RioCan Real Estate Investment Trust

Good day, ladies and gentlemen, and welcome to the Rio Can Real Estate Investment Trust third quarter 2021 conference call. At this time, all participants are in a listen-only mode. After management's presentation, there will be a question and answer session, and instructions will follow at that time. I would now like to hand the conference over to Jennifer Zeus, Senior Vice President and General Counsel. You may begin. Thank you.

Thank you and good morning. Everyone. I am Jennifer senior vice president, general counsel and corporate secretary for Rio. Can. Before we begin, I would like to draw your attention to the presentation materials that we will refer to in today's call, which were posted together with the and financials on website yesterday evening before turning the call over to Jonathan. I'm required to read the following cautionary statement. In talking about our financial and operating performance, and in responding to your questions, we may make forward-looking statements, including 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. These statements are based on our current estimates and assumptions and are subject to risks and uncertainties that could cause our actual results to differ materially from the conclusion in these forward-looking statements. In discussing our financial and operating performance, And in responding to your questions, we will also be referencing certain financial measures that are not generally accepted accounting principle measures under IFRS. These measures do not have any standardized definition prescribed by IFRS and are therefore unlikely to be comparable to similar measures presented by other reporting issuers. Non-GAAP measures should not be considered as alternatives to net earnings or comparable metrics determined in accordance with IFRS as indicators of REOCAM's performance, liquidity, cash flows, and profitability. REOCAM's management uses these measures to aid in assessing the Trust's underlying core performance and provides these additional measures so that investors may do the same. Additional information on the material risks that could impact our actual results and the estimates and assumptions we applied in making these forward-looking statements, together with details on our use of non-GAAP financial measures, can be found in the financial statements for the period ended September 30th, 2021, and management's discussion and analysis related thereto, as applicable, together with RioCAN's most recent annual information form that are all available on our website and at www.cdart.com. I will now turn the call over to Jonathan Gitlin.

Well, thanks, Jen, and thanks to everyone who called in today. I really appreciate the opportunity to speak to you all. I'm here not by myself, but with RioCan's executive leaders, and we're all happy to share our third quarter results with you. The impact of the pandemic on our day-to-day lives is thankfully and finally dissipating. Now that our tenants can fully participate in commerce, RioCan is perfectly positioned to capitalize on pent-up consumer demand. We are again firing on all cylinders. RioCan's story continues to be one of reliable, high quality income, and steady, responsible growth. Our quarter end results are strong, clean, and sustainable, with positive momentum on leasing activity, ESG, development deliveries, and balance sheet improvements. We've successfully navigated the pandemic because the retail bedrock of our portfolio remains solid and high performing. The majority of our revenue comes from retail tenants that provide the products and services that consumers need every day, including grocery stores, pharmacies, liquor stores, and banks. Experiential uses like gyms and restaurants, well, they limped through the pandemic, but they're finding their legs. They're becoming viable again, and as they did before the pandemic, they produce vibrancy, and they give us foot traffic to all of our retail and make-to-use properties. Ancillary revenue, including parking, Digital advertising and event activations will similarly ramp up as traffic steadily returns to our properties. Our demographic profile continues to improve as well. You can literally stand at virtually any prominent intersection or community in Canada's major markets, and there's a Rio Can property in close proximity. Retailers loathe to give up these penetrating locations that serve as efficient ways to distribute goods. They're also looking to expand into such spaces, and that's why retail assets, such as those that comprise RioCamp's portfolio, will continue to strengthen operationally and financially. Favorable commercial conditions, well, they're great for RioCamp, but they don't stand alone. We support our business activities by staying in front of changing market dynamics in a thoughtful and responsible manner, and that's why I'm going to lead today with a discussion about ESG. RioCan's commitment to environment, social, and governance isn't an initiative. Best practices in ESG are truly embedded in our DNA. I make this statement with such conviction because we're supporting our commitment to sustainability leadership through good old-fashioned measurement and reporting. Based on these processes and results, we received the top rating of five stars in the Gresby Real Estate Assessment for the second year in a row. Notably, we ranked second in North America amongst our peers, and in addition, we ranked first amongst our Canadian peers for public disclosure. We were also named regional sector leader for mixed-use development in our first-ever submission in the Gresby Development Assessment. Our commitment to ESG isn't driven by recognition for our efforts, although they are nice. It's driven by a deep understanding that it's essential to responsible growth and it's important to our tenants, our unit holders, and our employees. We focus on ESG because it makes good business sense, supports long-term value creation, and will accelerate the positive momentum we saw in this past quarter. Speaking of which, let's now reflect on our operational results for the third quarter. Essentially, all of RioCAN's tenants are open across the country. With approximately 98% of rent collected in the quarter, our collection continues to resemble the pre-pandemic state. Given the composition of our portfolio, the productivity our tenants have shown since reopening and the introduction of new stimulus programs, we really don't anticipate our rent collection to be materially impacted by the lifting of governmental support. With the trend back to normalcy, I'm sensing that as was the case for the first 26 years of our existence, Well, rent collection shouldn't be a significant metric of focus moving forward. As our overall committed occupancy continues to rise and increase to 96.4%, our same property NOI results will also continue to steadily recover. FFO per unit for the third quarter was 40 cents, and these metrics still reflect the direct effects of COVID-19 and pandemic-related provisions. However, as occupancy trends back to historic norms, the impact will continue to lessen. Ongoing leasing momentum reflects a favorable tension. Recall that we were hard at work selling lower growth assets long before this pandemic, and these efforts resulted in a strong tenant mix and a strong asset base. Tenant eagerness to capture market share in this omnichannel environment is intersecting with the attractiveness of our high-quality locations and compelling demographic profiles. Well-capitalized, forward-thinking retailers are seizing on the opportunity to lease well-located space, which RioCan has in abundance. This is evidenced by the fact that we completed nearly 1 million square feet of new and renewal leasing during the quarter and signed 217 new leases. But it's not just the number of leases. that we should note here today. It's the breadth and the quality of these tenants that will support our growth and resilience moving forward. Lease rates continue to trend positively with blended spreads of 7.5%. Our new and renewal leasing spreads continue to demonstrate the healthy upside between our average portfolio and market rent and our ability to grow rent even in the most volatile of environments. We're confident that our leasing and operating metrics and our dogged pursuit of efficient operating practices will continue to result in organic growth. While we continue to drive this growth through our entire portfolio, our attention never wavers from our long-term strategy and commitment to maximize the vast number of growth opportunities at our fingertips. I'm now going to focus on the capital recycling activity that we've benefited from recently. The transaction market has rebounded, and the cadence of transaction activity is projected to exceed pre-pandemic levels. RioCan is well-positioned to thrive in this market as there's increased demand for convenience-based, well-located retail sites, particularly those with future development potential. We just witnessed a 20-month stretch where the retail landscape, it couldn't possibly have been more stressed and challenged. In defiance of the retail narrative that prevailed through this period, we're sitting with occupancy and rent collection close to historic norms. The security of the income generated by these strong properties results in cap rate compression within the market for assets typical of those in our portfolio. The desirability becomes even more pronounced when the solid income is complemented by the intensification opportunities throughout our portfolio. As more proof points surface, we will continue to see enhanced net asset values. We're taking the opportunity to benefit from the disconnect, though, between the private and public markets to trade our assets at attractive pricing relative to the net asset value discount reflected in our current unit price. The capital raised will work hard for our unit holders as this disposition program effectively repatriates capital from low growth or vulnerable assets and allocates it to more beneficial uses strengthening the balance sheet and funding higher yielding, more diverse mixed-use development sites. The valuation of our assets in the private market are a proof point in our proposition and a strong precursor to the values that we believe will continue to be recognized in our organization. Turning now to RioCAN Living and RioCAN's ongoing developments. We are known as industry leaders in obtaining zoning entitlements. And as a result, we've got one of the country's largest and most advanced development pipelines. Our pipeline translates into lucrative opportunities to convert properties to their optimal use, a proven cycle that will continue to pay off in 2021 and long into the future. This pipeline fuels the diversification of our income through the delivery of mixed-use projects and the creation of NAB over the longer term. Development proceeded essentially unabated through the pandemic, particularly for mixed-use and residential construction in select markets where housing remains in short supply. The Trust's purpose-built residential rental portfolio continued to expand, and there's a dramatic acceleration in leasing activity since the provinces progressed in their reopening initiatives. RioCanLiving's residential rental portfolio currently includes almost 1,500 completed units across five buildings, and an additional 1,300 units, which are now under development. We're going to deliver approximately 290,000 square feet of new space by the end of this year, including two mixed-use properties in highly coveted Toronto neighborhoods. Those are Litho at DuPont and Christie and Strata at College and Bathurst. Once stabilized, these new spaces will contribute meaningfully to sustainable growth in NOI and NAV creation. We continue to demonstrate that we have the expertise to create value in a variety of ways. As our press release detailed, RioCan Living also saw robust sales activity in new condo projects. One example, in July, RioCan Living launched the sales for the first phase of Verge, our mixed-use project located on the Queensway in Toronto. We pre-sold 96% of the 176 first phase units that were released, and the second phase is selling at similar velocities. Now, I believe the implications of the recent residential leasing and condo sales momentum, they span further than our multifamily residential portfolio. The enhanced demand for urban, transit-oriented, mixed-use property signifies a validation of RioCan's growth strategy, and it's a testament to the strength and resiliency of these great communities. I have complete confidence that RioCan Living will thrive in the near and long term. The total NOI from our residential rental operations will continue to increase as we complete new projects throughout this year. With that, I'm going to turn the call over to Dennis Lasuti now, who, as most of you know, joined RioCan as our CFO in September of this year. And Dennis has already demonstrated that his breadth of financial knowledge, leadership, and corporate strategy experience will be a tremendous asset to the trust. So now for the first of hopefully many, many more presentations, I give you Dennis.