RioCan Real Estate Investment Trust Announces 14% Gain in Operating FFO for the Second Quarter 2012
(firmenpresse) - TORONTO, ONTARIO -- (Marketwire) -- 08/10/12 -- 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 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:
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.
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
United States
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%.
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%:
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 .
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 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 .
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.
Contacts:
RioCan Real Estate Investment Trust
Rags Davloor
Executive Vice President & CFO
(416) 642-3554
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Datum: 10.08.2012 - 11:30 Uhr
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