RioCan Real Estate Investment Trust (RIOCF) Q4 2022 Earnings Call Transcript

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RioCan Real Estate Investment Trust (OTCPK:RIOCF) Q4 2022 Earnings Conference Call February 16, 2023 10:00 AM ET

Company Participants

Jennifer Suess - SVP, General Counsel ESG and Corporate Secretary

Jonathan Gitlin - President and CEO

Dennis Blasutti - CFO

John Ballantyne - Chief Operating Officer

Oliver Harrison - Senior VP, Operations

Conference Call Participants

Mario Saric - Scotiabank.

Dean Wilkinson - CIBC

Pammi Bir - RBC Capital Markets

Shalabh Garg - Veritas Investment Research Corporation

Sam Damiani - TD Securities


Good day, ladies and gentlemen, and invited to nan RioCan Real Estate Investment Trust Fourth Quarter 202 Conference Call. At this time, each participants are successful a listen-only mode. After management's presentation, location will beryllium a question-and-answer convention and instructions will travel astatine that time.

I would now for illustration to manus nan convention telephone complete to Jennifer Suess, Senior Vice President, General Counsel, ESG and Corporate Secretary. You whitethorn begin.

Jennifer Suess

Thank you, and bully morning, everyone. I'm Jennifer Suess, Senior Vice President, General Counsel, ESG and Corporate Secretary of RioCan. Before we begin, I would for illustration to tie your attraction to nan position materials that we will mention to successful today's call, which were posted together pinch nan MD&A and financials connected RioCan's website yesterday evening. Before turning nan telephone over, I'm required to publication nan pursuing cautionary statements.

In talking astir our financial and operating capacity and successful responding to your questions, we whitethorn make forward-looking statements, including statements concerning RioCan's objectives, its strategies to execute those objectives arsenic good arsenic statements pinch respect to management's beliefs, plans, estimates and intentions and akin statements concerning anticipated early events, results, circumstances, capacity aliases expectations that are not humanities facts. These statements are based connected our existent estimates and assumptions and are taxable to risks and uncertainties that could origin our existent results to disagree materially from its conclusions successful these forward-looking statements.

In discussing our financial and operating capacity and successful responding to your questions, we will besides beryllium referencing definite financial measures that are not mostly accepted accounting rule measures, GAAP nether IFRS. These measures do not person any standardized meaning prescribed by IFRS and are, therefore, improbable to beryllium comparable to akin measures presented by different reporting issuers. Non-GAAP measures should not beryllium considered arsenic alternatives to nett net aliases comparable metrics wished successful accordance pinch IFRS arsenic indicators of RioCan's performance, liquidity, rate flows and profitability. RioCan's guidance uses these measures to assistance successful assessing nan trust's underlying halfway capacity and provides these further measures truthful that investors whitethorn do nan same. Additional accusation connected nan worldly risks that could effect our existent results and nan estimates and assumptions we applied successful making these forward-looking statements, together pinch specifications connected our usage of non-GAAP financial measures tin beryllium recovered successful nan financial statements for nan play ended December 31, 2022, and management's chat and study related thereto arsenic applicable, together pinch RioCan's astir caller yearly accusation shape that are each disposable connected our website and astatine

I will now move nan telephone complete to our President and CEO, Jonathan Gitlin.

Jonathan Gitlin

Thanks truthful much, Jennifer, and acknowledgment to everyone that's taking nan clip to subordinate america today. It's - you've sewage RioCan's elder guidance squad astir nan table. And overmuch for illustration nan remainder of 2022, nan 4th fourth demonstrated our portfolio's quality, our tenants' resilience and our team's bonzer extent and capability.

By each measure, RioCan's good positioned assets, beardown unchangeable tenant operation and transportation of developments drove beardown results successful 2022. These results bespeak our attraction connected nan pillars that support our 5 twelvemonth plan, resilient retail, customer centrism, intelligent diversification and responsible growth.

And erstwhile I deliberation astir 2022, nan connection that comes to mind is significant. It was earmarked by important challenges and disruption, including pandemic-related restrictions astatine its commencement and utmost ostentation and liking complaint increases arsenic nan twelvemonth progressed. At nan aforesaid time, it was a twelvemonth of important advancements for RioCan.

At our February Investor Day past year, we introduced our strategical roadworthy representation pinch 5 twelvemonth financial maturation targets. We group eager goals, and I'm pleased to stock that contempt ongoing economical turbulence, our 2022 capacity has america connected nan correct way to execute our targets.

Our awesome marketplace necessity-based portfolio generated beardown operating results. The results bespeak years of prudent dispositions of little maturation assets and nan strengthening and diversification of our portfolio and income. These moves person group america up for nan transportation of sustainable maturation arsenic we advancement into nan adjacent 4 years of our strategical plan.

Our improvement programme besides had an unprecedented twelvemonth of fueling growth. I'll speak much astir this successful a minute, but our programme achieved a watershed infinitesimal pinch nan worth of projects we completed successful 2022, outpacing what we spent.

Let's first dive into our operating results, which were awesome successful immoderate conditions, but moreover much truthful successful nan look of 2022's marketplace dynamics. Our committedness to resilient unit and customer centrism is yielding results. RioCan's assets are located successful Canada's awesome markets successful densely populated areas pinch precocious mean family incomes of $135,000 and an mean organization of 250,000 group wrong a 5 kilometer radius.

The portfolio has ne'er been much protect pinch astir 86.5% of our nett rent generated from beardown and unchangeable tenants. Same-property NOI for nan twelvemonth grew by 4.3%. We achieved nan higher extremity of our guidance scope pinch FFO per portion of $1.71, an summation of 7%.

When we portion retired onetime - sorry, erstwhile we portion retired restructuring expenses, FFO per portion was $1.73. New and renewed leases totaled 5 cardinal quadrate feet. We ended nan twelvemonth pinch unit committed occupancy of 97.9% and a renewal retention ratio of 91.5%. Tenant retention reached a caller precocious of 93.5% successful nan 4th quarter.

The blended leasing dispersed for nan twelvemonth was 9%, caller leasing spreads of 12.3% bolstered this result. Rent per quadrate ft for caller leasing successful nan 4th fourth was $24.10 supra nan mean nett rent for nan portfolio of conscionable beneath $21. The operation of precocious retention, leasing spreads and rising mean nett rent allows america to return tenant failures, specified arsenic was precocious announced by Bed Bath & Beyond and Stride.

I'm going to region for a infinitesimal present to reside immoderate questions you'll apt person astir nan effect of Bed Bath Beyond and its caller CCAA filings. First, I'll show you that this result was very good forecast, and we took proactive steps to mitigate and reside it. I'll besides show you that it was factored successful erstwhile we developed our 2023 guidance.

RioCan's 13 Bed Bath locations, astir are successful accepted midsized boxes that are successful precocious demand. Over nan past respective months, RioCan has been successful discussions pinch galore tenants that person expressed liking successful nan abstraction is each of whom service arsenic beardown postulation drivers. Once there's clarity connected nan CCAA process, we expect to capable nan vacated spaces quickly and successful astir cases, astatine higher rents.

In nan interim, we person 2 mitigants against nan contiguous impact. First, we'll person business rent done nan liquidation process, which is expected to return 8 to 12 weeks. We'll activity towards finalizing caller leases during this clip and successful doing so, minimize downtime. And second, successful summation to nan mechanisms nether nan Canadian CCAA process, we besides person an indemnity from nan U.S. parent. We will prosecute each remedies disposable to america pinch vigor.

Now moving backmost to nan bigger picture, our results show that tenants worth nan abstraction and work RioCan provides. They'll proceed to covet our space, peculiarly successful nan supply-constrained environment. This allows america to beryllium assured successful our expertise to find compelling replacement tenants that heighten nan unit operation astatine our shopping centers arsenic we person ever done. It besides augurs good for RioCan's semipermanent sustainable growth.

We proceed to spot nan transactional worth of our portfolio. The hallmark of RioCan's disposition programme backmost successful 2021 was raising businesslike superior by opportunistically capitalizing connected nan clear disconnect betwixt nationalist and backstage marketplace valuations. Now successful 2022, we shifted to strategically disposing assets to heighten nan value of nan portfolio.

RioCan raised adjacent to $460 cardinal successful equity done plus income successful nan year. The 2022 dispositions included secondary marketplace assets and 2 enclosed centers, nan waste of which improved our wide portfolio value and generated superior that tin beryllium recycled into much productive uses.

2022 besides saw important advancements for RioCan Living's residential rental portfolio pinch nan transportation of our Latitude and Strata buildings successful nan first quarter, nan completion of Luma and Rhythm successful Ottawa successful nan past half of nan twelvemonth and nan acquisition of marketplace Laval backmost successful February.

RioCan Living presently has astir 2,200 completed purpose-built residential rental units. The units are dispersed crossed 10 buildings successful Toronto, Montreal, Ottawa and Calgary. Supply is constrained successful these markets, and there's an summation successful request owed to nan return to in-person studies, accrued immigration, debased unemployment and cooling location sales.

Leasing velocity continues to beryllium excellent. Tenants are drawn to good located, amenity-rich rental accommodations pinch easy entree to transit. The 8 RioCan Living buildings that person reached stabilization are 95.7% leased and lease-up is progressing very good astatine Luma and Rhythm.

At nan extremity of 2022, RioCan Living besides had 2,575 condominium and townhouse units nether construction. Of nan six progressive condo building projects, 85% of nan units person been presold representing 95% of pro forma revenues. All presales person sizable deposits associated pinch them.

Between 2023 and 2026, these projects are expected to make mixed income gross of complete $860 million. Proceeds from trading condos and townhomes mixed pinch superior repatriated from plus dispositions gives america nan elasticity to self-fund higher-value, mixed-use improvement projects, fortify our equilibrium expanse and opportunistically repurchase RioCan units astatine charismatic levels pinch immoderate excess proceeds.

RioCan's intelligent diversification continues to advancement arsenic nan improvement squad executes galore mixed-use projects successful awesome markets crossed Canada. In nan year, we completed 651,000 quadrate feet of high-quality developments and 2 condo and townhouse projects pinch a mixed worth of complete $688 million, outpacing our spending, which was astir $427 million. We expect to present a akin magnitude of quadrate footage and worth successful 2023.

In our property release, we highlighted 5 projects that we are focused connected arsenic portion of our adjacent activity of development, aptly called nan Focus 5. These 5 projects are each large-scale transit-oriented mixed-use developments successful nan GTA. Each has standard that provides options to create worth done development, partnerships and aerial correct sales, which will thrust maturation for years to come.

We besides person a area improvement pipeline of 15 cardinal quadrate feet and person submitted applications for an further 8 cardinal quadrate feet of mixed-use developments, each successful nan GTA. We create worth by advancing projects done nan zoning process and return a disciplined attack to find further finance erstwhile they're shovel-ready.

We besides made important advancements successful our committedness to responsible growth. Our equilibrium expanse remains strong. We ended nan twelvemonth pinch $1.5 cardinal successful liquidity and an $8.3 cardinal unencumbered plus pool. We tactically leveraged this unencumbered excavation and refinance pinch secured mortgages for nan astir cost-effective capital.

We unveiled nan caller ESG strategy and a scheme to present science-based targets for our operations. Other accomplishments successful 2022 see ranking first among our Canadian peers successful nan 2022 GRESB existent property appraisal maintaining our first spot rank among Canadian peers and nan GRESB nationalist disclosure appraisal pinch an A standing for a 4th consecutive twelvemonth and expanding nan number of properties achieving BOMA BEST certifications specified that complete 65% of nan gross leasable area of RioCan's portfolio crossed Canada is now BOMA BEST certified.

We were besides recognized arsenic 1 of Greater Toronto's apical employers and achieved outstanding engagement results of 90% successful our yearly worker engagement survey, thing we are each very proud of. We proceed to lead nan measurement successful integrating responsible maturation and ESG champion practices successful everything we do. These efforts lead to contiguous results and besides service to bolster sustainable success.

Now arsenic I said erstwhile I started, RioCan's 2022 capacity was significant. It demonstrated our strength, which let america to look beyond short-term turbulence and attraction connected successful outcomes for nan agelong term. We entered 2023 pinch subject pointing to an economical slowdown. However, we entered nan twelvemonth from a position of strength, good positioned to flooded nan existent volatility while staying successful nan people of driving early maturation and worth creation.

We're poised to win successful immoderate situation and to use from nan favorable supply-demand dynamics wrong nan Canadian unit existent property sector. At nan aforesaid time, our established improvement level continues to substance early growth.

Balancing heightened uncertainty pinch nan spot of our instauration and continued request for our premier locations, we expect our FFO per portion to scope betwixt $1.77 and $1.80 for 2023. This is successful statement pinch our 5 twelvemonth target compounded yearly maturation of 5% to 7%. We expect same-property NOI maturation of 3% and an FFO payout ratio of betwixt 55% to 65%.

Development spending for 2023 is expected to beryllium betwixt $400 cardinal to $450 cardinal pinch reinforced assurance successful our competitory advantage, I'm pleased to denote different distribution increase.

RioCan's Board of Trustees has approved a 6% summation to its monthly distributions to unitholders from $0.085 to $0.09 per unit, opening pinch nan distribution declared successful February 2023 and payable successful March of 2023, bringing RioCan's annualized distribution to $1.08 per unit. This summation is aligned pinch nan extremity of delivering consistent, sustainable maturation for our unitholders, which we communicated successful our Investor Day past year.

We look nan early assurance that we strategically and responsibly negociate each facet of our business complete which we person control. Our efforts complete nan years person group RioCan up for success, and our attraction remains connected nan agelong term. We're assured successful our maturation trajectory and nan ongoing request for our scarce and high-quality existent estate.

The objectives successful our 5 twelvemonth scheme were established pinch intent and condemnation that successful performance pinch RioCan's galore differentiating attributes are achievable successful almost immoderate environment.

With that, I'm going to move nan telephone complete to Dennis to return you done our equilibrium expanse and supply penetration into really it continues to support our value and growth.

Dennis Blasutti

Thank you, Jonathan, and bully greeting to everyone connected nan call. 2022 was a twelvemonth of fantabulous capacity for RioCan. We drove beardown results done accordant and focused execution of our strategy that we laid retired astatine our Investor Day past year. This was made imaginable by an exceptional squad that strives to maximize nan worth of our high-quality portfolio that is located successful Canada's astir charismatic markets.

In my comments today, I'll supply further item connected our 2022 results, our 2023 guidance and item our equilibrium expanse strength. Our 2022 FFO per portion of $1.71 was an summation of $0.11 aliases 7% complete nan anterior year. This summation was driven by our halfway maturation drivers, which are same-property NOI maturation and improvement deliveries.

Same-property NOI maturation of 4% added $0.08 per unit. Development deliveries, including maturation successful our residential portfolio added $0.05 per unit. Higher liking rates partially offset these increases. However, this effect was muted by our early refinancing and hedging activities arsenic these measures resulted successful an effective liking complaint connected our refinancing of our 2022 maturities of 3.3%, importantly beneath market.

We besides benefited from higher liking income connected floating complaint indebtedness receivables. As a result, nan nett simplification caused by higher liking rates is only $0.01 per unit. Results were besides impacted by reduced FFO associated pinch assets that were sold, but location was an offset present arsenic well. The accretive effect of portion buybacks acquired utilizing excess proceeds from our distribution program. The nett FFO simplification related to assets sold was offset by nan portion repurchases was a $0.01 per portion impact.

Finally, our 2022 FFO included $4.3 cardinal of restructuring costs that we do not expect to occur. Our Q4 2022 FFO was driven by nan aforesaid factors arsenic nan afloat twelvemonth results. We reported a alteration of $0.04 arsenic compared to Q4 2021 owed to nan timing of inventory gains arsenic Q4 2021 included important inventory gains. Excluding nan effect of this variance, FFO per portion for Q4 2022 was $0.02 higher than Q4 2021.

Looking up to 2023, we provided FFO guidance successful nan scope of $1.77 to $1.80 per unit. In our 5 twelvemonth exemplary from Investor Day, nan target of 5% to 7% FFO maturation CAGR assumed a normal business situation successful each year. The reality is that location will beryllium ups and downs crossed nan years. We achieved nan precocious extremity of nan guidance scope successful 2022 and little successful 2023. The mean crossed these 2 years remains connected track. We reiterate our 5 twelvemonth expectations arsenic beardown NOI maturation is expected to mitigate nan effect of liking complaint volatility.

Similar to 2022, our halfway maturation drivers will substance our 2023 FFO increase. Our 2023 scheme targets 3% same-property NOI maturation from commercialized properties arsenic beardown leasing successful 2022 will thrust income successful 2023. We besides expect double-digit rental maturation from our stabilized residential properties.

We expect important contributions from our 2022 and 2023 improvement deliveries, which totaled $1.2 cardinal successful worth transportation to income-producing properties. Stabilized NOI associated pinch these deliveries is expected to beryllium astir $52 million, which will ramp up complete nan people of 2022 - sorry, 2023 and 2024. We besides expect our G&A to beryllium somewhat little successful 2023 than 2022 arsenic costs cost pressures were neutralized by nan 2022 restructuring that I mentioned earlier.

Two factors are expected to partially offset these positives. First, liking complaint disbursal will person an effect successful 2023. This effect will beryllium partially muted by nan aforementioned 2020 refinancing and higher liking income. We person astir $1 cardinal owed successful 2023 spaced passim nan year, which is presently astatine an mean contractual liking complaint of 3.75%.

For our 2023 plan, we person assumed that these are refinanced astatine a blended liking complaint of 5%. This is based connected an assumed weighted mean crossed secured mortgages, CMHC mortgages, slope loans and unsecured debentures. We person already taken steps to derisk this assumption. In January, we refinanced $200 cardinal slope word loans pinch a 3 twelvemonth indebtedness that was swapped to hole astatine 4.9%.

We besides entered into a 7 twelvemonth hedge related to our planned $200 cardinal April refinancing, locking successful nan underlying GOC constituent astatine 2.87%. We are not liking complaint speculators. Rather, we saw nan opportunity to fastener successful rates that were beneath nan fund assumptions that support nan guidance provided today, taking immoderate consequence disconnected nan table.

The 2nd offset to our FFO maturation is that we disposed of $460 cardinal worthy of assets successful 2022 astatine a weighted mean headdress complaint of 7.7% [ph] These plus income while astatine a higher yield, served to amended our portfolio quality. For example, done our distribution program, we person reduced our improved promenade vulnerability to only 4% of NAV.

In isolation, 2022 dispositions will trim 2023 FFO, but this will beryllium partially offset arsenic we redeploy disposition proceeds to higher return initiatives. $204 cardinal of nan distribution proceeds were allocated to buyback units connected an accretive basis, $90 cardinal was allocated towards acquisitions pinch nan equilibrium allocated towards developments. Because there's a clip lag betwixt nan finance successful improvement and resulting income, we expect a mini resistance connected short-term FFO. We judge that this is simply a mini value to salary for a divesting of little quality, little maturation assets to put successful exceptionally high-quality developments that will thrust semipermanent growth.

Finally, I want to stress that nan guidance - complaint provided accounts for nan consequence of a mean recessionary situation successful 2023, including nan consequence of tenant failures specified arsenic Bed Bath & Beyond, which Jonathan addressed earlier.

With nan 6% distribution summation we announced today, we expect to beryllium astir nan midpoint of our FFO payout ratio target of 55% to 65%. As we illustrated astatine our Investor Day past year, pinch our target payout ratio level, RioCan's operating income covers what we mention to arsenic our halfway priorities, namely, our distribution, attraction CapEx, revenue-enhancing CapEx and nan mostly of nan equity required for our improvement programme pinch nan equilibrium being covered by residential inventory proceeds.

Now 1 twelvemonth executing that plan, we tin show really we use this approach. I would promote you to reappraisal page 28 of our investor presentation, which shows nan backing of our halfway priorities per our scheme arsenic good arsenic nan allocation of distribution proceeds. With our payout ratio group astatine a level astatine which we tin money some our distribution and maturation initiatives, we expect to sustainably summation our distribution for years to come.

Turning to our equilibrium expanse and starting pinch nan equity component. Our nett book worth per portion was $25.73 astatine nan extremity of 2022, $0.19 per portion higher than nan anterior year. In 2022, we recorded adjacent worth losses connected finance properties of $241 million, which reduced our nett book value. This nonaccomplishment was much than offset by 3 superior factors.

First, arsenic a consequence of our blimpish payout ratio, we clasp operating income aft distributions, which allows america to compound worth connected our equilibrium sheet. Second, there's a affirmative effect connected nett book worth per portion resulting from our portion repurchases. And third, we recorded pinch an equity $86 cardinal of gains related to nan hedges I discussed earlier.

Turning to nan adjacent worth changes. We statement that wrong nan $240 cardinal adjacent worth loss, we had $409 cardinal write-down related to higher headdress complaint assumptions. This is partially offset by $160 cardinal of gains owed to higher income, reflective of our beardown leasing activities and improved portfolio.

Our weighted mean headdress complaint astatine nan extremity of 2022 was 5.33% compared to 5.29% astatine nan extremity of 2021. It's worthy record [ph] to unpack this 4% - sorry, 4 ground constituent increase. During 2022, we adjusted our headdress complaint assumptions, driving our comp complaint up by 17 ground points. However, this was offset by an 11 ground constituent alteration owed to nan waste of higher-than-average headdress complaint assets had a 2 ground constituent alteration from nan finance successful lower-than-average headdress complaint improvement and acquisitions.

This is nan continuation of a inclination that has been driven by our ongoing betterment successful portfolio quality. For example, our weighted mean headdress complaint of - arsenic astatine Q3 2018, erstwhile liking rates were overmuch person to today's levels was 5.51%, 18 ground points higher than today. However, this quality includes a 34 ground constituent effect from nan operation of dispositions of lower-quality assets and investments successful higher value developments.

Said different way, connected a same-property basis, our weighted mean headdress complaint coming is 16 ground points higher than it was backmost successful 2018. The betterment successful portfolio value has led to nan alteration successful nan header headdress rate. Clearly, erstwhile it comes to nan worth of RioCan assets, nan liking complaint and headdress complaint situation is only portion of nan story. The continuous betterment successful our portfolio value and income maturation complete nan past number of years has been a important driver of value.

Over nan agelong term, we expect our rate flows will proceed to thrust maturation successful our equity worth fixed our beardown positioning of our high-quality portfolio that will use from proviso and request tailwinds. We besides expect to unlock worth complete clip for our early improvement pipeline, which is presently weighted connected our equilibrium expanse astatine $14 per quadrate phone.

Finally, we proceed to run from a position of financial strength. We ended nan twelvemonth pinch $1.5 cardinal of disposable liquidity. This mixed pinch our well-laddered indebtedness maturity floor plan and ample unencumbered plus excavation ensures that we are capable to negociate financial consequence and besides return advantage of opportunities.

Our nett debt-to-EBITDA vanished nan twelvemonth astatine 9.5 times. As we signaled past quarter, this is up somewhat from Q3 2022 arsenic precocious inventory gains successful Q4 2021 rolled retired of our 4 4th trailing EBITDA measure. We expect to proceed nan inclination towards our target of 9 times arsenic EBITDA from developments continues to ramp up, and our income-producing properties proceed to make growth.

With that, I will move nan telephone complete to nan usability for questions.

Question-and-Answer Session


Thank you. [Operator Instructions] The first mobility is from nan statement of Mario Saric pinch Scotiabank. Your whitethorn proceed.

Mario Saric

Hey. Good morning, everyone. First mobility is much of a broader - nan first mobility is much of a broader question. If you had to prime benignant of RioCan's 2 apical strategical priorities for 2023 that if you were to execute those, you'd see '23 a successful twelvemonth successful your eyes? What would those 2 priorities be?

Jonathan Gitlin

Well, if I'm looking astatine for illustration benignant of broader strategies, I deliberation obviously, nan continuous transportation of our improvement finishes is key, and that includes finishing [ph] nan good connected clip because those really do - we saw this twelvemonth really do lend a important magnitude of growth, FFO maturation and NAV growth, each of nan cardinal elements. And also, of course, erstwhile you extremity paying for them, you don't person immoderate much adaptable indebtedness done nan building loans.

So I would opportunity that nan continuous accomplishment and conclusion of those projects is captious for RioCan. And then, of course, I tin spell - I tin grow further connected developments to opportunity that we would for illustration to besides commencement nan projects that are successful our pipeline and proceed moving nan ones on that are successful there. But to me, it's really astir nan completions and doing them connected time.

And past I would opportunity nan 2nd is, look, we're ever focused connected FFO maturation and really churning retired a important aliases arsenic overmuch productivity retired of our existing portfolio arsenic we can. And if I look backmost to our pillars of customer centers and reimagining retail, I deliberation we've done a very bully occupation of allocating nan due magnitude of superior to improving our offering, some connected nan work level and astatine nan spot level to make our properties worthy nan accrued rent that we are seeking from our various tenants. So I would opportunity that, that is simply a continuous and very important privilege for us.

I would beryllium remiss, though, successful saying that we're not focused connected our equilibrium expanse and our indebtedness simplification and nett indebtedness to EBITDA for america is critical, and we will proceed to put a batch of accent down achieving that 9 times nett indebtedness to EBITDA, 9 times aliases below. I cognize I gave you 3 there, Mario, but I couldn't cognize myself.

Mario Saric

Fair enough. That works. That's adjuvant color. Thank you. And past my 2nd question, conscionable coming backmost to nan guidance and Bed Bath & Beyond, specifically. Thank you for immoderate of nan incremental colour you provided astatine nan onset.

Can you conscionable possibly springiness america a spot much consciousness of, again, wrong nan guidance, really you're treating those 13 locations successful position of - I cognize you mentioned you expect to really beryllium astatine a higher rent, but conscionable successful position of timing connected nan merchandise and really galore stores you deliberation you whitethorn person to merchandise and truthful connected and so?

Jonathan Gitlin

Sure. I'm going to move that mobility complete to John Ballantyne, our Chief Operating Officer, who tin springiness you immoderate bully colour connected it. And I should besides say, I said 13, but it's technically '14 because we person a mixed Bed Bath and bargain buy Baby astatine Colas [ph] So again, it could spell either way. But anyways, John, why don't I move it complete to you?

John Ballantyne

Hey, Mario. Yes. So we've sewage technically 13 locations. They are CCAA correct now. We don't afloat understand what that means. We presume it's going to beryllium a afloat liquidation, and we'll get each of those stores back. But that process is going to get - they've really conscionable precocious applied to widen nan authorities until May 1. So we'll proceed to person business rents complete that time. We've sewage our afloat February rent correct now, and we'll proceed to get those until they - if they disclaim nan leases, they could very good beryllium going done a process correct now of trying to either waste stores aliases waste nan full portfolio of stores. We won't cognize that correct away. But ultimately, if they are doing that, they are going to person to travel to nan landlords.

So successful nan meantime, we are moving diligently to find backfill tenants. It's ne'er bully timing to get abstraction back, but we really consciousness that correct now is simply a spot of a beneficial clip for RioCan for a number of reasons.

First of all, arsenic Jonathan noted, we person known these that person been coming backmost for rather immoderate clip aliases that Bed bath would beryllium filing. We person been speaking to retailers. We precocious participated successful nan ICSC convention successful Whistler successful January. And rather frankly, a bully fistful of nan retailers, their first questions were, tin we talk astir your Bed Bath boxes? Our unit occupancy is 98% correct now. And location is simply a shortage of [Technical Difficulty] mean of 20.98 [ph] And if you look astatine nan deals we did complete nan past 4th of 2022, we were averaging $24 a quadrate foot. So we judge there's room there.

Also bully timing, conscionable based connected nan reinvestment we put into a batch of our awesome marketplace assets wherever these are located and our attraction connected customer centrism. We reorganized our leasing squad past twelvemonth and our tenant building squad to reposition them much arsenic a tenant acquisition team, which is, a, going to supply a amended merchandise to put caller tenants into but besides to person much of a achromatic mitt acquisition for nan retailers that we're putting successful place.

Lastly, if we do get those spaces back, we are shedding some, I would say, difficult leases from a alternatively difficult U.S. tenants. They do person capped costs. They do person a batch of restrictions and exclusive built into them, which has rather frankly, impacted our expertise to lease akin uses successful a bunch of our centers.

So each successful all, of course, not awesome news erstwhile we're losing a larger tenant, but I deliberation we're successful very bully style to backfill them comparatively quickly, peculiarly fixed nan strides we've taken truthful acold and nan magnitude of nan CCAA authorities period.

Jonathan Gitlin

And I'll conscionable reemphasize, Mario, that this was because we had a bully consciousness astir this, it was incorporated into nan guidance and our 2023 business plan. And we do person nan U.S. genitor company, which, I mean, I'm not judge what happens there, but astatine slightest it's an other measurement we tin take.

John Ballantyne

Maybe I'll conscionable wrap immoderate numbers astir nan sensitivity analysis. So it's $8 cardinal of revenue. As Jon mentioned, we've received February rents already and expect occupancy rents for different it sounds for illustration 2 to 3 months, depending connected nan timing of nan liquidation. So you return nan $8 billion, you backmost disconnected astatine slightest a mates of million, $2 cardinal to $3 cardinal from that gives you a consciousness of what nan benignant of downside script that we would return and sensitize done our budget, and that assumes if you had a downside script that assumes [Technical Difficulty] we don't do our guidance ranges that informs that sensitivity study informs really we travel up pinch nan range.

Jonathan Gitlin

Yes. And I would conscionable add, akin to what we went done pinch Target, it's nan opportunity to make our portfolio better. A bunch of nan liking we're getting early connected is really immoderate grocery. As we each know, grocers are desperately looking for much abstraction to summation their footprint successful Canada. And rather frankly, we've sewage a bunch of centers that are presently not grocery-anchored, wherever they're consenting to take, I would say, a small much unconventional abstraction aliases perchance smaller space. In Q4 of '22, we finalized nan Metro woody astatine our RioCan halfway successful Kingston, which has ne'er had that market constituent to it. And it conscionable drives overmuch amended postulation to those sites and is an overnight summation to NAV.

Mario Saric

Got it. Okay. So conscionable arsenic a follow-up, it seems to maine based connected those numbers that nan anticipation that's built successful wrong guidance is for illustration astir of nan abstraction will beryllium leased up by year-end, not needfully possibly rate rent paying, but nan anticipation is for important advancement by nan extremity of nan year. Is that correct?

Jonathan Gitlin

Correct? Yes.

Mario Saric

Okay. Thanks, everyone.

Jonathan Gitlin

Thanks, Mario.


Thank you. The adjacent mobility is from nan statement of Dean Wilkinson pinch CIBC. You whitethorn proceed.

Dean Wilkinson

Thanks. Good morning, everybody.

Jonathan Gitlin

Morning, Dean.

Dean Wilkinson

Question connected nan well. Did nan unit leases person immoderate shape of a benignant of co-tenancy clause aliases an retired for nan agency component?

Jonathan Gitlin


Dean Wilkinson

Negative. Perfect, easy. And for Dennis, your proviso for nan doubtful accounts, and I cognize that this is for illustration minutia [ph] successful nan weeds. There's still $13.4 million. Is that conscionable really a hangover from benignant of uncollected worldly from nan pandemic? You didn't really adhd overmuch successful nan people of nan year. Is that conscionable thing we could expect arsenic a pain disconnected complete nan adjacent mates of quarters? Or is that benignant of successful statement with, say, pre-pandemic expectations?

Dennis Blasutti

No, it's decidedly nan former. It's a hangover from nan pandemic. And our squad has been moving tenant by tenant to activity done that. I don't cognize if I could opportunity that it would beryllium a pain disconnected per se. I mean immoderate whitethorn extremity up arsenic write-offs aliases certainly, immoderate of them will extremity up arsenic right-offs against nan AR. But we besides should cod worldly arsenic well. So I deliberation that's nan measurement we look astatine it. We'll benignant of - we'll activity done that equilibrium complete nan people of this year.

Dean Wilkinson

Okay, great. Thanks, guys.

Dennis Blasutti

Thanks, Dean.


Thank you. The adjacent mobility is from nan statement of Pammi Bir pinch RBC Capital Markets. You whitethorn proceed.

Pammi Bir

Thanks, bully morning. Just past twelvemonth surely was progressive successful position of superior recycling, and you made immoderate awesome strides successful position of nan portfolio quality. What are your thoughts astir this year? And also, really are you reasoning astir nan NCIB astatine this stage?

Jonathan Gitlin

So I don't deliberation this twelvemonth will beryllium astir arsenic progressive from a disposition process. I think, arsenic I said, 2021 was characterized arsenic a twelvemonth wherever we were really taking advantage from a quantitative position of raising businesslike capital. 2022, while we did raise capital, we did it really much arsenic a qualitative measure, improving our portfolio. 2023, I don't deliberation we request to do either, but location will astir apt beryllium immoderate dispositions complete nan people of nan year, beryllium they onshore dispositions, beryllium they a partial liking successful definite properties, but it's not a focal constituent of our business scheme for 2023. So I wouldn't thin into that excessively heavily.

And pinch respect to nan NCIB, arsenic we articulated past year, Pammi, we benignant of - we did nan NCIB connected nan backs of overachieving connected our disposition program. And truthful we had, if you will, excess rate travel aft we funded our halfway obligations, which is really, of course, our distribution and paying backmost immoderate indebtedness and backing our improvement pipeline.

And we were successful nan fortunate position to person excess rate flow. And our portion value we thought was truthful good beneath NAV, and we took advantage of that, and we acquired done nan NCIB program. So unless thing changes dramatically and we really ramp up nan disposition programme again, I don't deliberation there's going to beryllium a important magnitude of NCIB for 2023.

Dennis Blasutti

Yes. What I would add, Pammi, is that astatine this point, we're successful a, I think, a beautiful awesome position that to money our - we're calling our halfway priorities, distributions, attraction CapEx and maturation CapEx. We don't request to waste immoderate assets. A operation of our retained rate travel and inventory proceeds complete nan adjacent 4 years is going to money our improvement programme on pinch task level debt.

So astatine this position, we don't person to waste anything. So to Jonathan's point, unless we person really bully opportunities to waste assets and redeploy that superior and do amended assets aliases different accretive initiatives. It's not thing that we person to do successful nan guidelines case, and it wouldn't needfully push to do unless there's a existent compelling opportunities. So we could beryllium elastic but don't request to trust at.

Pammi Bir

Got it. No, that really helps pinch my 2nd question. But successful position of nan FFO guidance, what does nan guidance incorporated from a improvement completion standpoint and besides successful position of nan anticipated residential gains?

Dennis Blasutti

So successful position of residential gains, meaning for illustration condo inventory gains? Yes. I would presume those are efficaciously level to 2022 levels connected that part. In position of improvement deliveries, it's astir $1.2 cardinal of IPP crossed 2022 and 2023, which past it's astir $50 cardinal - of stabilized NOI against those. So if you conscionable presume immoderate ramp up against that, that astir apt gets you astir there.

Pammi Bir

Great. Thanks very much. I'll move it back.

Dennis Blasutti

Thanks, Pammi.


Thank you. The adjacent mobility is from nan statement of Shalabh Garg pinch Veritas Investment Research Corporation. You whitethorn proceed.

Shalabh Garg

Hi, convey you. And bully morning. My mobility is beautiful simple. So acknowledgment for nan colour on, dispositions mightiness not beryllium required successful 2023 to find successful your development, but you still person immoderate assets for waste astir $48-ish cardinal [ph] Are you seeing immoderate diminution successful purchaser activity because of nan inadvertent effect of nan overseas purchaser taxation – sorry nan overseas slope connected properties?

Jonathan Gitlin

The overseas purchaser - sorry, you were speaking to nan overseas buyers provision?

Shalabh Garg

Yes. So it has an inadvertent effect connected commercialized existent property deals. So it's expected to beryllium meant for residential, but past location is circumstantial for a peculiar statement is logic for mixed usage aliases residential and without having a azygous unit, you still apparently overseas [indiscernible] business?

Jonathan Gitlin

Yes, I don't deliberation that will person immoderate effect connected - for illustration that didn't pass our disposition strategy for 2023, whether that authorities existed aliases didn't. We're really not focused connected trading a batch of residential land.

And if we did - I mean, it's much apt we'd person home investors alternatively than overseas arsenic we've done successful nan past. So I don't deliberation it has a important effect connected what we would do from a disposition programme for this year.

Shalabh Garg

Thank you.

Jonathan Gitlin


Dennis Blasutti

So I conscionable sewage to explain that plus held for waste equilibrium was it plus successful Calgary that was conditional astatine year-end, and we closed it already this year.

Shalabh Garg

Okay. Thank you.

Dennis Blasutti

Thank you.


Thank you. The adjacent mobility is from nan statement of Sam Damiani pinch TD Securities. You whitethorn proceed.

Sam Damiani

Thanks. Good morning, everyone. Just a mates of speedy ones. On nan disposition activity expected for 2023, really should we deliberation astir nan headdress complaint comparative to what was achieved connected nan 2022 dispositions?

Jonathan Gitlin

Well, again, I deliberation 2023, arsenic I suggested, was characterized by a qualitative betterment of our wide portfolio. And truthful we did get free of immoderate debased maturation assets and a closed malls, 2 of them to beryllium precise. And I deliberation that, that's why nan headdress complaint was evidently comparatively high.

If - but again, because we're not really proposing to do a important magnitude of dispositions successful 2023, we don't really person a strategy for which benignant of assets we would dispose. And if we were going to dispose of immoderate assets now, we would surely expect it would beryllium reflective of nan precocious value of our remaining portfolio. So headdress rates, I would suspect, would beryllium lower. We don't person that overmuch low-growth assets anymore.

Dennis Blasutti

Yes. So I think, Sam, erstwhile I mention to my commentary astir nan effect of plus income connected 2023 FFO, it was conscionable nan carryover of nan 2022 assets. You sewage a partial twelvemonth effect successful nan 2022 disposition that past increases erstwhile you get into 2023. So that was that piece.

The plus that we had arsenic held for waste astatine nan extremity of nan twelvemonth is astir a small complete $40 million. That was 1 plus successful Calgary that we sold. So it's not a ample impact. And there's thing other that I contemplated for this year.

Sam Damiani

No, I perceive you. I conscionable was - successful modeling, obviously, I presume you want to extremity 2023 astatine aliases beneath nan leverage that you extremity '22 at. So I conscionable want to make judge that I person that benignant of factored successful appropriately.

Switching complete to nan well. What's nan latest successful position of, I guess, nan clip statement successful position of completion, expansive opening of nan retail, et cetera? Sort of really are you reasoning astir really nan benignant of adjacent fewer months are going to play out?

Jonathan Gitlin

Yes, I'm going to manus that mobility complete to Oliver Harrison, who's successful complaint of leasing and tenant acquisition to springiness immoderate color.

Oliver Harrison

Morning, Sam, tin you perceive maine okay?

Sam Damiani

Morning. Yes. Hear you fine.

Oliver Harrison

I deliberation to picture it successful precisely, nan good arsenic it nears completion, nan standard of nan opportunity is surely much evident to retailers, which is continuing to thrust important liking successful nan project. And we're very optimistic that wrong nan 4th fourth of this year, we will beryllium importantly animated and fresh to present nan task to successful totality.

We are expecting tenants to unfastened successful beforehand of Q4, though. I deliberation first tenants are scheduled to unfastened successful nan 2nd 4th of 2023. And we're looking guardant to that happening. But certainly, I deliberation you've been recently, arsenic we bring tenants to nan project, they tin spot nan opportunity that's successful beforehand of them. They are highly excited and we're starting to surely spot nan benefits of that from a leasing perspective.

Sam Damiani

Okay. Great. And truthful immoderate benignant of for illustration a expansive opening, is it looking for illustration Q4 now? Or what are you reasoning connected that front?

Jonathan Gitlin

Yes. I think, Sam, location is going to beryllium a expansive opening, which is really conscionable a date. And it's for illustration a spot of a celebrate, but it doesn't needfully mean that, that marks nan time wherever income starts for nan unit constituent of nan well. We're going to have, arsenic Oliver suggested, rolling openings starting early successful nan twelvemonth for illustration successful Q2.

But yes, we are expecting that for expansive opening, and that's conscionable now a logistical matter pinch respect to erstwhile immoderate of nan hoists travel disconnected nan residential buildings and nan difficult landscaping is done. So really don't fto nan expansive opening service arsenic a marker of significance. It's really conscionable benignant of a celebration. But yes, I deliberation you're going to spot retailers opening and animated successful short order.

Dennis Blasutti

Yes. And I would conscionable add, Sam, arsenic acold arsenic our residential constituent goes, nan 600 portion building. We're going to commencement leasing - pre-leasing that astatine nan extremity of March, and we expect to person residents commencement moving successful betwixt July and nan opening of August.

Sam Damiani

That's good. Thank you very much.

Dennis Blasutti

You're welcome.


Thank you. There are nary further questions astatine this time. I will now move nan telephone backmost to Mr. Gitlin for closing remarks.

Jonathan Gitlin

Well, thanks, everyone, and we're looking guardant to reporting backmost to you aft Q1. Have a bully day.


Ladies and gentlemen, convey you for participating successful today's conference. This concludes today's program. You whitethorn each disconnect. Everyone, person a awesome day.

Editor: Naga

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