RioCan Real Estate Investment Trust Announces Financial Results for the First Quarter of 2018 With 6.1% Growth in Funds From Operations Per Unit and 2.6% Same Property NOI Growth

05/09/2018

RioCan's HIGHLIGHTS for the three months ended March 31, 2018 ("First Quarter"):

  • For First Quarter, IFRS Operating income increased 1.9% to $182 million;

  • FFO increased 4.5% to $149 million in the First Quarter over the comparable quarter in 2017. FFO per unit in the First Quarter increased from $0.44 in Q1 2017 to $0.46, a 6.1% increase;

  • Same property NOI increased by 2.6%, or $4.3 million in the First Quarter as compared to the same quarter in 2017. Same property NOI for RioCan's properties in Canada's six major markets increased 3.3% over the comparable First Quarter as compared to flat same property NOI growth for its secondary markets properties;

  • In-Place occupancy further improved to 95.7% as at March 31, 2018 and committed occupancy remained high at 96.6% as at March 31, 2018. Committed occupancy for RioCan's properties in Canada's six major markets increased by 30 basis points to 97.9% at March 31, 2018 as compared to December 31, 2017;

  • The Trust continues to make good progress on the execution of its strategy to accelerate its portfolio focus in Canada’s six major markets. Since the strategy's announcement in October 2017, the Trust has either completed or entered into firm agreements to sell $583 million of properties in secondary markets at a weighted average capitalization rate of 6.14% based on in-place NOI; the Trust currently also has conditional transactions under contract totalling $225 million, bringing total closed, firm or conditional deals to $808 million or approximately 40% of the announced disposition target. The aggregate sales proceeds from these assets are in line with the Trust's IFRS valuations; and

  • The Trust continued to maintain a strong balance sheet with a debt to Adjusted EBITDA ratio of 7.63x for the 12 months ended March 31, 2018 and a debt to total assets ratio of 42.4% on proportionate share basis as of March 31, 2018. The leverage was temporarily higher at the end of the Q1 2018 as a result of the Trust maximizing its NCIB purchases prior to entering the blackout period for NCIB due to quarter end reporting, in anticipation of receiving substantial disposition net proceeds in April 2018.

TORONTO, May 09, 2018 (GLOBE NEWSWIRE) -- RioCan Real Estate Investment Trust (“RioCan”) (TSX:REI.UN) today announced its financial results for three months ended March 31, 2018.

“We have started 2018 with a strong first quarter delivering solid growth in our funds from operations per unit and strong same property net operating income growth. Our development program is progressing well with major residential mixed-use projects expected to complete in late 2018 or early 2019,” said Edward Sonshine, Chief Executive Officer of RioCan. “I am pleased with the progress we have made to date in our disposition program both the amount of properties we have sold and the prices we have achieved, which are in line with our IFRS valuations. As we continue to market these assets through various channels, the interest that has been expressed leaves us confident in our ability complete the disposition program within our projected timeline.”

Financial Highlights
All figures are expressed in Canadian dollars unless otherwise noted. For further information about RioCan's results for the three months ended March 31, 2018, this earnings release should be read in conjunction with our unaudited interim consolidated financial statements ("Consolidated Financial Statements"), as well as Management's Discussion and Analysis ("MD&A") for the three months ended March 31, 2018.

RioCan’s Consolidated Financial Statements are prepared in accordance with International Financial Reporting Standards (IFRS). Consistent with RioCan’s management framework, management uses certain financial measures to assess RioCan’s financial performance, which are not generally accepted accounting principles (GAAP) under IFRS. For full definitions of these measures, please refer to “Non-GAAP Measures” in RioCan’s March 31, 2018 Management's Discussion and Analysis. As a result of the sale of the U.S. operations, we have reported our former U.S. geographic segment performance as "discontinued operations" with comparative income statement amounts adjusted to reflect this change, unless otherwise noted.

Net income from continuing operations attributable to unitholders

 Three months ended March 31,
(in millions except percentages and per unit values) 2018 2017% Change
Net income from continuing operations$  137.2$  163.1(15.9)%
Net income per unit from continuing operations attributable to unitholders – diluted$  0.43$  0.50(14.0)%
       

Q1 2018

Net income from continuing operations attributable to unitholders for the first quarter of 2018 is $137.2 million compared to $163.1 million during the same period in 2017. Excluding $5.3 million lower fair value gains over the comparable period and $15.7 million of unrealized items on marketable securities as a result of adopting the new accounting standard IFRS 9, Financial Instruments, net income from continuing operations attributable to unitholders for the three months ended March 31, 2018 is $140.1 million compared to $145.0 million in 2017, representing a decrease of $4.9 million or 3.4%.

The decrease of $4.9 million is largely the net effect of the following:

  • $4.0 million in lower income from our equity accounted investments primarily due to fair value gains in 2017;
  • $5.5 million in higher transaction costs on dispositions and acquisitions; partly offset by
  • $2.7 million of net operating income primarily due to strong same property performance, completed developments, higher lease cancellation fees, and net of the impact of property dispositions (net of acquisitions) and lower straight-line rent; and
  • $2.9 million in higher realized gains on marketable securities sold.

Refer to the Significant Accounting Policies and Estimates section and Non-GAAP Measures section of the First Quarter MD&A and Notes 2, 6 and 17 to the First Quarter consolidated financial statements for more detailed discussion on the effect of adopting the IFRS 9 on January 1, 2018.

Funds From Operations ("FFO")

 Three months ended March 31,
(in millions except percentages and per unit values) 2018 2017 % Change
FFO from continuing operations$  148.8$  142.9 4.1%
FFO from discontinued operations$  0.4$  (0.2)N/A 
FFO (i)$  149.2$  142.8 4.5%
FFO per Unit - diluted$  0.46$  0.44 6.1%
        

(i) A non-GAAP measurement. A reconciliation to net income can be found under “Results of Operations” in RioCan's Management's Discussion and
Analysis for the period ending March 31, 2018.

Q1 2018

FFO for the three months ended March 31, 2018 is $149.2 million compared to $142.8 million representing an increase of approximately $6.4 million or 4.5%. On diluted per unit basis, FFO is $0.46 compared to $0.44, representing an increase of 6.1%.

Continuing Operations

FFO from continuing operations increased from $142.9 million during 2017 to $148.8 million in 2018, representing an increase of $5.9 million or 4.1%. The $5.9 million increase in FFO from continuing operations for the period was primarily due to the following:

  • $2.9 million higher NOI (at RioCan’s proportionate share) mainly as a result of strong growth in same property NOI, development completions and higher lease cancellation fees, net of the impact of property dispositions (net of acquisitions) and lower straight-line rent,
  • $2.9 million increase in realized gains on marketable securities sold; and
  • $1.8 million less Series C preferred unit distributions; partially offset by
  • $1.5 million lower dividend income from marketable securities due to sales since Q1 2017.

Acceleration of Major Market Focus
On October 2, 2017, the Trust announced its plan to accelerate its portfolio focus in Canada’s six major markets through the sale of approximately 100 properties located primarily in secondary markets across Canada over the next two to three years. Refer to the Strategy section of the MD&A for further details.

As of May 8, 2018, the Trust has either completed or entered into firm agreements to sell $583.4 million of properties in secondary markets at a weighted average capitalization rate of 6.14% based on in-place net operating income (NOI), representing approximately 29% of the announced disposition target. The deals, which span a broad geographical range of secondary markets, consist of the following:

  • The closed or firm deals for fourteen properties as of February 13, 2018 as disclosed in the Trust's Q4 2017 MD&A , with aggregated sales proceeds of $511.9 million at a weighted average capitalization rate of 6.07% based on in-place NOI, have all been closed as of May 8, 2018.
  • The sale of three properties in Fergus and Belleville in Ontario and Trois Rivieres in Quebec for a sale price of $39.6 million at a weighted average capitalization rate of 6.56% based on in-place NOI. The sale of one property was closed in March 2018 at a sales price of $12.2 million. The sale of the remaining two properties were closed in May 2018 at a sales price of $27.4 million.
  • The sale of six small properties in Bowmanville, Kingston, London, Hamilton, Windsor, and Sudbury in Ontario for a sales price of $13.3 million at a weighted average capitalization rate of 7.12% based on in-place NOI.
  • Firm agreements to sell three properties located in Kingston and Port Colborne in Ontario and Miramichi in New Brunswick to three separate buyers for an aggregate sale price of $18.7 million at a weighted average capitalization rate of 6.58% based on in-place NOI.

In addition to the above $583.4 million closed and firm deals, as of May 8, 2018 the Trust has also entered into eight conditional agreements to sell fourteen properties Ontario, Quebec and British Columbia for aggregate sale proceeds of $224.8 million. Should these firm and conditional transactions close, the Trust would have completed the sale of 40 properties for aggregate sale proceeds of $808.2 million or approximately 40% of our disposition target by sales proceeds, at a weighted average capitalization rate of 6.40%. The aggregate proceeds from the sale of these properties are in line with the Trust's IFRS valuations.

The net proceeds from the dispositions have been and will be used to pay down debt, fund unit repurchases through RioCan’s Normal Course Issuer Bid (NCIB) program and fund the Trust’s development activities. Since the renewal of the NCIB program on October 20, 2017, RioCan has purchased and cancelled 9.8 million units at a total cost of $240.0 million.


Operational Performance 

Same Property NOI Growth

    Three months ended
March 31, 2018

     
Same Property NOI Growth   2.6%

Refers to same property NOI growth on a year over year basis.

Q1 2018

Same property NOI for the three months ended March 31, 2018 increased 2.6% or $4.3 million compared to the same period in 2017. Approximately $2.7 million of the increase is related to higher occupancy, renewal rate growth and contractual rent increases and $1.5 million is due to the timing of Target backfills and other expansion and redevelopment projects completed in 2018 and 2017, which is net of $0.7 million negative effect of the Sears closures.

As a component of total same property NOI growth, same property NOI from RioCan's properties in Canada's six major markets increased by 3.3% and same property NOI from its secondary markets properties remained flat for the three months ended March 31, 2018 when compared to the same period in 2017.

Operating Statistics

The key performance indicators related to operating and leasing for the Canadian portfolio over the last eight quarters are as follows:

 2018
   2017    2016  
  Q1 Q4 Q3 Q2 Q1 Q4 Q3 Q2
Committed occupancy96.6%96.6%96.8%96.7%96.2%95.6%95.3%95.1%
In-place occupancy95.7%95.6%96.0%95.2%94.4%93.6%93.6%92.9%
Retention rate87.0%87.5%93.6%93.9%88.6%84.0%83.1%91.6%
% increase in average net rent per sq ft for tenant renewals4.3%4.5%5.2%4.7%8.2%8.1%6.6%3.3%
                 
  • In-place occupancy increased by 10 basis points to 95.7% when compared to December 31, 2017 and committed occupancy remained high at 96.6%;

  • Committed occupancy for retail increased by 10 basis points from the previous quarter to 96.7% while office occupancy edged lower in the quarter due to to two office tenants vacating, which we are confident will be leased up in normal course.

  • As at March 31, 2018, the committed occupancy for our six major markets is 97.9%, up by 0.3% compared to 97.6% at December 31, 2017.

  • The Trust expects to generate $9.7 million of annualized net incremental IFRS rent once all tenants that have committed leases as of March 31, 2018 take possession of their space; and

  • The retention rate for Q1 2018 remained high at 87.0% with the renewal increase in average rent per square foot at 4.3% for the quarter.

Property Acquisitions and Dispositions 
Income Producing Property Acquisitions

During the three months ended March 31, 2018, RioCan acquired Thickson Centre in Whitby, Ontario for a purchase price of $31.7 million including transaction costs at a capitalization rate of 6.16% with no assumption of debt. The Trust also acquired the remaining one third interest in an existing income property in Newmarket, Ontario for a purchase price of $18.9 million including transaction costs at a capitalization rate of 5.65% and assumed a mortgage with a fair value of $9.4 million, which included a mark-to-market adjustment of $2.5 million.

Additional Capital Recycling
RioCan sold a portion of its marketable securities and realized a cash gain on units sold of $14.4 million for the three months ended March 31, 2018.

Development Property Acquisitions

During the first quarter of 2018, the Trust completed four development property acquisitions for an aggregate purchase price of $35.5 million including transaction costs at RioCan's interest. Three of these acquisitions represent land parcels pertaining to our Yorkville project development, located in the prestigious Yorkville area of Toronto, Ontario, where the total acquisition price was allocated $26.4 million to residential development inventory and $4.7 million to properties under development. RioCan and its partners are in the early stages of creating plans to redevelop the site, which has the potential for approximately half a million square feet of luxury condominiums, retail uses and up to 82 residential rental replacement units. RioCan has agreed to purchase the partners' interest in the retail portion upon project completion at a 6.00% capitalization rate and has the right of first opportunity to acquire the residential rental replacement units.

The other acquisition during the quarter was the acquisition of the remaining 18.75% equity interest in development lands located in Vaughan, Ontario, at a purchase price of $4.4 million.

Development Program
RioCan's development program is a significant component of its growth strategy to unlock the intrinsic value of its existing properties through redevelopment and intensification and deliver strong net asset value ("NAV") growth to its unitholders. During the First Quarter of 2018, RioCan continued to make significant progress in advancing its development program, notably:

  • RioCan Living - On March 5, 2018, RioCan announced its residential brand, RioCan LivingTM, marking RioCan’s official, and permanent, entry into the residential market. RioCan Living will deliver best in class purpose-built rental units and condominiums along Canada’s most prominent transit corridors. RioCan Living cultivates opportunities to turn selected existing retail shopping centres into vibrant, mixed-use communities, and unlock the intrinsic value of RioCan’s vast portfolio of major market properties. Property under development includes 17.2 million square feet (at RioCan's interest) of residential rental units and air rights sales and 1.0 million square feet of condominium or townhouse projects representing 69.5% of the Trust's total development pipeline of 26.2 million square feet as of March 31, 2018.

  • Development pipeline and progress - As of March 31, 2018, out of the Trust's 26.2 million square feet development pipeline at RioCan's interest, approximately 46.5% or 12.2 million square feet is zoned plus another 21.1% or 5.5 million square feet with zoning applications submitted. The Trust continues to make good progress on its developments such as Yonge & Eglinton NorthEast Corner (ePlace, eCondos and eCentral), King & Portland (Kingly), Sheppard Centre (Pivot) and Bathurst College Centre, all located in urban Toronto and scheduled for full or phased completion in 2018 and 2019.

  • Yorkville - This is a 50/25/25 joint venture amongst RioCan, Metropia and CD located in the prestigious Toronto Yorkville neighborhood. In January 2018, the partners acquired three more properties for this development and have substantially completed acquisitions of adjacent properties required for this project. The project has the potential for the development of approximately half a million square feet of luxury condominiums, retail uses and up to 82 residential rental replacement units.

Liquidity and Capital
RioCan’s debt and leverage metrics are disclosed below to help facilitate an understanding of RioCan’s leverage and its ability to service such leverage. The definitions that management uses, as well as the calculation methodology for the ratios included in the table below are described in RioCan's Management’s Discussion and Analysis for the three months ended March 31, 2018.

 
 Rolling 12 months ended
March 31, 2018December 31, 2017
Interest coverage – RioCan’s proportionate share (i)3.85x3.84x
Debt service coverage – RioCan’s proportionate share (i)3.12x3.06x
Fixed charge coverage – RioCan’s proportionate share (i)1.18x1.17x
Debt to Adjusted EBITDA – RioCan’s proportionate share (i)7.63x7.57x
Ratio of total debt to total assets   
(RioCan's proportionate share, net of cash and cash equivalents) 42.4% 41.4%
Unencumbered assets (millions)$8,078$7,663
% of NOI generated from unencumbered assets (ii) 58.4% 56.7%
Unsecured debt as a % of Total Debt – RioCan’s proportionate share (i) 59.3% 56.1%
Unencumbered assets to unsecured debt 220% 226%
     

(i)      Refer to section Non-GAAP Measures in RioCan's MD&A for further details and the calculation of Adjusted EBITDA for the respective periods.
(ii)     Ratio is calculated on a continuing operations basis.

As at March 31, 2018, we exceeded virtually all of our debt metrics targets.

The interest and debt service coverage ratios calculated at RioCan's proportionate share for the three months ended March 31, 2018 improved compared to December 31, 2017 mainly due to an increase in Adjusted EBITDA primarily as a result of strong same property NOI growth, development completions, and higher gains from sale of marketable securities, and lower interest costs. Debt service coverage also improved due to similar reasons and lower scheduled principal amortization.

The fixed charge coverage ratio calculated at RioCan's proportionate share for the three months ended March 31, 2018 improved compared to December 31, 2017, mainly due to lower total fixed charges (interest cost plus distributions to preferred and common unitholders) resulting from the redemption of Series C preferred units in Q2 2017, as well as increase in Adjusted EBITDA for reasons noted above.

Debt to Adjusted EBITDA at RioCan's proportionate share increased slightly to 7.63x for the three months ended March 31, 2018 from 7.57x as of December 31, 2017 mainly as a result of higher average debt balances partially offset by an increase in Adjusted EBITDA for reasons noted above. The debt balances were temporarily higher at March 31, 2018 as a result of the Trust maximizing its NCIB purchases prior to entering the black out period for NCIB due to quarter end reporting, in anticipation of receiving substantial disposition net proceeds in April 2018.

For the same reason, the Trust's ratio of total debt to total assets was at 42.4% as of March 31, 2018, temporarily higher than the upper end of our 38% to 42% target range. The Trust is committed to maintaining its leverage in its target range, although the leverage as of a quarter end may exceed the upper target range from time to time due to the same reason as noted for Q1 2018.

The percentage NOI generated from unencumbered assets has increased from 56.7% as of December 31, 2017 to 58.4% as of March 31, 2018 as we continued to unencumber assets this quarter. The unencumbered assets to unsecured debt ratio decreased modestly to 220% over this quarter as the increase in unsecured debt of $289.2 million outpaced the $414.9 million increase in unencumbered assets on a relative percentage basis. This resulted from the Trust maximizing its NCIB purchases prior to entering the black out period as explained above. Overall, we are still well over our 200% target for this measure.

Subsequent to March 31, 2018, the Trust exercised its option to extend the maturity date on its operating line of credit to May 31, 2023.

Selected Financial Information
The following includes financial information prepared by management in accordance with IFRS and based on the Trust's Consolidated Financial Statements for the month ended March 31, 2018. This financial information does not contain all disclosures required by IFRS, and accordingly should be read in conjunction with the Trust's Consolidated Financial Statements and MD&A for the month ended March 31, 2018, which is available on RioCan's website and on SEDAR.


CONSOLIDATED BALANCE SHEETS
(In thousands of Canadian dollars, except per unit amounts)
(unaudited)

As at March 31, 2018 December 31, 2017
Assets    
Investment properties$13,284,734$13,160,244
Deferred tax assets 11,529 11,929
Equity-accounted investments 178,533 176,256
Mortgages and loans receivable 180,096 145,873
Residential inventory 169,506 132,003
Assets held for sale 297,305 410,178
Receivables and other assets 243,973 269,870
Cash and cash equivalents 67,674 70,225
Total assets$14,433,350$14,376,578
Liabilities    
Debentures payable$2,742,915$2,694,619
Mortgages payable 2,243,516 2,300,247
Lines of credit and other bank loans 1,110,194 904,429
Liabilities associated with assets held for sale  32,670
Accounts payable and other liabilities 406,188 399,927
Total liabilities$6,502,813$6,331,892
Equity    
Unitholders' equity:    
Common 7,930,537 8,044,686
Total equity 7,930,537 8,044,686
Total liabilities and equity$14,433,350$14,376,578
     


CONSOLIDATED STATEMENTS OF INCOME
(In thousands of Canadian dollars, except per unit amounts)
(unaudited)

 Three months ended March 31,
 2018  2017
Revenue  
Rental revenue$  286,405 $  286,687
Property and asset management fees 3,674  2,982
  290,079  289,669
Operating costs  
Rental operating costs  
Recoverable under tenant leases 103,290  106,460
Non-recoverable costs 4,522  4,297
  107,812  110,757
Operating income 182,267  178,912
Other income  
Interest income 2,478  2,288
Income from equity-accounted investments 2,201  6,220
Fair value gains on investment properties, net 12,781  18,107
Investment and other income (loss) (17) 15,378
  17,443  41,993
Other expenses  
Interest costs 42,098  43,005
General and administrative 11,227  10,931
Internal leasing costs 2,757  2,493
Transaction and other costs 5,831  352
  61,913  56,781
Income before income taxes 137,797  164,124
Deferred tax expense 600  1,000
Net income from continuing operations$  137,197 $  163,124
Net income from discontinued operations 25  1,447
Net income$  137,222 $  164,571
Net income attributable to:  
Unitholders$  137,222 $  164,571
 $  137,222 $  164,571
Net income per unit - basic:  
From continuing operations$  0.43 $  0.50
From discontinued operations   
Net income per unit - basic$  0.43 $  0.50
Net income per unit - diluted:  
From continuing operations$  0.43 $  0.50
From discontinued operations   
Net income per unit - diluted$  0.43 $  0.50
Weighted average number of units (in thousands):  
Basic 321,895  326,778
Diluted 321,988  326,956
      


CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands of Canadian dollars)
(unaudited)

 Three months ended March 31,
 2018  2017 
Operating activities   
Net income from:   
Continuing operations$  137,197 $163,124 
Discontinued operations 25  1,447 
Net income 137,222  164,571 
Items not affecting cash:   
Depreciation and amortization 1,126  1,596 
Amortization of straight-line rent (1,313) (2,363)
Unit-based compensation expense 1,515  479 
Income from equity-accounted investments (2,201) (6,220)
Fair value gains on investment properties, net (12,781) (18,107)
Deferred tax expense 600  1,000 
Fair value losses on marketable securities 1,257   
Transaction gains, net on disposition of:   
Realized gain on marketable securities   (11,542)
Canadian investment properties (21) (342)
Adjustments for other changes in working capital items (42,455) (149,816)
Cash provided by (used in) operating activities 82,949  (20,744)
Investing activities   
Acquisitions of investment property (50,794) (5,384)
Construction expenditures on properties under development (92,058) (75,723)
Capital expenditures on income properties:   
Recoverable and non-recoverable costs (5,533) (4,600)
Tenant improvements and external leasing commissions (5,271) (8,933)
Proceeds from sale of investment properties 125,938  31,412 
Earn-outs on investment properties (567) (1,309)
Contributions to equity-accounted investments (3,002) (13,181)
Distributions received from equity-accounted investments 2,934  2,402 
Advances of mortgages and loans receivable (30,467) (2,250)
Repayments of mortgages and loans receivable   5,129 
Proceeds from sale of marketable securities, net of selling costs 38,896  42,778 
Cash provided by investing activities (19,924) (29,659)
Financing activities   
Proceeds from mortgage financing, net of issue costs 46,000  97,120 
Repayments of mortgage principal (111,242) (189,398)
Advances from bank credit lines, net of issue costs 256,828  95,531 
Repayment of bank credit lines (51,155) (5,000)
Proceeds from issuance of debentures, net of issue costs 298,323  298,383 
Repayment of unsecured debentures (250,000) (150,000)
Distributions to common trust unitholders, net of distributions reinvested (115,324) (107,932)
Distributions to preferred trust unitholders   (1,757)
Units repurchased under normal course issuer bid (140,406)  
Proceeds received from issuance of common units, net 1,400  505 
Cash provided by (used in) financing activities (65,576) 37,452 
Net change in cash and cash equivalents (2,551) (12,951)
Cash and cash equivalents, beginning of period 70,225  54,366 
Cash and cash equivalents, end of period$  67,674 $41,415 
       


Conference Call and Webcast
Interested parties are invited to participate in a conference call with management on Wednesday, May 9, 2018 at 10:00 a.m. Eastern time. You will be required to identify yourself and the organization on whose behalf you are participating.

In order to participate, please dial 647-427-3230 or 1-877-486-4304. If you cannot participate in the live mode, a replay will be available. To access the replay, please dial 1-855-859-2056 and enter passcode 6747217#.

A copy of the slides to be used for the conference call or, to access the simultaneous webcast, can be found on RioCan’s website at http://investor.riocan.com/investor-relations/events-and-presentations/ and click on the link for the webcast. The webcast will be archived 24 hours after the end of the conference call and can be accessed for 120 days.

About RioCan
RioCan is one of Canada’s largest real estate investment trust with a total enterprise value of approximately $13.7 billion at March 31, 2018. RioCan owns, manages and develops retail-focused, increasingly mixed-use properties located in prime, high-density transit-oriented areas where Canadians want to shop, live and work. Our portfolio is comprised of 284 properties, including 17 development properties, with an aggregate net leasable area of approximately 43 million square feet. To learn more about how we deliver real vision on solid ground, visit www.riocan.com.

Non-GAAP Measures

RioCan’s consolidated financial statements are prepared in accordance with IFRS. Consistent with RioCan’s management framework, management uses certain financial measures to assess RioCan’s financial performance, which are not generally accepted accounting principles (GAAP) under IFRS. The following measures, RioCan's Interest, RioCan's Proportionate Share, Funds From Operations (“FFO”), Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization (“Adjusted EBITDA”), Interest Coverage Ratio, Debt Service Coverage Ratio, Debt to Adjusted EBITDA, Net Operating Income ("NOI"), Same Property NOI, Fixed Charge Coverage, Percentage of NOI Generated from Unencumbered Assets, Unencumbered Assets to Unsecured Debt, and Total Enterprise Value, as well as other measures that may be discussed elsewhere in this release, do not have a standardized definition prescribed by IFRS and are, therefore, unlikely to be comparable to similar measures presented by other reporting issuers. RioCan supplements its IFRS measures with these non-GAAP measures to aid in assessing the Trust’s underlying performance and reports these additional measures so that investors may do the same. 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 flow, and profitability. For a full definition of these measures, please refer to the “Non-GAAP Measures” in RioCan’s Management Discussion and Analysis for the period ending March 31, 2018.

Forward-Looking Information
This news release contains forward-looking information within the meaning of applicable Canadian securities laws. This information includes, but is not limited to, statements made in “Financial Highlights”, "Acceleration of Major Market Focus", “Operational Performance", "Other Operating Statistics" “Acquisitions and Dispositions”, "Development Program", Liquidity and Capital" and other 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. Forward-looking information generally can be identified by the use of forward-looking terminology such as “outlook”, “objective”, “may”, “will”, “would”, “expect”, “intend”, “estimate”, “anticipate”, “believe”, “should”, “plan”, “continue”, or similar expressions suggesting future outcomes or events. Such forward-looking information reflects management’s current beliefs and is based on information currently available to management. All forward-looking information in this News Release is qualified by these cautionary statements.

Forward-looking information is not a guarantee of future events or performance and, by its nature, is based on RioCan’s current estimates and assumptions, which are subject to numerous risks and uncertainties, including those described under “Risks and Uncertainties” in RioCan's Management's Discussion and Analysis for the period ended March 31, 2018 ("MD&A"), which could cause actual events or results to differ materially from the forward-looking information contained in this News Release. Those risks and uncertainties include, but are not limited to, those related to: liquidity and general market conditions; tenant concentrations and related risk of bankruptcy or restructuring (and the terms of any bankruptcy or restructuring proceeding); occupancy levels and defaults, including the failure to fulfill contractual obligations by the tenant or a related party thereof; lease renewals and rental increases; the ability to re-lease and find new tenants for vacant space; retailer competition; access to debt and equity capital; interest rate and financing risk; joint ventures and partnerships; the relative illiquidity of real property, the timing and ability of RioCan to sell certain properties; the valuations to be realized on property sales relative to current IFRS values; and the Trust's ability to utilize the capital gain refund mechanism; unexpected costs or liabilities related to acquisitions and dispositions; development risk associated with construction commitments, project costs, related zoning and other permit approvals, and change in Ontario rent control legislation; environmental matters; litigation; reliance on key personnel; unitholder liability; income, sales and land transfer taxes; and credit ratings.

Our U.S. subsidiary qualified as a REIT for U.S. income tax purposes up to May 25, 2016, subsequent to the closing date of the sale of our U.S. property portfolio. For U.S. income tax purposes, the subsidiary distributed all of its U.S. taxable income and is entitled to deduct such distributions against its taxable income. The subsidiary’s qualification as a REIT depends on the REIT’s satisfaction of certain asset, income, organizational, distribution, unitholder ownership and other requirements up until May 25, 2016. Our U.S. subsidiary was subject to a 30% or 35% withholding tax on distributions of its U.S. taxable income to Canada. We did not distribute any withholding taxes paid or payable to our unitholders related to the disposition. Should RioCan’s U.S. subsidiary no longer qualify as a U.S. REIT for U.S. tax purposes prior to May 25, 2016, certain statements contained in the MD&A may need to be modified.

General economic conditions, including interest rate fluctuations, may also have an effect on RioCan’s results of operations. Material factors or assumptions that were applied in drawing a conclusion or making an estimate set out in the forward-looking information may include, but are not limited to: a stable retail environment; relatively low and stable interest costs; a continuing trend toward land use intensification, including residential development in urban markets; access to equity and debt capital markets to fund, at acceptable costs, future capital requirements and to enable our refinancing of debts as they mature; the availability of investment opportunities for growth in Canada; and the timing and ability for RioCan to sell certain properties, the valuations to be realized on property sales relative to current IFRS values, and the Trust's ability to utilize the capital gain refund mechanism. For a description of additional risks that could cause actual results to materially differ from management’s current expectations, refer to Risks and Uncertainties in RioCan's MD&A for the period ended March 31, 2018 and Risks and Uncertainties in RioCan’s AIF. Although the forward-looking information contained in RioCan's MD&A for the period ended March 31, 2018 is based upon what management believes are reasonable assumptions, there can be no assurance that actual results will be consistent with this forward-looking information.

Certain statements included in this News Release may be considered “financial outlook” for purposes of applicable Canadian securities laws, and as such the financial outlook may not be appropriate for purposes other than this News Release. The forward-looking information contained in this News Release is made as of the date of this News Release, and should not be relied upon as representing RioCan’s views as of any date subsequent to the date of this News Release.

Management undertakes no obligation, except as required by applicable law, to publicly update or revise any forward-looking information, whether as a result of new information, future events or otherwise.

Contact Information:

RioCan Real Estate Investment Trust
Qi Tang
Senior Vice President and Chief Financial Officer
416-866-3033
www.riocan.com

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Source: RioCan Real Estate Investment Trust

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