RioCan Real Estate Investment Trust
TSX : REI.UN

RioCan Real Estate Investment Trust

April 29, 2009 14:30 ET

RioCan Real Estate Investment Trust Announces Results for First Quarter Ended March 31, 2009

TORONTO, ONTARIO--(Marketwire - April 29, 2009) -

HIGHLIGHTS FOR Q1 2009:

- Portfolio occupancy increased to 97.5% from 96.9% at December 31, 2008

- Approximately 746,000 square feet or 91.7% of all lease maturities renewed in the first quarter of 2009 at an average net rent increase of approximately $0.58 per square foot (including anchor tenants) and approximately $1.37 per square foot (excluding anchor tenants)

- Completed the acquisition of six grocery-anchored properties in the greater Montreal area. In connection with the purchase, RioCan jointly acquired four of the properties with a private investor on a 50-50 basis. As a result, RioCan's net purchase price was $47.5 million

- Arranged secured financing of approximately $116 million, of which RioCan's share was $109 million

- Subsequent to quarter-end, the following financings were completed:

-- On April 3, 2009, issued $180 million face value Series L senior unsecured debentures at a coupon rate of 8.33%

-- In April 2009, secured an additional $49 million of financing

RioCan Real Estate Investment Trust ("RioCan") (TSX:REI.UN) today announced its financial results for the first quarter ended March 31, 2009.

Financial Highlights

RioCan reported net earnings for the three months ended March 31, 2009 of $30.7 million ($0.14 per Unit) compared to $30.3 million ($0.14 per unit) for the same period in 2008.

Funds from operations ("FFO") for the quarter ended March 31, 2009 is $70.6 million ($0.32 per unit) compared to $68.3 million ($0.32 per unit) for the same period in 2008. The $2.3 million increase in FFO is primarily comprised of an increase in net operating income from rental properties of $4.3 million, an increase in fees and other income of $606,000, and a decrease of $1.8 million in general and administrative expenses offset, in part, by lower gains on properties held for resale of $1.7 million, and an increase in interest expense of $2.3 million. The higher general and administrative expenses in 2008 arose from RioCan's head office relocation to Yonge Eglinton Centre. The increase in net operating income from rental properties of $4.3 million over the same period of 2008 was primarily due to acquisitions and completion of greenfield developments.

"RioCan's portfolio has held up very well during what is traditionally the most difficult quarter of the year," said Edward Sonshine, Q.C., President & Chief Executive Officer of RioCan. "While we did see some deterioration, primarily from non-national tenants, the results of our strategic initiatives over the course of the last seven years to focus our portfolio on the high growth markets of Canada with a preponderance of national tenancies are bearing fruit. We have also been able to enhance our liquidity position during the quarter with refinancing and new secured financings of unencumbered properties, capped off with the $180 million unsecured debenture issue closed just after quarter end. All of this financing activity positions RioCan as one of the few entities able to take advantage of such acquisition opportunities as may arise, such as our acquisition of the supermarket anchored portfolio completed during the first quarter."

Liquidity and Capital

In selecting appropriate funding choices, RioCan's objective is to manage its capital structure in such a way so as to diversify its funding sources while minimizing its funding costs and risks. For the remainder of 2009, RioCan expects to be able to satisfy all of its financing requirements through the use of cash on hand, cash generated by operations, refinancing of maturing debt, financing of certain assets currently unencumbered by debt and available credit facilities.

As at March 31, 2009, RioCan's indebtedness was 55.7% of Aggregate Assets, such that it could incur additional indebtedness of approximately $643 million and still not exceed the 60% leverage limit. Subsequent to March 31, 2009, RioCan completed net new funding for debentures and fixed term debt of $141.4 million. Based on these transactions, RioCan's indebtedness would be 56.8% of aggregate assets, such that it could incur additional indebtedness of $502 million. As a matter of policy, RioCan would not likely incur indebtedness significantly beyond 58% of Aggregate Assets, which would permit it to incur additional indebtedness of approximately $184 million.

The increase in the Debt to Aggregate Assets ratio for the quarter ended March 31, 2009 relative to December 31, 2008 was as a result of net increase in mortgages due to new financings during the quarter.

Debentures

On April 3, 2009, RioCan completed the $180 million principal amount of Series L senior unsecured debentures issue announced on March 30, 2009. Maturing on April 3, 2014, these debentures carry a coupon rate of 8.33%. The debentures were sold on an underwritten basis by a syndicate led by RBC Capital Markets.

On April 3, 2009, RioCan repurchased $4.6 million of the $110 million Series D debentures, which mature September 21, 2009, and $50.4 million of the $100 million Series J debentures, which mature March 24, 2010, for a total of $55 million. As a result, $79.7 million of the Series D debentures and $44.6 million of the Series J debentures remain outstanding.

After repayment of the Series D and J debentures, the debenture issue resulted in net proceeds of approximately $125 million which is available for general Trust purposes, including opportunistic acquisitions.

Lines of Credit

As at March 31, 2009, RioCan had three revolving lines of credit in place with two Canadian chartered banks, having an aggregate capacity of $293.5 million (December 31, 2008 - two revolving lines of credit totalling $203.5 million with one Canadian chartered bank).

RioCan's Unaudited Interim Consolidated Financial Statements, Management's Discussion and Analysis and a Supplemental Information Package as at and for the first quarter ended March 31, 2009 and the Audited Consolidated Financial Statements, Management's Discussion and Analysis and Supplemental Information Package for the year ended December 31, 2008 are available on RioCan's website at www.riocan.com.

Portfolio Stability

As at March 31, 2009:

- The portfolio occupancy rate at March 31, 2009 was 97.5% compared to 96.9% at December 31, 2008 and 96.6% at March 31, 2008. The overall increase in RioCan's occupancy rate is primarily due to the acquisition of approximately 355,000 square feet, with an occupancy rate of approximately 99%, and the reclass of 310,000 square feet relating to Renfrew Mall, in Renfrew, Ontario and Chaleur Centre, in Bathurst, New Brunswick, to properties under development. Excluding the impact of these assets which are slated for demolition, occupancy was 96.6%;

- Approximately 746,000 square feet were renewed during the first quarter of 2009 at an average rent increase of approximately $0.58 per square foot (including anchor tenants) and approximately $1.37 per square foot (excluding anchor tenants), compared to approximately 1.0 million square feet at an average rent increase of approximately $1.09 per square foot (including anchor tenants) and approximately $2.67 per square foot (excluding anchor tenants) in the first quarter of 2008;

- Same property net operating income (NOI) decreased by 0.1% on a year over year basis. The net vacancies of 125,000 square feet in the first quarter of 2009 impacted same property NOI negatively by approximately $1.2 million. Additionally, tenant bankruptcies resulted in RioCan recording approximately $1.6 million in higher provisions for bad debts as compared to the same period in 2008. This was offset by $2.1 million in increased rents from new and renewal leasing, fixed rent steps, and land use intensification;

- For the three months ended March 31, 2009, RioCan retained approximately 91.7% of the expiring leases compared to the first quarter of 2008, which had a renewal retention rate of 77%;

- Properties located in Canada's six high growth markets (including and surrounding Calgary, Edmonton, Montreal, Ottawa, Toronto and Vancouver) accounted for 66.1% of rental revenue;

- National and anchors tenants represent 84.4% of annualized rental revenue at March 31, 2009, compared to 83.4% at December 31, 2008;

- Approximately 61.8% of annualized rental revenue was derived from its 50 largest tenants; and

- No individual tenant comprised more than 5.3% of annualized rental revenue.

Portfolio Activity

During the first quarter of 2009, RioCan completed total acquisitions of $55.9 million comprised of approximately 355,000 additional square feet, compared to total acquisitions of $14 million comprised of approximately 73,000 square feet during the first quarter of 2008.

RioCan completed the acquisition of the portfolio of six grocery-anchored properties located in the greater Montreal area totalling approximately 454,000 square feet, as previously announced on January 22, 2009. The purchase price for the portfolio was $67.5 million. The portfolio features six grocery-anchored shopping centres with a total occupancy of 99%. The average age of the portfolio is 14 years, with an average remaining term on the grocery leases of 7.9 years. Approximately 82.8% of the portfolio is comprised of national and regional tenants, such as IGA (Sobeys), National Bank, Desjardins, Uniprix, TD Bank, Jean Coutu and Tim Hortons. Approximately 74% of the income from the portfolio is from a combination of grocery, pharmacy and bank tenancies.

In connection with the purchase, RioCan jointly acquired four of the properties with a private investor on a 50-50 basis. As a result, RioCan's interest in the properties is 333,000 square feet and its net purchase price is $47.5 million. Concurrent with the closing, RioCan arranged financing on two of the properties that were jointly acquired, totalling approximately $13.8 million at an average interest rate of 6.91% for ten-year terms. RioCan expects to finalize financing commitments for the remaining four properties shortly.

Development Activity

During the three months ended March 31, 2009, RioCan completed 487,000 square feet (three months ended March 31, 2008 - 180,000 square feet) of redevelopment and development activities of which approximately 64,000 square feet pertains to additional net leasable area added at existing properties compared to 27,000 during the same period in 2008, and 423,000 square feet pertains to the completion of greenfield development projects compared to 153,000 during the same period in 2008.

As at March 31, 2009, RioCan had ownership interests in 13 greenfield development projects that will, upon completion, comprise approximately 9.4 million square feet, of which RioCan's ownership interest will be approximately 3.2 million square feet.

Other Activities

Normal Course Issuer Bid ("NCIB")

In February 2009, RioCan repurchased 289,500 units for $3.4 million at an average cost per Unit of $11.83, under its NCIB approved by the TSX on November 4, 2008. The NCIB permits RioCan to purchase a total of 11 million Units, leaving RioCan with the ability to repurchase an additional 10.7 million Units as of the end of the first quarter. The current NCIB expires on November 6, 2009. Purchases will be funded from available cash. RioCan believes that, from time to time, the market prices of the units may not reflect their underlying value and that the purchase of Units may represent an appropriate and desirable use of funds.

Conference Call and Webcast

Interested parties are invited to participate in a conference call with management on Thursday, April 30, 2009 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 14, 2009. To access the replay, please dial 416-695-5800 or 1-800-408-3053 and enter passcode 7464838#.

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 $6.2 billion, as at March 31, 2009. It owns and manages Canada's largest portfolio of shopping centres with ownership interests in a portfolio of 247 retail properties, including 13 under development, containing an aggregate of over 59 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", "plan" 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 events or performance and, by their nature, are based on RioCan's estimates and assumptions, which 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 actual events or results to differ materially from the forward-looking statements contained in the MD&A. Those risks and uncertainties include, but are not limited to, those related to: liquidity in the global marketplace associated with current 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, 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 may include: a less robust retail environment than has been seen for the last several years; relatively stable interest costs; an increase in acquisition capitalization rates; a decrease in land costs for greenfield development; a continuing and accelerating trend towards land use intensification in high growth markets; and more limited but available access to equity and debt capital markets to fund, at acceptable costs, the future growth program and to enable RioCan to refinance debts as they mature. Although the forward-looking information contained in the MD&A 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 the MD&A may be considered "financial outlook" for purposes of applicable securities laws, and such financial outlook may not be appropriate for purposes other than the MD&A. 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
    www.riocan.com