RioCan Real Estate Investment Trust

good day ladies and gentlemen and welcome to the rio can real estate investment trust second quarter 2023 conference call and webcast as a reminder this conference call is being recorded i would now like to turn the conference call over to miss jennifer seuss vice senior vice president general counsel esg and corporate secretary miss seuss you may begin

Thank you and good morning, everyone. I am Jennifer Seuss, Senior Vice President, General Counsel, ESG and Corporate Secretary of RioCan. Before we begin, 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 REOCAN's performance, liquidity, cash flows, and profitability. RioCamp 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 June 30th, 2023 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 our President and CEO, Jonathan Gitlin.

Thanks so much, Jennifer, and thanks to everyone that's joined RioCAN's senior management team today. RioCAN's team and portfolio have again performed exceptionally well. We continue to strategically and responsibly manage every facet of our business over which we have control, such that we're able to grow and at the same time navigate macro level volatility. With each successive quarter since our February 2022 investor day, our operating results reflect the precision with which we execute on our strategy. In light of this, I reiterate our commitment to the 2023 guidance of FFO per unit in the range of $1.77 to $1.80. This commitment is a reflection of the retail environment and the capabilities of our team. Our quality portfolio continues to maintain high occupancy and drive strong leasing activity and leasing spreads. Our active development program generated new income through project completions. Our key financial indicators were equally strong with same property NOI exceeding our target range. This provides a foundation for reliable year-over-year growth in FFO per unit. The foundation of RioCAN's portfolio is resilient retail and our tenant base is tailored to offer consumers a compelling mix of convenience and necessity-based goods. The quality of RioCAN's tenant base continues to improve in lockstep with improvements in our portfolio's demographic profile. Our assets are in densely populated areas with high average household incomes of $140,000 and an average population of 260,000 people within a five kilometer radius. This demographic profile provides an increasingly compelling opportunity for our retail tenants. RioCAN's portfolio has never been more desirable or more defensive. SPNOI for the quarter grew by 5.2%. FFO per unit was 44 cents. Healthy new and renewal leasing spreads of 11.3% and 8.2% created a strong blended leasing spread of 9%. The results of the new leasing in the quarter highlighted the expanding mark-to-market between historical and current lease rates. The average rent per square foot of these new deals was $26.90, well above the average net rent for the portfolio of $21.34. And we believe this mark-to-market will provide a significant upside in the future as an increasing number of contractual fixed-rate renewals will burn off. Retail committed occupancy remains steady at 98%, including the backfill of two units previously occupied by Bed Bath & Beyond. Our strong occupancy levels, retention rates, and leasing spreads are driven by intense demand for RioCan's quality retail space. Canada's tight zoning regulations and the vast gap between replacement costs and market values make building new retail a very unlikely proposition. Canada is the fastest growing country in the G7, and there's a natural gravitation to transit-oriented major market locations to live and subsequently shop. These are the very same markets in which retail space is supply constrained. These factors converge to drive demand and create positive tension in lease negotiations for well-located bricks and mortar spaces. All indicators are that the type of space RioCan offers will continue to be in short supply and and more importantly, in high demand. Moving now to our development program, RioCan's organic growth is complemented by intelligent diversification largely driven by this program, which in our view is a significant competitive advantage. Our approach to self-funding development is also a key differentiator. We self-fund projects through retained earnings, project financing, and capital recycling. Our development pipeline focuses primarily on mixed-use opportunities with emphasis on residential, complemented with great retail. It is concentrated in the greater Toronto area and the majority is located on a transit route. This pipeline provides a regular cadence of development deliveries that bolsters REOCAN's growth by generating new income. Advancing our pipeline through expertise and hard work creates significant future value. With many development opportunities embedded within our existing portfolio, We prioritized our efforts on five projects, which you will see described in our disclosure materials as the Focus 5. Now, the Focus 5 sites are large-scale, transit-oriented, mixed-use developments in the Greater Toronto Area that we're advancing through the zoning and site plan approval process. These sites have the potential to deliver 20.2 million square feet and 23,126 residential units. We've got the in-house expertise to extract the maximum value from these sites. Now, the projects will be built in phases, or let me say it differently, they're modular. They provide the flexibility to stagger the construction commencement of the project phases at different sites in response to various market factors. Their scale provides optionality to create value through development, partnerships, air-ride sales, and outright property sales, driving growth for many years. Now, RioCAN Scarborough Center in the Golden Mile is one of RioCAN's focus five sites and is located on one of the premier development corridors in Canada. During the second quarter, zoning was achieved for two million square feet over the first two phases of the site. This is yet another example of us getting projects shovel ready and in doing so creating value that requires human capital and expertise, but little of the financial capital needed through the physical construction process. Active construction on our next wave of developments will commence in a manner that maximizes long-term value, but only when conditions are appropriate. Projects currently underway and slated for completion by 2026 are expected to provide approximately $43 million in stabilized NOI. Our development program is considerable. That said, I know there's always specific interest in the well, which is our flagship mixed-use development in Toronto. So let me provide a few highlights to you now. Approximately 80% of the retail component is leased, and an additional 7% is in advanced negotiations. We're proud and we're very excited about the ongoing progress of this incredible development, and we expect the majority of the retail tenants to be open by November of this year. Pre-leasing at 450 The Well, which is the 592-unit rental residential tower developed by RioCan with our partner Woodbourne, is progressing nicely. Since 450 The Wells launched in March of this year, over 100 leases have already been signed. The first residents were welcomed to their new homes yesterday. There are currently 12 purpose-built residential rental buildings operating in the RioCan Living portfolio. And when fully stabilized, these developments have high growth potential and have contributed approximately $9.4 million of NOI so far this year. We've also accelerated our capital recycling program through the sale of condos. The six condominium and townhouse projects we have under construction are 86% pre-sold, achieving 96% of pro forma revenue. These projects will generate $860 million in revenue or $179 million in profits over the next three years, which we will undoubtedly put to great use, and they're earmarked for very effective uses, including the repayment of debt. Moving now to our balance sheet, we continue to maintain a solid liquidity position and a conservative and very productive payout ratio. At the same time, we stagger the maturities of long-term debt and limit the use of floating rate debt to minimize exposure to interest rate fluctuations, as well as proactively employing various financial tactics. A few examples include preemptively refinancing the ventures in 2021 before interest rate hikes, tactically pivoting to more cost effective secured debt in some instances, and effectively hedging risk with bond forwards. Our combined capital market maneuvers have generated interest expense savings of approximately $160 million, or roughly $30 million per year over the average five and a half year term of our debt issues. These measures are all part of our commitment to responsible growth, which Dennis will speak about in a moment. So before I wrap up, I want to reiterate my conviction and RioCAN's ability to deliver long-term value. Like our portfolio, this team continues to demonstrate resiliency and productivity. Your management team will continue to operate with excellence and find strategies that mitigate the impact of heightened interest rates. Our consistency, foundation, strength of vision, and demonstrated commitment to responsible growth will continue to serve our unit holders well, but at the same time, position this trust for continued stability. With that, I'll turn the call over to Dennis to take you through our balance sheet and provide insight into how it continues to support our quality and growth. Dennis?