton. It is anchored by TD Canada Trust and has a mix of ground-floor retail tenants and office and residential tenants on the second and third floors. The purchase price was $5 million at 100% ($2.5 million at RioCan's interest), at a capitalization rate of 3.91%. The joint venture purchased the property free and clear of financing.

United States

  • RioCan purchased an 80% non-managing interest in Montgomery Plaza with Kimco Realty Corporation ("Kimco") for a purchase price of US$55.5 million at 100% (US$44.4 million at RioCan's interest) at a capitalization rate of 6.70%. Kimco retained a 20% interest and will manage the property on behalf of the joint venture. Montgomery Plaza is a 291,200 square foot new format retail centre located in Forth Worth, Texas. Montgomery Plaza is located near the downtown core. The property, which is currently 89% occupied, was built in 2005 and has a weighted average remaining lease term of 6.0 years. The property is shadow anchored by a Super Target and anchored by an Office Depot, Ross Dress for Less, Marshalls, PetSmart and Michaels (scheduled to open in Fall 2012). Other notable tenants include Dollar Tree and Pier 1 Imports. In connection with the purchase the joint venture has procured conventional third party financing on the property of US$30.9 million at 100% (US$24.7 million at RioCan's interest) for a ten-year term with an interest rate of 3.90%.

  • RioCan purchased a 90% non-managing interest in Ingram Hills Shopping Center as part of the RC Sterling Joint Venture for a purchase price of US$8 million at 100% (US$7 million at RioCan's interest) at a capitalization rate of 8.0%. Sterling Corporation, who owned a 100% managing interest in the property, has retained a 10% interest and will manage the property on behalf of the joint venture. Ingram Hills is an 80,300 square foot infill grocery anchored neighborhood retail center located in northwest San Antonio, Texas. Ingram Hills is located approximately nine miles northwest of downtown San Antonio at the intersection of Ingram Road and Callaghan Road in San Antonio, Bexar County, Texas. The property is 100% leased. The property was built in 1978 and renovated in 2003 and has a weighted average lease term of 5.1 years. The property is anchored by a La Fiesta a locally-owned, privately-held, Texas-based company with 8 grocery stores throughout San Antonio. Other notable tenants include Dollar General, Little Caesars, Chase Bank, Subway and T-Mobile. As part of the acquisition, the joint venture has assumed the existing mortgage in the amount of US$4 million (US$3.7 million at 90% interest) with an interest rate of 6.1% and maturity date of August 1, 2017. The loan is interest-only until August 2012, after which it converts to a standard amortizing loan.

Acquisitions Under Contract (Firm)

Canada

In Canada, RioCan has waived conditions pursuant to a purchase and sale agreement with respect to two properties that, if completed, represent $331 million of additional acquisitions at RioCan's interest with a weighted average capitalization rate of 5.5%.

  • RioCan expects to purchase a 100% interest in Georgian Mall in Barrie, Ontario. The purchase price of the property is $318 million, which equates to a capitalization rate of 5.5% for the income producing components. Georgian Mall is located near Highway 400 along Bayfield Street, a major commercial corridor through Barrie, and is the largest shopping centre in the Barrie-Huronia area. Barrie is located along the shores of Lake Simcoe, approximately 90 kms north of Toronto. It is one of Canada's fastest growing metropolitan areas with a population of 381,000 (for the Barrie region) and is projected to grow to nearly 463,000 by 2021. The property has a weighted average lease term of 4.5 years, is 97% leased, and contains more than 604,600 square feet of retail space. The mall has more than 150 stores and is anchored by The Bay and shadow anchored by Sears department stores. Major fashion tenants include H&M, American Eagle, Michael Hill, Mexx, The Garage Clothing Co., Melanie Lyne and Town Shoes. Other national tenants include, Disney Store SportChek, HomeSense and Shoppers Drug Mart. The average rent for the non-anchor space is $52.19 per square foot and over 91% of the gross rental revenue is generated by national tenants. The site encompasses 61.9 acres (including 6.57 acres of excess lands), and has parking for 3,105 vehicles. In connection with the acquisition, RioCan has arranged six-year first mortgage financing in the amount of $185 million which carries an interest rate of 3.09%.
  • RioCan expects to purchase a 100% interest in 649 Queen Street West, a 14,200 square foot single-tenant property occupied by CB2, the urban version of Crate & Barrel (there is an additional 6,450 square feet of basement space). Built in 1870's and completely renovated in 2011, the property is positioned at the intersection of Queen St. and Bathurst St. with frontage along Queen St. in the downtown core of Toronto, Ontario and has a weighted average lease term of 14.7 years. The purchase price for the property is $13.5 million at a capitalization rate of 4.89% and will be acquired free and clear of financing.

United States

In the US, RioCan has waived conditions pursuant to purchase and sale agreements with respect to three US properties that, if completed, represent US$97 million of additional acquisitions at RioCan's interest with a weighted average capitalization rate of 6.8%:

  • RioCan expects to purchase a 100% interest in Deptford Landing for a purchase price of US$52.0 million at a capitalization rate of 6.34%. Cedar Realty Trust will manage the property. Deptford Landing is a 517,100 square foot new format retail centre located in Deptford Township, New Jersey. Deptford Landing is located approximately eight miles southeast of downtown Philadelphia at the intersection of Highway 42 and Clements Bridge Road in Deptford Township, New Jersey. The property was built in 2008 and has a weighted average remaining lease term of 9.9 years. The property is anchored by Walmart and Sam's Club. Other notable tenants include Michaels, PetSmart and DSW Shoe Warehouse. As part of the acquisition, RioCan will assume the existing mortgage in the amount of US$33.6 million with an interest rate of 6.10% and maturity date of January 1, 2021.
  • RioCan expects to purchase an 85% non-managing interest in Arbor Park with Dunhill Partners, Inc. ("Dunhill") for a purchase price of US$26.1 million at 100% (US$22.2 million at RioCan's interest) which equates to a capitalization rate of 6.70%. Dunhill, who currently owns a 100% managing interest in the property, will retain a 15% interest and will manage the property on behalf of the joint venture. Arbor Park is a 139,700 square foot new format retail centre located in San Antonio, Texas. Arbor Park is located near the downtown core. The property, which is currently 98% occupied, was built in 1998 and has a weighted average remaining lease term of 4.7 years. The property is anchored by Sprouts Grocery Store, Ross Dress for Less, Office Max and Michaels. Other notable tenants include Dress Barn, GameStop and Payless Shoesource. As part of the acquisition, the joint venture will assume the existing mortgage in the amount of US$16.6 million (US$14.1 million at RioCan's interest) with an interest rate of 4.65% and maturity date of July 6, 2016.
  • RioCan expects to purchase an 85% non-managing interest in Las Colinas Village with Dunhill for a purchase price of US$26.6 million at 100% (US$22.6 million at RioCan's interest) which equates to a capitalization rate of 7.83%. Dunhill, who currently owns a 100% managing interest in the property, will retain a 15% interest and will manage the property on behalf of the joint venture. Las Colinas Village is a 104,700 square foot retail centre located in Irving, Texas. The property, which is currently 98% occupied, was built in 2001 and has a weighted average remaining lease term of 4.9 years. The property is anchored by Staples. Other notable tenants include State Farm Insurance and Starbucks. As part of the acquisition, the joint venture will assume the existing mortgage in the amount of US$17.2 million (US$14.6 million at RioCan's interest) with an interest rate of 6.23% and maturity date of February 11, 2021.

Acquisitions Under Contract (Conditional)

RioCan also currently has $49 million of income properties under contract in Canada where conditions have not yet been waived. These transactions are in various stages of due diligence and while efforts will be made to complete these transactions, no assurance can be given.

Acquisition Pipeline

RioCan is currently in negotiations regarding property acquisitions in Canada and the US that, if completed, represent approximately $87 million of additional acquisitions (calculated taking into account the US dollar transactions at an exchange rate of par). These transactions are in various stages of negotiations and while efforts will be made to complete these negotiations, no assurance can be given.

Joint Venture Activities

On April 11, 2012, RioCan and Tanger in conjunction with Orlando Corporation entered into an agreement to create a strategic alliance to develop designer outlet opportunities on lands within the Heartland Town Centre. It is the intention of the parties to add a newly designed ground up factory outlet centre of approximately 312,000 square feet to the highly productive two million square feet of retail space currently at Heartland Town Centre.

On July 16, 2012, RioCan and Allied Properties Real Estate Investment Trust ("Allied") (TSX:AP.UN) announced that they have entered into a non-exclusive agreement to create a joint venture to acquire sites in the urban areas of major Canadian cities that are suitable for mixed use intensification. The joint venture will also seek to identify properties currently within the Allied and/or RioCan portfolio that are suitable for redevelopment or intensification on a stand-alone basis or those where an assembly of adjacent lands is possible.

The joint venture will be structured on a 50/50 basis between RioCan and Allied. RioCan and Allied will act as joint development and construction managers. Upon completion of any projects RioCan will act as property manager for any retail portion of the property and Allied will act as property manager for any office portion.

Liquidity and Capital

The 12 month rolling EBITDA interest coverage for RioCan at June 30, 2012 was 2.54x (excluding prepayment costs of $2.3 million related to the early repayment of secured debt) compared to 2.45x at December 31, 2011. As at June 30, 2012, RioCan's indebtedness net of cash was 43.3% of total assets a decrease of 310 bps from year end (46.4%). RioCan's Net Debt to Adjusted EBITDA at June 30, 2012 was 7.36x up slightly from 7.30x at December 31, 2011. RioCan's Net Operating Debt to Adjusted Operating EBITDA, which excludes debt related to properties under development was 7.08x at June 30, 2012 compared to 7.04x at December 2011. As part of RioCan's capital management strategy, it is RioCan's objective to strengthen its balance sheet as well as improve its coverage ratios over time.

RioCan has the continued flexibility to generate additional funds in 2012 through financing maturing loan balances as well as repay additional balloon balances to increase the size of RioCan's pool of unencumbered assets, which was approximately 11% of RioCan's total properties on an NLA basis at June 30, 2012. As at June 30, 2012, RioCan had 75 properties (including 11 unencumbered properties under development) that are unencumbered with a fair value of approximately $961 million.

Mortgage Financing

Canada

In the Second Quarter, RioCan obtained approximately $34 million of fixed-rate mortgage financing at a weighted average interest rate of 3.5% with a weighted average term to maturity of about 4.8 years.

US

In the Second Quarter, RioCan obtained approximately $42 million of fixed-rate mortgage financing at an average interest rate of 3.9% with a weighted average term to maturity of about 5.9 years.

Unsecured Debentures

As at June 30, 2012, RioCan had seven series of Debentures outstanding totalling $1.0 billion (December 31, 2011 - six series totalling $822 million). On June 28, 2012 RioCan completed the offering of $150 million Series Q seven-year senior unsecured debentures that have a coupon rate of 3.85%, this series was subsequently increased to $175 million after June 30, 2012, the additional $25 million was issued at an effective interest rate of 3.609%.

Lines of Credit

RioCan has four revolving lines of credit in place with three Canadian chartered banks, having an aggregate capacity of $429 million against which approximately $116 million has been drawn and $26 million has been drawn as letters of credit leaving $287 million available for cash draws under the lines of credit.

Term facilities

Subsequent to the quarter end, RioCan received commitments for a US$150 million senior secured term facility arranged by Raymond James Bank N.A... The term facility is in the process of being syndicated to US Bank, N.A. and Bank of America, N.A. The facility is for a term of five years and will carry a floating interest rate of LIBOR plus 150bps. The facility is secured by a portfolio of Canadian assets.

Development Portfolio

As at June 30, 2012, RioCan had ownership interests in 10 greenfield development projects that will, upon completion, comprise about 8.9 million square feet (4.6 million square feet at RioCan's interest). In addition to its development projects, RioCan continues its urban intensification activities, primarily in the Toronto, Ontario market.

During the quarter ended June 30, 2012, RioCan completed the acquisition of an interest in a property to be fully redeveloped as part of the multi-parcel land assembly at the northeast corner of Yonge Street and Eglinton Avenue in Toronto, ON, at a purchase price of $4 million at RioCan's interest.

Subsequent to quarter end, RioCan completed the acquisition of an interest in the first property to be redeveloped with Allied as part of the multi-parcel land assembly at the intersection of King Street West and Portland Street in Toronto, ON, at a purchase price of $11 million at RioCan's interest.

RioCan has waived conditions pursuant to the purchase and sale agreement with respect to two development sites that, if completed, represent acquisitions of $18 million, at RioCan's interest. Additionally, RioCan has $116 million of development property acquisitions (at RioCan's interest) under contract where conditions have not yet been waived. These transactions are in various stages of due diligence and while efforts will be made to complete these transactions, no assurance can be given.

RioCan's Unaudited Interim Consolidated Financial Statements, Management's Discussion and Analysis and a Supplemental Information Package for the three and six months ended June 30, 2012 are available on RioCan's website at www.riocan.com.

Conference Call and Webcast

Interested parties are invited to participate in a conference call with management on Friday, August 10, 2012 at 10:00 a.m. eastern time. You will be required to identify yourself and the organization on whose behalf you are participating.

In order to participate, please dial 416-340-2218 or 1-866-226-1793. If you cannot participate in the live mode, a replay will be available until September 8, 2012. To access the replay, please dial 905-694-9451 or 1-800-408-3053 and enter passcode 4033292#.

Scheduled speakers include Edward Sonshine, O.Ont. Q.C., Chief Executive Officer, Fred Waks, President and Chief Operating Officer and Rags Davloor, Executive Vice President and Chief Financial Officer. Management's presentation will be followed by a question and answer period. To ask a question, press "star 1" on a touch-tone phone. The conference call operator will be notified of all requests in the order in which they are made, and will introduce each questioner.

Alternatively, to access the simultaneous webcast, go to the following link on RioCan's website http://investor.riocan.com/Investor-Relations/Events-Webcasts/default.aspx and click on the link for the webcast. The webcast will be archived 24 hours after the end of the conference call and can be accessed for 120 days.

About RioCan

RioCan is Canada's largest real estate investment trust with a total capitalization of approximately $13.6 billion as at June 30, 2012. It owns and manages Canada's largest portfolio of shopping centres with ownership interests in a portfolio of 336 retail properties containing an aggregate of 79.4 million square feet, including 48 grocery anchored and new format retail centres containing 12.3 million square feet in the United States through various joint venture arrangements as at June 30, 2012. RioCan's portfolio also includes 10 properties under development in Canada. For further information, please refer to RioCan's website at www.riocan.com.

Forward-Looking Information

This news release contains forward-looking statements within the meaning of applicable securities laws. These statements include, but are not limited to, statements made in this News Release (including the sections entitled "Highlights for the second quarter of 2012", "Financial Highlights", "Portfolio Stability", "Portfolio Activity and Acquisition Pipeline", "Liquidity and Capital", and "Development Portfolio"), and other statements concerning RioCan's objectives, its 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. Forward-looking statements generally can be identified by the use of forward-looking terminology such as "outlook", "objective", "may", "will", "would", "expect", "intend", "estimate", "anticipate", "believe", "should", "plan", "continue", or similar expressions suggesting future outcomes or events. Such forward-looking statements reflect management's current beliefs and are based on information currently available to management. All forward-looking statements in this News Release are qualified by these cautionary statements.

These forward-looking statements are not guarantees of future events or performance and, by their nature, are based on RioCan's current estimates and assumptions, which are subject to risks and uncertainties, including those described under "Risks and Uncertainties" in RioCan's Management's Discussion and Analysis for the period ended June 30, 2012, which could cause actual events or results to differ materially from the forward-looking statements contained in this News Release. Those risks and uncertainties include, but are not limited to, those related to: liquidity in the global marketplace associated with economic conditions, tenant concentrations, occupancy levels, access to debt and equity capital, interest rates, joint ventures/partnerships, the relative illiquidity of real property, unexpected costs or liabilities related to acquisitions, construction, environmental matters, legal matters, reliance on key personnel, unitholder liability, income taxes, the investment in the United States of America ("US"), fluctuations in the currency exchange rate between the Canadian and US dollar and RioCan's qualification as a real estate investment trust for tax purposes. Material factors or assumptions that were applied in drawing a conclusion or making an estimate set out in the forward-looking information may include, but are not limited to: a stable retail environment; relatively low and stable interest costs; a continuing trend toward land use intensification in high growth markets; access to equity and debt capital markets to fund, at acceptable costs, the future growth program to enable the Trust to refinance debts as they mature; the availability of purchase opportunities for growth in Canada and the US; and the impact of accounting principles adopted by the Trust effective January 1, 2011 under International Financial Reporting Standards ("IFRS"). Although the forward-looking information contained in this News Release is based upon what management believes are reasonable assumptions, there can be no assurance that actual results will be consistent with these forward-looking statements. Certain statements included in this News Release may be considered "financial outlook" for purposes of applicable securities laws, and such financial outlook may not be appropriate for purposes other than this News Release.

The Income Tax Act (Canada) contains provisions which potentially impose tax on publicly traded trusts (the "SIFT Provisions"). However, the SIFT Provisions do not impose tax on a publicly traded trust which qualifies as a real estate investment trust ("REIT"). RioCan currently qualifies as a REIT and intends to continue to qualify for future years. Should this not occur, certain statements contained in this News Release may need to be modified.

Except as required by applicable law, RioCan under takes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.

Contact Information

  • RioCan Real Estate Investment Trust
    Rags Davloor
    Executive Vice President & CFO
    (416) 642-3554
    www.riocan.com