RioCan Real Estate Investment Trust

I would now like to turn the conference 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 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. REOCAN'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 31, 2024, 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.cdarplus.com. And now I'd like to pass it over to Jonathan Gitlin, our president and CEO.

Thanks, Jennifer, and thank you for joining RioCAN's senior management team today. The first quarter of this year has been a testament to the sustained demand and attractive growth prospects for RioCan's high-quality retail portfolio. As I've been saying for a while, retail space remains scarce, and in the current conditions, it's unlikely that any meaningful amount of new supply will be added to the market. At the same time, we're witnessing substantial population growth, particularly in Canada's major markets. This backdrop, coupled with our emphasis on portfolio quality over the years, has put us in a position to fuel long-term organic growth. Today I'll discuss our operational highlights for the quarter. I'm going to focus specifically on our standout leasing results. RioCAN's portfolio and team have successfully built upon the positive momentum for 2023. RioCAN continues to capitalize on its unique combination of ideal locations in Canada's six largest and most densely populated cities, superior demographics, and its resilient tenant mix. The first quarter saw a sustained momentum in leasing, driven by RioCAN's high-quality, necessity-based retail portfolio. The committed occupancy of our retail portfolio is 97.9%. Our top-tier team leased 1.3 million square feet of space in the first quarter, nearly half a million of which were new leases. The blended leasing spread stood at 14%, bolstered by new leasing rent spreads of 20%. Renewal spreads were also healthy at 12%. RioCan continues to improve the overall quality of the portfolio with a focus on improving the percentage of strong and stable necessity-based use tenants. A remarkable 98% of the new deals completed in the quarter were with precisely this type of tenant, bringing our portfolio's strong and stable tenant category to 87.9% of annualized net rent. The average net rent of the new leasing activity was $23.62 per square foot, an 8% increase over RioCan's average net rent. This is an impressive increase considering that most of the new leasing was for larger spaces. Our leasing efforts are particularly noteworthy if they include the immediate backfill of a significant portion of the vacancies that came online in the quarter, primarily due to the failure of bad boys and rooms and spaces. These tenants previously occupied 10 locations in our shopping centers. As of May 7th, six of the 10 locations have been leased at significantly higher base rents, higher embedded year-over-year growth, and with far fewer restrictions. Negotiations are advanced for the majority of the remaining four locations. Vacancies typically raise concerns over tenant weakness, the cost to refit space, and foregone income. What I would say is that Rio Cane's defensive portfolio and exceptional leasing crowds turn these temporary issues into opportunities for medium and long-term benefits, shopping center upgrades, and space recycling with new tenants. It's worth noting that only 2.1% of our portfolio comprises transitional tenants, which are businesses that can be more susceptible to macroeconomic volatility. When Rio Cane units do become available, We're perfectly positioned to select relevant, resilient tenants that enhance the cross-shopping opportunities of our centers and contribute to higher rent. Vacancies also allow us to accommodate the increasing space requirements of tenants such as Loblaw, Metro, Shoppers Drug Mart, Dollarama, and TJX. A testament to this is Rio Can Center Kingston. where 32,000 square foot food basics opened last month in space that was formerly occupied by home outfitters. Our leasing achievements for the quarter are impressive. However, they signify more than just strong operating metrics for a single quarter. The nature of this leasing activity has practical impacts. It bolsters the resilience of our portfolio and enhances our income quality. Tenant upgrades also lead to enduring organic growth. Great retailers attract other great retailers. Moreover, with the demand for our site surpassing supply, we're negotiating favorable terms that support sustained growth and future flexibility. This includes embedded annual rent increases, reduced overlapping use restrictions, increased flexibility in development rights, and the inclusion of green lease clauses. In the short term, This transitory downtime can result in a temporary dilution of same property NOI, as was the case this quarter, which ended at 0.4% growth. The most significant impact of our new leasing activity for the first quarter will be realized in 2025. However, the ultimate outcome is the addition of grocery and critical service tenants that yield significantly better long-term results. I'll take a moment to delve into the specifics of our Q1 leasing activity, which contributed to our solid foundation for enduring income stability and growth. RioCAN successfully finalized three new agreements with grocery stores during the first quarter. These leases are in highly sought-after assets, RioCAN Hall in Toronto, RioCAN Colossus in Vaughan, and Grand Crossing in Ottawa. These deals encompass 65,000 square feet of average net rent It is 50.3% higher than the rents previously paid on this space. We're also on the verge of concluding negotiations with two additional grocery stores, which are expected to be finalized in the second quarter. In addition to the five grocery deals I've just mentioned, negotiations are nearing completion for a land lease with Costco for a redevelopment of a large component of Rio Canberra in the western end of the GTA. The long-term traffic driving benefits of transitioning spaces occupied by tenants such as rooms and spaces and bad boy to grocery uses are evidence. The transformation of open-air assets into highly valued grocery anchorage centers also boosts net asset value as grocery anchorage centers often warrant a lower capitalization rate when valuing the center due to the market's recognition of their stable income potential. Our development projects continue to deliver a steady stream of diversified net operating income, contributing significantly to our operational performance. Our progress continues to be excellent at the well, our flagship mixed-use development in Toronto's downtown west. The retail component is 94% leased with more than half of the space open and operational. We anticipate that the majority of the remaining retail tenants will commence operations in the coming months. There's likely no greater example of Rio Canteen's vision and talent than the well. We're excited to advance the evolution of Toronto's food scene with the upcoming opening of Wellington Market at the end of this month. Wellington Market will be fully licensed and house more than 50 food and beverage merchants. The diversity of the food offering together with the planned programming and activation of the market will fuel further excitement for the already busy well. The offering will be further complemented by additional restaurants in the complex that will open in the coming months. In the face of a volatile macroeconomic environment, we recognize the impact of inflation and interest rates on our sector. Our strategy is thus anchored in building a resilient portfolio that ensures steady growth. Quality is our mantra. It mitigates risk and fosters growth. Our approach is patient and strategic, negating the need for hasty asset sales, rushed leases, or development under suboptimal conditions. Retail evolved. We crafted a portfolio designed to absorb macroeconomic reverberation. A tight leasing market and strong demand for our space, combined with our team's extensive experience, fosters positive tension in lease negotiations, safeguards occupancy levels, and supports overall productivity and profitability. I'll now take a moment to discuss our balance sheet. In the quarter, our net debt to EBITDA ratio improved to 9.17 times, down from 9.28 times at the end of 2023. This decrease represents the advancement of the downward trajectory that will take us to our target of eight to nine times net debt to EBITDA. In a moment, Dennis will provide some details to support our confidence in achieving this target. However, I want to note that beyond the secure plan, we have to reduce net debt to EBITDA to eight to nine times. Our portfolio also has a considerable amount of development density and low cap rate properties. These assets provide RioCan with incremental levers, such as disposition, to further enhance financial flexibility should attractive opportunities arise. While we remain focused on our operations, balance sheet, and development pipeline, we're also committed to responsible growth. This has been well evidenced by the numerous accolades we've received regarding our advancements in the areas of sustainability, ethical governance, and fostering a positive culture. Before I turn the call over to Dennis, I reiterate that the dynamics of retail real estate are in our favor, creating long-term demand for our products. Our consistency, vision, and demonstrated commitment to responsible growth will continue to benefit our unit holders while ensuring the trust stability. RioCAN operates a top tier retail portfolio in the country's most desirable markets. We remain dedicated to prudent financial management, backed by an exceptional team. And speaking of which, I'll now turn the call over to Dennis.