RioCan Real Estate Investment Trust

Good day, ladies and gentlemen, and welcome to the RioCan Real Estate Investment Trust fourth quarter 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 Seuss, Senior Vice President and General Counsel, you may begin.

Thank you and good morning everyone. I am Jennifer Suth, Senior Vice President, General Counsel, and Corporate Secretary for RioCan. 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 MD&A and financials on RioCan's website yesterday evening. Before turning the call over, I am 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 conclusions 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, GAAP, 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 RioCAN's performance, liquidity, cash flows, and profitability. RioCAN'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 December 31st, 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.cdar.com. I will now turn the call over to Mr. Jonathan Gitlin, our president and CEO.

Thanks so much, Jennifer. Thanks to everyone who's called in today. And thank you also to my incredibly talented senior management team who is here with me today for this call. So Q4, like the rest of 2021, demonstrated the quality of RioCamp's portfolio, the resilience of our tenants, and the talent of our people. The distribution increase we announced yesterday clearly indicates our confidence that we will deliver sustainable growth and strong returns for our unit holders. We also gave guidance. And we provided this guidance as it simply makes management even more accountable to its unit holders. So now I'm not going to downplay the challenges that the commercial real estate industry faced throughout the year. 2021 was volatile. Tenant shutdowns lasted into the summer, and there were numerous phases of restrictions on retail throughout 2021. The year ultimately ended with additional disruption courtesy of Omicron, which incidentally paid a visit to the Gitlin household, which was unwelcome as well. That said, it's important to recognize that these volatile and uncertain times strengthened our confidence in RioCAN's competitive advantages and its vision for the future. The critical nature of physical stores has been emphasized, not diminished, during COVID. There's been a distinct merger of physical and online retail. Simply put, COVID raised questions about the future of retail. Two years later, many of those questions have been answered, and our confidence in retail, particularly necessity-based major market open-air retail, has been reinforced. Consumer behavior confirms that Canadians, well, they want to control their shopping experience, and physical retail stores will continue to play a critical part of their lives. E-commerce and physical retail don't just coexist. They've got a relationship, and there's every indication that well-placed physical retail, exactly the kind that RioCan owns, plays a vital role in this relationship. We're going to focus today on our fourth quarter results. I also want to discuss our strategy for growth, which builds on our foundational strengths and the value that's really inherent in our portfolio. RioCan is committed to responsible growth. To summarize, this means a prudent approach to capital management. It means reinforcing our ESG leadership position, and it means ongoing investment to enhance our great culture. The results of these investments are very evident in 2021. Now, you've heard me say before that our commitment to ESG is organic. It's not manufactured. It makes good business sense, supports long-term value creation, and it will certainly accelerate the positive momentum we saw this year. Our efforts were recognized in numerous ways in 2021, including the award of a five-star rating in the Gresby Real Estate Assessment for the second year in a row. And we're going to continue to advance our ESG initiatives as we enhance the quality of our portfolio and accelerate our growth. Now, this growth trajectory is also tied to our culture, which, in my humble opinion, differentiates RioCan, it drives results, and it retains, develops, and attracts top talent. We advanced our cultural roadmap and our employees responded with the highest engagement scores in RioCAN's history. Our 2021 employee engagement results placed RioCAN in the top decile of similar sized companies. These outstanding achievements can only happen with an exceptional leadership team. Now on that note, I want to acknowledge two important changes to our senior leadership team here at RioCAN. Franca Smith has been promoted to SVP of Finance, Franca has been with RioCamp for five years and recently stepped into the role of interim CFO. As always, she executed with excellence. Franca is an experienced finance leader. She's deeply respected both internally here at RioCamp and within the real estate industry. John Ballantyne has been promoted to chief operating officer. Many of you have had the privilege of working with John throughout his short 27-year career here at RioCamp. He's highly respected as a strategic thinker and an industry expert. He's a champion for RioCan. Our employees and the communities in which we operate and his real estate IQ is invaluable in driving long-term unit holder value. Let's turn to our operational results. The fourth quarter saw excellent momentum in our operating results with key operating metrics moving closer to pre-pandemic levels. Several large-scale deals were completed and occupancy climbed to 96.8%. It's important to note that retail occupancy buoyed the overall results, ending the year at over 97%. Retail tenants continue to seize the opportunity to lease our well-located space. This further demonstrates the well-located, professionally managed physical spaces, like the ones in Rio Can Centers, are hard to come by and highly valued. The spread between committed and in-place occupancy tightened, reflecting the intersection of accelerated new retail openings and RioCan's ability to quickly turn over this valuable space. Rent collection, which is still a closely watched metric in 2021, ended the year at 98.6% despite the many lockdowns and restrictions we faced. Leasing velocity was also healthy with blended leasing spreads of 4.6% for the quarter and 6.3% for the year. same property NOI increased by 4.9% in the quarter. Our Rio Can Living residential rental portfolio also gained a lot of momentum. Pivot at Young and Shepherd in Toronto saw significant traction in the last quarter, shifting from 62.5% leased in Q3 to close to 85% as of February 9th. Another success story was Litho in Toronto, a great mixed-use development which launched in July 2021 and increased from 27.6% in Q3 to 61.9% as of February 9th. In addition, leasing commenced to two new residential properties within the portfolio, Latitude in Ottawa and Strada here in Toronto. Early indicators are showing excellent demand for both of these dynamic projects. RioCan Living and its partners are seeing strength in their for-sale condo projects, with 1,481 units released for sale in 2021, with 94.4% sold as of February 9th. The profit expectation for RioCan from its existing condo projects is approximately $191 million. FFO per unit for the quarter was $0.46, an 18% increase over the same period last year. FFO per unit at the year end was $1.60. We're confident that our leasing capabilities and our efficient operating practices will continue to result in organic growth. We're working hand-in-hand to evolve our commercial spaces. This is necessary to solidify RioCans and our tenants' role in that last mile delivery chain. We envision what retail will need to be in four or five years, and we're starting to affect those changes now. RioCan has enviable locations, that goes without a doubt. But we won't rely on this factor alone. We want to make our offering stronger for our customers. Our objective is to distinguish ourselves from others. We continue to refine and further fortify our tenant mix. We're strategically investing capital into our properties to provide a consistent look and feel. And finally, we're implementing technology solutions such as our RioCan Connect tenant portal to enhance our tenants' experience. Now, as you're aware, development is also a critical component in RioCAN's growth strategy. Investors have been patient over the last five years as we built up our capabilities and invested in zoning entitlements and construction. We were clear-minded in our objectives. We're confident in the income and NAV growth that will resolve from conversion of the zoned lands into well-located, income-producing, mixed-use assets. Our in-house development team delivered more than a quarter of a million square feet of dynamic mixed use and purpose-built residential rental completions in 2021. Now, as we complete developments, we're breaking ground on new ones. We're achieving zoning on others, and we're initiating zoning approval on still more. This virtuous cycle will continue to be demonstrated long into the future. And we're now at a critical inflection point. This is the first year where the value of our development deliveries will exceed our development investment, a trend that we expect to continue for years to come. I'm certain our unit holders will reap the benefit of the resulting NAV increases long into the future. One of our most notable development projects is our flagship mixed-use development, The Well. Solid progress continued with the construction of the commercial component, which includes office and retail and it's now approximately 82% complete. Approximately 90% of the office space is leased and retail leasing has gained significant momentum. Nearly 62% of the retail space is leased or in late stage negotiations with various tenants. We've been very thoughtful in our approach to selecting tenants for the well. Our intention from the outset was to ensure the tenant mix is curated so as to enhance this extension of the King West community. At the same time, we're creating a destination designed and tenanted so as to draw traffic from far beyond the immediate radius. The well will be completed over the next 12 to 18 months and the retail component is expected to open in the spring of 2023. To summarize, the continuous improvement of our portfolio is happening concurrently with development deliveries. Both will translate into a positive NAV outcome. You're going to see significant buildup of our NAB over the next few years because the conditions will support it. Namely, improvements in our shopping centers, the increased resiliency of our tenant base, the delivery of developments, and of course, better market conditions as this pandemic subsides. RioCan's story continues to be one of reliable, high-quality income, and steady, responsible growth. We've proven our ability to execute in the face of unprecedented challenges, Our focus continues to be on our long-term strategy to maximize the value of this great portfolio and grow our business. We have a dedicated team, enduring strength, stability, and the vision to execute and create value for you, our unit holders. I want to thank the whole RioCAN team for their never-ending commitment and contributions this past year, and to our unit holders for your continued dedication and confidence in RioCAN. I'm now happy to turn the call over to our CFO, Dennis LeSue.