RioCan Real Estate Investment Trust

Good day, ladies and gentlemen, and welcome to the Rio Can Real Estate Investment Trust fourth quarter 2024 conference call and webcast. As a reminder, this conference call is being recorded. 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 statements. 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, GAF, 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 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. I will now turn the call over to RioCAN's President and CEO, Jonathan Gitlin.

Thanks, Jennifer, and thank you all for joining RioCAN's senior management team today. 2024 marked RioCAN's 30th anniversary. This milestone provided the opportunity to demonstrate that we put together an irreplaceable portfolio of high quality properties. Twenty twenty four was a watershed year for Rio can featuring numerous record breaking results for the trust. We leveraged every opportunity to strengthen our assets, foster strategic growth and create value. We invested in making our business even more fit for the future. We achieved this through technological advancements and a strategic restructuring designed to optimize the organization and support future growth. I speak to you today from a position of strength with the insights and knowledge gained from our extensive history, clear vision, and proven results. I'll spend some time today unpacking our results in the context of our strategy and the backdrop in which we are operating. The consistent theme throughout is We did what we said we would do. We achieved record breaking operational results and capitalized on opportunities to transition lower growth leases into high quality tenancies. We completed a higher proportion of the condo unit sales than initially projected and we continue to drive value through rezoning and enhancing existing entitlements and committed that we will not initiate new capital intensive construction projects for this foreseeable future. We accessed diverse funding sources, kept our payout ratio low, maintained ample liquidity, and reduced our net debt to EBITDA within our target range of eight to nine times. Throughout these achievements, we upheld our commitment to responsible growth, sustainability, and ethical governance, including receiving an ESG rating upgrade to AA from MSCI and recording top performance for employee engagement for the third consecutive year. We've long noted the scarcity in premium retail space, particularly the kind that comprises RioCAN's portfolio. Stringent zoning laws and elevated construction costs are likely to perpetuate the situation. An operating environment characterized by limited retail space and intense demand for high quality locations creates a protected marketplace favoring a platform of RioCAN's caliber. Mike Wilberg . Reocaine has the unique combination of a top tier team and ideal locations within Canada's six largest and most densely populated cities. 94% of our income is generated from these major markets. This leaves the trust perfectly positioned to take advantage of the existing market dynamics. It's taken intense focus and heavy lifting to get to this point and it's paying dividends. Here's why. The locations where we are concentrated have exceptional demographics and growing populations. This creates meaningful demand drivers for our space and attracts top-tier tenants. These factors, in turn, lead to exceptional operational outcomes such as those we've delivered. The quest for retail space, or more precisely, RioCans space, resulted in a committed retail occupancy of 98.7% and a blended leasing spread of 18.7% for the year. 2024 had four consecutive quarters of double-digit leasing spreads. We finalized approximately 4.8 million square feet of leases, including 1.5 million square feet of new leases. The average net rent of the new leases was $26.17. This is 17% higher than REOCAN's average net rent. We also further enhanced our income quality during the year, with 88% of our rental revenue now coming from strong and stable tenants. These retailers draw consistent traffic, enhance cross-shopping experience, provide sturdy and growing income, and increase asset value. Understandably, there's been concerns about the impact of tariffs on the Canadian economy. Predicting next steps or quantifying the impact right now, well, it's virtually impossible. However, I can say that the successful execution of RioCAN strategy has resulted in a portfolio of assets and tenants that, while not totally immune to the impact of tariffs, are certainly well suited to withstand them and any accompanying economic downturn. It's taken extensive efforts to improve the resilience and growth profile of our portfolio. These improvements are to ensure predictability and stability in precisely these types of situations. We also recognize that the condo market is currently under strain. First, it's important to note that we're not relying on the disposition of unsold inventory to achieve our balance sheet objectives. That said, there's been a significant amount of attention paid to the condo units in Rio Canes inventory that have been pre-sold. When it comes to these pre-sold units, I do not perceive a material risk. In our last earnings call, it was mentioned that the proof would be in the pudding when it came to our ability to close condominiums in a challenged market. Well, I'm pleased to report that we achieved significant success with our condo and townhouse interim occupancies. 98% of the 372 expected fourth quarter interim occupancies have been completed. RioCan expects approximately $530 million of sales revenue from the remaining units in our five active condominium construction projects. Approximately $430 million of the expected revenue, or 85% of units, have been pre-sold. The vast majority of these condos were sold before the market peak, and the closing prices are below current market value. They are also subject to legal purchase agreements with buyers who pass credit checks and made average deposits of close to 20% or on average $160,000 each, all of which motivates buyers to complete their purchases. In concert with the factor I just mentioned, Our performance thus far augurs well for the remainder of our pre-sold condo units. For Rio Can Living's rental portfolio, you'll recall that one objective was to create sufficient scale to provide flexibility and options. This objective was achieved in 2024 with Rio Can Living assets valued at over $930 million. The sale of Strata for a price above IFRS value in Q4 2024 highlights and substantiates the immense value of our residential rental properties. As we consider our next steps, we'll continue to benefit from the robust NOI generated by the portfolio. Residential rental operations delivered 5.1% same property NOI growth in 2024. Ultimately, the RioCan Living Platform, whether rental or condo, serves as a strategic lever to strengthen RioCan's balance sheet and portfolio and amplify growth in the near future. Before turning the call over to Dennis, I want to emphasize that we aren't just encouraged by the consistently strong results generated by RioCAN's high-quality, major market, necessity-focused portfolio. Our confidence in the fundamental strength of RioCAN's portfolio and platform has led us to buy 3.2 million RioCAN units at a weighted average price of $18.51 per unit for a cost of $60 million. The belief is that the market price of Rio Cane units does not accurately reflect the intrinsic value and prospects of the business, making the purchase of our own units, or said better, our own portfolio, a highly attractive investment. We funded the unit buyback through the sale of two lower growth assets. RioCAN's 2024 results again demonstrate our excellent execution of a sound strategy. We've shown operational strength, improved efficiency, and achieved our financial objectives. We've maintained an accelerated positive momentum through fortifying activity that enhances the trust, stability, and fuels future growth. Consequently, we're pleased to announce that RioCAN's Board of Trustees has approved a 4.3% increase in the distribution payout for our valued unit holders for the fourth consecutive year. Starting with the February distribution, which is paid in March, annual distributions will be increased to $1.16 per unit. With our solid foundation and promising growth prospects, we anticipate continued cash flow growth for our unit holders and sustained performance in 2025 and beyond. While acknowledging significant macroeconomic volatility introduces a certain level of uncertainty, based on what we currently know, we expect 2025 FFO to be in the range of $1.89 to $1.92, and commercial same property NOI growth of approximately 3.5%. We also expect to maintain a payout ratio of approximately 60%. We look forward to sharing additional details regarding our vision and strategy in an investor day, which will be held on May 21st, 2025. To conclude, I'll revisit some of the themes from today's discussion. RioCan has a premier retail portfolio in Canada's most desirable markets. Favorable retail real estate dynamics create long-term demand for our properties. Our strategy is anchored in a resilient retail portfolio that ensures steady growth and minimizes risk. We have several mechanisms to drive growth and to accelerate the repatriation of a tremendous amount of capital. We're committed to prudent financial management, backed by an excellent team. The deliberate repositioning of our portfolio, tenants, and platform has enhanced efficiency, effectiveness, and resilience. Our consistency, vision, and commitment to responsible growth will continue to benefit our unit holders while ensuring the trust's stability. And with that, I will turn the call over to Dennis.