RioCan Real Estate Investment Trust Announces 16% Growth in Operating FFO in 2012
(firmenpresse) - TORONTO, ONTARIO -- (Marketwire) -- 02/14/13 -- RioCan Real Estate Investment Trust ("RioCan") (TSX: REI.UN) -
HIGHLIGHTS for 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 ("RioCan") today announced its financial results for the year ended December 31, 2012.
"We are very pleased with the performance of the portfolio through what was, as anticipated, a challenging year. We are excited about the opportunities for continued growth in the portfolio on multiple fronts as we enter RioCan's 20th year as a publicly traded REIT," said Edward Sonshine, Chief Executive Officer of RioCan. "Including RioCan's $89 million of development property acquisitions, RioCan completed more than $1 billion of total acquisitions in 2012. RioCan's transformational growth over the past few years, the improved stability of our cashflow stream, and management's confidence in the future growth of RioCan were all contributing factors in the decision to increase RioCan's distribution in 2013."
Financial Highlights
Operating Funds from operations ("Operating FFO")
RioCan's Operating FFO represents the recurring cash flow generated through the ownership and management of income properties. This is the basis for determining RioCan's Adjusted Funds From Operations. In contrast to Funds From Operations ("FFO"), Operating FFO also excludes transactional gains from the sale of real estate as well as the expenditures related to development activities that in management's view forms part of the cost of its development projects, and are no longer capitalized under IFRS.
Operating FFO for the Fourth Quarter was $ 116 million ($ 0.39 per unit) compared to $ 100 million ($ 0.36 per unit) in the fourth quarter of 2011. The primary reasons for this increase were: a $20 million increase in net operating income ("NOI"), which was due to acquisitions, lease cancelation fees of $4 million, with same property growth of 0.2% in Canada and 1.9% in the US, and the completion of greenfield developments. Operating FFO also benefited from lower interest expenses of $1 million and lower general and administrative expenses of $1 million in the Fourth Quarter. These increases to Operating FFO were partially offset by reduced other revenue of $7 million and increased preferred unit distributions of $1 million during the Fourth Quarter.
Operating FFO for the year ended December 31, 2012 was $ 440 million ($ 1.52 per unit) compared to $ 380 million ($ 1.43 per unit) in 2011. The primary reasons for this increase were: a $91 million increase in net operating income ("NOI"), which was due to higher lease cancelation fees of $12 million, along with same property growth of 1.0% in Canada and 0.5% in the US, and the completion of greenfield developments. These increases to Operating FFO were partially offset by increased interest expense of $6 million, which included $2 million of costs associated with the early repayment of $90 million of secured debt in the second quarter (which carried an interest rate of 5.9%), increased preferred unit distributions of $7 million, higher general and administrative expenses of $3 million, and lower fees and other income of $13 million during 2012.
Net Earnings
RioCan reported net earnings attributable to unitholders for the Fourth Quarter of $468 million ($1.55 per common unit) compared to $241 million ($0.87 per common unit) for the same period in 2011, an increase of $227 million ($0.68 on a per common unit basis). Excluding the impact of taxes and fair value gains on investment properties, net earnings for the Fourth Quarter were $123 million as compared to $98 million during the same period in 2011. RioCan's increase in net earnings was due to an increase in the fair value of its investment properties as well as the same contributing factors as those which impacted RioCan's Operating FFO in the Fourth Quarter. Fair value gains for the Fourth Quarter were $348 million, a $202 million increase over the same period in 2011, due to increased property level NOI as well as a decline in capitalization rates, which decreased by 12 bps, on average, as compared to September 30, 2012.
RioCan reported net earnings attributable to unitholders for the year ended December 31, 2012 of $1.34 billion ($4.59 per common unit) compared to $873 million ($3.26 per common unit) for the same period in 2011, an increase of $471 million ($1.33 on a per common unit basis). Excluding the impact of taxes and fair value gains on investment properties, net earnings for the year ended December 31, 2012 were $446 million as compared to $351 million in the same period of 2011. RioCan's increase in net earnings was due to an increase in the fair value of its investment properties as well as the same contributing factors as those which impacted RioCan's Operating FFO for the year. RioCan's fair value gains on investment properties were $913 million for the year ended December 31, 2012 as compared to $533 million in 2011, an increase of $380 million due to increased property level NOI and a decline in capitalization rates, which decreased 52 bps on average during the year.
Same Store and Same Property NOI
Same store and same property NOI increased by 0.2% in the Fourth Quarter in Canada, compared to the same period in 2011, due largely to new leasing which favourably impacted NOI by $3.3 million, renewal and fixed rent steps which increased NOI by $1.6 million, and the leasing of space vacated due to bankruptcy or lease cancellations, which increased NOI by $2.3 million. The increases to same store and same property NOI were partially offset by the impact of vacancy caused by normal course turnover of $4.3 million, unanticipated vacancies that reduced NOI by $1.2 million, and $0.4 million in lower NOI from lease buyouts that have occurred in the last year.
Same store and same property NOI for year ended December 31, 2012 in Canada increased by 0.9% and 1.0% respectively, compared to 2011, due largely to new leasing which favourably impacted NOI by $15.0 million, renewal and fixed rent steps which increased NOI by $6.0 million, leasing of space vacated due to bankruptcy or lease cancellations which increased NOI by $5.7 million. The increases to same store and same property NOI were partially offset by the impact of vacancy caused by normal course turnover of $14.0 million, unanticipated vacancies that reduced NOI by $5.4 million and $1.5 million of lower NOI from lease buyouts that have occurred in the last year.
Sequentially, same store and same property NOI in Canada increased by 1.9% and 1.7% respectively for the Fourth Quarter compared to the third quarter of 2012. This was primarily due to an increase in NOI of $1.9 million due to new, renewal leasing and fixed rent steps which positively impacted NOI by $0.5 million, and leasing of space vacated due to bankruptcy or lease cancellations, which increased NOI by $0.4 million. The increases to same store and same property NOI were partially offset by reduced NOI due to vacancies caused by normal course turnover of $1.4 million.
On a US dollar basis, the US same store and same property NOI during the Fourth Quarter increased by 1.9% when compared to the same period in 2011. On the same basis, same property NOI for the year ended December 31, 2012 increased by 0.5% when compared to the same period in 2011 due to new and renewal leasing and fixed rent steps. Same store and same property NOI increased by 0.2% for the Fourth Quarter compared to the third quarter of 2012 primarily due to increased NOI as a result of new leasing, renewal rent increases and rent steps.
Portfolio Stability
As at December 31, 2012 :
Portfolio Activity and Acquisition Pipeline
During the Fourth Quarter, RioCan completed 31 acquisitions of interests in income producing properties (six in Canada and 25 in the US) at an aggregate purchase price of $378 million, at RioCan's interest (calculated taking into account the US dollar transactions at an average exchange rate of CAN$1 = US$1.013), with a weighted average capitalization rate of 6.4%.
For the year, RioCan completed 43 acquisitions of interests in income producing properties (14 in Canada and 29 in the US) at an aggregate purchase price of $926 million, at RioCan's interest (calculated taking into account the US dollar transactions at an average exchange rate of CAN$1 = US$1.007), with a weighted average capitalization rate of 6.1%.
In addition, RioCan has two income producing properties in Canada and the US with an aggregate purchase price of $61 million (calculated taking into account the US dollar transactions at an exchange rate of par) under contract where conditions have been waived pursuant to purchase and sale agreements that are expected to be completed during the first and second quarters of 2013.
Acquisitions Completed in the Fourth Quarter
Canada
United States
In turn, RioCan conveyed its 80% interest in Franklin Village (located in Franklin, Massachusetts) to Cedar for a gross sale price of US$60.1 million (less debt assumed by Cedar from RioCan in the amount of US$34.7 million). On October, 31, 2012, RioCan served Cedar with a notice of cancellation under the property management agreement, and effective February 1, 2013 RioCan commenced property management of the northeastern US portfolio.
Acquisitions Under Contract (Firm)
RioCan currently has two income properties in Canada and the US under contract where conditions have been waived that, if completed, represent $61 million of acquisitions at RioCan's interest, at a weighted average capitalization rate of 5.5%.
Canada
In Canada, RioCan has waived conditions pursuant to a purchase and sale agreement with respect to one property as follows:
- The acquisition of a 100% interest in 1860 Bayview Avenue in Toronto, Ontario. 1860 Bayview Avenue is a development site located at the northwest corner of Bayview Avenue and Broadway Avenue in the Leaside area of Toronto. KingSett and Trinity Development Group are currently developing a grocery-anchored centre on the site, and RioCan will be acquiring the completed site on a forward purchase basis at an expected purchase price of $58 million, at a capitalization rate of 5.4%. Once completed, the centre will consist of approximately 74,220 square feet of retail space and will be anchored by a 50,220 square foot Whole Foods. This acquisition is expected to close during the second quarter of 2013.
United States
In the US, RioCan has waived conditions pursuant to a purchase and sale agreement with respect to one property as follows:
- A 100% interest in a 24,000 square foot unit at Monroe Marketplace in Selinsgrove, Pennsylvania to be occupied by TJ Maxx. Acquired by RioCan in 2010 (and, with respect to Cedar's 20% interest, 2012), Monroe Marketplace is a 340,000 square foot power centre anchored by Giant Foods and Kohl's. The purchase price for the 24,000 square foot addition is US$2.8 million which equates to a capitalization rate of 7.64% and will be acquired free and clear of financing.
Acquisitions Under Contract (Conditional)
RioCan has $397 million of income 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.
KingSett Capital Led Consortium's bid for Primaris Retail REIT
Included in the amount above is the conditional agreement with Primaris Retail REIT ("Primaris") to purchase a 50% interest in Burlington Mall in Burlington, Ontario, and a 100% interest in Oakville Place in Oakville, Ontario, which was announced by RioCan on February 5, 2013. The aggregate gross purchase price for these two properties is approximately $362 million (at RioCan's interest) and the properties will be acquired at a capitalization rate estimated to be approximately 5.0% to 5.25%. In connection with the purchase, RioCan will assume, at its interest, the in place mortgage financing of approximately $165 million in aggregate. The purchase price will be reduced by a mark-to-market adjustment on closing in consideration of the debt's above market interest rate, which is currently estimated at approximately $8 million. RioCan will fund this acquisition through cash on hand and existing operating facilities.
These properties will add to RioCan's growing enclosed mall portfolio that includes such properties as Georgian Mall, RioCan Yonge Eglinton Centre, Lawrence Square, RioCan Sheppard Centre and Shoppers World Brampton, all located in the GTA and surrounding markets. The acquisition of Oakville Place and Burlington Mall will allow RioCan to gain a stronger foothold in the enclosed mall sector, specifically in the GTA, a segment otherwise difficult to enter. As well as strengthening RioCan's market leading retail platform, there are additional opportunities for organic growth within both shopping centres, which RioCan believes it can realize with its deep infrastructure and management strength. It is expected that the purchase will be completed in early April.
Also included in the conditional acquisitions amount is the acquisition of a 100% interest in South Cambridge Centre in Cambridge, Ontario, from H&R REIT at a purchase price of $35 million, which equates to an estimated capitalization rate of approximately 6.75% to 7.0%. This purchase is also conditional on the successful completion of the H&R REIT and KingSett Capital led consortium acquisition of Primaris. South Cambridge Centre is a 190,131 square foot grocery anchored shopping centre. The property is 100% occupied and is anchored by a Zehrs grocery store (Loblaws). Other major tenants at the property include the Liquor Control Board of Ontario, The Beer Store and Home Hardware. In connection with the purchase, RioCan will assume the in place mortgage financing of $19.7 million which carries an interest rate of 5.5% maturing in June 2016.
The purchases of Burlington Mall, Oakville Place and South Cambridge Centre are conditional on the successful completion of the H&R REIT and KingSett Capital led consortium acquisition of Primaris. On February 5, 2013, H&R REIT and H&R Finance Trust (collectively "H&R") and Primaris and the KingSett Capital led consortium announced that H&R and Primaris, together with PRR Investments Inc., have amended their previously announced arrangement agreement (dated January 16, 2013). The transaction is expected to be completed in April 2013.
Acquisition Pipeline
RioCan is currently in negotiations regarding property acquisitions in Canada and the US that, if completed, represent approximately $68 million of additional acquisitions at RioCan's interest (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.
Disposition Pipeline
RioCan is currently in the process of selling fourteen non-core properties in Canada. The properties are located in largely in secondary markets. The fair value of these properties as at December 31, 2012 calculated in accordance with IFRS is in excess of $645 million. The debt associated with these properties is approximately $230 million. RioCan is under no obligation to proceed with such proposed dispositions which, if completed, will be done to facilitate its objective of paring its portfolio and focusing on major markets.
On February 7, 2013, RioCan sold all 9.4 million shares of Cedar for total proceeds of approximately US$48 million. As a result of the sale of these shares held, RioCan no longer has any equity position in Cedar.
Liquidity and Capital
The 12 month rolling EBITDA interest coverage for RioCan at December 31, 2012 was 2.72x (2.82x for the Fourth Quarter) compared to 2.46x at December 31, 2011. As at December 31, 2012, RioCan's indebtedness net of cash was 43.5% of total assets a decrease of 290 bps from year end (46.4%). RioCan's Net Debt to Adjusted EBITDA at December 31, 2012 was 7.28x up slightly from 7.26x 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 December 31, 2012 compared to 7.00x 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 2013 through financing maturing loan balances as well as repay additional balloon balances to increase the size of RioCan's pool of unencumbered assets. As at December 31, 2012, RioCan had 79 properties (including 13 unencumbered properties under development) that are unencumbered with a fair value of approximately $1.3 billion.
Mortgage Financing
Canada
In 2012, RioCan obtained approximately $449 million of fixed-rate mortgage financing at a weighted average interest rate of 3.1% with a weighted average term to maturity of about 5.1 years.
US
In 2012, RioCan obtained approximately $92 million of fixed-rate mortgage financing at a weighted average interest rate of 4.3% with a weighted average term to maturity of about 6.8 years.
Unsecured Debentures
As at December 31, 2012, RioCan had eight series of Debentures outstanding totalling $1.3 billion (December 31, 2011 - six series totalling $822 million). During the Fourth Quarter RioCan issued $250 million Series R Senior Unsecured Debentures at a coupon rate of 3.716% for a nine year term ending in 2021.
Lines of Credit
RioCan has four revolving lines of credit in place with three Canadian chartered banks, having an aggregate capacity of $429 million. At December 31, 2012, $73 million has been drawn as a cash advance and $25 million has been drawn as letters of credit, leaving $330 million available for cash draws under the lines of credit.
Development Portfolio
As at December 31, 2012, RioCan had ownership interests in 11 greenfield development projects that will, upon completion, comprise about 9.9 million square feet (4.9 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 three months ended December 31, 2012, RioCan acquired an interest in the Globe and Mail development site in Toronto, Ontario, at a purchase price of $54 million, at RioCan's interest.
The acquisition has established the basis for a joint venture (the "Downtown West JV") between RioCan, Allied and Diamond, with each of RioCan and Allied having an undivided 40% interest and Diamond having an undivided 20% interest. RioCan has a beneficial ownership in the Downtown West JV of 43.9% including its 19.3% participation in Diamond's Whitecastle New Urban Fund 2. The joint-venture partners intend to redevelop the Property as a mixed-use retail, office and residential complex with approximately 2.3 million square feet of gross floor area.
In February 2013, the three partners included in the Downtown West JV entered into a conditional agreement to purchase an additional 1.2 acres adjacent to the 6.47 acres of land previously acquired. This land is zoned for 450,000 square feet of commercial space, will provide the partners the opportunity to develop the combined Globe and Mail parcels beyond the 2.3 million square feet planned for the first parcel (6.47 acres). This second acquisition is expected to close in the first quarter of 2013.
For the year ended December 31, 2012, RioCan acquired interests in four development sites in Toronto, Ontario, at a purchase price of $89 million, at RioCan's interest. Additionally, RioCan completed acquisitions of excess land at a purchase price of $6 million at RioCan's interest in connection with the acquisitions of interests in two income properties during the year ended December 31, 2012. In total, acquisitions of development properties aggregated $95 million in 2012.
Subsequent to year end, RioCan acquired a 50% interest in Sage Hill Crossing, a 34 acre greenfield development site that will be anchored by Walmart and Loblaws located in Northwest Calgary, Alberta, at a purchase price of $32 million ($16 million at RioCan's interest) with KingSett. Once completed, the anticipated gross leasable area is 377,000 square feet of retail use. Development is expected to commence during the summer of 2013.
RioCan currently has 2 development sites in Canada under contract where conditions have been waived that, if completed, represent $29 million of acquisitions at RioCan's interest.
Additionally, RioCan has $51 million of development sites in Canada (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 Audited Annual Consolidated Financial Statements, Management's Discussion and Analysis and a Supplemental Information Package for the three months and year ended December 31, 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 Thursday, February 14, 2013 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 416-340-2216 or 1-866-226-1792. If you cannot participate in the live mode, a replay will be available until March 15, 2013. To access the replay, please dial 905-694-9451 or 1-800-408-3053 and enter passcode 9670929#.
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 $14.3 billion as at December 31, 2012. It owns and manages Canada's largest portfolio of shopping centres with ownership interests in a portfolio of 346 retail properties containing more than 82 million square feet, including 52 grocery anchored and new format retail centres containing 13.6 million square feet in the United States through various joint venture arrangements as at December 31, 2012. RioCan's portfolio also includes 11 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 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 December 31, 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: 14.02.2013 - 12:00 Uhr
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