RioCan Real Estate Investment Trust

Ladies and gentlemen, thank you for your patience. This call will begin shortly. Thank you. Good day, ladies and gentlemen, and welcome to the Rio Can Real Estate Investment Trust first quarter 2023 conference call and webcast. As a reminder, this conference call is being recorded. I'd now like to turn the conference call over to Ms. Jennifer Seuss, Senior Vice President, General Counsel, ESG, and Corporate Secretary. Ms. Seuss, you may begin.

Thank you, and good morning, everyone. I am Jennifer Seuss, Senior Vice President, General Counsel, ESG, and Corporate Secretary of 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 MD&A and financials on REOCAN'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 REOCAN'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 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 REOCAN'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 March 31st, 2023, and management's discussion and analysis related thereto as applicable, together with RIOCAN's most recent annual information forms that are all available on our website and at www.cdar.com. I will now turn the call over to our CEO and President, Jonathan Gitlin.

Thanks so much, Jennifer, and thank you to everyone that's joined RIOCAN's senior management team today. I'm going to start the call today the same way that I'm going to end the call, with an acknowledgement that the market continues to be volatile. Fear of recession, interest rates, inflation, access to capital, regional banking vulnerabilities, these thoughts are top of mind for all of us. To suggest otherwise would be unrealistic. That said, even in the face of these macro-level gyrations, RioCan continues to perform exceptionally well. We've strategically and responsibly managed every facet of our business over which we have control. Despite the market volatility, I'm proud to reiterate our commitment to the guidance we presented at our February 2022 Investor Day and the FFO guidance we provided in our last call. With each successive quarter since our Investor Day, our operating results reflect the precision with which we execute our strategy. So let's dive into our Q1 operating results. As simply said, these results speak for themselves. They support our confidence in achieving the ambitious growth targets that we set out in our five-year plan. Just like the quarters that preceded it, the first quarter of 2023 demonstrated our portfolio's quality, our tenants' resilience, and our team's extraordinary depth and capability. By every measure, RioCan's well-positioned assets, stable tenant mix, and development progression drove strong results that translate into predictable outcomes. These results reflect our focus on the pillars that support our five-year plan. Resilient retail, customer centrism, intelligent diversification, and responsible growth. Our commitment to these pillars continues to yield results. Our assets are in Canada's major markets in densely populated areas with high average household incomes of $135,000 and an average population of 250,000 people within a five-kilometer radius of your average Rio Can property. RioCAN's portfolio has never been more defensive. The percentage of our net rent generated from strong and stable tenants increased 86.8% this quarter. Same property NOI for the quarter grew by 3.4%. FFO per unit was 44 cents. This reinforces our confidence in our FFO per unit target of $1.77 to $1.80 per unit for the entire year. Healthy new and renewal leasing spreads results created a strong blended leasing spread of 12.3%. Retail committed occupancy was 98%, and rent per square foot for new leasing in the quarter was $28.57, well above the average net rent for the portfolio, which is $21.13. These exceptional occupancy levels, retention rates, and leasing spreads continue to be driven by intense demand for RioCamp's quality retail space. the sort of retail space that's, well, simply put, in short supply. Your management team will continue to operate with excellence and find strategies that mitigate the impacts of current concerns, such as interest rates, an anticipated recession, and more limited access to capital. It's worth taking a moment to unpack these issues in the context of RioCAN's business. In seeking an explanation of how we've maintained and will continue to extract such strong operating results with such a volatile backdrop, I'm gonna start with the bigger picture, namely, the country within which we operate. Yeah, so I'm starting broad, but it matters. In today's global context, numerous attributes distinguish Canada as an incredible place to conduct business, and even more specifically, to own and to operate retail property. Consider our banking sector. Canada has a regulated and relatively stable banking system where reputation and relationships matter. RioCan has access to capital and substantial liquidity. We consistently demonstrate the ability to utilize our established network and track record to access the most efficient forms of financing. The retail landscape in Canada is also vastly different than in much of the world. Compared to the US, Canada has far fewer competing tenants for retail category, We also have approximately 40% less square footage of retail per capita than the U.S. A few factors will continue to temper the supply of retail space, including Canada's tight zoning regulations. In addition, the vast gulf between replacement costs and market values makes building new retail a very unlikely proposition. And then there's our commitment to immigration. Canada is the fastest-growing country in the G7, and it's projected to welcome approximately half a million qualified, productive newcomers each year. These new Canadians naturally gravitate to transit-oriented, major market locations to live and subsequently to shop. These are the same markets in which retail space is supply constrained. These factors converge to drive demand and create positive tension in lease negotiations for precisely the kind of well-located bricks and mortar spaces that RioCan offers. This was clearly evidenced by the immediate and pronounced demand for our Bed Bath & Beyond locations. While these locations contributed towards less than 1% of RioCan's revenue, I'm highlighting this example as it underscores the demand for the limited available retail space in Canada. Upon the retailer's CCAA filing in February, RioCan commenced negotiations with numerous who expressed interest in all 13 of our locations. Despite the positive progression of these negotiations, several strong retailers chose to take a more secure route, and they purchased locations directly from the receiver who was running the process. In total, 10 of RioCAN's locations were snapped up in the auction process run by the receiver. Retailers were unwilling to risk losing these sites. And for RioCan, the process resulted in the ability to fill the spaces with strong tenants, zero downtime, and no outlay of capital. Regarding our three locations that weren't sold through the CCAA process, we finalized one lease and were in final stage negotiations for the remaining two. The current supply-demand dynamic is expected to continue for the foreseeable future. This dynamic is one of numerous factors that bolster our confidence. It's also worth noting that if the real estate transaction market starts to pick up, we're seeing an increase in the number of data points that suggest that high-quality assets are holding their value. Specifically, in spite of interest rate fluctuations, we're seeing limited impact on cap rates for major market open-air retail centers. The type of retail that comprise our portfolio is also very relevant. Our properties generate resilient and growing income from a strong and stable base of tenants anchored by necessity uses like grocery stores, pharmacy, and value retailers. While these are precisely the uses that perform well and generate organic growth, even in turbulent economic conditions. Simply put, high-quality properties plus high-quality tenants result in high-quality cash flows. These factors, in turn, support strong valuations. As you know, RioCamp complements organic growth with intelligent diversification. Despite market conditions, our success in this area further supports our confidence. There is considerable detail regarding our development program and our disclosure. However, I'm going to provide a few highlights for you. We've leased approximately 94% of the total commercial space at the well, which, as you hopefully all know by now, is our flagship mixed-use development in Toronto. Eighty-two percent of the retail component is leased. which represents a 10 percentage point increase over the previous quarter. We have an additional 6% in advanced negotiations for a total of 88% of the retail space either leased or in advanced negotiations. Our six condo townhouse projects under construction are 86% pre-sold, achieving 96% of pro forma gross revenue. We've got significant deposits for these units which provide security against the unlikely but always possible scenario of homebuyer defaults. Between 2023 and 2026, RioCam will realize approximately $860 million in sales revenue from these projects. Our residential rental revenue also continues to increase. This rental revenue diversifies our cash flows and offers high embedded growth potential. RioCam Living now has 10 purpose-built residential buildings in operation. Demand for these units continues to be excellent. The NOI generated from our residential rental operations in the first quarter was $4.3 million, an increase of $1.9 million over the same period last year. There is, however, no question that interest rates are creating unwanted pressure. RioCan has taken meaningful steps to keep that expense as low as possible. We proactively employed various financial tactics, including staggering the maturities of long-term debt and limiting the use of floating rate debt to minimize exposure to interest rate fluctuations. As Dennis will explain to you shortly, we benefited from hedging activity where we took advantage of significant dips in the bond market and locked in favorable Government of Canada bond rates for both future, planned, and prior financing activities. These measures are all part of our commitment to responsible growth, which, again, Dennis will speak about in a moment. The last factor that supports my conviction and RioCAN's ability to deliver long-term value cannot be underestimated. It's the team. This team has weathered pandemics, tenant departures, recessions, financial meltdowns, and more. This team, like our portfolio, has demonstrated resiliency and the ability to deliver in any kind of condition. Each day their talent, creativity and commitment drive our strategy forward. I'm grateful for them and I confidently say that your trust is in very good hands. As always, we're prudently managing risks, maintaining a healthy balance sheet with strong liquidity and access to various financing channels. Our high quality portfolio and operational excellence provide respite against the volatile macroeconomic environment and give us the confidence to reaffirm our guidance for the year. The objectives in our five-year plan were established with purpose and conviction, and they're achievable in almost any environment. There are many words we can use to describe the economic environment, tumultuous, volatile, unstable. I'm going to say it more informally. I mean, it's pretty nuts out there. But what I want to leave you with is the words that describe REOCAN's performance in the same environment, predictable, solid, stable, sustainable. The foundation, strength of vision, and demonstrated commitment to responsible growth will continue to serve our unit holders well, and at the same time, position the trust for continued success as market stability returns. With that, I'll turn the call over to Dennis, who will take you through our balance sheet and provide insight into how it continues to support RioCAN's quality and growth. Dennis, over to you.