RioCan Real Estate Investment Trust
TSX : REI.UN

RioCan Real Estate Investment Trust

May 02, 2008 11:03 ET

RioCan Real Estate Investment Trust Announces First Quarter Results

TORONTO, ONTARIO--(Marketwire - May 2, 2008) - RioCan Real Estate Investment Trust ("RioCan")(TSX:REI.UN) -

HIGHLIGHTS:

- Rental revenue increased 5% for the quarter

- In February, RioCan announced the closing of the final phase of Quartier DIX30

- In April, RioCan entered into two agreements to lease with Lowe's Companies Canada, ULC ("Lowe's") to open two new home improvement stores in Ontario

- In April, RioCan completed the issuance of 7,130,000 trust units for gross proceeds of $150,086,500

RioCan Real Estate Investment Trust ("RioCan") today announced its financial results for the three months ended March 31, 2008.

Financial Highlights

RioCan reported net earnings for the quarter ended March 31, 2008 of $30,284,000 ($0.14 earnings per unit basic and diluted) as compared to net earnings of $37,400,000 ($0.18 per unit basic and diluted) for the three months ended March 31, 2007. The $7,116,000 (4 cents per unit) decrease is primarily comprised of an increase in general and administrative expense of $3,166,000 of one time costs and non-cash expenses incurred by reason of RioCan's move to RioCan Yonge Eglinton Centre and the departure of RioCan's previous Chief Financial Officer in this quarter. Additionally, RioCan had an increase in income property amortization of $3,444,000.

For the quarter ended March 31, 2008, rental revenue was $173,122,000 as compared to $164,956,000 for the three months ended March 31, 2007.

Funds from operations ("FFO") for the quarter ended March 31, 2008 was $67,666,000 ($0.32 per unit) as compared to $71,338,000 ($0.35 per unit) for the three months ended March 31, 2007. The $3,672,000 (3 cents per unit) decrease in FFO is the same as for net earnings, excluding the impact of changes in amortization expense.

"We are satisfied with our results for the first quarter and remain confident that our full year results will be in line with our expectations," said Edward Sonshine, Q.C., President and Chief Executive Officer of RioCan. "We continue to believe that the fundamentals in the Canadian retail environment continue to remain solid as we have experienced strong leasing activity, with our occupancy at quarter end being healthy at 96.6%".

RioCan's Unaudited Interim Consolidated Financial Statements, Management's Discussion and Analysis and a Supplemental Information Package as at and for the three months ended March 31, 2008 are available on RioCan's website at www.riocan.com.

FFO is a widely accepted supplemental measure of a Canadian real estate investment trust's performance and should not be construed as an alternative to net earnings or cash flow from operating activities determined in accordance with Canadian generally accepted accounting principles. RioCan's method of calculating FFO may differ from certain other issuers' methods and accordingly may not be comparable to measures reported by other issuers.

Portfolio Stability

As at March 31, 2008:

- Portfolio occupancy was 96.6%;

- 66.8% of rental revenue was derived from properties located in Canada's six high growth markets (including and surrounding Calgary, Edmonton, Montreal, Ottawa, Toronto and Vancouver);

- 82.4% of annualized rental revenue was derived from, and 82.9% of space was leased to, national and anchor tenants;

- Approximately 48.6% of annualized rental revenue was derived from its 25 largest tenants; and

- No individual tenant comprised more than 5.6% of annualized rental revenue.

Development Activity

RioCan's development program continues to move forward at a steady pace. At the end of the first quarter, approximately 7.9 million square feet was under development, of which RioCan's ownership interest will be approximately 3.5 million square feet. In addition to the 7.9 million square feet of current developments, an additional 4.9 million square feet is in the development pipeline.

- Richmond Hill, Ontario - One development nearing completion is RioCan Elgin Mills Crossing. Approximately 28,600 square feet was completed in the first quarter of 2008. This site is currently being developed into a 445,000 square foot new format retail centre as a joint venture with Trinity Development Group Inc. and Tamuz Investments. RioCan's ownership interest is 50%. The site is anchored by Costco (land lease), who commenced operations in the fourth quarter of 2007 and by Home Depot, who owns its own store and operates as part of the overall site. The centre has a strong mix of national tenants that include PetSmart, Staples/Business Depot, Michaels, Mark's Work Wearhouse, Scotiabank and TD Canada Trust. The centre is expected to be substantially complete in the second quarter of 2008.

- Brossard, Quebec - On February 25, 2008 RioCan announced the closing of the last originally contemplated phase of Quartier DIX30, Canada's first lifestyle centre, located in Brossard, Quebec, at the intersection of Highways 10 and 30. RioCan originally entered into a firm agreement with Devimco Inc. to become equal partners in the development of this property in January 2005 when the project was a greenfield site.

Upon full completion, Quartier DIX30 will comprise over 1.9 million square feet of retail space and boast over 155 stores and services. It is home to an outstanding line-up of anchors such as Wal-Mart and RONA (both retailer owned), Canadian Tire, Cineplex Odeon, Winners, HomeSense, Staples/Business Depot, Indigo, SkySpa, Gold's Gym, JYSK, Pier I Imports, Future Shop as well as Hotel Alt, an avant garde boutique hotel designed by the Germain Group, Theatre L'Etoile, a 900-seat live theatre and concert hall, plus Canada's top fashion retailers and restaurants.

- Lowe's Agreements - On April 4, 2008, RioCan announced that it has entered into two agreements to lease with Lowe's to open two new home improvement stores in Ontario. The first agreement to lease is for a Lowe's store that will form part of RioCan's greenfield shopping centre development site situated at Taunton Road and Garrard Road in Whitby, Ontario. Upon completion, the development will feature Lowe's, a Canadian chartered bank and two additional commercial retail buildings. Site work has already commenced, with an anticipated opening date of the Lowe's store in early 2009.

The second agreement to lease is for a Lowe's store that will form part of RioCan's existing property, RioCan Warden Centre, located at Warden Avenue and Eglinton Avenue in Toronto, Ontario. RioCan Warden Centre is a 250,000 square foot new format retail centre featuring a number of national retailers. In order to accommodate Lowe's, the former Wal-Mart premises will be demolished and a new Lowe's store will be constructed in its place. Demolition of the former Wal-Mart premises recently commenced, with an anticipated opening date of the Lowe's store in 2009.

Financing Transactions

On January 8, 2008, RioCan announced the repayment of its January 4, 2008 3.85% $110 million Series E debentures payable. A new $110 million secured revolving bank facility was arranged by RioCan to repay the debentures. RioCan has $880 million of debentures outstanding, of which, the next debenture matures on September 21, 2009. Its current outstanding debentures payable bear interest at a weighted average rate of 5.22% per annum.

Excluding the debenture maturity discussed above, RioCan has approximately $220 million of debt maturities for the current year. To date, RioCan has refinanced or entered into commitments for new financing aggregating $196 million.

On April 16, 2008, RioCan successfully completed its issuance of 6,200,000 trust units for $21.05 per unit for gross proceeds of $130,510,000. In addition, the underwriters purchased an additional 930,000 units pursuant to their over-allotment option. The gross proceeds of the over-allotment exercise were $19,576,500. The underwriting syndicate for the offering was co-led by RBC Capital Markets and BMO Capital Markets.

At March 31, 2008, RioCan's leverage ratio was 56.2% of historical cost. As a result of the equity issue on a pro-forma basis the leverage ratio is 54.1%, leaving approximately $844 million of room for additional debt capital, prior to reaching its 60% limit.

As a result of the activities mentioned above, RioCan continues to be in a strong financial position, prepared to take advantage of any opportunity that may arise.

Conference Call and Webcast

Interested parties are invited to participate in a conference call with management on Monday, May 5, 2008 at 9:00 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 416-641-6120 or 1-866-303-7746. If you cannot participate in the live mode, a replay will be available until May 19, 2008. To access the replay, please dial 416-695-5800 or 1-800-408-3053 and enter passcode 3257836#.

Scheduled speakers are Edward Sonshine, Q.C., President and Chief Executive Officer, Fred Waks, Executive Vice President and Chief Operating Officer, and Rags Davloor, Senior 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 https://riocan.com/_bin/presentations/webcast.cfm 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 $7.9 billion. It owns and manages Canada's largest portfolio of shopping centres with ownership interests in a portfolio of 214 retail properties, including 12 under development, containing an aggregate of almost 55 million square feet. 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 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. Forward-looking statements generally can be identified by the use of forward-looking terminology such as "outlook", "objective", "may", "will", "expect", "intend", "estimate", "anticipate", "believe", "should", "plans" or "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.

These statements are not guarantees of future performance and are based on our estimates and assumptions that are subject to risks and uncertainties, including those described under Risks and Uncertainties in the MD&A available on www.sedar.com, which could cause our actual results to differ materially from the forward-looking statements contained herein. Those risks and uncertainties include risks associated with real property ownership, financing and interest rates, environmental matters, construction, unitholder liability, and income taxes. Material factors or assumptions that were applied in drawing a conclusion or making an estimate set out in the forward-looking information include: an increasing divergence in the general economy between eastern and western Canada; a less robust retail environment than we have seen for the last few years; interest costs to us remain relatively stable; acquisition capitalization rates increase and land costs for greenfield development decrease; a continuing and accelerating trend towards land use intensification in high growth markets; and equity and debt capital markets will continue to provide access to capital to fund at acceptable costs our future growth program and refinance our debts as they mature. Although the forward-looking information contained herein 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. All forward-looking statements in this MD&A are qualified by these cautionary statements. 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.

Contact Information

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