QUALITY &
GROWTH
A N N U A L R E P O R T 2 0 2 2
Frontier & Latitude
Ottawa, ON
193
Properties
33.6M SF
of NLA
Located in
Canada’s most
in-demand
markets
97.4%
Committed
occupancy
RIOCAN AT A
GLANCE
Vancouver
5 assets
1.4M SF1
5.8%*
Greater
Toronto Area
84 assets
16.0M SF1
55.4%*
Edmonton
9 assets
1.8M SF1
5.2%*
Calgary
16 assets
3.6M SF1
12.2%*
Montreal
17 assets
1.8M SF1
2.9%*
Ottawa
36 assets
4.8M SF1
13.0%*
* Percentage of total fair value of income producing properties at RioCan’s interest
1 Income producing properties at RioCan’s interest
FINANCIALS
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$
$236.8M
Net Income
$712.7M
Operating
Income
$1.71
FFO/Unit1,3
4.3%
SPNOI
Growth 2,3
59.0%
FFO Payout
Ratio3
$1.5B
In Available
Liquidity3,4
$
$459.8M
Capital Recycling
Activity
At capitalization
rate of 7.74%
$8.3B
Unencumbered
Assets3,4
1 FFO: Funds From Operations
2 SPNOI: Same Property Net Operating Income Growth
3 This is a non-GAAP measurement. For more information, refer to the Non-GAAP Measures
section in the MD&A for the three months and year ended December 31, 2022.
4 RioCan's proportionate share
ABOUT
RIOCAN
RioCan is one of Canada’s largest real
estate investment trusts.
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.
As of December 31, 2022, our portfolio is comprised
of 193 properties with an aggregate net leasable area
of approximately 33.6 million square feet (at RioCan’s
interest) including office, residential rental and 10
development properties.
TABLE OF
CONTENTS
01
03
05
07
09
11
13
15
18
RioCan At a Glance
Letter from the President & CEO
Resilient Retail
Intelligent Diversification
Customer Centrism
Responsible Growth
Financial Review
Key Performance Indicators
Management Discussion and Analysis
105
Audited Annual Consolidated
Financial Statements
To learn more, visit www.riocan.com
The WellTM
Toronto, ON
2
Dear Fellow Unitholders,
In 2022, RioCan’s fundamentals strengthened and our
high-quality portfolio performed remarkably in a year
where Omicron dominated headlines early on before
giving way to intense inflation and corresponding interest
rate increases.
RioCan’s continuous evolution to address macro trends
and market dynamics have culminated in a leading
portfolio of premium assets located in areas with
exceptional demographic profiles. The quality of our
portfolio, tenant mix, demand-driven development
pipeline, dedicated management team, and growth
trajectory are industry leading. We complement our
competitive advantages with a balance sheet that is
prudently managed to perform well in all economic
conditions.
RioCan is poised to succeed in any environment, and
importantly, benefits from the favourable supply /
demand dynamics of our core business: retail real estate
in Canada. The Canadian retail business continues
to thrive, particularly for physical stores as retailers
re-prioritize brick and mortar locations in critical omni-
channel strategies and service a growing population
driven by Canada’s focus on immigration. Well-located
retail centres, such as RioCan’s, are exceptionally
attractive with demand outstripping supply due to the
lack of new open-air retail centre construction over
the last decade. This condition is exacerbated by high
replacement costs.
While we find ourselves in a period of heightened
uncertainty, RioCan is well-positioned to overcome the
current volatility while staying the course to drive future
growth and value creation. With positive momentum and
reinforced confidence in our competitive advantages,
our Board of Trustees has approved RioCan’s distribution
increase of 6% effective with our February 2023
distribution.
Building from a quality foundation
At the start of 2022, we announced our strategic
roadmap with five-year financial growth targets.
We set ambitious goals, and I am pleased to state that,
despite ongoing economic headwinds, our performance
in 2022 puts us on the right track to achieve our targets.
We closed the year with our seventh consecutive quarter
of Same Property NOI growth and delivered a year-over-
year increase of 4.3% in 2022. We achieved the higher
end of our guidance range with FFO per unit of $1.71,
representing an increase of 7%. Our FFO payout ratio was
59.0%, consistent with our 55% to 65% target, leading
to excess cash flow of $154.8 million, and contributed to
our established cadence of development deliveries. This
year, our development spend was $427.1 million while the
value of development deliveries totaled $688.2 million.
In addition to producing strong financial results, we
continue to see the transactional value of our portfolio.
We overachieved on our capital recycling objectives
and raised $459.8 million in equity through asset sales.
LETTER FROM THE
PRESIDENT
& CEO
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Capital repatriated from asset dispositions combined
with proceeds from the sale of condominium and
townhomes enable us to self-fund higher valued, mixed-
used development projects; strengthen our balance
sheet; and opportunistically repurchase RioCan units at
attractive levels with excess proceeds.
include cash flow generation, conservative leverage and
capital recycling, which includes over $860 million in
sales revenue over the next four years from pre-sold
condominiums. Our two-pronged capital recycling
program prevents us from solely relying on dispositions,
particularly during periods of uncertainty.
Our balance sheet also remains strong. We ended the
year with $1.5 billion in liquidity and an $8.3 billion
unencumbered asset pool. We tactically leveraged
this unencumbered pool and refinanced with secured
mortgages for the most cost-effective capital.
We enter 2023 with signs pointing to an economic
slowdown. Balancing heightened uncertainty with the
strength of our foundation and continued demand for
our prime locations, we expect our FFO per unit to range
between $1.77 - $1.80 for the year. This is in line with our
five-year compounded annual growth target of 5-7%.
A strong plan for growth
The current macroeconomic volatility will pass, as it
always does. At the same time, the supply and
demand trends in the Canadian real estate market will
endure and provide long-term tailwinds for our business.
Within this landscape, RioCan remains keenly focused
on the future. Our four strategic pillars: Resilient Retail;
Intelligent Diversification; Customer Centrism; and
Responsible Growth, are designed to improve our quality,
deliver growth and create value. We showcase our
achievements against our strategic initiatives in the
following pages of this annual report but I will highlight
each of the pillars here.
Resilient Retail is the core of our business, and we will
continue to tailor our tenant base to offer consumers
a compelling mix of convenience and necessity-based
goods and services. In addition, as we sell lower growth
assets, we expect to further improve our property mix
and demographics to enhance the quality of our income.
Managed by our RioCan Living™ team and developed
by our exceptional in-house development group, our
growing residential rental portfolio is a key component
of our Intelligent Diversification pillar. With the delivery
of four new projects this year, RioCan now operates 10
buildings totaling more than 2,200 rental units generating
income with high growth potential. Given our large and
advanced pipeline of 15.0 million square feet of fully
entitled excess density, we have established a cadence of
new income generation. We strategically stagger project
starts to mitigate risk. Our in-progress projects, which are
reflected in our five-year plan targets, embed downside
protection with fixed prices negotiated during the early
stages of these developments. Additionally, we have the
competitive advantage to postpone breaking ground
on new projects and still benefit from in-place income
provided by functional retail properties. As always, RioCan
will exercise a high degree of discretion backed up by
in-depth analysis before construction of each new
project is commenced.
We will continue to take a prudent and balanced
approach to capital allocation. Our sources of capital
Committed to Customer Centrism, we launched our
new property design program in 2022 to optimize our
assets to cater to the specific needs of tenants across
our portfolio. We are setting a new RioCan standard
to elevate the consumer experience at our sites while
enhancing RioCan brand recognition. We will continue
to invest in our income producing centres, utilizing our
expertise and experience to further bolster our SPNOI
potential.
When it comes to Responsible Growth, RioCan benefits
significantly from our dedicated ESG program. Our
ESG initiatives are a significant component of our
commitment to enhance our employee experience, our
responsible citizenship, and the quality of our portfolio
to drive long-term value. In 2022, we unveiled a new
ESG strategy and a plan to introduce science-based
targets for our operations. We are proud to lead the way
in integrating ESG best practices in everything we do. Not
only will our efforts lead to immediate results, but they
will also continue to bolster RioCan’s future success.
Committed to creating long-term value
We have seen many peaks and valleys in the economy
since our inception as a publicly traded REIT in 1994
and have proven our ability to withstand volatility. The
strength and stability of our foundation allows us to look
beyond short-term turbulence and focus on enduring,
sustainable outcomes. Simply put, our portfolio is on
solid ground and poised for growth. RioCan’s strong
performance and fundamentals, combined with
favourable Canadian real estate market dynamics,
empowers us to maintain a positive outlook and remain
committed to our five-year plan.
Underpinning our strategy is an experienced
management team dedicated to delivering long-term
value for unitholders. Our efforts have set RioCan up
for success, and our team is focused on leveraging
opportunities to pursue our growth initiatives while
managing risk.
I want to thank our invaluable RioCan team for your
commitment and hard work, and our Unitholders for your
ongoing dedication to RioCan. Your trust and confidence
motivate us every day.
Jonathan Gitlin
President and Chief Executive Officer
4
RESILIENT
RETAIL
In an ever-changing Canadian retail
landscape, RioCan’s retail portfolio has
proven resilient. Our properties are in high
demand as retailers rely on physical stores as
part of their multi-channel approach to reach
customers. Over the past decade, very little
new retail supply has been created, so quality
spaces are scarce and highly coveted.
Supply is further constrained by high retail
replacement costs, particularly in the major
markets where RioCan is primarily located.
RioCan’s retail core is poised to deliver
reliable income and achieve steady growth
despite challenging market dynamics.
Our strategically curated portfolio offers
an asset mix of accessible retail centres
located in Canada’s most populated and
fastest growing metropolitan areas. Through
targeted leasing, we have a roster of strong
and stable tenants that can reliably pay rent
in any business environment. We focus on
improving our portfolio attributes – and we
will not stop leveraging our experience and
expertise to further enrich our retail business.
Our improving demographic profile,
property and tenant mix served to drive
positive occupancy trends, solid leasing
spreads, and higher average rent per square
foot, which in turn drive SPNOI growth.
5th & Third
Calgary, AB
HIGH-QUALITY PORTFOLIO
LOCATED IN PRIME,
IN-DEMAND AND
GROWING MARKETS
Dense population*
~180,000
people in 2017
~250,000
people in 2022
+39%
Strong household incomes*
~$110,000
avg. household
income in 2017
~$135,000
avg. household
income in 2022
+23%
* Within 5km radius
Source: DemoStats - 2022 - Trends, 2022 Environics Analytics
QUALITY DRIVEN RESULTS
Solid Leasing Spread*
(blended leasing spread)
9.4%
9.0%
6.3%
5.7%
5.0%
5.0%
2017
2018
2019
2020
2021
2022
* Weighted average net rent leasing spread for both renewal
leasing and new leasing
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HIGH-QUALITY PORTFOLIO
PROPERTY MIX
BY FAIR VALUE*
2017
2022
Target Property Type1
people in 2022
91%
96%
1 Includes Grocery Anchored, Mixed-Use Urban and Open Air Centre
Enclosed Centre
9%
4%
* Percentage of total fair value of income producing
properties at RioCan’s interest
QUALITY DRIVEN RESULTS
TENANT MIX
BY REVENUE2
19.2%
Grocery/Pharmacy/Liquor
(-1.9% vs. 2017)
14.0%
Essential Personal Services
(+1.4% vs. 2017)
14.9%
Specialty Retailers
(+1.1% vs. 2017)
9.5%
Furniture & Home
(-0.1% vs. 2017)
10.9%
Value Retailers
(+0.8% vs. 2017)
8.3%
Other Personal Services
(+0.8% vs. 2017)
7.2%
Quick Service Restaurants
(+1.6% vs. 2017)
5.9%
Sit-Down Restaurants
(-0.1% vs. 2017)
5.7%
Apparel
(-3.1% vs. 2017)
0.1%
Department Stores
(-0.2% vs. 2017)
4.3%
Movie Theatres
(-0.3% vs. 2017)
2 Percentage of annualized net rental revenue
Rent Growth
(average net rent per occupied square foot)
High Occupancy
(average rate of committed occupancy)
$19.75
$19.80
$20.16
$19.07
97.1%
97.2%
96.6%
96.8%
$20.98
97.4%
$17.75
95.7%
2017
2018
2019
2020
2021
2022
2017
2018
2019
2020
2021
2022
6
INTELLIGENT
DIVERSIFICATION
15.0 MILLION OF
ZONED DENSITY
Expected to deliver diversification of cash
flows and enhanced income growth potential
RioCan diversifies its tenant mix, asset base and cash
flow streams to bolster our portfolio’s quality and
income growth potential. Our development pipeline is a
key source of diversification and growth as we intensify
our existing income producing properties with mixed-
use residential development.
From 2019 to 2022, RioCan completed the
construction of more than 700,000* square feet of
residential rental space. We now operate 10 rental
buildings across Canada, which drive traffic to our
existing retail sites bolstering our high-quality income
in high-density, transit-oriented areas.
Building on our success over the past three years,
our deep development pipeline provides RioCan with
valuable growth opportunities for years to come.
In 2023, we expect to deliver 633,000* square feet of
new developments including FourFifty The Well, the
46-storey, 592-unit residential tower at The Well in
Toronto. RioCan self-funds its development program
through retained earnings, conservative leverage and
capital recycling, while our condominium and townhome
projects address ownership demand. RioCan’s pipeline
also provides an avenue to diversify our capital sources
through air rights sales and partnerships with
recognized investors.
Column1
Residential
Rental
Condominium/
Townhouse
50%
30%
3%
Office
17%
Retail
PIPELINE FUNDED BY:
• Retained Earnings
• Project Financing
• Capital Recycling
* At RioCan’s interest
Supported by over $860M in revenue from sale of
condominiums over the next four years
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Luma / Elmvale
Ottawa, ON
GROWING RESIDENTIAL RENTAL
PORTFOLIO WITH IN-HOUSE EXPERTISE
2,219 RENTAL UNITS BUILT SINCE 2019
eCentral
Frontier
Brio
Pivot
Litho
Market
9
1
0
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1
2
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Strada
Luma
Latitude
Rhythm
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CUSTOMER
CENTRISM
WITH NEARLY 5,000 TENANTS ACROSS
THE RIOCAN PORTFOLIO, WE ARE
KEENLY FOCUSED ON REMAINING THE
LANDLORD OF CHOICE IN CANADA.
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RioCan Durham
Greater Toronto, ON
We continually invest in our great locations to provide quality space and support for tenants
at all stages of their growth and evolution.
To anchor our customer-centric approach,
we developed a RioCan property standard, which is
designed to bring our brand to the forefront and elevate
the retail experience for our tenants and shoppers alike.
From the highly-visible pylons that showcase our high-
quality tenants, branded bike racks and benches, to
touchless entrances.
In 2022, we officially kicked off the RioCan Property
Design Program with 20 projects nationally. The new
RioCan property standard is a purposeful initiative
that differentiates our shopping centres. Our ongoing
investments will drive foot traffic and translate into
increased revenue by attracting new tenants and
retaining existing ones for the long term.
10
RESPONSIBLE
GROWTH
RioCan aspires to grow responsibly by operating a resilient
business, forming strategic partnerships, and creating a
positive impact for our environment and communities. In
2022, we refined RioCan’s ESG strategy, which guides our
company-wide approach to ESG and serves as a blueprint
to track and report our commitments and progress. We
continuously refine our ESG strategy to address emerging
trends and incorporate evolving materiality topics.
We believe that responsible growth is incumbent on not
only RioCan and its management, but also our employees,
contractors, suppliers, and partners. Our strategy serves to
help us consistently collaborate and share best practices
with our stakeholders so they can operate as sustainably as
possible.
RioCan is proud to lead the way in ESG for Canadian real
estate. Our investments in technology and ESG are critical
parts of our business, empowering us to grow responsibly
and enhance our long-term value in the process.
KEY 2022
ESG ACHIEVEMENTS
• SECTOR LEADER
2022 GRESB Real Estate Assessment-Standing Investments
• GOLD RECOGNITION
2022 Green Lease Leader Designation
• TOP 100 EMPLOYERS
One of Greater Toronto’s Top Employers
• GREENEST EMPLOYER
One of Canada’s Greenest Employers for 2022
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RIOCAN’S ESG
COMMITMENTS
Resilient Business
Future-proofing RioCan through best-in-class governance
and climate-resilient assets
• Climate: ensure our operations, portfolio and developments
are resilient to the effects of climate change and contribute to
the transition to a low-carbon economy
• Governance: operate with leading ESG governance and
risk management practices and continuously provide high-
quality and transparent reporting
• Finance: use sustainable strategies to generate long-term
value for our investors and gain access to new sources of
capital
Purposeful Impact
Pursuing sustainable economic growth by purposefully
creating value and impact for our environment, people
and communities
• Environment: design and operate high-quality assets that not
only limit the environmental footprint, but enhance it
• People: attract, retain and develop a diverse and talented
workforce and create a workplace where all employees are
valued, included and empowered to do their best work
• Community: enhance the communities in which we
operate through purposeful design and economic and
social growth initiatives
Strategic Partnerships
Collaborating with RioCan’s partners to address the pertinent
challenges facing our society
• Tenants: continuously enhance tenant experience, wellbeing
and safety, and identify opportunities to engage them to
identify and achieve mutual ESG objectives
• Supplier: apply procurement and partner selection criteria
that support positive environmental and social change and
supply chain resilience
• Industry: collaborate and advocate with industry initiatives
and groups to collectively address material ESG challenges
facing our industry
For more information on RioCan’s ESG program and to read
our 2022 ESG Report visit the Corporate Responsibility
section at www.riocan.com
12
Burlington Centre
Greater Toronto, ON
FINANCIAL
REVIEW
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Yonge Eglinton Centre
Toronto, ON
TABLE OF CONTENTS
Key Performance Indicators
Management's Discussion and Analysis
Introduction
About this Management's Discussion and Analysis
Forward-Looking Information
Our Business and Our Business Environment
Business Overview
Strategy
Operating Environment
Outlook
Environmental, Social and Governance (ESG)
Initiatives
Property Portfolio Overview
Property Operations - Total Portfolio
Property Operations - Commercial
Property Operations - Residential Rental
Results of Operations
Summary of Selected Financial Information
Revenue
Operating Income and Net Operating Income (NOI)
Other Income (loss)
Other Expenses
Net Income (Loss) Attributable to Unitholders
Funds From Operations (FFO)
Adjusted Funds From Operations (AFFO)
Asset Profile
Property Valuations
Acquisitions and Dispositions
Mortgages and Loans Receivable
Joint Arrangements
15
18
18
18
18
19
19
19
20
22
23
24
24
26
30
31
31
32
33
34
34
36
36
37
38
38
40
42
42
Capital Expenditures on Income Properties
Development Program
Development Pipeline
Completed Developments
Development Projects Under Construction
Development Projects in Planning
Capital Resources and Liquidity
Capital Management Framework
Debt Metrics
Credit Ratings
Total Debt Profile
Liquidity
Off-Balance Sheet Arrangements
Hedging Activities
Trust Units
Distributions to Unitholders
Other Disclosures
Related Party Transactions
Selected Quarterly Results and Trend Analysis
Fourth Quarter Unaudited Consolidated Statements of
Income (Loss)
Accounting Policies and Estimates
Adoption of New Accounting Standards
Critical Accounting Judgements and Estimates
Future Changes in Accounting Policies
Controls and Procedures
Climate-Related Financial Disclosures
Non-GAAP Measures
Risks and Uncertainties
44
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46
47
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51
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52
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57
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59
61
61
62
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99
RioCan Annual Report 2022 14
KEY PERFORMANCE INDICATORS
(In thousands of dollars, except percentages, square feet and per unit values)
FINANCIAL
Rental Revenue
Q4 2022
$268,864
Year 2022
$1,074,192
Q4 2021
$266,899
+0.7%
Year 2021 $1,066,562 +0.7%
Same Property NOI (i) (vii)
Q4 2022
$149,771
Year 2022
$600,529
Q4 2021
$146,405
+2.3%
Year 2021 $575,707
+4.3%
Operating Income
Q4 2022
Year 2022
$175,421
$712,692
Q4 2021
$194,788
-9.9%
Year 2021 $701,665
+1.6%
FFO Per Unit - Diluted (i)
Q4 2022
Year 2022
$0.42
$1.71
Q4 2021
$0.46
-8.7%
Year 2021 $1.60
+6.9%
FFO Payout Ratio (i)
AFFO Payout Ratio (i)
Q4 2022
Q4 2022
59.0%
67.1%
Q4 2021
62.6%
-3.6%
Q4 2021
71.6%
-4.5%
Net Income (Loss)
Q4 2022
Year 2022
$(4,961)
$236,772
Q4 2021
$208,776
-102.4% Year 2021 $598,389
-60.4%
15 RioCan Annual Report 2022
to higher occupancy,
Base rent for the year and the quarter exceeded last
rental growth,
year due
acquisitions, development completions, net recoveries
and percentage rent, net of the impact from dispositions
and a reduction in straight-line rent.
SPNOI increased by 4.3% and 2.3% on a year and
quarter basis, respectively primarily due to increases in
occupancy, rent growth from contractual rent steps,
increases in rent upon renewal and a lower pandemic-
related provision.
Operating income improvement for the year was driven
by higher SPNOI and net operating income (NOI)(i) from
completed developments, partially offset by the impact
of properties sold
the current and prior year.
Residential NOI also improved over the prior year.
Residential inventory gains were lower for both the year
and the quarter due to timing, causing the year-over-
year decline in operating income in the quarter.
in
FFO per unit was $0.11 higher for the year when
compared to the same period last year. Improved
property fundamentals drove SPNOI higher. Higher NOI
from residential properties and completed developments
also added to the increase. Higher interest expense was
partially offset by higher interest and other income. The
current year NOI impact of asset dispositions was
mostly offset by the accretive benefit of unit buybacks.
The $0.04 lower FFO per unit for the quarter when
compared to the same period last year was mainly due
to lower inventory gains due to timing.
the
increase
The FFO Payout Ratio is within the Trust's long-term
in
target range of 55-65%. Despite
distributions per unit in 2022, the FFO Payout Ratio
decreased when compared to the same period last year
mainly due to a higher FFO and a lower number of
outstanding units from unit buybacks. RioCan's Board of
Trustees approved a 6% increase to its per unit monthly
the
distributions $0.085
distribution declared
in February 2023, bringing
RioCan's annualized distribution to $1.08 per unit.
to $0.090 beginning with
The decrease in net income over the same periods last
year is mainly due to net fair value losses on investment
properties in 2022 compared to fair value gains in 2021.
The current year fair value loss of $241.1 million was
driven by increased capitalization rate assumptions, an
impact of $408.5 million loss, partially offset by the
positive impact of $167.4 million from higher property
level NOI due to strong leasing.
KEY PERFORMANCE INDICATORS
(In thousands of dollars, except percentages, square feet and per unit values)
LEASING - COMMERCIAL
Committed Occupancy(iii)
In-Place Occupancy (iii)
Q4 2022
97.4%
Q4 2022
96.8%
Q4 2021
96.8%
+0.6%
Q4 2021
96.1%
+0.7%
New Leasing Spread (iv)
Q4 2022
11.8%
Year 2022
12.3%
Q4 2021
3.8%
+8.0%
Year 2021 8.6%
+3.7%
Renewal Leasing Spread (iv)
Q4 2022
8.3%
Year 2022
8.2%
Q4 2021
5.0%
+3.3%
Year 2021 5.4%
+2.8%
Blended Leasing Spread (iv)
Q4 2022
8.8%
Year 2022
9.0%
Q4 2021
4.6%
+4.2%
Year 2021 6.3%
+2.7%
DEVELOPMENT
Development Spending (i)(v)
Q4 2022
Year 2022
$114,552
$427,068
Q4 2021
$95,406
+20.1%
Year 2021 $437,927
-2.5%
Development NLA Completions (sq. ft.) (vi)
Q4 2022
Year 2022
258,000
651,000
Q4 2021
86,000
+200.0% Year 2021 243,000
+167.9%
The increase in committed and in-place occupancy was
driven by higher retail occupancy. Retail committed
occupancy of 97.9% exceeds pre-pandemic levels and
reflects the strong demand for the Trust’s quality retail
assets.
Average net rent per square foot for new leasing for the
year and quarter were approximately $7.32 and $3.12
above our portfolio average net rent per occupied
square foot. The Trust generated positive new leasing
spreads for the quarter due to strong demand from
tenants for the high-quality locations that are found in
RioCan’s portfolio.
For the year, the renewal leasing spread was strong
despite having a large number of fixed rate renewals
with larger national and anchor tenants. In Q4 2022, the
retention ratio reached a new high at 93.5%, with the
majority of renewals at market rates resulting in a strong
renewal leasing spread.
Strong double digit new leasing spreads, together with
strong renewal spreads, resulted in a high single digit
2022 blended leasing spread.
Full year Development Spending of $427.1 million was
at the low end of the anticipated range for 2022 of $425
million to $475 million, net of expected cost recoveries
and air rights sales mainly as a result of timing.
in
largely
for 2022 were
The 651,000 square feet of property under development
line with
completions
expectations and included four residential buildings
which added a combined 246,000 square feet or 650
residential units to the RioCan LivingTM portfolio. In
addition, 168 condo units were completed in the quarter,
bringing the 2022 completions to 608 units, generating
revenue of $118.7 million.
In Q4 2022, 151,000
commercial square feet at The WellTM were completed,
bringing the 2022 transfers to 292,000 square feet.
RioCan Annual Report 2022 16
KEY PERFORMANCE INDICATORS
(In thousands of dollars, except percentages, square feet and per unit values)
Balance Sheet
Liquidity (i)(ii)(iii)
Unencumbered Assets (i)(ii)(iii)
Q4 2022
Q4 2022
$1,548,237
$8,256,508
Q4 2021
$1,010,475 +53.2%
Q4 2021
$9,392,266 -12.1%
Total Adjusted Debt to
Total Adjusted Assets
(i)(ii)(iii)
Adjusted Debt to Adjusted
EBITDA (i)(ii)
Q4 2022
45.2%
Q4 2022
9.51x
Q4 2021
43.9%
+1.3%
Q4 2021
9.59x
-0.08x
The increase in Liquidity from Q4 2021 is mainly due to
a $250 million higher limit on our revolving unsecured
operating line, new construction lines, and $250 million
of senior unsecured debentures issued in 2022 which
were used to repay certain ordinary course debt
including the replenishment of the operating line of
credit.
The Unencumbered Assets decreased from Q4 2021
due to mortgage financing obtained on certain formerly
unencumbered assets, given
favourable
pricing on secured financing, new construction lines
relating
residential development projects and
dispositions, net of acquisitions of unencumbered
assets. Unencumbered Assets generated 55.9% of
RioCan's Annual Normalized NOI(i) and provided 2.18x
coverage over its Unsecured Debt(i)
.
the more
to
Total Adjusted Debt to Total Adjusted Assets increased
from Q4 2021 mainly due to development activities
being partially funded with incremental debt, which was
mitigated to some extent by the continued investment in
development-related assets and hedging instrument fair
value gains.
The improvement in Adjusted Debt to Adjusted EBITDA
was mainly driven by higher Adjusted EBITDA .
(i) This is a non-GAAP financial measure. Refer to the Non-GAAP Measures section in this MD&A for more information on each non-GAAP financial
measure.
(ii) At RioCan's proportionate share.
(iii) Information presented as at the respective period end.
(iv) Based on annualized contractual base rent.
(v) Effective Q1 2022, the definition of Development Spending was revised to include RioCan's share of Development Spending from equity-
accounted joint ventures, accordingly, the comparative period has been restated.
(vi) NLA for development completions includes properties under development (PUD) only and excludes residential inventory.
(vii) For commercial portfolio only.
17 RioCan Annual Report 2022
MANAGEMENT’S DISCUSSION AND ANALYSIS
Our Business
and Our
Business
Environment
Environmental,
Social and
Governance
(ESG)
Initiatives
Property
Portfolio
Overview
Introduction
INTRODUCTION
Results of
Operations
Asset Profile
Development
Program
Capital
Resources
and Liquidity
Other
Disclosures
Non-GAAP
Measures
Risks and
Uncertainties
About this Management's Discussion and Analysis
This Management’s Discussion and Analysis (MD&A) for the three months and year ended December 31, 2022 ("Q4 2022 and
YTD 2022", respectively) is dated February 15, 2023 and should be read in conjunction with the annual audited consolidated
financial statements and related notes for the year ended December 31, 2022 (2022 Annual Consolidated Financial Statements).
Unless the context indicates otherwise, references to "RioCan", "the Trust", "we", "us" and "our" in this MD&A refer to RioCan
Real Estate Investment Trust and its consolidated operations. Unless otherwise specified, all amounts are based on financial
statements prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the International
Accounting Standards Board (IASB). These documents, as well as additional information relating to RioCan, including our most
recently filed Annual Information Form (AIF), have been filed electronically with Canadian securities regulators through the
System for Electronic Document Analysis and Retrieval (SEDAR) and may be accessed through the SEDAR website at
www.sedar.com or RioCan's website at www.riocan.com.
In addition to using performance measures determined in accordance with IFRS, RioCan also measures performance using
certain additional non-IFRS performance measures and provides these measures in this MD&A so that investors may do the
same. Such measures do not have any standardized definitions prescribed under IFRS generally accepted accounting principles
(GAAP) and, therefore, may not be comparable to similar measures presented by other real estate investment trusts or
enterprises. Refer to the Non-GAAP Measures section of this MD&A for a list of defined Non-GAAP financial measures and
reconciliations.
Unless otherwise specified, amounts are in thousands of Canadian dollars, and percentage changes are calculated using whole
numbers.
Forward-Looking Information
Certain information included in this MD&A contains forward-looking information within the meaning of applicable Canadian securities laws. 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. This information
includes, but is not limited to, statements made in the Key Performance Indicators, Our Business and Our Business Environment, Property Portfolio
Overview, Asset Profile, Development Program and Capital Resources and Liquidity sections in this MD&A. This MD&A includes, but is not limited to,
forward-looking statements regarding increases to RioCan’s SPNOI due to development activities; expected Annual Development Spending and
capital expenditure during 2023; completion of construction and estimated project costs in connection with Properties Under Development (“PUDs”);
estimated FFO per unit growth and the FFO Payout Ratio; continued demand for space in our target markets; the expected effect of the global
pandemic and consequent economic disruption; RioCan’s internal forecast; the creation of future value; NOI and growth from PUDs; RioCan’s
property and tenant mix; return on investments; market trends and anticipated demand for retail and residential properties; our expectations regarding
development of potential incremental density; anticipated net leasing activity and rental rates; management’s expectations regarding future
distributions; completion of future financings and availability of 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. Such forward-looking information reflects
management’s current beliefs and is based on information currently available to management. All forward-looking information in this MD&A is qualified
by the following 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 about future events and financial trends, which RioCan believes may affect its financial condition, business and operations, and financial
results, including, but not limited to: a gradual recovery and growth of the retail environment; a rising interest rate environment; a continuing trend
toward land use intensification at reasonable costs and development yields, including residential development in urban markets; the Trust’s ability to
redevelop, sell or enter into partnerships with respect to the future incremental density it has identified in its portfolio; continued access to equity and
debt capital markets to meet the Trust’s current and future financing needs; and the availability of investment opportunities for growth in Canada.
Risks and uncertainties which could cause actual events or results to differ materially from the forward-looking information contained in this MD&A
include those described under the Risks and Uncertainties section in this MD&A and the Trust's AIF, as well as those related to: the duration and
impact of the COVID-19 pandemic on the business, operations and financial condition of RioCan and its tenants, as well as on consumer behaviours
and the economy in general; financial and liquidity risks; interest rate and financing risk; inflation risk; 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; 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; regulatory risk including changes to rent control legislation; development risk associated
with construction commitments, project costs and timing, related zoning and other permit approvals and pace of lease-up or pre-sale; risks related to
the residential rental business; access to debt and equity capital; credit ratings; joint ventures and partnerships; the Trust's ability to utilize the capital
gain refund mechanism; changes in income tax legislation; unexpected costs or liabilities related to acquisitions and dispositions; environmental
matters; climate change; litigation; uninsured losses; reliance on key personnel; Unitholder liability; income, sales and land transfer taxes; and cyber
security.
Although the forward-looking information contained in this MD&A 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 MD&A may be
considered “financial outlook” for the purposes of applicable Canadian securities laws, and as such the financial outlook may not be appropriate for
purposes other than this MD&A. The forward-looking information contained in this MD&A is made as of the date of this MD&A, and should not be
relied upon as representing RioCan’s views as of any date subsequent to the date of this MD&A. 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.
RioCan Annual Report 2022 18
MANAGEMENT’S DISCUSSION AND ANALYSIS
Our Business
and Our
Business
Environment
Environmental,
Social and
Governance
(ESG)
Initiatives
Property
Portfolio
Overview
Introduction
Results of
Operations
Asset Profile
Development
Program
Capital
Resources
and Liquidity
Other
Disclosures
Non-GAAP
Measures
Risks and
Uncertainties
OUR BUSINESS AND OUR BUSINESS ENVIRONMENT
Business Overview
RioCan is an unincorporated “closed-end” trust governed by the laws of the Province of Ontario constituted pursuant to the
amended and restated declaration of Trust dated June 2, 2020 ( the "Declaration of Trust"). RioCan's trust units (Units) are listed
on the Toronto Stock Exchange (TSX) under the symbol REI.UN. RioCan is one of Canada’s largest real estate investment trusts,
with a total enterprise value of approximately $13.4 billion as at December 31, 2022.
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.
RioCan's property portfolio includes Mixed-Use / Urban, Grocery Anchored centres and Open Air centres which are defined in the
Property Portfolio Overview section of this MD&A.
As at December 31, 2022, the portfolio was comprised of 100% owned and co-owned properties as follows:
100% owned properties
Co-owned properties (i)
Total
NLA
28,664
4,963
33,627
Income producing
properties
Property Count
Properties under
development
146
37
183
2
8
10
Total
148
45
193
In addition, the Trust owns partial interests in 15 properties through six joint ventures. RioCan enters into co-ownership
arrangements and joint ventures to leverage its robust pipeline of prime locations to efficiently raise capital, mitigate development
and concentration risk and earn management fees for its expertise in managing income producing properties and development
projects. As at December 31, 2022, our retail portfolio accounts for 88.5% of the Trust's annualized contractual gross rent,
followed by office at 8.5% and residential at 3.0%.
Strategy
The Trust remains committed to serving prime, high-density, transit-oriented areas where Canadians want to shop, live and work.
Its long-term strategy builds on RioCan's competitive advantages including the quality of its portfolio, the fundamental strength of
its tenants and its embedded development pipeline. RioCan assets are primarily located in Canada’s most populated and fastest
growing cities; the average population within five kilometres of the Trust’s properties is 250,000 with an average household
income of $135,000. Anchored by tenants servicing consumers’ everyday needs, RioCan has a roster of strong and stable
tenants that can reliably pay rent through different economic cycles. RioCan's large development pipeline includes 15.0 million
square feet of zoned excess density, of which 100% is located in Canada’s six major markets. The Trust's well-positioned portfolio
and resilient base of tenants are the cornerstones of its track record of delivering stable and high-quality income while its robust
development pipeline offers near, mid and long-term growth opportunities. Committed to expanding net asset value and
increasing total Unitholder return, RioCan's strategy is anchored on the four pillars described below, which are designed to
enhance the quality, growth profile and resilience of the Trust’s portfolio. RioCan executes its strategy with a goal to lead the
industry with ESG best practices. The Trust approaches every aspect of its business with a sustainability mindset in support of
building and growing for future market expectations, regulatory requirements and technology opportunities and, importantly, for
the benefit of the communities it serves.
Resilient Retail
Physical retail spaces have proven to be critical to retailers' omni-channel strategies by offering in-person experiences that
augment and support the merging of physical and online commerce. RioCan has a well-positioned retail portfolio, which provides
secure income to Unitholders. To drive exponential growth, the Trust is committed to investing in its properties to enhance the
retail offering, provide a consistent customer experience at each one of our shopping environments, and support our tenants as
they continue to expand their customer channels. Building on its well-established portfolio, RioCan will continue to invest in select
properties to enhance Same Property NOI potential and divest slower growth assets.
Intelligent Diversification
To further enhance the quality, stability and growth of its income, RioCan is intelligently diversifying its asset base, tenants and
income sources.
19 RioCan Annual Report 2022
MANAGEMENT’S DISCUSSION AND ANALYSIS
Our Business
and Our
Business
Environment
Environmental,
Social and
Governance
(ESG)
Initiatives
Property
Portfolio
Overview
Introduction
Results of
Operations
Asset Profile
Development
Program
Capital
Resources
and Liquidity
Other
Disclosures
Non-GAAP
Measures
Risks and
Uncertainties
Development is one of the key drivers of diversification, particularly with respect to asset type and income streams. RioCan is
diversifying its asset base by primarily growing its residential portfolio in combination with great retail to elevate its residential
tenant experience and in turn drive traffic for its onsite retail tenants. The Trust’s dedicated RioCan Living team is executing on a
robust pipeline of active development projects that are concentrated in Canada’s fastest growing markets. As a means to
supplement the expansion of the RioCan Living portfolio, the Trust will evaluate and pursue opportunities to acquire selective
sites that are suitable for development, to assemble properties adjacent to existing prospective development lands or to acquire
multi-unit residential operating rental properties. In addition, the Trust's residential inventory serves specific market demand for
housing ownership as opposed to rental and enables the Trust to accelerate capital recycling to further fuel its development
program.
RioCan is also diversifying through its tenant mix to ensure a solid base of healthy, necessity-based and value-oriented tenants.
The Trust will continue to drive growth in its retail core by introducing non-traditional complementary “intra-RioCan” uses, such as
medical, educational and fulfillment.
RioCan is also focused on diversifying its sources of capital and is continuously exploring options to recycle capital including air
rights sales and capital partnerships with recognized investors. Where applicable, the Trust will utilize its condominium fund
structure that enables RioCan to generate management fees from non-managing partners for its expertise, as well as a promote
and participate in sales profits. This strategic approach provides multiple benefits to RioCan, including diversified risk, efficient
capital to fuel its development program, and crystallizing the value of its zoned excess density. RioCan expects to continue to
attract and establish long-term relationships with capital partners.
Customer Centrism
RioCan is committed to deepening its emphasis on customer centricity and enhancing the distinctiveness of RioCan’s value
proposition to its tenants across retail, residential and office. To better serve tenants and changing consumer habits, RioCan
invests in the quality of its assets by placing a focus on technology as well as by driving traffic to its shopping centres, through
supporting retailers’ E-commerce logistics and elevating the retail experience with enhanced RioCan brand standards from pylons
to touchless door ways. The Trust leverages tenant feedback and data to improve the attributes that tenants care most about and
to support its commercial leasing, retention and attraction efforts, which resulted in enhanced leasing spreads and occupancy
rates. RioCan also offers a dedicated asset manager to each partnership who regularly engages with respective partner and
provides relevant support and requisite reporting.
Responsible Growth
RioCan believes responsible growth requires a culture of excellence that differentiates RioCan, drives results and retains,
develops and attracts top talent. The Trust is executing on its cultural roadmap and evaluating and refining its existing processes,
policies and initiatives to create a more diverse, united and productive workforce. RioCan is also one of the leaders within the
Canadian real estate industry on ESG best practices. It is taking action to continuously improve and monitor its progress and
embed ESG into all facets of its business to enhance the organization and assets and to deliver long-term Unitholder value.
RioCan maintains ample liquidity and prudently manages its balance sheet and capital structure. The Trust sets goals to maintain
leverage within target ranges and an optimal mix of Unsecured and Secured Debt to provide continued financial flexibility and
liquidity, staggers its debt maturities and limits its variable rate debt to reduce interest rate and refinancing risk, builds on
established lender relationships and continues to utilize multiple sources of capital. This disciplined approach allows RioCan to
maintain the strong liquidity and financial strength needed to drive growth and thrive in the ever-changing marketplace.
Operating Environment
Canadian Retail Environment
The retail industry continues to evolve at an accelerated pace. Increasingly, retailers recognize the importance of human
interaction and of brick and mortar stores in the retail landscape and are looking to create a seamless customer experience
between digital and in-store offerings. Despite an increase in online shopping, retailers, necessity-based or otherwise, continue to
evolve their infrastructure to accommodate a variety of delivery models including curbside pick-up and buy-online-pickup-in-store.
Increased in-person visits to necessity-based retailers such as grocery and pharmacies during the pandemic demonstrated that
E-commerce does not fully accommodate the Canadian consumers' demand for goods and services, validating the importance of
physical stores as part of a robust omni-channel model.
Retailers recognize the vital necessity of offering customers the ability to control their own shopping experience by providing
multiple shopping channels and adapting store sizes, layout and product mix to better meet consumer demands. RioCan shares
the belief that shopping centres will continue to provide a cost-effective distribution channel for retailers given Canada’s
geographic dispersion, the high cost of “last kilometre” deliveries and high barriers to establishing distribution centres in urban
settings. Physical store networks, that are deeply penetrated in well-populated neighbourhoods, are forms of last kilometre
distribution or facilitation centres and can serve as an efficient and convenient mechanism to put goods into the hands of
consumers. As a responsible and forward-thinking commercial landlord, RioCan will continue to seek ways to help retailers adapt
their stores to provide their customers with flexibility and, through this process, will continue to provide relevant and resilient
shopping environments.
RioCan Annual Report 2022 20
MANAGEMENT’S DISCUSSION AND ANALYSIS
Our Business
and Our
Business
Environment
Environmental,
Social and
Governance
(ESG)
Initiatives
Property
Portfolio
Overview
Introduction
Results of
Operations
Asset Profile
Development
Program
Capital
Resources
and Liquidity
Other
Disclosures
Non-GAAP
Measures
Risks and
Uncertainties
Relative to other countries, Canada has low retail space per capita, a limited number of retailers within each retail category, tight
building zoning controls and high costs of new construction that keep supply in check. Very little new retail space is being built,
making our well-positioned portfolio that much more desirable. The increasing scarcity of well-positioned retail space together
with retailers' bricks and mortar expansion plans is resulting in positive tension in lease negotiations. In addition, Canada's
population growth is expected to be fueled by immigration. The Canadian federal government recently announced a plan to take
in 500,000 immigrants a year by 2025, many of whom are expected to land in or migrate to urban markets, especially the Greater
Toronto Area (GTA).
All of the above factors contribute to a resilient base of quality retail centres. The current high level of inflation will impact retail
tenants to varying degrees. While there may be some short-term volatility, the majority of our tenants are considered to be strong
and stable and are largely comprised of national, necessity-based retailers with strong covenants. We believe that these well-
established tenants are poised to navigate through this inflationary environment. Strong, well-positioned retail assets, such as
those owned by RioCan, have proven and will continue to prove resilient. The attributes of RioCan's portfolio, such as proximity to
transit, an exceptional demographic profile and high visibility at key intersection and major thoroughfares, will not lose their
prominence.
Over its 28-year history, RioCan's experienced management team, recognized for its leadership and adaptability, has successfully
managed through various challenges and economic cycles by continually assessing and adapting its strategies to changing
market dynamics.
Development Environment and Residential Real Estate Market
The Trust remains vigilant in monitoring market trends and continues to adapt its development program to the changing market
conditions. With population growth and a limited supply of land available for development, Canada’s six major markets have
experienced a persistently high level of development and construction activity over the last few years mainly in non-retail sectors.
Most recently, labour shortages, supply chain disruptions, higher interest costs and increasing development charges by
municipalities have presented new challenges for developers.
RioCan’s in-house development experts employ a variety of techniques to navigate through this changing development
environment. The design, budget and contracts of new projects are subject to a high level of scrutiny. Developments are
prioritized and undertaken selectively, based on opportunities within the major markets that RioCan's portfolio is situated in.
RioCan can choose to start projects only after costs are locked down or pause those not in active construction without harm to
the Trust as the underlying lands are typically active and productive retail properties. Furthermore, RioCan benefits from a low
invested land cost as many of its projects are situated on land acquired years ago and its advanced pipeline primarily located in
the GTA provides the Trust with diminished zoning risk thus easing certain return pressures.
RioCan often shares development risk with reputable, outside investors whose ownership interest can be as high as 80% for
certain condominium and townhouse projects. RioCan Living developments have a diverse range of rental and home ownership
offerings, located near or on Canada's prominent transit corridors. Through due diligence and market research RioCan ensures
that the target-market appeal is maximized in every project. For earlier-stage residential projects, RioCan has the added flexibility
of being able to pivot between its purpose-built rental and condominium/townhouse projects. Our condominium/townhouse
projects are pre-sold, with those under construction achieving 95% of pro forma gross revenue, and significant deposits provide
security against default by homebuyers.
Recently, rising interest rates have subdued the demand for homeownership and are keeping would-be buyers in the rental
market. Therefore fundamental supply/demand imbalance for housing persists and may worsen in the face of interest rate and
cost headwinds. If, in the face of these headwinds, higher required return expectations by industry participants do not materialize,
deferred or cancelled projects could ultimately be the result. Housing demand from immigration, the return of international
students to in-class learning and return to work in urban centres further exacerbates the supply/demand imbalance.
The federal and provincial governments recognize this housing supply/demand imbalance and have introduced several initiatives
to address this issue which generally aim to speed up the planning and delivery of housing and increase the supply and choice of
housing, including affordable housing. The Trust is monitoring developments both at the federal and provincial level as details of
these initiatives emerge.
Over the long-term, RioCan is confident that its high-quality residential offering, which is overseen internally by a dedicated team
of residential experts, will be in high demand given its design, amenities, community focus, professional management and access
to strong retail offerings. RioCan is confident in its mixed-use residential development strategy and long-term NAV growth
potential which will create value for its Unitholders.
Refer to the Development Program section of this MD&A for further details regarding the development pipeline.
Economic Environment
Market volatility driven by high inflation prevailed in 2022. While still at elevated levels, inflation seems to have peaked as the
effects of sharp increases in interest rates during the past year and steady improvements in supply chains have begun to take
hold. The Bank of Canada (BOC) overnight lending rate of 4.5% is the highest rate in Canada in 15 years. The BOC expects the
economy to slow as the impact of higher interest rates is absorbed into the economy allowing the supply to catch up with
21 RioCan Annual Report 2022
MANAGEMENT’S DISCUSSION AND ANALYSIS
Our Business
and Our
Business
Environment
Environmental,
Social and
Governance
(ESG)
Initiatives
Property
Portfolio
Overview
Introduction
Results of
Operations
Asset Profile
Development
Program
Capital
Resources
and Liquidity
Other
Disclosures
Non-GAAP
Measures
Risks and
Uncertainties
demand, despite the continuing tight labour market. Longer term Government of Canada benchmark rates have also increased
significantly. Funding in the Canadian financial markets continues to be available, albeit at a higher cost.
RioCan's balance sheet, portfolio and market position provides the Trust with the flexibility needed to navigate volatile economic
conditions. With well-located real estate that is part of the fabric of vibrant communities, RioCan is positioned to attract top
tenants who are able to absorb higher net rents as their revenues increase with inflation. Our strong and stable tenants are less
susceptible to economic uncertainty, and necessity-based goods and services tenants are less affected by changes in
discretionary spending. The supply/demand imbalance of quality retail real estate resulting from a lack of investment over the
past few years will become more prevalent with increasing replacement costs that are generally well above market values. This
imbalance creates positive tension in lease negotiations and can result in increased rental rates and property values. It has also
resulted in higher retention ratios as existing tenants have fewer alternatives, and even when alternative space is available, the
expense of fitting out this space has become prohibitive. Relocation is disruptive to retail businesses since their customers value
the convenience and familiarity of incumbent locations and are loath to break their existing shopping patterns. Our RioCan Living
residential portfolio provides another diversified source of revenue, and the short-term nature of the leases allow rents to keep
pace with annual inflation. For a discussion on the impact of increasing interest rates on the residential real estate market, see
the Development Environment and Residential Real Estate Market section above.
Higher interest rates lead to increased cost of capital and could lower expected returns on projects which could slow investment
volumes and put upward pressure on capitalization rates. To date, solid operating fundamentals, buyers’ expectations for robust
NOI growth on a post-pandemic recovery and a limited supply of high-quality assets has served as an offset to these rising
interest rate pressures. We have also yet to fully reverse the IFRS value reductions that were recorded in 2020 as a result of the
pandemic. Furthermore, our existing development projects are largely insulated from inflation as the majority of costs are already
secured with fixed-rate contracts, and for the majority of our next wave of projects, we will be developing on lands that we already
own with in-place income which gives us the ability to maintain discipline.
RioCan has proactively employed a variety of financial tactics to protect against rising interest rates, namely maintaining a low
proportion of floating rate debt, locking in long-term fixed rate debt and maintaining a well-distributed debt maturity profile. Ample
Liquidity of $1.5 billion and Unencumbered Assets of $8.3 billion, provide additional financial flexibility to the Trust in the current
economic environment.
COVID-19
The majority of public health and workplace safety measures have been lifted. Tenants are open and operating under minimal
restrictions and employees are increasingly being required to return to offices. As successive waves of the variant arise,
governments are taking a more balanced, longer-term approach to managing the impact of the virus and relying more heavily on
vaccines and antivirals. Therefore, the expectation is that any future waves of the virus will result in fewer economic disruptions, if
any. The Trust continues to monitor and follow public health guidelines to ensure the safety of its tenants, customers and
employees. As a result, our expectation is that we will no longer be reporting on COVID-19 in our 2023 disclosure.
Outlook
RioCan manages its portfolio and capital structure to focus on long-term growth and deliver on its commitment to optimize Total
Unitholder Return. By focusing on the quality of our portfolio and the build out of our development pipeline, we will continue to
generate resilient income and grow FFO to support sustainable and growing distributions and increase net asset value.
For 2023, we anticipate FFO per unit to be within the range of $1.77 to $1.80, SPNOI growth of 3%, and an FFO Payout Ratio of
between 55% to 65%. Development Spending for 2023 is expected to be between $400 million to $450 million.
RioCan Annual Report 2022 22
MANAGEMENT’S DISCUSSION AND ANALYSIS
Our Business
and Our
Business
Environment
Environmental,
Social and
Governance
(ESG)
Initiatives
Property
Portfolio
Overview
Introduction
Results of
Operations
Asset Profile
Development
Program
Capital
Resources
and Liquidity
Other
Disclosures
Non-GAAP
Measures
Risks and
Uncertainties
ENVIRONMENTAL, SOCIAL AND GOVERNANCE (ESG) INITIATIVES
RioCan embeds ESG in every aspect of its business, including developments, operations, investment activities and corporate
functions. Embedding ESG is important for RioCan as it:
•
•
promotes resource efficiency, saving costs and minimizing environmental degradation;
increases property values, contributing to stakeholder satisfaction, and drives long-term net asset value growth for
Unitholders;
drives the appeal of our assets, helping to attract and retain tenants;
builds collaborative relationships with our tenants and employees, which accelerates the pace of positive change;
manages risks and complies with evolving regulations, enhancing operations management and governance practices; and
provides its employees with sustainability impact opportunities, leading to increased employee job satisfaction and retention.
•
•
•
•
To meet its ESG objectives, RioCan has revised its strategy and initiatives to improve its ESG performance year-over-year. For
performance tracking and reporting, the GRESB Real Estate Assessment provides the Trust with a framework to benchmark
organization-wide performance and ensure transparency and continuous improvement. The Trust published its fourth annual ESG
report in 2022 in accordance with Global Reporting Initiative (GRI) Standards and the report includes indicators from the
Sustainability Accounting Standards Board (SASB) Real Estate sub-sector and recommended disclosures from the Financial
Stability Board (FSB) and the Task Force on Climate-Related Financial Disclosures (TCFD).
RioCan's ESG Council is comprised of cross-functional executive and leadership team members that oversee the Trust’s ESG
strategy implementation and drive performance improvements. In addition, RioCan has a dedicated ESG team, led by the SVP,
General Counsel, ESG & Corporate Secretary, responsible for reporting ESG goals, plans and performance to the ESG Council
and Board of Trustees, and ensuring ESG initiatives are resourced and elevated across the Trust. To review RioCan's ESG policy
and for additional information, please visit RioCan's website.
RioCan launched its ESG program in 2016. Key accomplishments for 2022 include the following:
Environmental
•
•
RioCan ranked first among its Canadian peers in the 2022 GRESB Real Estate Assessment - Standing Investments;
Maintained its first place rank among its Canadian peers in the GRESB Public Disclosure Assessment with an ‘A’ rating for a
fourth consecutive year;
Increased its 2022 GRESB Development Assessment score by five points;
Increased the number of properties achieving Building Owners and Managers Association Building Environmental Standards
(BOMA BEST) certifications. Over 65% of gross leasable area of RioCan’s portfolio across Canada are now BOMA BEST
certified;
Earned the 2022 Green Lease Leader (Gold Level). Presented by the Institute for Market Transformation and the U.S.
Department of Energy’s Better Building Alliance, the Gold Level is awarded to organizations that exhibit a strong commitment
to high performance and sustainability in buildings, and best practice leasing;
•
•
•
• Won BOMA Toronto's race2reduce Commercial Real Estate Trailblazers (CREST) Award for Performance Leadership at two
properties in the GHG under the 100k ≤ sf < 500k and the Innovative excellence under >500 sf categories; and
Achieved the WELL Health-Safety Rating for over three million square feet of RioCan's portfolio.
•
Recognized as one of the top 100 employers by Greater Toronto’s Top Employers;
Recognized as one of Canada’s Greenest Employers for 2022;
Progressed on our Diversity, Equity and Inclusion (DEI) plan. Created a formal role to support RioCan’s DEI program;
Hosted a Community Marketplace at RioCan Warden Centre for local entrepreneurs as part of the Inclusive Local Economic
Opportunity (ILEO) Initiative co-convened by BMO Financial Group and United Way Greater Toronto; and
Achieved a 95th percentile ranking on our Employee Engagement survey, relative to a benchmark of similar-sized
businesses.
Governance
•
Conducted a comprehensive materiality assessment with key stakeholders, including institutional investors, tenants, joint
venture partners, development planners, general contractors and industry associations and revised our ESG strategy and
plan; and
Included in the Canadian Coalition for Good Governance’s (CCGG) 2022 edition of its Best Practices for Proxy Circular
Disclosure publication. This publication is updated annually and includes examples that the CCGG considers to be high-
quality public disclosure of important corporate governance policies and executive compensation practices. The document
provides guidance to reporting issuers on effective communications with shareholders, emphasizing the substance of
disclosure that investors expect of regulatory filings and demonstrating the evolution of good disclosure practices.
•
•
Social
•
•
•
•
23 RioCan Annual Report 2022
MANAGEMENT’S DISCUSSION AND ANALYSIS
Our Business
and Our
Business
Environment
Environmental,
Social and
Governance
(ESG)
Initiatives
Property
Portfolio
Overview
Introduction
Results of
Operations
Asset Profile
Development
Program
Capital
Resources
and Liquidity
Other
Disclosures
Non-GAAP
Measures
Risks and
Uncertainties
PROPERTY PORTFOLIO OVERVIEW
Property Operations - Total Portfolio
Net Leasable Area (NLA) and Property Count
RioCan's portfolio of net leasable area and properties consisted of the following as at December 31, 2022:
(thousands of sq. ft., except where otherwise noted)
Income producing properties (i)
Properties under development (ii)
Total NLA
NLA at RioCan's Interest
Total
Commercial
Office
Residential
Rental (iii)
Total Portfolio
NLA
Property
Count
2,304
319
2,623
31,639
760
32,399
935
293
32,574
1,053
1,228
33,627
183
10
193
Retail
29,335
441
29,776
(i)
(ii)
Includes NLA that was occupied or available for occupancy on or before December 31, 2022. Excludes 11 income producing properties that are
owned through joint ventures and reported under equity-accounted investment and includes 72 thousand square feet of legacy residential rental.
Includes 1.7 million NLA of Development Projects Under Construction excluding 4 development properties that are owned through joint ventures
and reported under equity-accounted investments and condominium and townhouse units. Includes completed properties under development NLA
that have a rent commencement date after December 31, 2022.
(iii) See the Property Operations - Residential Rental section of this MD&A for further details.
The increase in residential rental NLA compared to 1.0 million total NLA in December 31, 2021 was primarily due to the Q1 2022
acquisition of MarketTM, a new apartment complex in the heart of Laval, Montreal's largest suburban area, and the addition of
Queen & AshbridgeTM. Queen & Ashbridge is located in an established Toronto neighbourhood and is a multi-use development
that includes purpose-built rental units.
Property Mix
The Trust operates a variety of income producing property formats or classes to best serve the communities in which it operates.
The Trust has identified the following three major categories of property classes:
Category
Grocery Anchored Centre
Mixed-Use / Urban
Open Air Centre
Description
Assets with a grocery anchor tenant or shadow grocery anchors(i). Properties anchored or shadow-
anchored by Walmart of Costco are included in this category. Examples of these properties include:
Clarkson Crossing and RioCentre Thornhill.
Assets with more than one type of use (retail, office, residential mixed-use assets) located in major
markets and non mixed-use assets located in high-density urban areas. Examples of these properties
include: King Portland Centre and Yonge Sheppard Centre.
Community shopping centres with little or no enclosed component. They often include high-quality
anchor tenants such as pharmacy, liquor, home improvement and / or a bank branch. Examples of these
properties include: RioCan Warden and RioCan Thickson Ridge.
(i) A shadow anchor is a retail store that is adjacent or in close proximity to an owned property that generates a great deal of traffic and attracts
business to a property of the Trust but the underlying property / land for this retail store is not owned by the Trust.
RioCan Annual Report 2022 24
MANAGEMENT’S DISCUSSION AND ANALYSIS
Our Business
and Our
Business
Environment
Environmental,
Social and
Governance
(ESG)
Initiatives
Property
Portfolio
Overview
Introduction
Results of
Operations
Asset Profile
Development
Program
Capital
Resources
and Liquidity
Other
Disclosures
Non-GAAP
Measures
Risks and
Uncertainties
As at December 31, 2022, RioCan's portfolio of income producing properties consisted of the following:
(i) Mixed-Use / Urban includes approximately 0.9 million square feet of residential rental NLA and the corresponding fair value.
(ii) Effective Q4 2022, Enclosed Centres have been subsumed into the remaining categories as applicable.
The majority of the Trust's portfolio is comprised of formats that are attractive from a tenanting perspective, more resilient to
changes in economic cycles and evolving retail trends. During Q4 2022, the Trust continued to execute on its strategy to shift its
portfolio to more urban, mixed-use, and necessity-based uses. These dispositions further strengthen its solid foundation for
organic growth.
Tenant Composition
To strategically manage its tenant mix, the Trust has aligned its tenant segmentation into the following three categories: strong
and stable, compelling traffic drivers and transitional tenants. Defining our tenant mix using these three categories helps to guide
our future decision-making with respect to tenancies.
Based on annualized net rent as at December 31, 2022, approximately 86.5% of the Trust's tenants are classified as "strong and
stable".
(i) Strong and Stable is represented by tenants with stable rent-paying ability, strong covenants, and reliable foot traffic. This category is largely
comprised of national, necessity-based retail tenants.
(ii) Compelling Traffic Drivers is represented by tenants that drive meaningful traffic and/or incremental visits to our properties, such as services,
experiential tenants, and independent food service providers.
(iii) Transitional are tenants that are currently fulfilling their rent obligation but can be transitioned out for a strong covenant tenant that drives
meaningful traffic.
25 RioCan Annual Report 2022
NLA by Property Mix 66.4%18.2%15.4%Fair Value by Property Mix57.4%29.4%13.2%Grocery Anchored Centre (ii)Mixed-Use / Urban (i) (ii)Open Air Centre (ii)% of Annualized Net Rent by Tenant Composition86.5%10.2%3.3%Strong and Stable (i)Compelling Traffic Drivers (ii)Transitional (iii) MANAGEMENT’S DISCUSSION AND ANALYSIS
Our Business
and Our
Business
Environment
Environmental,
Social and
Governance
(ESG)
Initiatives
Property
Portfolio
Overview
Introduction
Property Operations - Commercial
Top 30 Commercial Tenants
Results of
Operations
Asset Profile
Development
Program
Capital
Resources
and Liquidity
Other
Disclosures
Non-GAAP
Measures
Risks and
Uncertainties
We strive to reduce our exposure to rental revenue risk in our portfolio through geographical diversification, staggered lease
maturities, growing our major market portfolio, diversifying revenue sources, avoiding dependence on any single tenant by
ensuring no individual tenant contributes a significant percentage of our gross revenue and ensuring a considerable portion of
rental revenue is earned from national and anchor tenants.
As at December 31, 2022, RioCan’s 30 largest commercial tenants measured by annualized contractual gross rent are as follows:
Rank Tenant name
1
2
3
Canadian Tire Corporation (ii)
The TJX Companies, Inc. (iii)
Loblaws/Shoppers Drug Mart (iv)
Cineplex (v)
4
5 Metro/Jean Coutu (vi)
6 Walmart
7
8
Sobeys/Safeway (vii)
Dollarama
9 Michaels
10 Recipe Unlimited (viii)
11 GoodLife Fitness
12 Staples/Business Depot
13 TD Bank
14
Lowe's
15 PetSmart
16 Value Village
17 Bank Of Montreal
18 Chapters/Indigo
19 Bed Bath & Beyond
20
Liquor Control Board of Ontario (LCBO)
21 DSW/The Shoe Company
22 Tim Hortons/Burger King/Popeyes
23
24
Leon's/The Brick
LA Fitness
25 The Bank Of Nova Scotia
26 Best Buy
27 Old Navy
28 Canadian Imperial Bank of Commerce
29 Rexall Pharma Plus
30 Carter's Oshkosh
Total portfolio
Percentage
of total
annualized
contractual
gross rent
Number
of
locations
NLA
(thousands of
sq. ft.)
Percentage
of total
IPP NLA
Weighted
average
remaining lease
term (years) (i)
4.9 %
4.6 %
3.9 %
3.3 %
2.5 %
2.3 %
2.0 %
1.9 %
1.5 %
1.4 %
1.4 %
1.3 %
1.2 %
1.2 %
1.1 %
1.0 %
0.9 %
0.9 %
0.8 %
0.7 %
0.7 %
0.7 %
0.7 %
0.6 %
0.6 %
0.6 %
0.6 %
0.5 %
0.5 %
0.5 %
62
65
50
20
31
12
23
67
23
69
23
25
44
7
23
14
30
14
13
20
28
58
9
6
23
9
21
17
10
25
1,902
1,830
1,378
1,129
1,222
1,613
796
643
507
316
502
501
233
915
351
390
188
271
301
180
214
134
228
265
113
204
195
99
109
111
6.0 %
5.8 %
4.4 %
3.6 %
3.9 %
5.1 %
2.5 %
2.0 %
1.6 %
1.0 %
1.6 %
1.6 %
0.7 %
2.9 %
1.1 %
1.2 %
0.6 %
0.9 %
1.0 %
0.6 %
0.7 %
0.4 %
0.7 %
0.8 %
0.4 %
0.6 %
0.6 %
0.3 %
0.3 %
0.4 %
44.8 %
841
16,840
53.3 %
6.3
5.2
8.1
5.5
8.3
6.6
11.3
6.9
5.3
5.6
9.5
5.7
6.4
7.0
4.8
8.6
4.7
6.9
5.2
8.5
4.8
7.1
6.0
12.2
4.7
3.8
4.5
4.0
6.5
4.1
6.6
7.3
(i) Weighted average remaining lease term based on annualized contractual gross rent.
(ii) Canadian Tire Corporation includes Canadian Tire, PartSource, Mark’s, Sport Chek, Sports Experts, National Sports, Atmosphere and Party City.
(iii) The TJX Companies, Inc. includes Winners, HomeSense and Marshalls.
(iv) Loblaws/Shoppers Drug Mart includes No Frills, Fortinos, Zehrs Markets, Joe Fresh and Maxi.
(v) Cineplex includes Galaxy Cinemas.
(vi) Metro/Jean Coutu includes Super C, Loeb, and Food Basics.
(vii) Sobeys/Safeway includes Farm Boy and Longo's.
(viii) Recipe Unlimited (formerly Cara Operations Limited) includes Montana's, Harvey's, Swiss Chalet, Kelseys, The Keg and East Side Mario's, among
others.
RioCan Annual Report 2022 26
MANAGEMENT’S DISCUSSION AND ANALYSIS
Our Business
and Our
Business
Environment
Environmental,
Social and
Governance
(ESG)
Initiatives
Property
Portfolio
Overview
Introduction
Occupancy by Markets and Usages
Results of
Operations
Asset Profile
Development
Program
Capital
Resources
and Liquidity
Other
Disclosures
Non-GAAP
Measures
Risks and
Uncertainties
The committed (tenants that have signed leases) and in-place (tenants that are in possession of their space) occupancy rates for
our commercial property portfolio at RioCan's interest are as follows:
At RioCan’s Interest
As at December 31
Greater Toronto Area (i) (iv)
Ottawa (ii)
Calgary
Montreal
Edmonton
Vancouver (iii)
Other (iv)
Total Commercial
Committed Occupancy
In-Place Occupancy
2022
97.0 %
99.2 %
98.4 %
96.6 %
93.7 %
99.8 %
96.8 %
97.4 %
2021
96.9 %
98.8 %
97.3 %
95.2 %
93.1 %
99.2 %
95.5 %
96.8 %
2022
96.6 %
99.0 %
98.0 %
94.9 %
92.3 %
99.3 %
95.8 %
96.8 %
2021
96.2 %
98.6 %
94.7 %
95.2 %
91.7 %
99.2 %
95.3 %
96.1 %
(i) Area extends north to Newmarket, Ontario; west to Hamilton, Ontario; and east to Oshawa, Ontario.
(ii) Area extends from Nepean and Vanier to Gatineau, Quebec.
(iii) Area extends east to Abbotsford, British Columbia.
(iv) Effective Q4 2022, comparatives have been restated to remove Barrie from the GTA.
The following table summarizes the Trust's committed and in-place occupancy rates by retail and office as at December 31, 2022
and December 31, 2021.
As at
Total Portfolio
Committed Occupancy
In-Place Occupancy
December 31, 2022
December 31, 2021
Retail
97.9 %
97.4 %
Office
90.6 %
89.9 %
Total
Commercial
97.4 %
96.8 %
Retail
97.2 %
96.5 %
Office
91.6 %
90.5 %
Total
Commercial
96.8 %
96.1 %
Committed and in-place occupancy for the total commercial portfolio increased by 60 and 70 basis points, respectively during
2022.
Retail committed occupancy of 97.9% exceeds pre-pandemic levels and reflects the high demand for the Trust's quality retail
assets. Given the nominal amount of vacant space available, our retail portfolio is effectively fully occupied after taking into
account the expected normal tenant turnover.
The decline of 100 and 60 basis points, in office committed and in-place occupancy, respectively, during the year was primarily as
a result of tenants consolidating their space requirements. However, on a sequential basis, office committed and in-place
occupancy increased by 60 and 30 basis points, respectively, as a result of the continued transfer of The Well completed office
units and the sale of a property which included an office component with a lower than portfolio average in-place occupancy.
Future Lease Commencements
Subsequent to Q4 2022, we expect to generate approximately $5.5 million of annualized gross incremental rent, under the IFRS
basis, from tenants that have signed leases but have not taken possession of the space as at December 31, 2022. This includes
base rent, operating cost recoveries and straight-line rent, but excludes operating costs capitalized while a property is under
redevelopment.
Average Net Rent
The portfolio weighted average net rent per occupied square foot for our income producing properties is as follows:
As at December 31
Average net rent per occupied square foot (i)
Retail
Office
(i)
Net rent is primarily contractual base rent pursuant to tenant leases.
$
$
$
2022
20.98 $
20.91 $
21.98 $
2021
20.16
20.22
19.24
Average net rent per occupied square foot increased when compared to the prior year mainly due to contractual rent steps, rent
increases per square foot, higher than average net rent per square foot on new deals, development completions that had higher
net rent per square foot and properties sold during the year that had a lower average net rent per square foot.
27 RioCan Annual Report 2022
MANAGEMENT’S DISCUSSION AND ANALYSIS
Our Business
and Our
Business
Environment
Environmental,
Social and
Governance
(ESG)
Initiatives
Property
Portfolio
Overview
Introduction
New Leasing Activity
(in thousands, except per sqft amounts)
New Leasing NLA at 100% - IPP & PUD
Average net rent per square foot - IPP & PUD (i)
IPP
PUD
Results of
Operations
Asset Profile
Development
Program
Capital
Resources
and Liquidity
Other
Disclosures
Non-GAAP
Measures
Risks and
Uncertainties
Three months ended December 31
Years ended December 31
2022
222
24.10 $
21.06 $
42.31 $
2021
523
25.12 $
18.59 $
52.09 $
2022
1,258
28.30 $
21.96 $
45.09 $
2021
1,674
23.33
19.96
39.50
$
$
$
(i)
Net rent is primarily contractual base rent pursuant to tenant leases. Includes new square footage that has not previously been tenanted and
existing square footage leased to a new tenant.
New leasing activity for the three months and year ended December 31, 2022 totalled 222,000 and 1,258,000 square feet at an
average rate of $24.10 and $28.30 per square foot, respectively. Lower new lease volumes are mainly due to high in-place retail
occupancy levels which limit the amount of available space to lease and allow the Trust to exercise more discretion in tenant
selection, improving our tenant mix and quality. In addition, a significant amount of leasing to larger office tenants has been
completed at The Well, leaving certain smaller retail units to lease.
Average net rent per square foot for new leasing for the quarter is approximately $3.12 per square foot above our portfolio
average net rent per occupied square foot. New IPP leases are comprised of a diverse tenant mix including grocery, value and
specialty retailers.
Renewal Leasing Activity
Three months ended December 31
Years ended December 31
(in thousands, except percentage and per sqft amounts)
Square feet renewed at market rental rates (at 100%)
Square feet renewed at fixed rental rates (at 100%)
Total square feet renewed (at 100%)
Average net rent per square foot (i)
Renewal leasing spread in average net rent (ii)
$
$
2022
455
247
702
19.01 $
1.45 $
2021
523
162
685
23.24 $
1.11 $
2022
2,058
1,675
3,733
19.89 $
1.51 $
Retention ratio
93.5%
81.8%
91.5%
2021
2,146
860
3,006
21.51
1.10
83.8%
Net rent is primarily contractual base rent pursuant to tenant leases.
(i)
(ii) Represents increase in average net rent per square foot for renewal leasing.
The retention ratio reached a new high in Q4 2022 at 93.5%. During 2022, a number of anchor tenants renewed their leases at
fixed rates, preserving the higher proportion of strong and stable tenants within the portfolio. In Q4 2022, the majority of renewed
leases were renewed at market rental rents that resulted in strong renewal leasing spreads.
Leasing Spreads
New leasing spread (i)
Renewal leasing spread
Blended leasing spread (ii)
Three months ended December 31
Years ended December 31
2022
11.8%
8.3%
8.8%
2021
3.8%
5.0%
4.6%
2022
12.3%
8.2%
9.0%
2021
8.6%
5.4%
6.3%
(i)
(ii)
The new leasing spread excludes any units that have not previously been tenanted (such as a newly completed development) or that have been
vacant for longer than two years. The quarterly new leasing spread is calculated for properties owned by the Trust as of each quarter end date.
The year-to-date leasing spread is the weighted average of the quarterly new leasing spread as reported over the respective period. For further
clarity, net rent on new leases signed on new square footage from new development projects is included in the average net rent per square foot for
new leases but is excluded in calculating the new leasing spread given that there is no base to compare to for such new developments.
The blended leasing spread is the weighted average net rent leasing spread for both renewal leasing and new leasing.
Strong new and renewal leasing spreads resulted in an improved blended leasing spread for 2022.
RioCan Annual Report 2022 28
MANAGEMENT’S DISCUSSION AND ANALYSIS
Our Business
and Our
Business
Environment
Environmental,
Social and
Governance
(ESG)
Initiatives
Property
Portfolio
Overview
Introduction
Results of
Operations
Asset Profile
Development
Program
Capital
Resources
and Liquidity
Other
Disclosures
Non-GAAP
Measures
Risks and
Uncertainties
Lease Expiries
Lease expiries for the next five years are as follows:
(in thousands, except per sqft and percentage amounts)
For the years ending
At RioCan's interest
Square feet
Square feet expiring/Portfolio NLA
Average net rent per occupied square foot
Contractual Rent Increases
Total IPP
NLA
31,639
$
2023
2,823
8.9 %
22.60 $
2024
4,258
13.5 %
21.65 $
2025
4,042
12.8 %
20.48 $
2026
3,849
12.2 %
20.45 $
2027
3,927
12.4 %
21.28
Certain of our leases provide periodic increases in rates during the lease terms which contribute to growth in Same Property NOI.
Contractual rent increases in each year for the next five years for our properties are as follows:
(thousands of dollars)
At RioCan's interest
Contractual rent increases
For the years ending
2023
8,956 $
2024
6,918 $
2025
5,538 $
2026
4,509 $
2027
3,458
$
The contractual rent increases noted above are based on existing leases as at December 31, 2022 and are on a year-over-year
incremental increase basis. The contractual rent increases in 2023 reflect more market rent changes as a result of new leasing
and renewals completed in 2022 than in the outer years. The above schedule is on a cash rent basis and takes into account the
timing of contractual rent increases year-over-year (in other words, not on an annualized basis but based on a year-over-year
cash rent change basis).
29 RioCan Annual Report 2022
MANAGEMENT’S DISCUSSION AND ANALYSIS
Our Business
and Our
Business
Environment
Environmental,
Social and
Governance
(ESG)
Initiatives
Property
Portfolio
Overview
Introduction
Results of
Operations
Asset Profile
Development
Program
Capital
Resources
and Liquidity
Other
Disclosures
Non-GAAP
Measures
Risks and
Uncertainties
Property Operations - Residential Rental
RioCan's residential brand, RioCan Living, includes purpose-built residential rental buildings developed or acquired by RioCan
and townhouse and condominium developments as further discussed in the Development Program and Asset Profile - Joint
Arrangements sections of this MD&A.
Demand for well-located, amenity-rich rental accommodations with easy access to transit strengthened in the quarter. The return
to office and in-person studies, increased immigration, low unemployment and cooling home sales all drove demand for
residential rental units higher. This increased demand combined with a shortage of rental housing supply resulted in a significant
increase in leasing velocity in the quarter.
RioCan's portfolio of 2,219 completed residential rental units include 139 income producing residential rental units acquired by
RioCan on February 8, 2022 through its purchase of a 90% interest in the first phase of Market, a new apartment complex in the
heart of Laval, Montreal's largest suburban area. RioCan will also acquire a 90% interest in 297 units in two additional phases
under construction upon stabilization, provided certain conditions are met. Market is RioCan Living's first acquisition of an
operational multi-unit residential building and contributes to the diversification of RioCan's asset base and income stream. While
RioCan is focused on organically growing its multi-unit residential holdings through development, it will strategically participate in
acquisitions from time-to-time in order to further enhance the RioCan Living portfolio and achieve the desired scale.
None of the Trust's residential rental units (other than the rental replacement units, which are rented at prescribed rents) are
subject to rent controls.
Occupancy and Leasing Update
Residential Rental Buildings in Operation
Number of
total units (i)
Date of lease
launch % of occupied units
% of leased units
Occupancy as at
December 31, 2022
Leasing as of
February 15, 2023
Stabilized (8 properties)
In lease-up
Luma (Ottawa)
Rhythm (Ottawa) (ii)
1,837
December 2018 to
November 2021
168
214
March 2022
June 2022
96.0 %
62.5 %
24.3 %
95.7 %
74.4 %
53.1 %
(i) Number of units are at 100% ownership interest and all buildings are 50% owned except Market which is 90% owned.
(ii) Completed in Q4 2022. Pre-leasing commenced in Q2 2022.
The 592 rental residential units at FourFifty The WellTM will be completed in phases starting in mid-2023, through to early-2024.
Pre-leasing of this building is scheduled to commence in Q1 2023.
Average Market Rent
As at December 31
Average monthly market rent per occupied square foot - same property (i) (ii)
$
2022
3.07 $
2021
2.94
(i) Average rent per square foot on a same property basis is calculated as monthly gross rents (excluding utilities which are paid by tenants) from
leased residential units divided by the total number of net leasable square feet for these leased residential units. It does not include revenue from
parking or other sources. RioCan Living tenants generally pay their own utility bills.
(ii) Average monthly market rent per occupied square foot - same property is only calculated for properties that are owned and stabilized at each of
the reporting dates presented. A property is considered to have reached stabilization upon the earlier of (i) achieving 95% occupancy or (ii) 24
months after first occupancy as of the quarter end reporting date. As at December 31, 2022 and 2021 three properties (eCentralTM located in
Toronto, FrontierTM located in Ottawa and Brio, located in Calgary) are included as same properties.
Average monthly rent per occupied square foot on a same property basis increased compared to December 31, 2021 from an
increase in lease-up and improved occupancy in the GTA.
In the GTA, on a total portfolio basis, average monthly market rent per occupied square foot was $3.80 as at December 31, 2022,
an increase of 5.3% over the same period last year.
Average rent increases for market units were 12.2% and 5.7% on stabilized properties for the three months and year ended
December 31, 2022, respectively.
RioCan Annual Report 2022 30
MANAGEMENT’S DISCUSSION AND ANALYSIS
Our Business
and Our
Business
Environment
Environmental,
Social and
Governance
(ESG)
Initiatives
Property
Portfolio
Overview
Introduction
RESULTS OF OPERATIONS
Results of
Operations
Asset Profile
Development
Program
Capital
Resources
and Liquidity
Other
Disclosures
Non-GAAP
Measures
Risks and
Uncertainties
Summary of Selected Financial Information
The following table summarizes key selected financial information that is based on or derived from, and should be read in
conjunction with, the Consolidated Financial Statements of the Trust for the respective years indicated in the table.
(thousands of dollars, except where otherwise noted)
As at or for the years ended December 31
Revenue
Net income (loss)
Operating income
Net Operating Income (NOI) (i)
Net Operating Income NOI (RioCan's Proportionate Share) (i)
FFO (i)
FFO Adjusted (i)
Weighted average Units outstanding (in thousands)
Basic
Diluted
Per unit basis
Net income (loss) - basic
Net income (loss) - diluted
FFO - diluted (i)
FFO Adjusted - diluted (i)
Unitholder distributions (iii)
FFO Payout Ratio (i) (ii)
FFO Payout Ratio Adjusted (i) (ii)
AFFO Payout Ratio (i) (ii)
AFFO Payout Ratio Adjusted (i) (ii)
Investment properties
Total assets
Total debt
Total equity
Total Adjusted Debt to Total Adjusted Assets (RioCan's Proportionate Share) (i)
Interest Coverage (RioCan's Proportionate Share) (i)
Adjusted Debt to Adjusted EBITDA (RioCan's Proportionate Share) (i)
Weighted average contractual interest rate (iv)
Weighted average effective interest rate (v)
Net book value per unit
2022
2021
2020
1,213,847 $
236,772
712,692
674,989
698,118
524,678
1,175,061 $
598,389
701,665
663,311
684,737
506,982
528,967
523,953
1,143,663
(64,780)
680,283
652,177
665,739
507,394
507,394
306,069
306,247
317,201
317,284
317,725
317,725
0.77 $
0.77 $
1.71 $
1.73 $
1.02 $
59.0 %
58.5 %
67.1 %
66.4 %
1.89 $
1.89 $
1.60 $
1.65 $
0.96 $
62.6 %
60.6 %
71.6 %
68.9 %
(0.20)
(0.20)
1.60
1.60
1.44
90.2 %
90.2 %
101.3 %
101.3 %
13,807,740 $
15,101,859
6,742,343
7,728,892
45.2%
3.11
9.51
3.41%
3.40%
25.73 $
14,021,338 $
15,177,463
6,610,618
7,911,344
43.9%
3.26
9.59
2.92%
3.00%
25.54 $
14,063,022
15,267,708
6,927,883
7,734,973
45.0%
3.10
9.47
3.13 %
3.21 %
24.34
$
$
$
$
$
$
$
$
(i)
This is a non-GAAP financial measure. Refer to the Non-GAAP Measures section in this MD&A for more information on each non-GAAP financial
measure.
(ii) Calculated on a trailing twelve-month basis. For further discussion of the Trust's FFO and AFFO Payout Ratios, refer to the FFO and AFFO
sections in this MD&A.
(iii) Effective January 2021, the distribution was reduced to $1.02 on an annualized basis.
(iv) For hedged floating rate debt, the interest rate reflects the fixed rate in the interest swap.
(v)
Inclusive of bond forward hedges.
The Trust's year-over-year changes in revenues, FFO, operating income and net income, as well as other key financial metrics
were primarily impacted by the timing and magnitude of its residential condominium and townhouse projects closings, the
magnitude and pace of development expenditures and project completions, property dispositions and the global pandemic and its
effects on RioCan's tenants and operations particularly during 2020 and 2021. Net income, investment properties, total assets
and total equity were further impacted by the year-over-year changes in the fair values of investment properties, particularly the
significant fair value write-downs in 2020 as a result of the pandemic. Refer to the various sections of this MD&A for more detail
on the Trust's key financial and operational information.
31 RioCan Annual Report 2022
MANAGEMENT’S DISCUSSION AND ANALYSIS
Our Business
and Our
Business
Environment
Environmental,
Social and
Governance
(ESG)
Initiatives
Property
Portfolio
Overview
Introduction
Results of
Operations
Asset Profile
Development
Program
Capital
Resources
and Liquidity
Other
Disclosures
Non-GAAP
Measures
Risks and
Uncertainties
The Q4 2022 and 2022 variances discussed in the following sections are to compare the respective 2022 results to the same
comparable periods in 2021 unless otherwise noted.
Revenue
The revenue for the three months and years ended December 31, 2022 and 2021 is as follows:
(thousands of dollars)
Rental revenue
Residential inventory sales
Three months ended December 31
Years ended December 31
2022
2021
Change
2022
2021
Change
$ 268,864 $ 266,899 $
1,965 $ 1,074,192 $ 1,066,562 $
7,630
33,873
65,620
(31,747)
118,659
93,727
24,932
Property management and other service fees
3,450
3,920
(470)
20,996
14,772
6,224
Revenue
$ 306,187 $ 336,439 $
(30,252) $ 1,213,847 $ 1,175,061 $
38,786
The rental revenue for the three months and years ended December 31, 2022 and 2021 is as follows:
(thousands of dollars)
Base rent
Three months ended December 31
Years ended December 31
2022
2021
Change
2022
2021
Change
$ 170,791 $ 170,034 $
757 $ 687,459 $ 681,333 $
6,126
Realty tax and insurance recoveries
49,013
50,027
(1,014)
199,437
203,384
(3,947)
Common area maintenance recoveries
43,842
42,091
1,751
168,144
159,980
Percentage rent
Straight-line rent
Lease cancellation fees
Parking revenue
Rental revenue
2022
3,234
806
391
787
2,562
1,050
394
741
672
(244)
(3)
46
9,092
1,884
5,119
3,057
6,579
6,928
6,457
1,901
$ 268,864 $ 266,899 $
1,965 $ 1,074,192 $ 1,066,562 $
8,164
2,513
(5,044)
(1,338)
1,156
7,630
The increase in revenue was mainly due to higher rental revenue, higher residential inventory sales and property management
and other service fee income.
Rental revenue increased mainly from higher occupancy and rental growth, acquisitions and development completions, higher net
recoveries and higher percentage rent, partially offset by asset dispositions and lower straight-line rent.
Residential inventory sales increased primarily due to the timing of condominium sales, partially offset by the sale of an 80%
interest in The Queensway project and the sale of a 75% interest in the condominium component of the RioCan Leaside Centre
mixed-use project in Toronto in the prior year.
Property management and other service fees increased primarily from new development projects.
Q4 2022
The decrease in revenue was mainly due to lower residential inventory sales partially offset by higher rental revenue.
The increase in rental revenue was mainly due to higher occupancy and rental growth, acquisitions and development
completions, higher net recoveries and higher percentage rent.
Residential inventory sales decreased primarily due to the sale of a 75% interest in the condominium component of the RioCan
Leaside Centre mixed-use project in Toronto in the prior year, partially offset by timing of condominium sales.
RioCan Annual Report 2022 32
MANAGEMENT’S DISCUSSION AND ANALYSIS
Our Business
and Our
Business
Environment
Environmental,
Social and
Governance
(ESG)
Initiatives
Property
Portfolio
Overview
Introduction
Results of
Operations
Asset Profile
Development
Program
Capital
Resources
and Liquidity
Other
Disclosures
Non-GAAP
Measures
Risks and
Uncertainties
Operating Income and Net Operating Income (NOI)
The operating income and NOI for the three months and years ended December 31, 2022 and 2021 is as follows:
(thousands of dollars, except where otherwise
noted)
Operating income
NOI (i)
Three months ended December 31
Years ended December 31
2022
2021
Change
2022
2021
Change
$ 175,421 $ 194,788 $
(19,367) $ 712,692 $ 701,665 $
11,027
$ 166,062 $ 165,798 $
264 $ 674,989 $ 663,311 $
11,678
NOI (RioCan's proportionate share) (i)
$ 171,934 $ 171,470 $
464 $ 698,118 $ 684,737 $
13,381
NOI
Commercial
Residential
Total NOI
$ 162,043 $ 163,934 $
(1,891) $ 661,367 $ 659,253 $
4,019
1,864
2,155
13,622
4,058
2,114
9,564
$ 166,062 $ 165,798 $
264 $ 674,989 $ 663,311 $
11,678
(i) This is a non-GAAP financial measure. Refer to the Non-GAAP Measures section in this MD&A for more information on each non-GAAP financial
measure.
2022
The increase in operating income was largely the combined effect of $11.7 million higher NOI, $6.2 million higher property
management and other service fee revenue mainly from higher construction and development fees, partially offset by $6.0 million
lower inventory gains primarily due to the sale of an 80% interest in The Queensway project and the sale of a 75% interest in the
condominium component of the RioCan Leaside Centre mixed-use project in Toronto in the prior year, net of timing of
condominium sales.
The increase in commercial NOI was largely due to Same Property NOI growth of 4.3% or $24.8 million; and $7.2 million higher
NOI from completed developments; partially offset by, $23.5 million lower NOI due to asset dispositions; $5.0 million lower
straight-line rent; and $1.3 million lower lease cancellation fees.
Residential NOI increased primarily due to strong leasing progress in the residential rental portfolio including PivotTM, Litho.TM,
and LatitudeTM, and the acquisition of Market early in 2022.
Q4 2022
The decrease in operating income was largely due to $18.9 million lower residential inventory gains primarily due to the gain from
the sale of a 75% interest in the condominium component of the RioCan Leaside Centre mixed-use project in Toronto in the prior
year, net of timing of condominium sales.
The decrease in commercial NOI was largely due to Same Property NOI growth of 2.3% or $3.4 million, and $1.2 million higher
NOI from completed developments; offset by, $6.3 million lower NOI due to asset dispositions; and $0.2 million lower straight-line
rent.
The increase in residential NOI was primarily due to strong leasing progress in the residential rental portfolio including Litho.,
Latitude, StradaTM and the acquisition of Market early in 2022.
Same Property NOI
Same Property NOI for the three months and years ended December 31, 2022 and 2021 is as follows:
Three months ended December 31
Years ended December 31
(thousands of dollars)
Same Property NOI (i)
Same Property NOI including completed PUD (i)
$ 154,638 $ 150,082
Adjusted Same Property NOI (i)
$ 152,074 $ 148,406
2.5 % $ 601,543 $ 585,953
$ 149,771 $ 146,405
2022
2021 % change
2021 % change
2022
2.3 % $ 600,529 $ 575,707
3.0 % $ 617,456 $ 585,390
4.3 %
5.5 %
2.7 %
(i)
This is a non-GAAP financial measure. Refer to the Non-GAAP Measures section in this MD&A for more information on each non-GAAP financial
measure.
2022
Same Property NOI increased primarily due to increases in occupancy, rent growth from contractual rent steps, increases in rent
upon renewal and a lower pandemic-related provision, which was specifically $15.1 million lower on a same property basis, net of
certain 2021 favourable items which did not recur in 2022. Including completed properties under development, primarily RioCan
Windfields in Oshawa, The Well and 740 Dupont Street in Toronto, Same Property NOI increased by 5.5% for the Trust's
commercial portfolio.
Adjusted Same Property NOI increased by 2.7%. Adjusted Same Property NOI adjusts predominantly for the impact of the
pandemic-related provision and legal and CAM/property tax settlements.
33 RioCan Annual Report 2022
MANAGEMENT’S DISCUSSION AND ANALYSIS
Our Business
and Our
Business
Environment
Environmental,
Social and
Governance
(ESG)
Initiatives
Property
Portfolio
Overview
Introduction
Q4 2022
Results of
Operations
Asset Profile
Development
Program
Capital
Resources
and Liquidity
Other
Disclosures
Non-GAAP
Measures
Risks and
Uncertainties
Same Property NOI increased primarily due to increases in occupancy, rent growth from contractual rent steps, increases in rent
upon renewal and a lower pandemic-related provision, which was specifically $1.5 million lower on a same property basis, net of
certain 2021 favourable items which did not recur in 2022. Including completed properties under development, primarily The Well,
and 740 Dupont Street in Toronto, Same Property NOI increased by 3.0% for the Trust's commercial portfolio.
Adjusted Same Property NOI increased by 2.5%.
Other Income (loss)
(thousands of dollars)
Interest income
Three months ended December 31
Years ended December 31
2022
2021
Change
2022
2021
Change
$
6,272 $
3,842 $
2,430 $
20,902 $
13,666 $
7,236
Income from equity-accounted investments
(3,864)
6,503
(10,367)
2,349
19,189
(16,840)
Fair value (loss) gain on investment properties, net
(115,507)
72,255
(187,762)
(241,128)
124,052
(365,180)
Investment and other income (loss), net
240
(696)
936
(1,842)
2,743
(4,585)
Other income (loss)
$ (112,859) $
81,904 $ (194,763) $ (219,719) $ 159,650 $ (379,369)
2022
Interest income increased mainly due to higher average mortgages and loans receivable and higher effective interest rates.
RioCan's share of FFO from equity-accounted investments(i) was $21.4 million, $0.6 million lower than the comparative period in
2021 primarily due to $0.1 million lower FFO from the RioCan-HBC joint venture and lower transaction gains from other equity-
accounted investments, net of higher capitalized interest from additional equity-accounted investments in 2022. For further details
on the results of operations of the RioCan-HBC joint venture, refer to the Joint Arrangements section of this MD&A.
The Trust recognized fair value losses of $241.1 million on investment properties including assets held for sale, compared to fair
value gains of $124.1 million in the same period last year. Refer to the Property Valuations section of this MD&A for further
details.
Investment and other income (loss) decreased due to the effect of the $3.8 million decrease in the change in unrealized fair value
on marketable securities (which do not impact FFO), and $1.3 million in lower other income primarily from transaction
adjustments.
Q4 2022
Interest income was higher primarily due to higher average mortgages and loans receivable and higher effective interest rates.
For the quarter, RioCan's share of FFO from equity-accounted investments was $5.4 million, $0.1 million lower than the
comparative period, primarily due to $0.5 million lower FFO from the RioCan-HBC joint venture, net of higher capitalized interest
from additional equity-accounted investments in 2022. For further details on the results of operations of the RioCan-HBC joint
venture, refer to the Joint Arrangements section of this MD&A.
The Trust recognized fair value loss of $115.5 million on investment properties including assets held for sale for the quarter,
compared to fair value gains of $72.3 million in the same period last year. Refer to the Property Valuations section of this MD&A
for further details.
Investment and other income (loss) increased due to the net effect of the $1.1 million in higher other income primarily from
transaction adjustments, net of $0.4 million decrease in the change in unrealized fair value on marketable securities (which does
not impact FFO).
(i)
This is a non-GAAP financial measure. Refer to the Non-GAAP Measures section of this MD&A for more information.
Other Expenses
Interest Costs
(thousands of dollars, except where otherwise
noted)
Total interest
Three months ended December 31
Years ended December 31
2022
2021
Change
2022
2021
Change
$
60,015 $
52,424 $
7,591 $ 224,040 $ 211,808 $
12,232
Interest costs capitalized (i)
Interest costs, net
(11,695)
48,320 $
(10,021)
42,403 $
$
(1,674)
5,917 $ 180,365 $ 171,521 $
(40,287)
(43,675)
(3,388)
8,844
Capitalized interest as percentage of total interest
19.5%
19.1%
0.4%
19.5%
19.0%
0.5%
(i) Includes amounts capitalized to properties under development and residential inventory.
RioCan Annual Report 2022 34
MANAGEMENT’S DISCUSSION AND ANALYSIS
Our Business
and Our
Business
Environment
Environmental,
Social and
Governance
(ESG)
Initiatives
Property
Portfolio
Overview
Introduction
2022
Results of
Operations
Asset Profile
Development
Program
Capital
Resources
and Liquidity
Other
Disclosures
Non-GAAP
Measures
Risks and
Uncertainties
Total interest costs increased mainly due to higher average debt balances and higher average cost of debt. As at December 31,
2022, the weighted average effective interest rate of our total debt is 3.40% (December 31, 2021 - 3.00%).
Interest was capitalized to properties under development and residential inventory at a weighted average effective interest rate of
3.33% for the year ended December 31, 2022 (year ended December 31, 2021 – 3.08%).
Q4 2022
Total interest costs increased mainly due to higher average debt balances and higher average cost of debt.
Interest was capitalized to properties under development and residential inventory at a weighted average effective interest rate of
3.78% for the three months ended December 31, 2022 (three months ended December 31, 2021 – 3.05%).
General and Administrative (G&A)
(thousands of dollars, except where otherwise
noted)
Non-recoverable salaries and benefits, net
Three months ended December 31
Years ended December 31
2022
2021
Change
2022
2021
Change
$
5,715 $
5,467 $
248 $
26,228 $
23,823 $
2,405
Unit-based compensation expense
Depreciation and amortization
Other G&A expense (i)
1,796
726
4,608
1,506
1,002
3,949
290
(276)
659
6,998
10,580
(3,582)
4,774
16,437
4,022
12,975
752
3,462
Total G&A expense (ii)
$
12,845 $
11,924 $
921 $
54,437 $
51,400 $
3,037
Adjusted G&A Expense as a percentage of rental
revenue (iii)
4.6%
4.5%
0.1%
4.7%
4.3%
0.4%
(i) Primarily includes information technology costs, public company costs, travel, marketing, legal and professional fees, as well as trustee costs.
(ii) G&A expenses are presented net of recoverable expenses and expenses capitalized to development and residential inventory.
(iii) Adjusted G&A Expense is a non-GAAP financial measure excluding restructuring costs and one-time compensation costs. Refer to the Non-GAAP
Measures section in this MD&A for more information on each non-GAAP financial measure.
2022
G&A expenses increased primarily due to the net effect of a $3.5 million increase in other G&A expenses mainly as a result of
increased expenses related to the resumption of normal business activities, timing and commodity tax accruals; and a $0.8 million
increase in expense from the acceleration of amortization expense of certain software intangible assets. These increases were
partially offset by a $1.2 million decrease in compensation costs mainly from $6.1 million in one-time compensation costs in 2021
that are not expected to recur in future quarters, partially offset by $4.3 million of restructuring charges due to elimination of
certain positions and outsourcing of the property management of the Trust's Quebec portfolio in Q1 2022.
Q4 2022
G&A expenses increased primarily due to the net effect of a $0.5 million increase in compensation costs mainly due to higher
salaries and unit-based compensation; and $0.7 million increase in other G&A expenses due to the same reasons explained
above in the full year.
Internal Leasing Costs, Transaction Costs and Debt Prepayment Costs
(thousands of dollars, except where otherwise
noted)
Internal leasing costs (i)
Transaction and other costs (ii)
Debt prepayment costs, net
Three months ended December 31
Years ended December 31
2022
2021
Change
2022
2021
Change
3,306 $
2,982 $
324 $
12,204 $
11,807 $
397
3,236 $
6,779 $
(3,543) $
8,274 $
17,343 $
(9,069)
— $
3,896 $
(3,896) $
— $
10,914 $
(10,914)
$
$
$
(i) Comprised of the payroll costs of our internal leasing department and related administration costs.
(ii)
Includes marketing costs related to condominium and townhouse projects which are expensed as incurred before condominium sales revenue are
recognized into income.
2022
Transaction and other costs decreased due to decreased disposition activities. The Trust incurred $1.7 million of marketing costs
(year ended December 31, 2021 - $1.9 million).
Debt prepayment costs decreased due to the early redemption of our Series R debenture in Q1 2021 and Series V debenture in
Q4 2021.
35 RioCan Annual Report 2022
MANAGEMENT’S DISCUSSION AND ANALYSIS
Our Business
and Our
Business
Environment
Environmental,
Social and
Governance
(ESG)
Initiatives
Property
Portfolio
Overview
Introduction
Q4 2022
Results of
Operations
Asset Profile
Development
Program
Capital
Resources
and Liquidity
Other
Disclosures
Non-GAAP
Measures
Risks and
Uncertainties
Transaction and other costs decreased due to decreased disposition activities. The Trust incurred $0.4 million of marketing costs
(three months ended December 31, 2021 - $0.2 million).
Debt prepayment costs decreased due to the early redemption of our Series V debenture in Q4 2021.
Net Income (Loss) Attributable to Unitholders
(thousands of dollars, except per unit amounts)
Net income (loss) attributable to Unitholders
Net income (loss) attributable to Unitholders (basic)
Net income (loss) attributable to Unitholders (diluted)
2022
2021
Change
2022
2021
Change
(4,961) $ 208,776 $ (213,737) $ 236,772 $ 598,389 $ (361,617)
(0.02) $
(0.02) $
0.66 $
0.66 $
(0.68) $
(0.68) $
0.77 $
0.77 $
1.89 $
1.89 $
(1.11)
(1.11)
$
$
$
Three months ended December 31
Years ended December 31
2022
Net income attributable to Unitholders decreased largely as a result of the net effect of a $365.2 million unfavourable change in
fair value on investment properties; partially offset by an $11.0 million increase in operating income and a $7.7 million decrease in
other expenses. Refer to the Operating Income and Net Operating Income (NOI) and Other Expenses sections of this MD&A for
further details.
Q4 2022
Net income attributable to Unitholders decreased largely as a result of the net effect of a $187.8 million unfavourable change in
fair value on investment properties and a $19.4 million decrease in operating income; partially offset by a $0.3 million decrease in
other operating expenses. Refer to the Operating Income and Net Operating Income (NOI) and Other Expenses sections of this
MD&A for further details.
Funds From Operations (FFO)
RioCan’s method of calculating FFO is in compliance with the REALPAC definition issued in January 2022 except that RioCan
excludes unrealized fair value gains or losses on marketable securities in its calculation of FFO and continues to include realized
gains or losses on marketable securities in FFO. Refer to the Non-GAAP Measures section of this MD&A for more information.
(thousands of dollars, except where otherwise
noted)
FFO
FFO Adjusted
FFO per unit - basic
FFO per unit - diluted
FFO Adjusted per unit - diluted
Weighted average number of Units - basic
(in thousands)
Weighted average number of Units - diluted
(in thousands)
FFO Payout Ratio (i)
FFO Payout Ratio Adjusted (i)
Three months ended December 31
Years ended December 31
2022
2021
Change
2022
2021
Change
$ 127,643 $ 146,521 $
(18,878) $ 524,678 $ 506,982 $
17,696
$ 128,153 $ 150,417 $
(22,264) $ 528,967 $ 523,953 $
5,014
$
$
$
0.42 $
0.42 $
0.42 $
0.46 $
0.46 $
0.48 $
(0.04) $
(0.04) $
(0.06) $
1.71 $
1.71 $
1.73 $
1.60 $
1.60 $
1.65 $
0.11
0.11
0.08
302,321
315,534
(13,213)
306,069
317,201
(11,132)
302,423
315,733
(13,310)
306,247
317,284
(11,037)
59.0%
58.5%
62.6%
60.6%
(3.6)%
(2.1)%
(i) Calculated on a twelve-month trailing basis. For a definition of the Trust's Unitholder distributions as a percentage of FFO and FFO Adjusted, refer
to the Non-GAAP Measures section of this MD&A.
2022
FFO increased by $17.7 million and FFO Adjusted, which excludes net debt prepayment costs, one-time compensation and
restructuring costs of $12.7 million, increased by $5.0 million over the comparable period. On a diluted per unit basis, FFO and
FFO Adjusted increased by $0.11 and $0.08, or 6.9% and 4.8%, respectively.
The $5.0 million increase in FFO Adjusted resulted mainly from $24.8 million higher SPNOI, $9.6 million higher residential NOI, a
$7.2 million improvement in NOI from completed properties under development, partially offset by a $23.5 million decline from
dispositions, lower inventory gains of $6.0 million due to timing and $4.8 million higher Adjusted G&A Expense. Higher net interest
costs of $8.8 million from higher average debt balances and higher effective interest rates were partially offset by $7.1 million of
higher interest income and other income.
FFO per unit improved by $0.11 and was driven higher by the items described above plus the accretive benefit of unit buybacks.
RioCan Annual Report 2022 36
MANAGEMENT’S DISCUSSION AND ANALYSIS
Our Business
and Our
Business
Environment
Environmental,
Social and
Governance
(ESG)
Initiatives
Property
Portfolio
Overview
Introduction
Q4 2022
Results of
Operations
Asset Profile
Development
Program
Capital
Resources
and Liquidity
Other
Disclosures
Non-GAAP
Measures
Risks and
Uncertainties
FFO decreased by $18.9 million and FFO Adjusted, which excludes debt prepayment costs and restructuring costs of $3.4
million, decreased by $22.3 million over the comparable period. On a diluted per unit basis, FFO and FFO Adjusted decreased by
$0.04 and $0.06, or 8.7% and 12.5%, respectively.
The $22.3 million decrease in FFO Adjusted resulted mainly from a $3.4 million increase in SPNOI and $2.2 million increase in
residential NOI offset by $18.9 million lower residential inventory gains due to timing and $6.3 million lower commercial NOI due
to asset dispositions. Higher net interest costs of $5.9 million primarily due to higher average cost of debt and higher average
debt balances were partially offset by $3.4 million of higher interest income and other income.
FFO per unit decreased by $0.04 as a result of the items described above net of the accretive benefit of unit buybacks. The
decrease in residential inventory gains accounted for $0.06 of the FFO per unit decline in the quarter.
FFO Payout Ratio
The FFO Payout Ratio was 59.0% for the twelve-month period ended December 31, 2022 compared to 62.6% in 2021. The
decline in the FFO Payout Ratio relative to last year is mainly due to higher FFO and units repurchased under the Normal Course
Issuer Bid (NCIB), partially offset by a $0.06 per unit per annum increase in distributions effective February 2022.
Adjusted Funds From Operations (AFFO)
AFFO is a non-GAAP financial measure. Refer to the Non-GAAP Measures section of this MD&A for more information. RioCan’s
method of calculating AFFO is in compliance with the REALPAC definition issued in January 2022, except that RioCan excludes
unrealized fair value gains or losses on marketable securities in its calculation of FFO and by extension AFFO, and continues to
include realized gains or losses on marketable securities.
(thousands of dollars)
AFFO
AFFO Adjusted
AFFO per unit - basic
AFFO per unit - diluted
AFFO Adjusted per unit - diluted
Weighted average number of Units - basic
(in thousands)
Weighted average number of Units - diluted
(in thousands)
AFFO Payout Ratio (i)
AFFO Payout Ratio Adjusted (i)
Three months ended December 31
Years ended December 31
2022
2021
Change
2022
2021
Change
$ 111,346 $ 131,375 $
$ 111,856 $ 135,271 $
(20,029) $ 461,381 $ 443,660 $
(23,415) $ 465,670 $ 460,631 $
17,721
5,039
$
$
$
0.37 $
0.37 $
0.37 $
0.42 $
0.42 $
0.43 $
(0.05) $
(0.05) $
(0.06) $
1.51 $
1.51 $
1.52 $
1.40 $
1.40 $
1.45 $
0.11
0.11
0.07
302,321
315,534
(13,213)
306,069
317,201
(11,132)
302,423
315,733
(13,310)
306,247
317,284
(11,037)
67.1%
66.4%
71.6%
68.9%
(4.5)%
(2.5)%
(i) Calculated on a twelve-month trailing basis. For a definition of the Trust's Unitholder distributions as a percentage of AFFO and AFFO Adjusted,
refer to the Non-GAAP Measures section of this MD&A.
2022
AFFO increased by $17.7 million and AFFO Adjusted, which excludes net debt prepayment costs, one-time compensation and
restructuring costs of $12.7 million, increased by $5.0 million over the comparable period. On a diluted per unit basis, AFFO and
AFFO Adjusted increased by $0.11 and $0.07, or 7.9% and 4.8%, respectively.
The $5.0 million increase in AFFO Adjusted was primarily due to higher FFO Adjusted. Refer to the Funds From Operations
(FFO) section of this MD&A for further details.
Q4 2022
AFFO decreased by $20.0 million and AFFO Adjusted which excludes debt prepayment costs and restructuring costs of $3.4
million, decreased by $23.4 million over the comparable period. On a diluted per unit basis, AFFO and AFFO Adjusted decreased
by $0.05 and $0.06, or 11.9% and 14.0%, respectively.
The $23.4 million decrease in AFFO Adjusted was primarily due to lower FFO Adjusted during the quarter. Refer to the Funds
From Operations (FFO) section of this MD&A for further details.
AFFO Payout Ratio
The AFFO Payout Ratio was 67.1% for the twelve-month period ended December 31, 2022 compared to 71.6% in 2021. The
decline compared to last year was primarily due to higher AFFO and units repurchased under the NCIB, partially offset by a $0.06
per unit per annum increase in distributions effective February 2022.
37 RioCan Annual Report 2022
MANAGEMENT’S DISCUSSION AND ANALYSIS
Our Business
and Our
Business
Environment
Environmental,
Social and
Governance
(ESG)
Initiatives
Property
Portfolio
Overview
Introduction
ASSET PROFILE
Property Valuations
Results of
Operations
Asset Profile
Development
Program
Capital
Resources
and Liquidity
Other
Disclosures
Non-GAAP
Measures
Risks and
Uncertainties
Refer to Note 3 of the 2022 Annual Consolidated Financial Statements for a continuity schedule for the change in consolidated
IFRS carrying values of our investment properties.
Investment Property Valuation
The Trust recorded net fair value losses of $115.5 million and $241.1 million, including assets held for sale, for the three months
and year ended December 31, 2022, respectively. The fair value losses in the current quarter and year were driven by increased
capitalization rate assumptions following an increase in market interest rates, partially offset by the positive impact of higher
property level NOI across many income producing properties due to strong occupancy and leasing. The year-to-date fair value
losses were also partially offset by increases in the fair value of certain developments. Over the long-term, underlying
fundamentals are expected to drive cash flow growth offsetting short-term interest rate volatility that is currently impacting
portfolio valuation.
Capitalization Rates
The capitalization rate is based on the location and quality of the properties and takes into account market data at the valuation
date.
The table below provides details of the change in the average capitalization rate (weighted by Stabilized NOI):
Weighted Average Capitalization Rate
Beginning of period
Impact of dispositions
Impact of acquisitions
Development yield
Other adjustments
End of period
Three months ended December 31
Years ended December 31
2022
5.37 %
(0.10) %
— %
— %
0.06 %
5.33 %
2021
5.42 %
0.01 %
— %
(0.09) %
(0.05) %
5.29 %
2022
5.29 %
(0.11) %
(0.01) %
(0.01) %
0.17 %
5.33 %
2021
5.44 %
(0.02) %
— %
(0.09) %
(0.04) %
5.29 %
The weighted average capitalization rate increased by 4 basis point when compared to December 31, 2021. The increases in
capitalization rates for certain assets were partially offset by the impact of dispositions with relatively higher capitalization rates
and the inclusion of development projects as construction continues to advance. The carrying value of investment properties
reflects the Trust's best estimate for the highest and best use as at December 31, 2022.
At December 31, 2022, the weighted average capitalization rate of the Trust's investment portfolio decreased by 4 basis points
when compared to September 30, 2022. Higher capitalization rates for certain assets were more than offset by the impact of
certain dispositions valued at relatively higher capitalization rates.
The valuation of investment properties is subject to a number of factors underlying the estimated cash flows and capitalization
rates used in the valuation process. These factors include but are not limited to geographic location, property type, strength of
underlying tenant covenants, future intensification opportunities, estimated vacancy allowances and the resulting re-tenanting
costs. Property values can also be impacted by rising interest rates as they tend to put upward pressure on capitalization rates.
Interest rates however are only one of the many factors that impact property values. Favourable supply / demand dynamics,
strong property fundamentals, the delivery of highly valued mixed-use residential developments and rising replacement costs,
which further restrict the supply of quality open air retail centres, all provide support for fair values. Notwithstanding low visibility in
a distorted market that is short of transactions, our valuations have been validated by third-party appraisals and substantiated
with available market data points. Refer to Note 3 of the 2022 Annual Consolidated Financial Statements for a sensitivity analysis
of investment property valuations to changes in the three key inputs to the property valuation - Stabilized NOI, capitalization rates
and costs to complete.
Given the volatility in the current macroeconomic environment, the impact on the Trust's investment property valuation remains
difficult to assess and predict. Refer to the Risks and Uncertainties - Interest Rate and Financing Risk, and Inflation Risk section
of this MD&A for discussions on these risks and uncertainties.
RioCan Annual Report 2022 38
MANAGEMENT’S DISCUSSION AND ANALYSIS
Our Business
and Our
Business
Environment
Environmental,
Social and
Governance
(ESG)
Initiatives
Property
Portfolio
Overview
Introduction
Valuation Processes
Internal Valuations
Results of
Operations
Asset Profile
Development
Program
Capital
Resources
and Liquidity
Other
Disclosures
Non-GAAP
Measures
Risks and
Uncertainties
RioCan measures the vast majority of its investment properties, including co-owned properties, using valuations prepared by its
internal valuation team which utilizes appraisal methodologies largely consistent with the practices employed by third-party
appraisers. This team of individuals has specialized industry experience in real estate valuations and report directly to a senior
member of the Trust's management. The internal valuation team's processes and results are reviewed and approved by the
Valuations Committee on a quarterly basis.
The Trust's Valuations Committee is responsible for approving any fair value changes to the investment properties and consists of
senior management of the Trust including the Chief Financial Officer, Chief Operating Officer, Chief Investment Officer and other
executive members.
External Valuations
Depending on the property asset type and location, management may opt to obtain independent third-party valuations from
accredited valuation professionals for purposes of adopting such appraised values in the case of land parcels or assessing the
reasonableness of its internal investment property valuations.
During the year ended December 31, 2022, the Trust obtained a total of 29 external property appraisals which supported an IFRS
fair value of approximately $2.5 billion or 18.0% of the Trust's investment property portfolio as at December 31, 2022. Our
mandate is to conduct an average of six external appraisals on investment properties on a quarterly basis or 24 investment
properties a year, plus a selection of external land valuations, which is done every fourth quarter on our excess land and
greenfield sites.
39 RioCan Annual Report 2022
MANAGEMENT’S DISCUSSION AND ANALYSIS
Our Business
and Our
Business
Environment
Environmental,
Social and
Governance
(ESG)
Initiatives
Property
Portfolio
Overview
Introduction
Acquisitions and Dispositions
Acquisitions
Results of
Operations
Asset Profile
Development
Program
Capital
Resources
and Liquidity
Other
Disclosures
Non-GAAP
Measures
Risks and
Uncertainties
The acquisitions during the year ended December 31, 2022 are as follows:
(in thousands of dollars or sq. ft., except where otherwise noted)
Purchase price (i)
(At RioCan's interest)
Date acquired
Interest
acquired
IPP
PUD
Residential
Inventory
Total
Vendor
take-back
mortgage,
purchase
price
payable
and/or debt
assumed
NLA
acquired
(thousands
of sq. ft.)
November 22
100.0 % $ 5,011 $
— $
— $ 5,011 $
—
$ 5,011 $
— $
— $ 5,011 $
—
August 8
100.0 % $ 1,072 $
— $
— $ 1,072 $
—
$ 1,072 $
— $
— $ 1,072 $
—
Property name and location
Q4 2022
Building at South Cambridge SC,
Cambridge, ON (ii)
Q3 2022
4980 Boulevard des Sources, Pierrefonds,
QC
Q2 2022 - No Acquisitions
Q1 2022
Queen & Ashbridge (QA), Toronto, ON (iii)
February 17
50.0 % $
— $ 11,946 $
19,440 $ 31,386 $
30,372
3302 Dufferin Street, Toronto, ON
February 11
100.0 % 22,218
Market, Laval, QC (iv)
February 8
90.0 % 48,349
Bloor Street West & Lansdowne Ave
Portfolio, Toronto, ON (v)
January 28
100.0 % 19,381
—
—
—
— 22,218
— 48,349
— 19,381
—
—
—
$ 89,948 $ 11,946 $
19,440 $ 121,334 $
30,372
Total 2022 Acquisitions (vi)
$ 96,031 $ 11,946 $
19,440 $ 127,417 $
30,372
(i) Purchase price includes transaction costs of $4.5 million in aggregate.
(ii) RioCan acquired a tenant owned building located at the property, and converted the tenant lease into a land and building lease.
(iii) The Queen & Ashbridge (QA) acquisition included both property under development and residential inventory components and was allocated as
$11.9 million and $19.4 million, respectively. The vendor take-back mortgage and purchase price payable of $30.4 million includes a $24.2 million
vendor-take-back mortgage payable to the vendor at a weighted average interest rate of 2.61%.
(iv) Acquired for the purposes of facilitating a nearby mixed-use development.
(v) Bloor Street West & Lansdowne Ave Portfolio acquisition comprises four properties, which are part of a larger land assembly.
(vi) Acquisitions exclude properties acquired in the PR Bloor Street LP joint venture in conjunction with the disposition of 85 Bloor Street West,
Toronto, ON. See the Joint Arrangements section of this MD&A for more information.
RioCan Annual Report 2022 40
—
—
3
3
—
13
114
22
149
152
MANAGEMENT’S DISCUSSION AND ANALYSIS
Our Business
and Our
Business
Environment
Environmental,
Social and
Governance
(ESG)
Initiatives
Property
Portfolio
Overview
Introduction
Dispositions
Results of
Operations
Asset Profile
Development
Program
Capital
Resources
and Liquidity
Other
Disclosures
Non-GAAP
Measures
Risks and
Uncertainties
The Trust closed a number of dispositions during the year ended December 31, 2022 as summarized below:
(in thousands of dollars or sq. ft., except where otherwise
noted)
Gross sales proceeds
(at RioCan's interest)
Property name and location
Date disposed
Q4 2022
Ownership
interest
disposed
IPP
PUD
Residential
Inventory
Total
Debt
associated
with
property
NLA
disposed
at
RioCan's
Interest
Abbotsford Power Centre, Abbotsford, BC
December 19
100.0 % $ 53,000 $ — $
— $ 53,000 $
Mill Woods Town Centre, Edmonton, AB
December 15
100.0 % 58,269 10,470
— 68,739
Fallingbrook Shopping Centre, Ottawa, ON (i)
December 6
100.0 % 38,856
Shoppes on Queen West, Toronto, ON
December 1
100.0 % 51,218
Chahko Mika Mall, Nelson, BC
November 28
100.0 % 28,312
—
—
—
— 38,856
— 51,218
— 28,312
$ 229,655 $ 10,470 $
— $ 240,125 $
Q3 2022
Parkwood Place, Prince George, BC
September 13
100.0 % $ 30,500 $ — $
— $ 30,500 $
RioCan Greenfield, Greenfield Park, QC
September 8
100.0 % 47,838
Trinity Conception Square,Carbonear, NFLD
August 29
100.0 % 14,900
107th Avenue Northwest, Edmonton, AB
July 7
100.0 %
3,400
—
—
—
— 47,838
— 14,900
—
3,400
$ 96,638 $ — $
— $ 96,638 $
Q2 2022
Lethbridge Walmart Centre, Lethbridge, AB
RioCan Centre Vaughan, Vaughan, ON
June 6
May 3
100.0 % $ 27,625 $ — $
— $ 27,625 $
100.0 %
— 9,300
—
9,300
$ 27,625 $ 9,300 $
— $ 36,925 $
—
—
—
—
—
—
—
—
—
—
—
—
—
—
220
455
97
89
173
1,034
370
341
182
12
905
285
—
285
Q1 2022
Mega Centre Notre-Dame, Sainte-Dorothée,
QC (ii) (iii)
March 30
50.0 % $ 32,728 $ — $
— $ 32,728 $
—
126
Highbury Shopping Plaza, London, ON
March 29
100.0 % 10,750
97th Street Northwest, Edmonton, AB
March 17
100.0 %
2,000
Eastcourt Mall, Cornwall, ON
Timiskaming Square, New Liskeard, ON
85 Bloor Street West, Toronto, ON (ii) (iv)
March 14
March 14
March 14
50.0 %
6,945
50.0 %
1,650
50.0 % 17,500
—
—
—
—
—
— 10,750
—
—
—
2,000
6,945
1,650
— 17,500
The Well (Building C), Toronto, ON (v)
January 24
40.0 %
— 14,507
— 14,507
$ 71,573 $ 14,507 $
— $ 86,080 $
—
—
—
—
—
—
—
71
12
71
49
7
—
336
Total 2022 Dispositions
$ 425,491 $ 34,277 $
— $ 459,768 $
—
2,560
(i) RioCan provided a vendor take-back mortgage with a fair value of $22.3 million related to this transaction.
(ii) The following represent partial interest dispositions. RioCan retained the remaining ownership interest in these properties.
(iii)
(iv) RioCan disposed of a 100% ownership interest in 85 Bloor Street West to PR Bloor Street LP as part of the consideration to obtain a 50.0%
Includes Desserte Ouest located in Sainte-Dorothée, QC.
interest in the joint venture. See the Joint Arrangements section of this MD&A for more information.
(v) The Well (Building C) disposition includes cost recoveries of $1.1 million.
In 2022, the Trust completed $459.8 million of dispositions at a weighted average capitalization rate of 7.74%, a testament to the
quality of and demand for the Trust's assets, which include $425.5 million of income producing assets at a weighted average
capitalization rate of 8.37% and $34.3 million of development properties with no in-place income.
As of February 15, 2023, the Trust has firm or conditional deals and deals that closed subsequent to year end to sell full or partial
interests in a number of properties totaling $43.0 million.
RioCan's disposition program permits, in some cases, the advantages of shedding low growth or vulnerable assets, but in all
cases, is an effective means to raising capital that can be put to beneficial use to strengthen its balance sheet and fund
development. A number of these transactions involve the sale of partial interests in development properties as well as closing of
prearranged air rights sales or future density which allows the Trust to not only realize inherent density value and recycle capital,
but also to mitigate risk, share costs, earn additional fee income, and attract new partners or strengthen existing partner
relationships.
41 RioCan Annual Report 2022
MANAGEMENT’S DISCUSSION AND ANALYSIS
Our Business
and Our
Business
Environment
Environmental,
Social and
Governance
(ESG)
Initiatives
Property
Portfolio
Overview
Introduction
Mortgages and Loans Receivable
Results of
Operations
Asset Profile
Development
Program
Capital
Resources
and Liquidity
Other
Disclosures
Non-GAAP
Measures
Risks and
Uncertainties
Contractual mortgages and loans receivable as at December 31, 2022 and December 31, 2021 are comprised of the following:
(thousands of dollars)
Weighted average
As at
Mezzanine financing to co-owners
Vendor take-back and other
Total
Floating rate loans (ii)
Fixed rate loans (iii)
Total
Contractual
interest rates (i)
Effective
interest rates (i)
Terms to
maturity
(in years) (i) December 31, 2022 December 31, 2021
9.06 %
4.09 %
7.73 %
9.87 %
6.91 %
7.73 %
9.06 %
6.05 %
8.26 %
9.87 %
7.63 %
8.26 %
3.9 $
3.3
3.8 $
3.8 $
3.8
3.8 $
197,537 $
71,802
269,339 $
75,020 $
194,319
269,339 $
178,230
59,560
237,790
51,005
186,785
237,790
Information presented as at December 31, 2022.
(i)
(ii) As at December 31, 2021, contractual interest rate and effective interest rates were 6.00%% and 6.00%, respectively.
(iii) As at December 31, 2022, $10.4 million included in fixed rate loans was variable to the prime rate, with a prime rate floor of 3.95% and prime rate
cap of 4.95% (December 31, 2021 - $9.8 million).
All of the $269.3 million of mortgages and loans receivable as at December 31, 2022 are carried at amortized cost. RioCan's
Declaration of Trust and certain credit agreements contain provisions that have the effect of limiting the investment in mortgages
receivable under specific circumstances. Refer to Note 26 of the 2022 Annual Consolidated Financial Statements for further
details.
Joint Arrangements
Joint arrangement activities represent real estate investments in which RioCan has joint control and either owns an undivided
interest in the assets and liabilities with its co-owners (co-ownership or joint operations) or ownership rights to the residual equity
of a separate entity holding the property interests (joint ventures) that are accounted for as equity-accounted investments (EAI
JV). RioCan has 45 properties in joint operations and 15 properties in 6 joint ventures. RioCan’s primary co-ownership
arrangements are with Allied Properties REIT (Allied); Boardwalk REIT (Boardwalk); Broccolini Real Estate Group (Broccolini);
Canada Pension Plan Investment Board (CPPIB); Killam Apartment REIT (Killam); KingSett Capital (KingSett); Tanger Factory
Outlet Centres, Inc. (Tanger); Woodbourne Canada Partners (Woodbourne); and Sun Life Financial. The Trust also has partial
interests in 15 properties held through joint ventures with Hudson's Bay Company (HBC), Marketvest Corporation/Dale-Vest
Corporation, Fieldgate Urban (Fieldgate), Parallax Properties Inc. (Parallax), Metropia and with a number of investors in RC
(Queensway) LP, which are included in our equity-accounted investments in the 2022 Annual Consolidated Financial Statements.
The Trust’s co-ownership arrangements are governed by co-ownership agreements with its various co-owners. The Trust's joint
venture arrangements are typically governed by limited partnership agreements and/or shareholders' agreements. RioCan’s
standard joint arrangements provide exit and transfer provisions, including, but not limited to, buy/sell and/or right-of-first offers or
refusals that allow for the unwinding of these joint arrangements should the circumstances necessitate.
Generally, the Trust is only liable for its proportionate share of the obligations of the joint arrangements in which it participates,
except in limited circumstances. Credit risk may arise in the event that co-owners default on the payment of their proportionate
share of such obligations. The joint arrangement agreements will typically provide RioCan with an option to remedy any non-
performance by a defaulting co-owner/partner. These credit risks are mitigated as the Trust has recourse against the assets
under its joint arrangement agreements in the event of default by its co-owners/partners, in which case the Trust’s claim would be
against both the underlying real estate investments and the co-owners/partners that are in default. In addition to the matter noted
above, RioCan has provided guarantees on debt totalling $255.4 million as at December 31, 2022 on behalf of co-owners/
partners (December 31, 2021 - $225.4 million).
In addition to the 6 joint ventures, the Trust has significant influence over 5 limited partnerships, and, as a result, these are also
equity-accounted investments.
RioCan Annual Report 2022 42
MANAGEMENT’S DISCUSSION AND ANALYSIS
Our Business
and Our
Business
Environment
Environmental,
Social and
Governance
(ESG)
Initiatives
Property
Portfolio
Overview
Introduction
Results of
Operations
Asset Profile
Development
Program
Capital
Resources
and Liquidity
Other
Disclosures
Non-GAAP
Measures
Risks and
Uncertainties
Selected Financial Information of Joint Ventures and Other Equity-Accounted Investments
Total Assets
(thousands of dollars)
As at December 31, 2022
Joint operations:
Total assets of proportionately consolidated
joint operations
Equity-accounted joint ventures:
HBC (RioCan-HBC JV)
Marketvest Corporation/Dale-Vest Corporation
(Dawson-Yonge LP)
Bloor Street West (RioCan-Fieldgate LP)
RC (Queensway) LP
RC (Leaside) LP - Class B
PR Bloor Street LP
Income
properties
Residential
PUD
inventory Other (i) Total assets
Total assets as
at December 31,
2021
$ 1,940,747 $ 757,918 $ 239,436 $ 170,402 $ 3,108,503 $
2,818,537
$ 383,884 $
— $
— $ 33,718 $ 417,602 $
431,639
9,436
—
—
211
9,647
—
—
—
—
1,918
1,390
15,179
380
17,477
15,182
2,021
18,593
—
10,273
63
10,336
2,073
5,381 $ 127,253 $ 38,073 $ 564,027 $
86,619
90,372
1,680
—
87,283
7,707
94,990
9,135
16,429
11,069
10,235
—
478,507
97,058
575,565
Total assets of equity-accounted joint ventures (ii) $ 393,320 $
Other equity-accounted investments (ii)
—
Total assets of equity-accounted investments (ii)
$ 393,320 $
5,381 $ 214,536 $ 45,780 $ 659,017 $
Total joint operations and equity-accounted
investments (ii)
$ 2,334,067 $ 763,299 $ 453,972 $ 216,182 $ 3,767,520 $
3,394,102
(i)
Primarily includes finance lease receivable, cash and cash equivalents, rents receivable and other operating expenditures recoverable from
tenants.
(ii) This is a non-GAAP financial measure. Refer to the Non-GAAP Measures section in this MD&A for more information on each non-GAAP financial
measure.
Total NOI
NOI of proportionately consolidated joint operations and NOI of joint operations and equity-accounted investments are non-GAAP
financial measures. Refer to the Non-GAAP Measures section of this MD&A for more information.
(thousands of dollars)
Joint Operations:
Three months ended
December 31
Years ended
December 31
2022
2021
2022
2021
Total NOI from proportionately consolidated joint operations
$
21,358 $
17,078 $
73,249 $
64,444
Equity-accounted investments:
Joint ventures:
HBC (RioCan-HBC JV)
Marketvest Corporation/Dale-Vest Corporation (Dawson-Yonge LP)
Bloor Street West (RioCan-Fieldgate LP)
RC (Queensway) LP
PR Bloor Street LP
Total NOI of equity-accounted joint ventures
Other equity-accounted investments
Total NOI of equity-accounted investments
Total NOI of joint operations and equity-accounted investments
PR Bloor Street LP
$
5,424 $
5,402 $
21,389 $
20,501
123
4
—
258
5,809 $
63
5,872 $
97
8
50
—
486
28
29
914
403
67
105
—
5,557 $
115
5,672 $
22,846 $
283
23,129 $
21,076
350
21,426
27,230 $
22,750 $
96,378 $
85,870
$
$
$
On March 14, 2022, RioCan and Parallax sold 100% interest in their respective properties, 85 Bloor Street West and 93 Bloor
Street West, in exchange for partnership units of PR Bloor Street LP, a 50/50 joint venture formed for the development of a mixed-
use high-rise condominium project. In addition, on March 14, 2022, the partnership acquired 83 Bloor Street, 89-91, 95 and 95 A
Bloor Street for an aggregate purchase price of $52.5 million at RioCan's ownership interest, excluding transaction costs. These
transactions are more fully described in Note 4 of the 2022 Annual Consolidated Financial Statements.
43 RioCan Annual Report 2022
MANAGEMENT’S DISCUSSION AND ANALYSIS
Our Business
and Our
Business
Environment
Environmental,
Social and
Governance
(ESG)
Initiatives
Property
Portfolio
Overview
Introduction
Results of
Operations
Asset Profile
Development
Program
Capital
Resources
and Liquidity
Other
Disclosures
Non-GAAP
Measures
Risks and
Uncertainties
Capital Expenditures on Income Properties
Maintenance Capital Expenditures
Maintenance capital expenditures consist primarily of tenant improvements, third-party leasing commissions and certain
recoverable and non-recoverable capital expenditures. Maintenance capital expenditures maintain the existing earnings capacity
of our property portfolio and are dependent upon many factors. These include, but are not limited to, lease expiry profile, tenant
vacancies, the age and location of the income properties and general economic and market conditions, which impact the level of
tenant bankruptcies. As at December 31, 2022, the estimated weighted average age of our income property portfolio is
approximately 26 years.
Actual maintenance capital expenditures can vary widely from period to period depending on a number of factors as noted above,
as well as the level of acquisition and disposition activity. As a result, management believes that for the purpose of determining
AFFO which, as discussed in the Non-GAAP Measures section of this MD&A, is used as an input in assessing a REIT's recurring
economic earnings, Normalized Capital Expenditures are more relevant than using actual capital expenditures. Refer to the Non-
GAAP Measures section of this MD&A for details on how management estimates its Normalized Capital Expenditures used in the
determination of AFFO.
Tenant improvements and external leasing commissions
The Trust's portfolio requires ongoing investments of capital for costs related to tenant improvements, broker commissions on
new and renewal tenant leases and other third-party leasing costs. The amount and timing of capital outlays to fund tenant
improvements on the Trust's income property portfolio depend on several factors, which may include the lease maturity profile,
unforeseen tenant bankruptcies and the location of the income property.
Recoverable and non-recoverable capital expenditures
The Trust also invests capital on a regular basis to physically maintain its income properties. Typical costs incurred are for
expenditures such as roof replacement programs and the resurfacing of parking lots. Tenant leases generally provide for the
ability to recover a significant portion of such costs from tenants over time as property operating costs. The Trust expenses or
capitalizes these amounts to income properties, as appropriate. The majority of such activities occur when weather conditions are
favourable. As a result, these expenditures are generally not consistent throughout the year.
Revenue Enhancing Capital Expenditures
Capital spending for new or existing income properties that is expected to create, improve and/or add to the overall earnings
capacity of the property portfolio is considered revenue enhancing. RioCan considers such amounts to be investing activities. As
a result, it does not expect such expenditures to be funded from cash flows from operating activities and does not consider such
amounts as a key determinant in setting the amount that is distributed to our Unitholders. Revenue enhancing capital
expenditures are not included in the determination of AFFO.
Summary of Capital Expenditures
Expenditures for third-party leasing commissions and tenant improvements, recoverable and non-recoverable, and revenue
enhancing capital expenditures pertaining to our income properties are as follows:
(thousands of dollars)
Maintenance capital expenditures:
Tenant improvements and external
leasing commissions
Recoverable from tenants
Non-recoverable
Revenue enhancing capital
expenditures
Three months ended December 31
Years ended December 31
Normalized Capital
Expenditures (i)
2022
2021
Change
2022
2021
Change
2022
2023
$
9,928 $
8,803 $
1,125 $ 33,450 $ 29,724 $
3,726 $ 22,500 $ 28,300
5,056
1,576
3,480
21,680
14,932
6,748
22,500
23,500
962
3,874
(2,912)
5,365
8,166
(2,801)
5,000
3,200
$ 15,946 $ 14,253 $
1,693 $ 60,495 $ 52,822 $
7,673 $ 50,000 $ 55,000
18,220
12,963
5,257
40,972
25,134
15,838
$ 34,166 $ 27,216 $
6,950 $ 101,467 $ 77,956 $ 23,511
(i)
This is a non-GAAP financial measure. Refer to the Non-GAAP Measures section in this MD&A for details on how management estimates its
Normalized Capital Expenditures.
RioCan's total maintenance capital expenditures for the year ended December 31, 2022 were $60.5 million, $10.5 million higher
than the Normalized Capital Expenditures estimate of $50.0 million. This was primarily related to $3.3 million of expenditures on
certain properties prior to disposition, and an increase in tenant improvements and external leasing commissions from higher
leasing activity. For 2023, normalized maintenance capital expenditure guidance is set at $55.0 million, allocated evenly to each
quarter, although quarterly fluctuations between the estimated normalized maintenance capital expenditures and actual
expenditures are expected. The Trust will reassess the estimated normalized maintenance capital expenditures as necessary on
a going forward basis. Refer to the Non-GAAP Measures section of this MD&A for details on how estimates of Normalized Capital
Expenditures were determined. Revenue enhancing capital expenditures of $50.0 million to $55.0 million are expected in 2023.
RioCan Annual Report 2022 44
MANAGEMENT’S DISCUSSION AND ANALYSIS
Our Business
and Our
Business
Environment
Environmental,
Social and
Governance
(ESG)
Initiatives
Property
Portfolio
Overview
Introduction
DEVELOPMENT PROGRAM
Results of
Operations
Asset Profile
Development
Program
Capital
Resources
and Liquidity
Other
Disclosures
Non-GAAP
Measures
Risks and
Uncertainties
RioCan’s development program is a key component of its growth strategy serving to drive net asset value expansion, increasing
NOI, and favourable portfolio diversification. Our development program has the following competitive advantages:
Development Opportunities
RioCan's sizable portfolio provides embedded development opportunities. The Trust's well-located retail centres are generally
built with lot coverages of approximately 25% of the underlying lands which provides excess density for potential intensification.
All development sites are well-located, transit-oriented locations in Canada's six largest metropolitan markets with over 82% of
projects located in the GTA.
Established Development Expertise
RioCan operates an in-house development team with extensive experience to execute every stage of the development lifecycle
from site identification, planning and design, construction management oversight, product delivery, and operations. The Trust has
over 30 years of experience in the Canadian commercial real estate development landscape and a track record of successfully
executing development projects.
Strategic Financial & Risk Management
RioCan's management team continuously reviews and prioritizes development opportunities allowing the Trust to actively
manage development capital requirements and adapt to changing market conditions. New projects undergo rigorous planning to
enable cost clarity in any environment. Given that RioCan's development pipeline primarily comprises of excess density
embedded within existing income-producing assets, the Trust is able to manage the timing of development starts. If required,
these assets can continue to generate income until the appropriate time to commence development is reached in order to
generate strong incremental returns and increase the Trust's net asset value. Refer to the Our Business and Our Business
Environment and Risks and Uncertainties sections of this MD&A for discussions about the development environment as well as
associated development risk.
The Trust categorizes the projects within its development program as follows:
Category
Projects under construction
Shovel ready development sites
Zoning approved
Zoning application submitted
Future developments
Development Pipeline
Description
Development projects under active construction or anticipate to commence active construction in
the next three months.
Zoning by-law approval, legal obligations achieved, as well as environmental and tenant
encumbrances resolved. Upon financial commitment and site plan approval, project will
commence construction.
Achieved full zoning by-law amendment approval.
Trust has submitted re-zoning application to change municipality zoning designation and / or
increase density.
Sites identified in key urban markets with potential for mixed-use and residential development.
The Trust is actively reviewing redevelopment strategy on these sites including re-zoning and
entitlement process to seek incremental density.
RioCan's development pipeline on a proportionate share basis in equity-accounted joint ventures as at December 31, 2022 is
summarized below:
(in thousands of dollars or sq. ft. and at
RioCan's interest unless otherwise
noted)
Projects under construction (vii)
Shovel ready development sites
Estimated GFA (i)
Investment
Commercial
Residential
(ii)
Total (iii)
(iv)
Residential
units at 100%
ownership (i)
Residential
inventory
cost to
date(v)(vi)
PUD cost
to date (v)
Estimated
cost to
complete
Estimated
total
738
636
1,207
1,945
3,493 $
223,257 $ 667,331 $ 746,072 $ 1,636,660
901
1,537
2,265
3,287
77,374
Zoning approved
1,417
10,112 11,529
11,822
57,528
91,272
Zoning application submitted
636
7,518
8,154
11,108
123,910
59,809
Future developments
Development lands & others
Total Development at Cost
1,779
17,966 19,745
14,515
4,150
97,709
—
—
—
—
—
65,783
5,206
37,704 42,910
43,203 $
412,132 $ 1,059,278 $ 746,072 $ 2,217,482
Total properties under development at fair value
$ 1,178,610
(i) Estimated GFA and the number of residential units are based on current development plans, final square footage and units may differ. Effective Q4
2022, the development pipeline is measured in GFA and excludes any completed components of the projects.
Includes residential condominiums, townhouse, and residential rental development.
(ii)
(iii) Estimate total square footage includes 4.8 million square feet of NLA currently income producing.
45 RioCan Annual Report 2022
—
—
—
—
—
80,661
148,800
183,719
101,859
65,783
MANAGEMENT’S DISCUSSION AND ANALYSIS
Our Business
and Our
Business
Environment
Environmental,
Social and
Governance
(ESG)
Initiatives
Property
Portfolio
Overview
Introduction
Results of
Operations
Asset Profile
Development
Program
Capital
Resources
and Liquidity
Other
Disclosures
Non-GAAP
Measures
Risks and
Uncertainties
(iv) Change in total development pipeline from prior quarter resulted mainly from a decrease of 1.3 million square feet from Q4 2022 completions and
removing square footage of project phases completed in prior periods, 1.6 million square feet from the disposition of Mill Woods Town Centre and
an increase of 3.5 million square feet from converting from NLA to GFA in Q4 2022.
(v) Non-GAAP financial measures are presented at RioCan's Proportionate Share in Equity-Accounted Joint Ventures. Refer to the Non-GAAP
Measures section in this MD&A for more information.
(vi) Residential inventory cost to date includes commissions.
(vii) Estimated NLA on projects under construction approximates 1.7 million square feet by applying a 90% GFA conversion factor.
Completed Developments
For the year ended December 31, 2022, RioCan transferred a total of 651,000 square feet of new development including 650
residential units.
During the quarter, the Trust completed Rhythm, a rental residential development comprising 213 premium units. Rhythm is
conveniently located next to RioCan's Westgate Shopping Centre with close proximity to downtown Ottawa. Progress continues
at The Well with the Trust delivering 147,000 square feet of office and 4,000 square feet of retail space.
The following tables detail RioCan’s development completions in the year ended December 31, 2022:
(in thousands and at RioCan's interest unless otherwise
noted)
NLA (in '000 sq. ft.)
Project / Location
Mixed-use
Latitude, Gloucester, ON
Strada, Toronto, ON
Luma, Ottawa, ON
Rhythm, Ottawa, ON
Residential
units at
100%
ownership
%
Ownership
Q1
Q2
Q3
Q4
Total
Tenants
50 %
50 %
50 %
50 %
208
83 — — —
83 Residential
61
27 — — —
27 Residential, Healthy Planet
168 — —
63 —
63 Residential
213 — — —
73
73 Residential
The Well, Toronto, ON
50 %
n/a —
36 105 151
292
Financeit, MD&C LLP, Enwave,
Index Exchange, Intuit, Quadrangle,
Shopify, Torstar, Netflix, Dyson
Subtotal mixed-use
Retail
Centre St. Jean, St. Jean sur Richelieu, QC
Yonge Sheppard Centre, Toronto, ON
Strawberry Hill Shopping Centre, Surrey, BC
Oakville Place, Oakville, ON
Garden City, Winnipeg, MB
RioCan Shawnessy, Calgary, AB
Subtotal retail
Total completed developments
650 110
36 168 224
538
100 %
100 %
100 %
50 %
100 %
100 %
n/a
2 — — —
2 A&W
n/a —
19 — —
19 Cactus Club Café
n/a — —
3 —
3 Jollibee
n/a — —
8 —
8 Laura
n/a — — —
4
4 Five Guys
n/a
33
14 —
30
77
London Drugs, Value Village,
Calgary Climbing Centre
—
35
33
11
34
650 145
69 179 258
113
651
During 2022, RioCan completed two condominium / townhouse projects for a combined 608 residential units, recognizing a total
inventory gain of $22.4 million on a total investment of $91.3 million.
The following tables detail RioCan’s condominium / townhouse completions in the year ended December 31, 2022:
(in thousands of dollars and at RioCan's
interest unless otherwise noted)
Project / Location
Condominium / townhouses
U.C. Uptowns, Oshawa, ON (i)
U.C. Tower, Oshawa, ON (ii)
Total condominium / townhouse developments
%
Ownership
Units at 100%
ownership
Revenue
Cost
Commissions
Inventory gain
50 %
50 %
105 $
503
608 $
25,600 $
21,719 $
93,059
69,603
118,659 $
91,322 $
718 $
4,246
4,964 $
3,163
19,210
22,373
(i) A total of 153 units were developed at U.C. Uptowns, of which 48 units sold in 2021.
(ii) Of the completed 503 units, one completed unit is expected to close in 2023.
RioCan Annual Report 2022 46
MANAGEMENT’S DISCUSSION AND ANALYSIS
Our Business
and Our
Business
Environment
Environmental,
Social and
Governance
(ESG)
Initiatives
Property
Portfolio
Overview
Introduction
Results of
Operations
Asset Profile
Development
Program
Capital
Resources
and Liquidity
Other
Disclosures
Non-GAAP
Measures
Risks and
Uncertainties
The Trust's development completions for 2022 and projected completions in 2023 are summarized as follows:
(in thousands dollars and RioCan's interest)
Development completions
Completion year
2022
2023 (iv)
NLA completion
(sq. ft.)
IFRS cost
transfers from
PUD to IPP
Adjustments to
cash basis (i)
Total net costs
transfers from
PUD to IPP (ii)
Incremental
stabilized cash
NOI (ii) (iii)
651,000
633,000
$
$
565,520
673,000
$
$
(60,553)
(43,400)
$
$
504,967
629,600
$
$
24,132
28,136
(i) Adjustments to cash basis include: vacant land costs, proceeds from land sales recognized during the life of the project, applicable interim income
or fee income earned during the development period, capitalized interest on invested equity, and fair value on initial amounts transferred into
properties under development.
(ii) Non-GAAP financial measure.
(iii) This is a forward-looking non-GAAP financial measure calculated based on proforma annualized Stabilized NOI. Refer to the Non-GAAP
Measures section of this MD&A for more information on NOI.
(iv) Forward-looking information.
Development Projects Under Construction
RioCan currently has 11 mixed-use developments and two retail developments under active construction. Upon completion of
these projects, the Trust is expected to deliver a total of 738,000 square feet of commercial space and 3,493 residential units,
including 2,510 condominium units, and 65 town homes. The following table details RioCan's development projects under
construction on a proportionate share basis including equity-accounted joint ventures as at December 31, 2022:
(in thousands dollars and RioCan's interest unless
otherwise noted)
Estimated GFA
('000 sq. ft.) (i)
Investment
—
24,425
50,926
75,351
n/a
2025 H1
Residential
units at
100%
ownership
(i) Commercial Residential
%
Ownership
Residential
inventory
(ii) (iii)
Estimated
cost to
complete
Estimated
total (iii)
PUD (ii)
Mixed-use
The Well, Toronto, ON
50 %
—
529
— $
— $ 445,486 $ 123,894 $ 569,380
FourFifty The Well, Toronto, ON
Luma, Ottawa, ON
Rhythm, Ottawa, ON
U.C. Towns 2, Oshawa, ON (v)
5th & THIRD East Village, Calgary, AB
11 YV, Toronto, ON - Rental
11 YV, Toronto, ON - Condominium
Queen & Ashbridge, Toronto, ON - Rental
Queen & Ashbridge, Toronto, ON -
Condominium
U.C. Tower 2, Oshawa, ON
U.C. Tower 3, Oshawa, ON
Verge, Toronto, ON - Rental
50 %
50 %
50 %
50 %
100 %
50 %
50 %
50 %
592
—
—
65
—
81
587
233
50 %
399
50 %
50 %
20 %
606
386
12
Verge, Toronto, ON - Condominium
20 %
532
—
6
10
—
21
17
—
10
—
—
—
6
—
210
—
105,525
46,490
152,015
—
—
2,020
2,956
—
—
2,185
5,151
5,141
5,151
15,328
17,348
—
10,036
1,150
11,186
—
28,008
21,589
49,597
144,699
—
120,514
265,213
—
—
51
—
28
217
104
144
42,364
—
84,514
126,878
228
138
2
17,128
—
108,832
125,960
624
—
—
81,287
81,911
1,376
4,073
5,449
85
16,422
—
46,319
62,741
Estimated
residential
inventory
sales
revenue
Estimated
completion
period (iv)
n/a
n/a
n/a
n/a
$27,000 -
$28,000
n/a
n/a
$328,000 -
$330,000
2023 H1 -
2024 H1
2023 H2 -
2024 H2
2023 H2
2023 H2
2023 H2
2024 H2
2024 H2
2024 H2
$151,000 -
$153,000
$157,000 -
$159,000
$126,000 -
$128,000
n/a
$71,000 -
$73,000
$860,000 -
$871,000
2025 H1
2024 H2
2025 H1
2025 H1
2025 H1
Subtotal mixed-use
Retail
3,493
599
1,207 $ 223,257 $ 617,812 $ 712,252 $ 1,553,321
RioCan Windfields, Oshawa, ON - Phase 1
100 %
n/a
23
East Hills, Calgary, AB
Subtotal retail
40 %
n/a
—
116
139
—
—
—
n/a 21,073
3,119
24,192
n/a
2023 H2
n/a 28,446
30,701
59,147
—
49,519
33,820
83,339
n/a
—
2024 H1 -
2026 H2
Total projects under construction
3,493
738
1,207 $ 223,257 $ 667,331 $ 746,072 $ 1,636,660
$860,000 -
$871,000
(i) Estimated GFA and residential units are based on current development plans, final square footage and units may differ.
(ii) Non-GAAP financial measures, refer to the Non-GAAP Measures section in this MD&A for more information.
(iii) Includes selling commissions which are included in prepaid expenses and other assets. Costs are transferred to cost of sales upon buyer interim
possession.
(iv) H1 and H2 denotes first six months and the last six months of the year, respectively. Estimated completion period on condominium developments
represent estimated interim closing with final closing approximately 12 to 15 months thereafter.
(v) U.C. Towns 2, interim and final closings are expected in the second half of 2023.
47 RioCan Annual Report 2022
MANAGEMENT’S DISCUSSION AND ANALYSIS
Our Business
and Our
Business
Environment
Environmental,
Social and
Governance
(ESG)
Initiatives
Property
Portfolio
Overview
Introduction
Results of
Operations
Asset Profile
Development
Program
Capital
Resources
and Liquidity
Other
Disclosures
Non-GAAP
Measures
Risks and
Uncertainties
The Well, Toronto, ON
The Well is the most ambitious development in Canada of its scale. As an extension of the vibrant King West neighbourhood of
Toronto, this mixed-use development is expected to deliver at RioCan's share approximately 733,000 square feet of commercial
space with a total expected investment of $910.7 million. The total estimated PUD costs for The Well are net of approximately
$54.0 million of recoverable costs at RioCan's interest relating to matters such as parking, parkland dedication, and an Enwave
thermal energy tank and approximately $75.6 million of completed air rights sales proceeds.
As at December 31, 2022, approximately 91% of the total commercial space at The Well has been leased. To date, the Trust has
completed 292,000 square feet of commercial space and anticipates full project completion in early 2024. Development
completions at The Well are transferred at the earlier of cash rent commencement and the date tenants begin operations. The
Trust expects development completions to largely coincide with tenants' cash rent commencement dates. In instances where
tenants began operations prior to cash rent commencement, the Trust will recognize straight-line rent from the date of tenant
operations. This completion transfer methodology results in the capitalization of development carrying costs up to the end of the
fixturing period.
Estimated NLA (sq. ft.)
Investment
(in thousands dollars
and RioCan's interest)
Completed
PUD
Total
Completed
Cost to date
Estimated
cost to
complete
Total estimated
cost
Adjustments to
cash basis (i)
Estimated total
net cost (i)
Investment Property
292,000 441,000 733,000 $
341,341 $
445,486 $
123,894 $
910,721 $
(64,367) $
846,354
(i) Non-GAAP financial measure. Adjustments to cash basis include: vacant land costs, proceeds from land sales recognized during the life of the
project, applicable interim income or fee income earned during the development period, capitalized interest on invested equity, and fair value on
initial amounts transferred into properties under development.
FourFifty The Well, Toronto, ON
FourFifty The Well is a 46-storey luxury residential rental comprising of 592 units. This building will provide its residents with direct
access through its retail podium to superior amenities within The Well, including The Wellington Market™ and other conveniences
offering a one-stop shop for living, shopping, working and entertainment. Construction continues to progress, with phased
completion and first occupancy in the second half of 2023, with an anticipated 18 month lease-up period.
Estimated GFA (sq. ft.)
Investment
(in thousands dollars
and RioCan's interest)
Completed
PUD
Total
Completed
Cost to date
Estimated
cost to
complete
Total estimated
cost
Adjustments to
cash basis (i)
Estimated total
net cost (i)
Investment Property
— 210,000 210,000 $
— $
105,525 $
46,490 $
152,015 $
(7,819) $
144,196
(i) Non-GAAP financial measure. Adjustments to cash basis include: vacant land costs, proceeds from land sales recognized during the life of the
project, applicable interim income or fee income earned during the development period, capitalized interest on invested equity, and fair value on
initial amounts transferred into properties under development.
U.C. Towns 2, U.C. Tower 2, and Tower 3, Oshawa, ON
Located in north Oshawa with close proximity to Ontario Highway 407, this multi-phase residential development is adjacent to
RioCan Windfields shopping centre, providing residents convenient access to essential retail and restaurant amenities.
Construction is progressing well on all phases with U.C. Towns 2 expected to achieve final close in the second half of 2023. U.C.
Tower 2 and U.C. Tower 3 are under construction. On a combined basis, 82% of units at U.C. Tower 2 and U.C. Tower 3 are
released to market, of which 88% are pre-sold.
11 YV, Toronto, ON
11 YV is a 62-storey mixed-use development offering 587 luxury condominium units, 81 rental replacement residential units and
approximately 34,000 square feet of retail space. Located in the heart of Toronto's prestigious Yorkville neighbourhood, 11YV
provides access to luxury retail shops, upscale dining, museums, and several Toronto Transit Commission ("TTC") Subway
stations within walking distance. Above grade construction continues, all condominium units are released to market with 99% of
units pre-sold.
Queen & Ashbridge, Toronto, ON
Queen & Ashbridge is a mixed-use development offering 233 residential rental units, 399 condominium units and podium retail
space. The development is well-located between The Beaches and Leslieville neighbourhoods in Toronto with close proximity to
parks, waterfront amenities, boutique retail and restaurants. Above grade construction continues, all condominium units are
released to market with 96% of units pre-sold.
Verge, Toronto, ON
Verge is a mixed-use development offering 532 condominium units,12 rental units and at-grade retail. Verge is located at the
southwest corner of Islington Avenue and The Queensway in Toronto with direct access to the Gardiner Expressway and in close
proximity to a GO Station and a TTC Subway station. Construction commenced in summer 2022, 89% units are released to
market, of which 97% of units pre-sold.
RioCan Annual Report 2022 48
MANAGEMENT’S DISCUSSION AND ANALYSIS
Our Business
and Our
Business
Environment
Environmental,
Social and
Governance
(ESG)
Initiatives
Property
Portfolio
Overview
Introduction
Development Projects in Planning
Results of
Operations
Asset Profile
Development
Program
Capital
Resources
and Liquidity
Other
Disclosures
Non-GAAP
Measures
Risks and
Uncertainties
RioCan continues to unlock high-quality development opportunities in its existing portfolio. The Trust's development pipeline
focuses on mixed-use development projects with substantially all of its developments located in Canada's six largest urban
markets. As of this year end, the Trust has 12.4 million square feet of zoned mixed-use development sites in planning, of which
0.9 million square feet is shovel ready. Shovel ready sites have achieved necessary zoning designation, legal approvals, and
environment and tenant encumbrances have been resolved at which time the Trust is in a position to commence construction
once total project capital is finalized and committed. Additionally, the Trust has submitted applications for 8.2 million square feet of
mixed-use developments, all located in the GTA.
The following table details RioCan's development projects in planning including equity-accounted joint ventures as at
December 31, 2022:
(in $ thousands and RioCan's interest unless otherwise
noted)
Development
type % Ownership Commercial Residential
Total
Potential GFA ('000 sq.ft.) (i)
Potential
residential
units at
100%
ownership (i)
Carrying
cost (ii)
Shovel ready development sites
F5 Shoppers World Brampton, ON - Phase 1
Gloucester - Future Phases, Ottawa, ON
Next, Surrey, BC
RioCan Windfields, Oshawa, ON
6 projects
Subtotal shovel ready sites
Zoning approved development sites
Mixed-use
Mixed-use
Mixed-use
Retail
Retail
100 %
50 %
100 %
100 %
various
—
10
—
586
40
636
544
257
100
—
—
544
267
100
586
40
759 $
6,088
630
123
3,382
5,823
753
56,090
n/a
9,278
901
1,537
2,265
80,661
F5 Shoppers World Brampton, ON - Future phases
Mixed-use
100 %
429
3,156
3,585
3,969
—
100% Rental
25% Condo
178
812
990
1,452
92,010
F5 RioCan Leaside Centre, Toronto, ON (iii)
2955 Bloor Street West, Toronto, ON
2323 Yonge Street, Toronto, ON
Dufferin Plaza, Toronto, ON
Markington Square, Toronto, ON
RioCan Durham Centre, Ajax, ON
Clarkson Village, Mississauga, ON
RioCan Grand Park, Mississauga, ON
Elmvale, Ottawa, ON
Westgate, Ottawa, ON
RioCan Brentwood, Calgary, AB
Jasper Gates, Edmonton, AB
Southland Crossing, Calgary, AB (iv)
Subtotal zoning approved sites
Mixed-use
Mixed-use
Mixed-use
Mixed-use
Mixed-use
Mixed-use
Mixed-use
Mixed-use
Mixed-use
Mixed-use
Mixed-use
Mixed-use
Mixed-use
Zoning application submitted development sites
F5 RioCan Scarborough Centre, Toronto, ON - Golden Mile
Mixed-use
Mixed-use
Mixed-use
Mixed-use
Mixed-use
Mixed-use
Mixed-use
Mixed-use
Mixed-use
Mixed-use
F5 RioCan Hall, Toronto, ON
2345 Yonge Street, Toronto, ON
2990 Eglinton Avenue East, Toronto, ON
2939 Bloor Street West, Toronto, ON
3180 Dufferin Street, Toronto, ON
85 Bloor Street West, Toronto, ON
Bloor Street West & Lansdowne Avenue, Toronto, ON
Above, Mississauga, ON
Sandalwood Square, Mississauga, ON
Subtotal zoning application submitted sites
Future developments
F5 RioCan Colossus Centre, Vaughan, ON
12 projects
Subtotal future developments
Total development projects in planning
100 %
50 %
50 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
50 %
100 %
50 %
50 %
50 %
100 %
50 %
100 %
8
36
8
79
28
24
17
113
67
—
243
187
98
130
240
904
613
480
221
344
524
810
106
166
248
983
641
504
238
457
591
810
912
1,155
868
1,055
126
352
1,571
1,144
606
18,088
1,209
1,387
754
10,054
591
20,434
272
848
643
1,000
—
—
2,653
—
—
—
638
821
1,417
10,112 11,529
11,822 148,800
202
328
68
6
8
8
6
3
7
—
636
788
991
4,069
4,271
4,983
6,653
530
214
737
69
211
379
195
198
916
858
282
743
77
219
385
198
205
916
693
11,535
648
935
876
2,574
242
17,101
555
32,947
1,118
88,659
230
1,010
577
22,364
1,127
—
7,518
8,154
11,108 183,719
9,212 10,000
11,270
19,850
8,754
9,745
3,245
82,009
1,779
17,966 19,745
14,515 101,859
4,468
36,497 40,965
39,710 $ 515,039
Mixed-use
Mixed-use
100 %
various
Includes residential inventory and properties under development cost to date.
(i) Potential GFA and residential units are estimates base on current development plans, final square footage and units may differ.
(ii)
(iii) RioCan owns 970 residential units which include 809 rental units at 100% ownership and 643 condominium units of which the Trust owns 25%.
(iv) Southland Crossing sold subsequent to year end.
49 RioCan Annual Report 2022
MANAGEMENT’S DISCUSSION AND ANALYSIS
Our Business
and Our
Business
Environment
Environmental,
Social and
Governance
(ESG)
Initiatives
Property
Portfolio
Overview
Introduction
Results of
Operations
Asset Profile
Development
Program
Capital
Resources
and Liquidity
Other
Disclosures
Non-GAAP
Measures
Risks and
Uncertainties
RioCan's Focus Five ("F5") large scale projects
With many opportunities to advance development opportunities embedded within the existing portfolio, RioCan has chosen five
projects to prioritize our efforts. These Focus Five sites are large scale, transit-oriented, mixed-use developments in the GTA that
the Trust is currently advancing through zoning and site plan approval process. The projects will be built in phases, have the
potential to deliver 20.2 million square feet and 23,126 residential units. The scale of these projects provides optionality to create
value through development, partnerships and air rights sales, driving growth for many years to come.
RioCan Leaside Centre, Toronto, ON
RioCan Leaside Centre is an 8.8-acre real estate development situated at the southeast corner of Eglinton East & Laird Drive in
the upscale neighbourhood of Leaside. The forthcoming Eglinton Crosstown Light Rapid Transit ("LRT") will provide this master-
planned community, comprising of eight towers, unparalleled connectivity. When complete, this project will span approximately
1.0 million square feet. The development will offer 1,452 residential units, retail spaces, public parks, community centres, and
privately-owned public spaces elevating the urban vibrancy of the neighborhood. The Zoning By-law Amendment has been
approved by the City of Toronto and the Trust has submitted Site Plan Application to the City of Toronto.
Shoppers World Brampton, ON
RioCan’s Shoppers World Brampton is a 52.1-acre site that currently contains an approximate 700,000 square foot community
shopping centre located in Brampton, Ontario. The property is located in the GTA within close proximity of major regional and
municipal rapid transit, including the proposed Hurontario LRT, and is ideally suited for mixed-use redevelopment. The City of
Brampton has targeted the site as the “Uptown Gateway” in its 2040 Vision Report. The project will be a multi-phase development
totaling approximately 4.1 million square feet. The Trust has submitted Site Plan Approval for Phase 1A proposing two residential
towers with at-grade commercial at the southwest corner of the property with direct frontage onto Steeles Avenue West and in
walking distance to the proposed terminus stop of the future LRT.
RioCan Scarborough Centre, Toronto, ON - Golden Mile
RioCan's Scarborough Centre is located in The Golden Mile district of Toronto and is set to undergo a significant transformation
with the proposed development of an approximately 26.4-acre site located along Eglinton Avenue East. The master plan for this
multi-phase, mixed-use community contemplates high-density residential and retail amenities. This transit-oriented site is located
directly adjacent to the newly constructed transit stations of the Eglinton Crosstown LRT. RioCan’s development plan includes a
total of 4.3 million square feet, and 4,983 residential units. The Zoning By-law Amendment has been approved by the City of
Toronto with the Trust anticipating final zoning approval and Site Plan Application submission in 2023.
RioCan Hall, Toronto, ON
RioCan Hall is a prime downtown Toronto landmark situated at the southwest corner of John Street and Richmond Street. The
current development plan contemplates two mixed-use buildings offering 693 residential units, entertainment, retail and office
spaces spanning across 0.9 million square feet. The design also includes a pedestrian-oriented podium and a public park leading
into the development, contributing to the enhancement of community spaces and promoting a vibrant and livable community. The
Zoning By-law Amendment has been approved by the City of Toronto with the Trust anticipating final zoning approval in 2023.
RioCan Colossus Centre, Vaughan, ON
RioCan Colossus Centre, spanning an approximate area of 61.7 acres, is strategically located at the intersection of Highway 400
and Highway 7 in Vaughan - a rapidly growing municipality in the GTA. The location is situated in close proximity to the Vaughan
Metropolitan Centre Station, providing access to the TTC Subway line and York Regional public transit. This project envisions a
mixed-use community of approximately 10.0 million square feet comprising 11,270 residential units, office and retail spaces. This
master-planned neighborhood will enhance the public realm through a newly connected street network, parks and pedestrian
mews. The Trust will execute the development in a phased manner and has submitted an Official Plan Amendment to the City of
Vaughan.
RioCan Annual Report 2022 50
MANAGEMENT’S DISCUSSION AND ANALYSIS
Our Business
and Our
Business
Environment
Environmental,
Social and
Governance
(ESG)
Initiatives
Property
Portfolio
Overview
Introduction
Results of
Operations
Asset Profile
Development
Program
Capital
Resources
and Liquidity
Other
Disclosures
Non-GAAP
Measures
Risks and
Uncertainties
CAPITAL RESOURCES AND LIQUIDITY
Capital Management Framework
RioCan defines capital as the aggregate of Unitholder and preferred Unitholders’ equity and debt. RioCan's capital is as follows:
(thousands of dollars)
As at
Total debt
Total equity
Total capital
IFRS basis
RioCan's proportionate share (i)
December 31, 2022 December 31, 2021 December 31, 2022 December 31, 2021
$
$
6,742,343 $
6,610,618 $
7,003,630 $
7,728,892
7,911,344
7,728,892
6,825,035
7,911,344
14,471,235 $
14,521,962 $
14,732,522 $
14,736,379
(i)
This is a non-GAAP financial measure. Refer to the Non-GAAP Measures section in this MD&A for more information on each non-GAAP financial
measure.
The Trust’s capital management framework is designed to maintain a level of capital that:
•
•
•
•
complies with investment and debt restrictions pursuant to the Trust’s Declaration of Trust;
complies with debt covenants;
enables RioCan to achieve target credit ratings; and
funds the Trust’s business strategies and builds long-term Unitholder value.
The key elements of RioCan’s capital management framework are set out in the Declaration of Trust, and/or approved by the
Trust’s Board, through the Board’s annual review of the strategic plan and budget, supplemented by periodic Board and related
committee meetings. Management monitors capital adequacy of the Trust by assessing performance against the approved
annual plan throughout the year, which is updated accordingly, and by monitoring adherence to investment and debt restrictions
contained in the Declaration of Trust and debt covenants. In selecting appropriate funding choices, RioCan’s objective is to
diversify its funding sources while minimizing its funding costs and risks. RioCan expects to satisfy all of its financing
requirements through the use of some or all of the following: cash on hand, cash generated by operations, refinancing of maturing
debt, utilization of its operating line of credit, credit facilities, construction financing facilities, sale of non-core properties or sale of
partial interests in developments or air rights, and through public offerings of unsecured debentures and common equity. In
challenging market conditions, the Trust could finance certain assets currently unencumbered by debt or issue preferred units.
RioCan's refined objectives related to managing total debt are to change the weighting of unsecured and secured debt to
70%/30% of total debt respectively and to extend the weighted average term to maturity of the total debt portfolio beyond the
current 3.45 years, when market conditions permit. This transition is expected to take time and will be balanced with credit rating
implications, cost of debt, debt ladder composition, and liquidity needs.
Declaration of Trust and Financial Covenants
As noted above, the Trust is subject to certain investment and debt restrictions. These restrictions include but are not limited to,
total indebtedness, secured indebtedness, debt service coverage ratio, minimum unitholders' equity, ratio of unencumbered
property assets to unsecured indebtedness and properties held for development as a percentage of consolidated gross book
value of assets. In addition, the Declaration of Trust limits direct and indirect investments in greenfield developments and
development properties held for resale (each net of related mortgage debt and including mezzanine financing which funds the co-
owners’ share of such developments) to no more than 15% of Adjusted Unitholders’ Equity of the Trust (herein referred to as the
"Basket Ratio" with Adjusted Unitholders' Equity as defined in the Declaration). As at December 31, 2022, the Basket Ratio was
6.1%. These and other covenants and restrictions are more fully described in Note 26 of the 2022 Annual Consolidated Financial
Statements.
As at December 31, 2022, the Trust was in compliance with all of the restrictions under the Declaration of Trust and all financial
covenants pursuant to the operating line of credit and credit facilities agreements and debentures payable.
51 RioCan Annual Report 2022
MANAGEMENT’S DISCUSSION AND ANALYSIS
Our Business
and Our
Business
Environment
Environmental,
Social and
Governance
(ESG)
Initiatives
Property
Portfolio
Overview
Introduction
Debt Metrics
Results of
Operations
Asset Profile
Development
Program
Capital
Resources
and Liquidity
Other
Disclosures
Non-GAAP
Measures
Risks and
Uncertainties
The following table summarizes the Trust's key debt metrics presented on both an IFRS and RioCan's proportionate share basis:
Targeted
Ratios (v)
Total Adjusted Debt to Total Adjusted Assets (i) (iii) 38.0%- 42.0%
Adjusted EBITDA (i)
Adjusted Debt to Adjusted EBITDA (i)
Interest Coverage (i)
Debt Service Coverage (i)
Ratio of floating rate debt to total debt (ii) (iii)
Ratio of Unsecured Debt to Total Contractual Debt
(i) (iii)
Weighted average term to maturity (in years) (iii)
Weighted average effective interest rate (iii) (iv)
8.0x - 9.0x
>3.00x
>2.25x
<15.0%
70.0%
Rolling 12 months ended
IFRS basis
RioCan's proportionate share (i)
December 31, December 31, December 31, December 31,
2022
44.3 %
2021
43.3 %
2022
45.2 %
2021
43.9 %
704,136
705,093
728,543
713,218
9.49
3.14
2.61
6.5%
56.0%
3.45
3.40%
9.44
3.33
2.71
8.9%
61.4%
3.92
3.00%
9.51
3.11
2.58
8.0%
53.9%
3.36
3.47%
9.59
3.26
2.64
9.6%
59.4%
3.69
3.03%
(i)
This is a non-GAAP financial measure. Refer to the Non-GAAP Measures section of this MD&A for more information on each non-GAAP financial
measure.
(ii) $131.6 million of floating rate debt pertains to a revolving unsecured operating line of credit. Excluding this, the ratio of floating rate debt to total
debt on an IFRS basis is 4.6% and at RioCan's proportionate share is 6.1% (December 31, 2021 - 3.4% and 4.3%, respectively).
Information is as of respective period end.
Inclusive of hedges.
(iii)
(iv)
(v) Financial covenants pursuant to credit facilities agreements and debentures payable are less restrictive than management targeted ratios. Refer to
Note 26 of the 2022 Annual Consolidated Financial Statements.
The Trust's Total Adjusted Debt to Total Adjusted Assets at RioCan's Proportionate Share increased from December 31, 2021
mainly due to higher Total Adjusted Debt as development activities were partly funded with incremental debt, partially offset by
continuing investment in development related assets on the balance sheet and hedging instrument fair value gains.
Adjusted EBITDA is a key input in calculating the Adjusted Debt to Adjusted EBITDA, Interest Coverage and Debt Service
Coverage ratios. Adjusted EBITDA at RioCan's Proportionate Share increased for the rolling twelve months ended December 31,
2022 when compared to December 31, 2021 as a result of higher fee income and higher NOI mainly from higher in-place
occupancy and lower pandemic-related provision, net of dispositions.
The decrease in Adjusted Debt to Adjusted EBITDA at RioCan's Proportionate Share for the rolling twelve months ended
December 31, 2022 when compared to December 31, 2021 was primarily due to the higher Adjusted EBITDA partially offset by
higher average Total Adjusted Debt.
The decrease in the Interest Coverage and Debt Service Coverage ratios at RioCan's Proportionate Share for the rolling twelve
months ended December 31, 2022 when compared to December 31, 2021 is mainly due to higher interest costs partially offset by
higher Adjusted EBITDA. Lower scheduled principal amortization also offset the decrease in the Debt Service Coverage Ratio.
The floating interest rate debt exposure decreased from December 31, 2021 mainly due to the issuance of the $250.0 million
Series AF senior unsecured debenture which was used to repay a revolving unsecured line of credit, net of the factor on timing of
development spend.
Credit Ratings
RioCan intends to maintain strong interest and debt service ratios as part of its commitment to maintaining its investment-grade
debt ratings. RioCan is rated by two independent credit rating agencies: Standard and Poor’s (S&P) and DBRS Morningstar
(DBRS). A credit rating generally provides an indication of the risk that the borrower will not fulfill its obligations in a timely
manner. A credit rating of BBB- or higher by S&P and BBB (low) or higher by DBRS is considered an investment-grade rating. On
June 9, 2022, S&P affirmed its Issuer Credit Rating of BBB and changed the Outlook from Negative to Stable. On December 6,
2022, DBRS confirmed its Issuer Credit Rating for RioCan at BBB with Stable trend. The following table summarizes RioCan’s
credit ratings as at December 31, 2022:
Issuer Credit Rating
Senior Unsecured Debentures
S&P
DBRS
Credit Rating
Outlook
Credit Rating
BBB
BBB
Stable
N/A (i)
BBB
BBB
Trend
Stable
Stable
(i) S&P does not provide an outlook on the Debentures.
RioCan Annual Report 2022 52
MANAGEMENT’S DISCUSSION AND ANALYSIS
Our Business
and Our
Business
Environment
Environmental,
Social and
Governance
(ESG)
Initiatives
Property
Portfolio
Overview
Introduction
Total Debt Profile
Results of
Operations
Asset Profile
Development
Program
Capital
Resources
and Liquidity
Other
Disclosures
Non-GAAP
Measures
Risks and
Uncertainties
RioCan’s debt maturity profile and future repayments are as outlined below:
(thousands of dollars)
Year of debt maturity
2023
2024
2025
2026
2027
Thereafter
Total Contractual Debt (i)
Unamortized debt financing
costs, premiums and
discounts on origination
and debt assumed, and
modifications
Total debt (iii)
Contractual principal maturities and interest rates
Weighted
average
interest
rate (ii)
Mortgages
payable
Weighted
average
interest
rate (ii)
Lines of
credit
and other
bank loans
Weighted
average
interest
rate (ii) Total debt
Weighted
average
interest
rate (ii)
3.42 % $ 320,177
238,713
3.29 %
527,991
2.58 %
138,440
2.64 %
2.36 %
197,623
3.47 % 1,241,696
2.99 % $ 2,664,640
3.55 % $ 332,461
531,673
3.44 %
79,945
3.32 %
65,610
3.55 %
133,648
2.55 %
—
3.48 %
3.39 % $ 1,143,337
4.44 % $ 1,152,638
3.76 % 1,070,386
6.10 % 1,107,936
804,050
5.68 %
681,271
6.34 %
— % 1,941,696
4.53 % $ 6,757,977
3.75 %
3.56 %
3.19 %
3.04 %
3.20 %
3.48 %
3.41 %
Debentures
payable
$ 500,000
300,000
500,000
600,000
350,000
700,000
$ 2,950,000
(7,949)
(5,460)
(2,225)
(15,634)
$ 2,942,051
3.06 % $ 2,659,180
3.29% $ 1,141,112
4.54 % $ 6,742,343
3.40 %
(i)
This is a non-GAAP financial measure. Refer to the Non-GAAP Measures section of this MD&A for more information on each non-GAAP financial
measure.
(ii) For hedged floating rate debt, the interest rate reflects the fixed rate in the interest swap. Including the benefit of bond forward hedges, the
weighted average contractual interest rates for debentures is 2.93%, mortgages is 3.25% and total debt is 3.33%.
(iii) Weighted average interest rate reflects the effective interest rate, inclusive of bond forward hedges.
The Total Contractual Debt continuity schedule for the year ended December 31, 2022 is as follows:
(thousands of dollars)
Year ended December 31, 2022
Total Contractual Debt, beginning of year
Borrowings
Scheduled amortization
Repayments
Vendor take-back mortgage or debt assumed
Total Contractual Debt, end of year
Weight average contractual interest rate -
new borrowing (i)
Debentures
Payable Mortgages Payable
Lines of Credit and
Other Bank Loans
Total
$
3,000,000 $
2,338,507 $
1,288,525 $
6,627,032
250,000
—
(300,000)
—
347,623
(45,640)
—
24,150
178,554
—
(323,742)
—
$
2,950,000 $
2,664,640 $
1,143,337 $
776,177
(45,640)
(623,742)
24,150
6,757,977
4.63 %
4.63 %
5.18 %
(i) For hedged floating rate debt, the interest rate reflects the fixed rate in the interest rate swap. Including bond forward hedges the weighted average
contractual interest rates for new debentures is 3.87% and new mortgages is 3.58%.
Debentures Payable
(thousands of dollars)
As at
Weighted
average effective
interest rate (ii)
Weighted
average term to
maturity (years)
Total
Total
December 31, 2022 December 31, 2021
Debentures payable (i)
3.06 %
3.2 $
2,942,051 $
2,990,692
(i) Amount outstanding deducts a total of $7.9 million as at December 31, 2022 (December 31, 2021 - $9.3 million) in unamortized financing costs.
(ii) Inclusive of bond forward hedges.
Issuance
On April 18, 2022, RioCan issued $250 million of Series AF senior unsecured debentures. These debentures were issued at
$99.998 per $100 of principal, with a coupon rate of 4.628% per annum and mature on May 1, 2029. Inclusive of the benefit of
bond forward hedges, the all-in rate of these debentures is 3.870%. See the Hedging Activities section of this MD&A for more
information regarding the bond forward hedges.
53 RioCan Annual Report 2022
MANAGEMENT’S DISCUSSION AND ANALYSIS
Our Business
and Our
Business
Environment
Environmental,
Social and
Governance
(ESG)
Initiatives
Property
Portfolio
Overview
Introduction
Redemption
Results of
Operations
Asset Profile
Development
Program
Capital
Resources
and Liquidity
Other
Disclosures
Non-GAAP
Measures
Risks and
Uncertainties
On October 3, 2022, RioCan redeemed, in full, its $300 million, 2.830% Series Y unsecured debenture upon maturity. The
repayment was primarily funded through six mortgages for a combined total of $295.5 million at a weighted average hedged
interest rate of 3.667%.
RioCan’s debentures maturity profile and future repayments are as outlined below:
(thousands of dollars)
As at
Maturity date
October 3, 2022
April 18, 2023
September 29, 2023
February 12, 2024
February 12, 2025
February 6, 2026
June 15, 2026
March 10, 2027
November 8, 2028
May 1, 2029
Series
Y
T
AA
W
AB
I
AD
AC
AE
AF
Contractual obligations
Unamortized debt financing costs
Balance, end of year
Coupon rate
2.83 %
3.73 %
3.21 %
3.29 %
2.58 %
5.95 %
1.97 %
2.36 %
2.83 %
4.63 %
Interest payment frequency
Semi-annual
Semi-annual
Semi-annual
Semi-annual
Semi-annual
Semi-annual
Semi-annual
Semi-annual
Semi-annual
Semi-annual
December 31, 2022 December 31, 2021
300,000
— $
$
200,000
300,000
300,000
500,000
100,000
500,000
350,000
450,000
—
3,000,000
(9,308)
2,990,692
200,000
300,000
300,000
500,000
100,000
500,000
350,000
450,000
250,000
2,950,000 $
2,942,051 $
(7,949)
$
$
The Series I debentures, which are due in 2026 and are $100 million in aggregate, have an additional provision that provides
RioCan with the right, at any time, to convert these debentures to mortgage debt, subject to the acceptability of the security given
to the debenture holders. In such an event, the covenants relating to the 60% leverage limit, minimum Adjusted Unitholders'
Equity and Interest Coverage ratio would be eliminated for this series of debentures.
Mortgages Payable
Mortgages payable consist of the following:
(thousands of dollars)
As at
December 31, 2022 December 31, 2021
Weighted
average effective
interest rate (iii)
Weighted
average term to
maturity (years)
Fixed rate mortgages - Conventional (i) (ii)
Fixed rate mortgages - CMHC (ii)
Total (ii)
3.35%
2.67%
3.29%
4.1 $
8.5
4.9 $
Total
2,422,295 $
236,885
2,659,180 $
Total
2,143,788
190,228
2,334,016
Includes hedged floating rate mortgages, interest rate reflects the fixed rate in the interest rate swaps.
(i)
(ii) Amount outstanding deducts a total of $5.5 million as at December 31, 2022 (December 31, 2021 - $4.5 million) in unamortized financing costs,
net of unamortized differential between contractual and market interest rates on liabilities assumed at the acquisition of properties and unamortized
debt modification losses.
(iii) Inclusive of the bond forward hedges.
At the outset of 2022, RioCan had $54.4 million of mortgage principal maturing in 2022 at a weighted average contractual interest
rate of 2.81%. For the year ended December 31, 2022, RioCan completed new term mortgage borrowings of $347.6 million at a
weighted average hedged interest rate inclusive of bond forward hedges of 3.58% and a weighted average term of eight years,
assumed a vendor take-back mortgage of $24.2 million, and repaid $45.6 million of mortgage balances and scheduled
amortization.
Maximizing Canadian Mortgage and Housing Corporation (CMHC) insured mortgages is a key component of the Trust’s debt
strategy as they provide access to an alternative new source of financing and lowers the overall cost of debt.
The majority of our mortgage debt provides recourse to the assets of the Trust, as opposed to only having recourse to the specific
property charged. The Trust follows this policy as it generally results in lower interest rates for the Trust.
RioCan Annual Report 2022 54
MANAGEMENT’S DISCUSSION AND ANALYSIS
Our Business
and Our
Business
Environment
Environmental,
Social and
Governance
(ESG)
Initiatives
Property
Portfolio
Overview
Introduction
Lines of Credit and Other Bank Loans
Results of
Operations
Asset Profile
Development
Program
Capital
Resources
and Liquidity
Other
Disclosures
Non-GAAP
Measures
Risks and
Uncertainties
Lines of credit and other bank loans consist of the following:
(thousands of dollars)
As at
Available
facility
Weighted
average
interest rate (ii)
Maturity Date Amounts drawn Amounts drawn
December 31,
2022
December 31,
2021
Revolving unsecured operating line of credit (i) $ 1,250,000
6.34 %
May 31, 2027 $
133,649 $
Non-revolving unsecured credit facilities (i)
200,000
3.53 % January 31, 2023
Non-revolving unsecured credit facilities (i)
350,000
3.59 % February 7, 2024
Non-revolving unsecured credit facilities (i)
150,000
3.68 %
June 27, 2024
200,000
350,000
150,000
365,920
200,000
350,000
150,000
Construction lines and other bank loans
Total Contractual
Unamortized debt financing costs, premiums
and discounts on origination and debt
assumed, and modifications
Total (iii)
577,250
$ 2,527,250
5.89 %
4.53 %
December 2023
to February 2026
309,688
222,605
$
1,143,337 $
1,288,525
4.54 %
(2,225)
$
1,141,112 $
(2,615)
1,285,910
(i)
The underlying rates on amounts drawn under the revolving unsecured operating line of credit are based on floating rates while the underlying
rates on the non-revolving unsecured credit facilities are all fixed through interest rate swaps. The credit spreads for the revolving unsecured
operating line of credit and the non-revolving unsecured credit facilities are based on the Trust's credit rating. Effective January 2022, the all-in
fixed interest rates of these facilities increased by 25 basis points due to changes in the credit spread as a result of a credit rating change by
DBRS on December 1, 2021.
Inclusive of interest rate swaps used to hedge floating rate debt.
(ii)
(iii) Weighted average interest rate reflects the effective interest rate.
During the year, the Trust increased the credit limit on its revolving unsecured operating line of credit by $250.0 million to $1.25
billion and extended the maturity till May 31, 2027. All other terms and conditions remained the same.
On January 31, 2023, RioCan refinanced its $200 million non-revolving unsecured credit facility with a weighted average annual
all-in fixed rate of 4.93% through interest rate swaps and a maturity date of February 5, 2025 with an option to extend to January
30, 2026, all other terms were similar to the matured facility.
Liquidity
Liquidity refers to the Trust having credit availability under committed credit facilities and/or generating sufficient amounts of cash
and cash equivalents to fund the ongoing operational commitments including maintenance capital and development capital
expenditures, distributions to Unitholders and planned growth in the business.
RioCan maintains a committed revolving unsecured operating credit facility to provide financial liquidity which can be drawn or
repaid on short notice, reducing the need to hold liquid resources in cash and deposits. This minimizes costs arising from the
difference between borrowing and deposit rates, while reducing credit exposure.
Liquidity risk is the risk that the Trust will not meet its financial obligations as they become due. The Trust mitigates its liquidity risk
by staggering the maturity dates of its long-term debt, actively renewing expiring credit arrangements, utilizing undrawn operating
lines of credit, maintaining a large number of assets unencumbered by debt and issuing equity when considered appropriate.
As at December 31, 2022, RioCan had $1.5 billion of Liquidity as summarized in the following table:
(thousands of dollars, except where
otherwise noted)
As at
Cash and cash equivalents
Undrawn revolving unsecured operating
line of credit
Undrawn construction lines and other bank
loans
Liquidity (i)
IFRS basis
RioCan's proportionate share (i)
December 31, 2022 December 31, 2021 December 31, 2022 December 31, 2021
$
86,229 $
77,758 $
94,230 $
86,871
1,116,351
634,080
1,116,351
634,080
267,562
$
1,470,142 $
241,883
953,721 $
337,656
1,548,237 $
289,524
1,010,475
(i) This is a non-GAAP financial measure. Refer to the Non-GAAP Measures section of this MD&A for more information on each non-GAAP financial
measure.
The $537.8 million increase in Liquidity on a proportionate share basis over the prior year end was primarily due to the $250.0
million increase of the credit limit on its revolving unsecured operating line on February 2, 2022, new construction lines and the
55 RioCan Annual Report 2022
MANAGEMENT’S DISCUSSION AND ANALYSIS
Our Business
and Our
Business
Environment
Environmental,
Social and
Governance
(ESG)
Initiatives
Property
Portfolio
Overview
Introduction
Results of
Operations
Asset Profile
Development
Program
Capital
Resources
and Liquidity
Other
Disclosures
Non-GAAP
Measures
Risks and
Uncertainties
$250.0 million issuance of Series AF senior unsecured debenture which was used to repay certain debt incurred in the ordinary
course including replenishing its operating line of credit.
Unencumbered Assets
Through its unencumbered investment properties, RioCan has the potential to obtain additional mortgages to bolster liquidity, if
needed, and preserve credit availability under its revolving unsecured line of credit, while maintaining compliance with debt
covenants under various credit facilities. At RioCan's Proportionate Share, unencumbered investment property assets as at
December 31, 2022 were as follows:
(thousands of dollars, except where otherwise noted)
As at
Unencumbered Assets
Unencumbered Assets to Unsecured Debt (i)
Percentage of Normalized NOI Generated from
Unencumbered Assets (i)
Targeted
Ratios
> 200%
> 50.0%
IFRS basis
RioCan's proportionate share (i)
December 31, December 31, December 31, December 31,
2022
8,200,280 $
2021
9,332,833 $
2022
8,256,508 $
2021
9,392,266
$
217 %
57.4 %
230 %
66.7 %
218 %
55.9 %
231 %
64.9 %
(i)
This is a non-GAAP financial measure. Refer to the Non-GAAP Measures section of this MD&A for more information on each non-GAAP financial
measure.
The decrease in the Unencumbered Assets from December 31, 2021 was due to mortgage financing obtained on certain formerly
unencumbered assets, given the more favourable pricing on secured financing, new construction lines relating to residential
development projects and dispositions, net of acquisitions of unencumbered assets.
Contractual Commitments
The Trust's Liquidity is impacted by contractual debt commitments and committed expenditures on active development projects.
Its contractual debt commitments and committed development expenditures for the next five years are as follows:
(thousands of dollars)
Contractual obligations:
2023
2024
2025
2026
2027
Thereafter
Total
Lines of credit and other bank loans $ 332,461 $ 531,673 $
Mortgages payable
320,177
238,713
79,945 $
65,610 $ 133,648 $
— $ 1,143,337
527,991
138,440
197,623 1,241,695 2,664,640
Unsecured debentures
Lease liabilities (i)
500,000
300,000
500,000
600,000
350,000
700,000 2,950,000
6,777
1,710
1,707
1,770
1,872
22,736
36,572
Other operating lease obligations
432
64
55
55
24
—
630
Total Contractual Obligations
$ 1,159,847 $ 1,072,160 $ 1,109,698 $ 805,875 $ 683,167 $ 1,964,431 $ 6,795,179
Total estimated cost to complete-
projects under construction (ii) (iii)
392,004
206,038
105,129
33,846
9,055
—
746,072
Total Commitments (iv)
$ 1,551,851 $ 1,278,198 $ 1,214,827 $ 839,721 $ 692,222 $ 1,964,431 $ 7,541,251
(i) Represents the discounted minimum lease payments of lease liabilities under IFRS 16.
(ii) This includes RioCan's Proportionate Share in Equity-Accounted Joint Ventures. Refer to Development Projects Under Construction section of this
MD&A.
(iii) Includes costs that do not have committed construction contracts.
(iv) The table above excludes unfunded investment commitments of $96.2 million relating to equity-accounted investments for which timing is
unknown.
The Trust's contractual debt obligations and projected Development Spending can be funded by proceeds from mortgage
refinancing, net proceeds from the sale of assets (including, but not limited to, sale of excess land and development density),
existing cash on hand, revolving unsecured operating line of credit, proceeds from the issuance of unsecured debentures or
issuance of equity Units.
RioCan has also entered into purchase obligations to acquire certain interests from its partners as further described in Note 3 of
the 2022 Annual Consolidated Financial Statements.
RioCan, as a mutual fund trust, expects to make monthly distributions to Unitholders with the cash generated from ongoing
operating activities. For more information on monthly distributions see the Distributions to Unitholders section of this MD&A.
RioCan Annual Report 2022 56
MANAGEMENT’S DISCUSSION AND ANALYSIS
Our Business
and Our
Business
Environment
Environmental,
Social and
Governance
(ESG)
Initiatives
Property
Portfolio
Overview
Introduction
Off-Balance Sheet Arrangements
Guarantees
Results of
Operations
Asset Profile
Development
Program
Capital
Resources
and Liquidity
Other
Disclosures
Non-GAAP
Measures
Risks and
Uncertainties
As at December 31, 2022, the Trust is contingently liable for debt guarantees, provided on behalf of certain of our co-owners'
interests and mortgages assumed by purchasers on property dispositions, of $284.7 million (December 31, 2021 - $255.4
million), with expiries between 2023 and 2030.
As at and for the year ended December 31, 2022, there have been no defaults by the primary obligors for debts on which we
have provided guarantees and no provision for expected losses on these guarantees has been recognized in our 2022 Annual
Consolidated Financial Statements.
The parties on behalf of which RioCan has outstanding guarantees are as follows:
(thousands of dollars)
As at
Partners and co-owners
Woodbourne
Metropia and Capital Developments
Bayfield
Other
Assumption of mortgages by purchasers on property dispositions
Letter of Credit Facilities and Surety Bonds
December 31, 2022 December 31, 2021
$
$
$
122,770 $
79,945
21,700
30,988
255,403 $
29,286
284,689 $
119,033
45,715
21,700
38,904
225,352
30,019
255,371
The Trust has aggregate letter of credit facilities with certain Schedule I banks totaling $111.6 million (December 31, 2021 - $94.9
million). As at December 31, 2022, the Trust’s outstanding letters of credit under these facilities was $53.0 million (December 31,
2021 - $58.1 million).
The Trust is contingently liable for surety bonds that have been provided to support condominium developments and warranties
in the amount of $147.7 million (December 31, 2021 - $110.5 million).
Hedging Activities
Interest Rate Risk
The Trust is exposed to interest rate risk on its borrowings and could be adversely affected if it were unable to obtain cost-
effective financing. The majority of the Trust's debt is financed at fixed rates with maturities staggered over a number of years,
thereby mitigating its exposure to changes in interest rates and financing risks. As at December 31, 2022, approximately 6.5%
(December 31, 2021 - 8.9%) of the Trust's debt is financed at variable rates (including mortgage debt related to properties held
for sale, if applicable, and excluding debt that has been hedged to fixed rates), exposing the Trust to interest rate risk.
From time to time, the Trust may enter into floating-for-fixed interest rate swaps as part of its strategy for managing its exposure
to interest rate risk on debt with floating interest rates. The Trust may also enter into bond forward contracts to hedge its exposure
to movements in interest rates from the time it determines it will refinance or issue a fixed rate debt and the time the fixed rate
debt is issued. The intent is to use the bond forwards to manage the change in cash flows of the future interest payments on the
anticipated fixed rate debt.
As at December 31, 2022, the outstanding notional amount of floating-to-fixed interest rate swaps was $1.0 billion (December 31,
2021 – $1.0 billion) with the term to maturity of these swap agreements ranging from January 2023 to November 2028; and the
outstanding notional amount of bond forwards was $200 million, with a maturity in April 2023 (December 31, 2021 - $300 million,
maturity in September 2022). The fair value of the interest rate swaps and bond forwards is, in aggregate, a net financial asset of
approximately $27.2 million (December 31, 2021 - net financial liability of approximately $23.2 million).
On December 14, 2021, the Trust entered into bond forward contracts to sell on September 15, 2022 $300.0 million Government
of Canada Bonds due June 1, 2029 with an effective bond yield of 1.46%, to hedge its exposure to movements in underlying risk-
free interest rates on the anticipated refinancing of the $300.0 million Series Y debentures maturing on October 3, 2022.
On February 1, 2022, the Trust entered into bond forward contracts to sell on April 28, 2022 $200.0 million Government of
Canada Bonds due June 1, 2029 with an effective bond yield of 1.71%, to hedge its exposure to movements in underlying risk-
free interest rates on highly probable anticipated fixed rate debt issuances.
On April 8, 2022, in conjunction with the offering of the Series AF debenture, the Trust settled $200.0 million of bond forward
contracts entered into on February 1, 2022 and a $50.0 million portion of bond forward contracts entered into on December 14,
2021. During Q3 2022, the Trust settled the remaining $250.0 million of bond forward contracts entered into on December 14,
2021, as it locked interest rates for $250.0 million of new mortgages. During 2022, the Trust settled a total of $500 million of bond
forward contracts, which resulted in a weighted average interest rate reduction of 109 basis points or a weighted average hedged
57 RioCan Annual Report 2022
MANAGEMENT’S DISCUSSION AND ANALYSIS
Our Business
and Our
Business
Environment
Environmental,
Social and
Governance
(ESG)
Initiatives
Property
Portfolio
Overview
Introduction
Results of
Operations
Asset Profile
Development
Program
Capital
Resources
and Liquidity
Other
Disclosures
Non-GAAP
Measures
Risks and
Uncertainties
interest rate of 3.68% for $507.5 million of 7-year debt.
On November 24, 2022, the Trust entered into bond forward contracts to sell on April 3, 2023 $200.0 million of Government of
Canada Bonds due June 1, 2030 with an effective bond yield of 2.876%, to hedge its exposure to movements in underlying risk-
free interest rates on highly probable anticipated fixed rate debt issuances.
We assess the effectiveness of the hedging relationships on a quarterly basis and have determined there is no ineffectiveness in
the hedging of interest rate exposures as at December 31, 2022. Refer to Note 25 of the 2022 Annual Consolidated Financial
Statements for further details.
Trust Units
As at December 31, 2022, there are 300.4 million Units outstanding, including exchangeable limited partnership units. All Units
outstanding have equal rights and privileges and entitle the holder to one vote for each Unit at all meetings of Unitholders. During
the three months and years ended December 31, 2022 and 2021, we issued and repurchased Units as follows:
(in thousands)
Units outstanding, beginning of period (i)
Units issued:
Unit-based compensation exercises, net of Units
repurchased for settlement of Unit exercises
Direct purchase plan
Exchangeable limited partnership units
Units repurchased and cancelled
Units outstanding, end of period (i)
Three months ended December 31
Years ended December 31
2022
303,912
2021
317,768
2022
309,797
2021
317,748
—
4
—
(3,557)
—
2
—
(7,973)
88
14
—
(9,540)
—
16
6
(7,973)
300,359
309,797
300,359
309,797
(i)
Included in Units outstanding are exchangeable limited partnership units of three limited partnerships that are subsidiaries of the Trust (the LP
units) which were issued to vendors, as partial consideration for investment properties acquired by RioCan (December 31, 2022 – 499,754 LP
units, December 31, 2021 – 499,754 LP units).
As of February 15, 2023, there are 300.4 million Units issued and outstanding. In addition, 5.7 million Unit options were issued
under the Trust’s incentive Unit option plan and 0.7 million deferred Units were issued and outstanding under the Trust's Trustee
deferred Unit plan. The convertible securities are convertible into, or exercisable for, Units of the Trust, of which 4.6 million Unit
options were exercisable at December 31, 2022, at a weighted average exercise price of $26.41.
As at December 31, 2022, the Trust also had 0.4 million Senior Executive Restricted Equity Units (REU), 0.4 million Employee
REUs, and 0.4 million Performance Equity Units (PEU) that are unvested and outstanding, which upon vesting will be settled by
delivery of an equivalent number of Units purchased on the secondary market, and if elected, net of applicable withholding taxes.
Further information regarding the incentive Unit option plan, Trustee deferred Unit plan, Senior Executive REUs, Employee REUs,
PEUs and the related performance metrics and other terms attributable to plans are set out in the Trust's Management
Information Circular.
Normal Course Issuer Bid (NCIB)
On October 15, 2021, RioCan received TSX approval of its notice of intention to renew its NCIB (the 2021/2022 NCIB), to acquire
up to a maximum of 31,616,150 Units, or approximately 10% of the public float as at October 13, 2021, for cancellation or to
satisfy RioCan's obligation to deliver Units under the REU and PEU plans, over the next 12 months, effective October 22, 2021.
On November 3, 2022, RioCan received TSX approval of its notice of intention to renew its NCIB (the 2022/2023 NCIB), to
acquire up to a maximum of 30,247,803 Units, or approximately 10% of the public float as at October 31, 2022, for cancellation or
to satisfy RioCan's obligation to deliver Units under the REU and PEU Plans, over the next 12 months, effective November 7,
2022.
The number of Units that can be purchased pursuant to the 2022/2023 NCIB is subject to a current daily maximum of 207,826
Units (which is equal to 25% of 831,305, being the average daily trading volume of Units during the last six months), subject to
RioCan’s ability to make one block purchase of Units per calendar week that exceeds such limits. RioCan intends to fund the
purchases out of its available cash and undrawn credit facilities.
During 2022, 9,539,675 units were acquired and cancelled at a weighted average purchase price of $21.36 per unit for a total
cost of $203.9 million. The excess of the purchase price over the carrying amount of the units purchased, representing the unit
price increase over the weighted average historical unit issuance price, was recorded as a reduction to retained earnings of $59.2
million.
On December 12, 2022, RioCan established an automatic securities purchase plan (“ASPP”) in connection with its previously
announced 2022/2023 NCIB applicable to its outstanding Units. The ASPP is intended to allow for the purchase of Units under
the NCIB at times when RioCan would ordinarily not be permitted to purchase Units due to regulatory restrictions and customary
self-imposed blackout periods. Pursuant to the ASPP, purchases will be made by RioCan's designated broker based on
periodically pre-established purchasing parameters, in accordance with the rules of the TSX and applicable securities laws.
RioCan Annual Report 2022 58
MANAGEMENT’S DISCUSSION AND ANALYSIS
Our Business
and Our
Business
Environment
Environmental,
Social and
Governance
(ESG)
Initiatives
Property
Portfolio
Overview
Introduction
Results of
Operations
Asset Profile
Development
Program
Capital
Resources
and Liquidity
Other
Disclosures
Non-GAAP
Measures
Risks and
Uncertainties
Outside of pre-determined blackout periods, Units may be purchased under the NCIB at such times as RioCan determines to be
appropriate in compliance with TSX rules and applicable securities laws.
Distributions to Unitholders
RioCan qualifies as a mutual fund trust and a “real estate investment trust” (REIT Exemption) for Canadian income tax purposes.
We expect to distribute all of our taxable income to Unitholders and are entitled to deduct such distributions for Canadian income
tax purposes. From time to time, RioCan may retain some taxable income and net capital gains, when appropriate, in order to
utilize the capital gains refund available to mutual fund trusts without incurring any income taxes. Accordingly, no provision for
current income taxes payable is required, except for amounts incurred in our incorporated Canadian subsidiaries.
The Trust consolidates certain wholly-owned incorporated entities that are subject to tax. Any tax disclosures, expense and
deferred tax balances relate only to these entities.
If the Trust were to cease to qualify for the REIT Exemption for Canadian income tax purposes, certain distributions (taxable
distributions) would not be deductible in computing income for Canadian income tax purposes and it would be subject to tax on
such distributions at a rate substantially equivalent to the general corporate income tax rate. Any remaining distributions, other
than taxable distributions, would generally continue to be treated as returns of capital to Unitholders. From year-to-year, the
taxability of the Trust's distributions may fluctuate depending upon the timing of recognition of certain gains and losses based on
the activities of the Trust.
The Trust's monthly distribution, effective February 2022, is $0.085 per unit, which increased from $0.08 in 2021. Distributions
declared to Unitholders were as follows:
(thousands of dollars)
Distributions declared to Unitholders
Three months ended
December 31
Years ended
December 31,
2022
2021
2022
2021
$
76,890 $
75,362 $
310,163 $
304,153
Total distributions declared increased for the three months and year ended December 31, 2022 when compared to the same
periods in the prior year due to the distribution increase effective February 2022, partially offset by the reduction in average Units
outstanding as a result of NCIB purchases in 2022.
Difference between cash flows provided by operating activities and distributions to Unitholders
A comparison of distributions to Unitholders with cash flows provided by operating activities and distributions is as follows:
(thousands of dollars)
Cash flows provided by operating activities
Add / (deduct) the decrease / (increase) in non-cash working capital
items
Cash flows provided by operating activities, excluding non-cash
working capital items (i)
Less: Distributions declared to Unitholders
Excess cash flows provided by operating activities excluding non-
cash working capital, net of distributions declared (ii)
Three months ended
December 31
Years ended
December 31
2022
2021
2022
2021
$
170,362 $
169,537 $
506,124 $
490,397
(49,055)
(32,241)
26,470
(20,136)
121,307
137,296
532,594
470,261
(76,890)
(75,362)
(310,163)
(304,153)
$
44,417 $
61,934 $
222,431 $
166,108
(i)
Includes nil expense for net debt prepayment costs for the three months and year ended December 31, 2022, respectively (three months and year
ended December 31, 2021 - $3.9 million and $10.9 million).
(ii) This is a non-GAAP financial measure. Refer to Non-GAAP Measures section of this MD&A for more information.
For the three months ended December 31, 2022, cash flows provided by operating activities, excluding non-cash working capital
items, were higher than distributions declared to Unitholders during the period by $44.4 million. For the year ended December 31,
2022, cash flows provided by operating activities, excluding non-cash working capital items, were higher than distributions
declared to Unitholders during the period by $222.4 million.
59 RioCan Annual Report 2022
MANAGEMENT’S DISCUSSION AND ANALYSIS
Our Business
and Our
Business
Environment
Environmental,
Social and
Governance
(ESG)
Initiatives
Property
Portfolio
Overview
Introduction
Results of
Operations
Asset Profile
Development
Program
Capital
Resources
and Liquidity
Other
Disclosures
Non-GAAP
Measures
Risks and
Uncertainties
Distribution increase effective February 2022 and February 2023
RioCan's Board of Trustees approved an increase to its monthly distributions to Unitholders of 6.25% from $0.08 per unit to
$0.085 cents per unit which commenced with the February 2022 distribution, paid in March 2022. This increase brought RioCan's
annualized distribution to $1.02 per Unit. Subsequent to year end, RioCan's Board of Trustees also approved a 6% increase to its
monthly distributions to Unitholders from $0.085 to $0.090 per unit which commenced with the February 2023 distribution,
payable in March 2023, bringing RioCan's annualized distribution to $1.08 per unit. These increases are in keeping with the
Trust's objectives to provide sustainable distribution increases supported by FFO per unit growth while maintaining a consistent
FFO Payout Ratio of approximately 55% to 65% over the long-term with retained cash flow used to support future growth. The
Trust expects to achieve its payout ratio objective.
The Trust does not use net income in accordance with IFRS as the basis to establish the level of Unitholders’ distributions as net
income includes, among other items, non-cash fair value adjustments related to its investment property portfolio. In establishing
the level of distributions to Unitholders, consideration is given by RioCan to the level of cash flow from operating activities, capital
expenditures for the property portfolio and preferred Unitholder distributions (if any).
As always, the Board will continuously reevaluate the distribution on a regular basis based on various factors. In determining the
level of distributions to Unitholders, the Board considers, among other factors, cash flow from operating activities, forward-looking
cash flow information including forecasts and budgets and the future business prospects of the Trust including the impact of the
pandemic, the interest rate environment and cost of capital, estimated development completions and development spending,
impact of future acquisitions and dispositions, and maintenance capital expenditures and leasing expenditures related to our
income producing portfolio. In determining the level of distributions to Unitholders, the Board also considers the impact of its
distribution reinvestment plan, if reinstated, when assessing its ability to sustain current distribution levels during the current
period and on a rolling twelve-month basis.
RioCan Annual Report 2022 60
MANAGEMENT’S DISCUSSION AND ANALYSIS
Our Business
and Our
Business
Environment
Environmental,
Social and
Governance
(ESG)
Initiatives
Property
Portfolio
Overview
Introduction
OTHER DISCLOSURES
Related Party Transactions
Results of
Operations
Asset Profile
Development
Program
Capital
Resources
and Liquidity
Other
Disclosures
Non-GAAP
Measures
Risks and
Uncertainties
In the ordinary course of business, we may enter into transactions with entities whose directors or trustees are also RioCan
trustees and/or part of RioCan's senior management. All such transactions are in the normal course of operations and are
measured at market-based exchange amounts.
RioCan's related parties include the following persons and/or entities:
•
•
Associates, joint ventures, or entities which are controlled or significantly influenced by the Trust; and
Key management personnel including the Trustees and those persons having the authority and responsibility for planning,
directing and controlling the activities of RioCan, directly or indirectly.
Effective January 1, 2022, Mr. John Ballantyne was appointed as Chief Operating Officer of RioCan and included as key
management personnel. As at December 31, 2022, the Trust’s key management personnel include each of the Trustees and the
following individuals: President and Chief Executive Officer, Jonathan Gitlin; Chief Financial Officer, Dennis Blasutti; Chief
Investment Officer, Andrew Duncan and Chief Operating Officer, John Ballantyne. As at December 31, 2021, the Trust’s key
management personnel include each of the Trustees and the following individuals: President and Chief Executive Officer,
Jonathan Gitlin; Chief Financial Officer, Dennis Blasutti; Chief Investment Officer, Andrew Duncan.
Effective June 7, 2022, Ms. Marie-Josée Lamothe was elected as a Trustee at RioCan's annual meeting of Unitholders held on
June 7, 2022.
Remuneration of the Trust’s Trustees and Key Executives during the three months and years ended December 31, 2022 and
2021 is as follows:
(thousands of dollars)
(thousands of dollars)
Compensation and benefits
Unit-based compensation
Post-employment benefit costs
$
$
Three months ended December 31
Trustees
Key Executives
Years ended December 31
Trustees
Key Executives
2022
107 $
289
—
396 $
2021
62 $
248
—
310 $
2022
1,123 $
826
46
1,995 $
2021
942 $
695
47
1,684 $
2022
420 $
2,058
—
2,478 $
2021
249 $
1,966
—
2,215 $
2022
4,597 $
3,500
176
2021
6,367
7,496
175
8,273 $ 14,038
The decrease for the year ended December 31, 2022 in Key Executive costs over the comparable period was primarily due to the
one-time $6.1 million in general and administrative expenses relating to the executive transitions including the accelerated
expensing of certain unit-based compensation in 2021.
61 RioCan Annual Report 2022
MANAGEMENT’S DISCUSSION AND ANALYSIS
Our Business
and Our
Business
Environment
Environmental,
Social and
Governance
(ESG)
Initiatives
Property
Portfolio
Overview
Introduction
Results of
Operations
Asset Profile
Development
Program
Capital
Resources
and Liquidity
Other
Disclosures
Non-GAAP
Measures
Risks and
Uncertainties
Selected Quarterly Results and Trend Analysis
(millions of dollars, except where otherwise noted)
As at and for the quarter ended (i)
Revenue
Q4
306 $
Net income (loss) attributable to Unitholders
NOI (ii)
FFO (ii)
FFO Adjusted (ii)
AFFO (ii)
AFFO Adjusted (ii)
Unitholder distributions
Weighted average Units outstanding – diluted
(in thousands)
Per unit basis (diluted)
2022
2021
Q3
Q2
Q1
Q4
Q3
Q2
305 $
308 $
294 $
336 $
264 $
298 $
(5) $
3 $
78 $
160 $
209 $
138 $
145 $
166 $
171 $
171 $
167 $
166 $
165 $
167 $
128 $
135 $
132 $
131 $
147 $
127 $
128 $
128 $
135 $
135 $
131 $
150 $
127 $
128 $
111 $
120 $
116 $
114 $
131 $
110 $
112 $
Q1
277
107
165
106
119
90
112 $
120 $
119 $
115 $
135 $
110 $
112 $
103
77 $
77 $
78 $
77 $
75 $
76 $
76 $
76
$
$
$
$
$
$
$
$
302,423
304,005
308,537
310,114
315,733
317,961
317,882
317,758
Net income (loss) attributable to Unitholders
$ (0.02) $
0.01 $
0.25 $
0.52 $
0.66 $
0.43 $
0.46 $
0.34
FFO (ii)
FFO Adjusted (ii)
Unitholder distributions
Net book value per unit
Closing market price per unit
Key Performance Indicator Ratios
FFO Payout Ratio (ii)
FFO Payout Ratio Adjusted (ii)
AFFO Payout Ratio (ii)
AFFO Payout Ratio Adjusted (ii)
Total assets
Total debt
Total Adjusted Debt to Total Adjusted Assets (RioCan's
Proportionate Share) (ii)
Adjusted Debt to Adjusted EBITDA (RioCan's
Proportionate Share) (ii) (iii)
Other
Total portfolio NLA (in thousands)
Number of properties
Number of employees (iv)
Residency of Unitholders (v)
– Canadian
– Non-resident
$
$
$
0.42 $
0.44 $
0.43 $
0.42 $
0.46 $
0.40 $
0.40 $
0.33
0.42 $
0.44 $
0.44 $
0.42 $
0.48 $
0.40 $
0.40 $
0.37
0.26 $
0.26 $
0.26 $
0.25 $
0.24 $
0.24 $
0.24 $
0.24
$ 25.73 $ 25.92 $ 26.15 $ 25.96 $ 25.54 $ 25.00 $ 24.78 $ 24.53
$ 21.13 $ 18.62 $ 20.02 $ 25.23 $ 22.94 $ 21.64 $ 22.08 $ 19.46
59.0%
58.5%
67.1%
66.4%
56.7%
55.9%
64.0%
63.0%
57.3%
56.5%
65.1%
64.0%
57.3%
56.8%
65.1%
64.5%
62.6%
60.6%
71.6%
68.9%
73.4%
71.5%
84.3%
81.8%
81.0%
78.9%
92.2%
89.7%
92.0%
104.7%
89.3%
101.6%
$ 15,102 $ 15,324 $ 15,474 $ 15,346 $ 15,177 $ 15,292 $ 15,236 $ 15,175
$ 6,742 $ 6,842 $ 6,878 $ 6,710 $ 6,611 $ 6,740 $ 6,764 $ 6,824
45.2%
45.3%
45.0%
44.2%
43.9%
44.4%
44.7%
45.3%
9.51
9.28
9.41
9.48
9.59
9.94
9.84
9.99
33,627
34,791
35,930
36,193
36,355
36,886
37,220
37,976
193
563
198
550
202
557
204
581
207
575
210
570
214
574
223
587
66.7%
33.3%
68.4%
31.6%
64.8%
35.2%
66.9%
33.1%
66.6%
33.4%
71.2%
28.8%
73.1%
26.9%
74.6%
25.4%
(i) Refer to RioCan’s respective annual and interim MD&As issued for a discussion and analysis relating to those periods.
(ii) This is a non-GAAP financial measure. Refer to the Non-GAAP Measures section of this MD&A for more information on each non-GAAP financial
measure.
(iii) Q1 2021 to Q3 2021 was restated to reflect one-time compensation costs occurring in Q1 2021.
(iv) Beginning Q3 2022, the number of employees reported exclude individuals working exclusively with the third-party residential rental property
managers. Accordingly, amounts reported from Q4 2021 to Q2 2022 were restated. As at December 31, 2022, there are 41 individuals who work
exclusively with third-party residential rental property managers.
(v) Estimates based on Unitholder mailing addresses on record at the end of each reporting period.
Our revenue and operating results are not materially impacted by seasonal factors. However, macroeconomic and market trends,
and the unprecedented COVID-19 pandemic impact the demand for space, occupancy levels and consequently, the Trust's
revenue, financial performance and property valuations.
The Trust's quarterly changes in revenue, FFO, AFFO and net income were primarily impacted by acquisitions and dispositions,
the timing and magnitude of its residential condominium and townhouse projects closings, the magnitude and pace of
development expenditures and project completions, and from Q1 2021 to Q1 2022, the global pandemic and its effects on the
economy and RioCan operations.
Net income was further impacted by the changes in the fair values of investment properties.
RioCan Annual Report 2022 62
MANAGEMENT’S DISCUSSION AND ANALYSIS
Our Business
and Our
Business
Environment
Environmental,
Social and
Governance
(ESG)
Initiatives
Property
Portfolio
Overview
Introduction
Results of
Operations
Asset Profile
Development
Program
Capital
Resources
and Liquidity
Other
Disclosures
Non-GAAP
Measures
Risks and
Uncertainties
Fourth Quarter Unaudited Consolidated Statements of Income (Loss)
(thousands of dollars, except per unit amounts)
Three months ended December 31
Revenue
Rental revenue
Residential inventory sales
Property management and other service fees
Operating costs
Rental operating costs
Recoverable under tenant leases
Non-recoverable costs
Residential inventory cost of sales
Operating income
Other income (loss)
Interest income
Income (Loss) from equity-accounted investments
Fair value (loss) gain on investment properties, net
Investment and other income (loss)
Other expenses
Interest costs, net
General and administrative
Internal leasing costs
Transaction and other costs
Debt prepayment costs, net
Income (Loss) before income taxes
Current income tax recovery
Net income (loss)
Net income (loss)
Unitholders
Net income (loss) per unit
Basic
Diluted
Weighted average number of units (in thousands):
Basic
Diluted
63 RioCan Annual Report 2022
2022
2021
$
268,864 $
266,899
33,873
3,450
65,620
3,920
306,187
336,439
95,258
9,060
26,448
130,766
175,421
6,272
(3,864)
(115,507)
240
(112,859)
48,320
12,845
3,306
3,236
—
67,707
(5,145)
(184)
93,346
9,019
39,286
141,651
194,788
3,842
6,503
72,255
(696)
81,904
42,403
11,924
2,982
6,779
3,896
67,984
208,708
(68)
$
$
$
$
$
(4,961) $
208,776
(4,961) $
(4,961) $
208,776
208,776
(0.02) $
(0.02) $
0.66
0.66
302,321
302,423
315,534
315,733
MANAGEMENT’S DISCUSSION AND ANALYSIS
Our Business
and Our
Business
Environment
Environmental,
Social and
Governance
(ESG)
Initiatives
Property
Portfolio
Overview
Introduction
Accounting Policies and Estimates
Results of
Operations
Asset Profile
Development
Program
Capital
Resources
and Liquidity
Other
Disclosures
Non-GAAP
Measures
Risks and
Uncertainties
Our significant accounting policies are described in Note 2 of RioCan's 2022 Annual Consolidated Financial Statements. The
preparation of financial statements requires management to make estimates and judgments that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported
amounts of revenue and expenses during the reporting period. Actual results may differ from those estimates under different
assumptions and conditions.
Estimation Uncertainty
In the preparation of RioCan’s 2022 Annual Consolidated Financial Statements, the Trust has incorporated the potential impact of
the current macroeconomic environment into its significant estimates and assumptions that affect the reported amounts of its
assets, liabilities, net income and related disclosures using available information as at December 31, 2022. Estimates and
assumptions that are most subject to increased uncertainty caused by the current macroeconomic environment relate to the
valuation of investment properties, refer to Note 3 of the 2022 Annual Consolidated Financial Statements. Due to the continuing
risks and uncertainties arising from the current macroeconomic environment, actual results may differ from these estimates and
assumptions.
Adoption of New Accounting Standards
Effective January 1, 2022, the Trust adopted the following amended standard as issued by the International Accounting
Standards Board (IASB). As a result, significant accounting policies, estimates and judgments most affected by the adoption of
the new pronouncements have been updated as applicable as indicated in Note 2 of the 2022 Annual Consolidated Financial
Statements and further described below.
Amendments to IFRS 9, Financial Instruments, Fees in the 10 per cent test for derecognition of financial liabilities
As part of its 2018 - 2020 annual improvements to the IFRS process, the IASB issued an amendment to IFRS 9. The amendment
clarifies the types of fees that an entity includes when assessing whether the terms of a new or modified financial liability are
substantially different from the terms of the original financial liability. The amendment specifies that only fees paid or received
between the borrower and the lender, including fees paid or received by either the borrower or lender on the other’s behalf,
should be included. An entity applies the amendment to financial liabilities that are modified or exchanged on or after the
beginning of the annual reporting period in which the entity first applies the amendment. The amendment is effective January 1,
2022, with earlier adoption permitted.
The Trust applied the standard on financial liabilities modified or exchanged after January 1, 2022. These amendments did not
impact the Trust's consolidated financial statements upon adoption.
Critical Accounting Judgements and Estimates
Our critical accounting judgements and estimates relate to the following areas: fair value, contractual rents and other tenant
receivables - allowance for doubtful accounts, the net realizable value of residential inventory, the determination of the type of
lease where we are the lessor and income taxes.
Fair Value
Fair value is the amount at which an item could be bought or sold in a current transaction between independent, knowledgeable
willing parties, as opposed to a forced or liquidation sale, in an arm’s length transaction under no compulsion to act.
Quoted market prices in active markets are the best evidence of fair value and are used as the basis for fair value measurement,
when available. When quoted market prices are not available, estimates of fair value are based on the best information available,
including prices for similar items and the results of other valuation techniques. Valuation techniques used would be consistent
with the objective of measuring fair value.
The techniques used to estimate future cash flows will vary from one situation to another depending on the circumstances
surrounding the asset or liability in question.
The Trust’s consolidated financial statements are affected by the fair value based method of accounting, the most significant
areas of which are as follows:
•
Investment properties are initially measured at cost, including all amounts related to the acquisition and costs associated with
improving and/or extending the life of the asset. Judgement is required in determining whether certain costs represent
additions to the carrying amount of the property, in distinguishing between tenant incentives and capital improvements and
for capitalization of costs to properties under development, when the project commences active development and when it is
substantially complete. The investment properties are subsequently measured at fair value. The determination of fair value of
investment property is based upon, among other things, rental revenue from current leases and reasonable and supportable
assumptions that represent what knowledgeable, willing parties would assume about rental revenue from future leases in
light of current conditions, less future cash outflows in respect of tenant installation costs, capital expenditures and
investment property operations. The Trust uses the direct capitalization method to fairly value its income properties. Under
this valuation method, a capitalization rate is applied to Stabilized NOI to yield a fair value. The Trust uses an internal
valuation process to estimate the fair value of certain properties under development that consist of undeveloped land on a
RioCan Annual Report 2022 64
MANAGEMENT’S DISCUSSION AND ANALYSIS
Our Business
and Our
Business
Environment
Environmental,
Social and
Governance
(ESG)
Initiatives
Property
Portfolio
Overview
Introduction
Results of
Operations
Asset Profile
Development
Program
Capital
Resources
and Liquidity
Other
Disclosures
Non-GAAP
Measures
Risks and
Uncertainties
land value per acre or per buildable square foot basis using the particular attributes of the project with respect to zoning and
pre-development work performed on the site. Where a site is partially developed and meets certain thresholds, the direct
capitalization method is applied to capitalize the pro forma Net Operating Income, stabilized with market allowances, from
which the costs to complete the development are deducted. RioCan has involved third-party appraisers in its valuation
process. For the year ended December 31, 2022, RioCan had 29 properties including 3 land parcels (year ended
December 31, 2021 - 28 properties including 5 land parcels) valued by experienced valuation professionals having the
required qualifications in property appraisals. Going forward, our plan is to select a sample of investment properties
(approximately six each quarter) on a rotational basis for external appraisal. Refer to the Property Valuations section of this
MD&A for further discussion of fair values of investment property.
•
IFRS 9, Financial Instruments (IFRS 9) establishes the standard for recognizing and measuring financial assets, financial
liabilities and non-financial derivatives. All financial instruments are required to be measured at fair value on initial
recognition, except for certain related party transactions. Measurement in subsequent periods depends on the classification
of the financial instrument.
Net Realizable Value of Residential Inventory
Residential inventory is stated at the lower of cost and net realizable value. In calculating the net realizable value of residential
inventory and assessing for impairment of condominium sales receivables, the Trust estimates the selling prices based on
prevailing market prices, estimated cost to complete and selling costs.
Leases - Classification, RioCan as Lessor
The Trust makes judgments in determining whether certain leases, in particular tenant leases where the Trust is the lessor, are
either operating or finance leases. When RioCan has determined, based on an evaluation of terms and conditions of the lease
arrangements, that the Trust retains all of the significant risks and rewards of ownership of these properties, it accounts for these
arrangements as operating leases.
Leases - Determination of lease term of contracts
The Trust determines the lease term as the non-cancellable term of the lease, together with any periods covered by an option to
extend the lease if it is reasonably certain to be exercised by the lessee, or any periods covered by an option to terminate the
lease, if it is reasonably certain not to be exercised by the lessee, including purchase options. The Trust determines the lease
commencement date as the date on which the underlying asset is made available for use by the lessee, which is based on the
terms of the lease contract, the type and extent of tenant improvements, and, for properties under development, the state of
completion of the property. At commencement date, the Trust determines as lessee or as lessor whether there is reasonable
certainty that options to extend or cancel a lease will be exercised. To make this analysis, the Trust takes into account the
extension terms of the contract including whether the extension is likely to be below market rent, the cost to cancel a lease and
significant investments made on the property. After the commencement date, the Trust revises the lease term when an extension
or termination option is exercised and it was not previously included in the lease term.
Income Taxes
The Trust uses judgment to interpret income tax rules and regulations and to determine the appropriate rates and amounts in
recording current and deferred income taxes, giving consideration to timing and probability. Actual income taxes could
significantly vary from these estimates as a result of future events, including changes in income tax law or the outcome of reviews
by tax authorities and related appeals. To the extent that the final tax outcome is different from the amounts that were initially
recorded, such difference would impact the income tax provision in the period in which such determination is made.
The recognition of deferred income tax assets and liabilities also requires significant judgment as the recognition is dependent on
RioCan's projection of future taxable profits and income tax rates that are expected to be in effect in the period the asset will be
realized or the liability settled. Any changes to this projection will result in changes in the amount of deferred tax assets and
liabilities on the consolidated balance sheets and the deferred tax expense in the consolidated statements of income.
Future Changes in Accounting Policies
RioCan monitors the potential changes proposed by the IASB and analyzes the effect that changes in the standards may have on
RioCan’s operations. Standards issued, but not yet effective, up to the date of issuance of the 2022 Annual Consolidated
Financial Statements for the year ended December 31, 2022, are described below. This description is of standards and
interpretations issued, which we reasonably expect to be applicable at a future date. We intend to adopt these standards when
they become effective.
Amendments to IAS 1 and IFRS Practice Statement 2
In February 2021, the IASB issued amendments to IAS 1 and IFRS Practice Statement 2, Making Materiality Judgements, in
which it provides guidance and examples to help entities apply materiality judgments to account policy disclosures.The
amendments aim to help entities provide accounting policy disclosures that are more useful by replacing the requirement for
entities to disclose their "significant" accounting policies with a requirement to disclose their material accounting policies and
adding guidance on how entities apply the concept of materiality in making decisions about accounting policy disclosures.
65 RioCan Annual Report 2022
MANAGEMENT’S DISCUSSION AND ANALYSIS
Our Business
and Our
Business
Environment
Environmental,
Social and
Governance
(ESG)
Initiatives
Property
Portfolio
Overview
Introduction
Results of
Operations
Asset Profile
Development
Program
Capital
Resources
and Liquidity
Other
Disclosures
Non-GAAP
Measures
Risks and
Uncertainties
The amendments are applicable January 1, 2023, with early adoption permitted. Since the amendments to the IFRS Practice
Statement 2 provide non-mandatory guidance on the application of the definition of material to accounting policy information, an
effective date for these amendments is not necessary.
Management is currently reviewing the Trust's accounting policy disclosures to ensure consistency with the amended
requirements.
Amendments to IAS 8, Definition of Accounting Estimates
In February 2021, the IASB issued amendments to IAS 8, in which it introduces a definition of ‘accounting estimates’. The
amendments clarify the distinction between changes in accounting estimates and changes in accounting policies and the
correction of errors. Also, they clarify how entities use measurement techniques and inputs to develop accounting estimates. The
amendments are effective January 1, 2023, with early adoption permitted. Management is currently assessing the impact of these
amendments.
Amendment to IAS 1, Presentation of Financial Statements - Classification of Liabilities as Current or Non-Current
In January 2020 and October 2022, the IASB issued amendments to paragraphs 69 - 76 of IAS 1 to clarify the requirements for
classifying liabilities as current or non-current. The amendments specify that the conditions which exist at the end of a reporting
period are those which will be used to determine if a right to defer settlement of a liability exists. The amendments also clarify the
situations that are considered a settlement of a liability. The amendments are effective January 1, 2024, with early adoption
permitted. The amendments are to be applied retrospectively. Management is currently assessing the impact of these
amendments.
Controls and Procedures
Disclosure Controls and Procedures (DCP)
The CEO and CFO of the Trust have designed or caused to be designed under their direct supervision the Trust’s DCP to provide
reasonable assurance that: (i) material information relating to the Trust is made known to management by others, particularly
during the period in which the annual and interim filings are being prepared; and (ii) information required to be disclosed by the
Trust in its annual and interim filings or other reports filed or submitted under securities legislation is recorded, processed,
summarized and reported within the time period specified in securities legislation. The CEO and CFO are assisted in this
responsibility by a Disclosure Committee, which is composed of RioCan senior management. The Disclosure Committee has
established disclosure controls and procedures to ensure that material information affecting RioCan is communicated to
management of the Trust, including the CEO and CFO, as appropriate, and the appropriateness and timing of any required
disclosure is determined. As required by National Instrument 52-109 – Certification of Disclosure in Issuers’ Annual and Interim
Filings (“NI 52-109”), an evaluation of the effectiveness of the Trust’s DCP was conducted, under the supervision of management,
including RioCan’s CEO and CFO, as at December 31, 2022. The evaluation included documentation review, enquiries and other
procedures considered by management to be appropriate in the circumstances. It was determined, as at December 31, 2022, that
the design and operation of RioCan’s DCP were effective.
Internal Controls over Financial Reporting (ICFR)
RioCan has established adequate ICFR to provide reasonable assurance regarding the reliability of the Trust’s financial reporting
and the preparation of the financial statements for external purposes in accordance with IFRS. In accordance with NI 52-109,
management, including RioCan’s CEO and CFO, has assessed or caused an assessment under their direct supervision, of the
design and operating effectiveness of the Trust’s ICFR as at December 31, 2022 based on the criteria set forth in Internal Control
- Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on
that assessment, it was determined that, as at December 31, 2022, RioCan’s ICFR were appropriately designed and were
operating effectively based on the criteria established in the Internal Control - Integrated Framework (2013).
There were no changes in the Trust’s ICFR during the three and twelve months ended December 31, 2022 that have materially
affected, or are reasonably likely to materially affect, the Trust’s ICFR.
Inherent Limitations
It should be noted that a control system, no matter how well conceived and operated, can provide only reasonable, not absolute,
assurance that the objectives of the control system are met. Given the inherent limitations in all control systems, no evaluation of
controls can provide absolute assurance that all control issues, including instances of fraud, if any, have been detected. These
inherent limitations include, among other items: (i) that management’s assumptions and judgments could ultimately prove to be
incorrect under varying conditions and circumstances; (ii) the impact of any undetected errors; and (iii) controls may be
circumvented by the unauthorized acts of individuals, by collusion of two or more people, or by management override.
Canadian REIT Status and Monitoring
RioCan currently qualifies for the REIT Exemption for purposes of the Income Tax Act (Canada). Accordingly, RioCan continues
to be able to flow taxable income through to Unitholders on a tax effective basis. Generally, to qualify for the REIT Exemption,
RioCan's Canadian assets must be comprised primarily of real estate and substantially all of our Canadian source revenues must
be derived from rental revenue, capital gains and fee income from properties in which we have an interest.
RioCan monitors its REIT Exemption status to ensure that we continue to qualify as a Canadian REIT. From time to time, the
members of the Board of Trustees, Audit Committee and senior management are updated on RioCan's continued REIT
Exemption qualification, including any significant legislation updates.
RioCan Annual Report 2022 66
MANAGEMENT’S DISCUSSION AND ANALYSIS
Our Business
and Our
Business
Environment
Environmental,
Social and
Governance
(ESG)
Initiatives
Property
Portfolio
Overview
Introduction
Results of
Operations
Asset Profile
Development
Program
Capital
Resources
and Liquidity
Other
Disclosures
Non-GAAP
Measures
Risks and
Uncertainties
Climate-Related Financial Disclosures
Commitment to Climate Change
Climate change poses environmental, social and business risks. RioCan understands that investing in climate-resilient real estate
is essential to sustainable growth, delivering on the UN Sustainable Development Goals and reducing climate-related risks. We
rely on the recommendations of the Financial Stability Board’s (FSB) Task Force on Climate-Related Financial Disclosures
(TCFD) to guide us in addressing our climate change-related risks. We also continue to monitor the development of applicable
laws in this area and the evolution of disclosure requirements for public issuers such as RioCan, including the proposed National
Instrument 51-107 – Disclosure of Climate-related Matters.
This section provides a summary of our approach to managing our climate risk and opportunities in alignment with TCFD during
2022, unless otherwise noted. For additional details related to our climate program, please refer to RioCan’s 2022 ESG report,
available on our website.
Governance
Board Oversight
The Board of Trustees has ultimate oversight for risk management and receives updates on ESG-related issues, including climate
change. The Board of Trustees has delegated the responsibility of overseeing ESG management including climate change and
resilience to the Nominating, Environmental, Social and Governance Committee. Significant and emerging risks, including those
related to climate change, are escalated to the Audit Committee, which also oversees environmental compliance. RioCan has
committed to addressing climate change risk, in part, by adopting and aligning our climate change program with the
recommendations of the TCFD.
Management
Our President and Chief Executive Officer holds overall senior executive accountability for ESG, risk management and climate
change. Our SVP, General Counsel, ESG & Corporate Secretary is responsible for reporting on ESG goals, plans and
performance, including those related to climate change and resiliency. In 2016, RioCan established an ESG Council to oversee
its ESG strategy implementation and drive performance improvements. The Council is comprised of members of our executive
and senior leadership teams from key functional areas of our business. Council members ensure that ESG considerations
including climate change are systematically embedded in RioCan’s decision making and enable performance evaluation.
In 2021, RioCan established a Climate Committee that reports to the ESG Council and consists of subject matter experts from
different business functions. The objective of this committee is to advance climate change considerations within RioCan’s
objectives for resource efficient and climate-resilient current and future growth.
Strategy
Approach and Progress
Our climate strategy helps guide our approach to managing risks and opportunities related to climate change. Climate-related
risks include both physical and transitional risks. Physical risks are described as chronic and acute physical impacts of climate
change, including as a result of extreme weather events such as flooding and storms. Transition risks are related to transitioning
the business to a low-carbon economy, such as climate-related policy actions, technological advancements, and market shifts in
demand for products.
Our climate strategy supports responsible growth by integrating climate initiatives across our organization. RioCan’s approach
involves building resilience and net zero criteria into our tools, accountabilities and decision making – from asset management
and operations to developments, investments, procurement and leasing processes. This will enable us to protect asset value,
enhance governance and disclosure, and meet evolving stakeholder expectations.
Our climate objectives are:
•
Strengthen resilience and protect assets: Protect our operations, portfolio and developments against physical effects of
climate change
Reduce emissions and advance towards net-zero: Decarbonize operations, portfolio and developments to support transition
to a low-carbon economy
Enhance climate governance and disclosure: Create accountability and oversight and ensure strong communication
practices to stakeholders
•
•
Our progress at-a-glance: Over the past few years we have taken steps to strengthen our approach to climate management.
•
•
2020: RioCan conducted a preliminary climate change and resilience assessment.
2021: Established climate committee; organized climate training sessions with the members of the Climate Committee;
conducted workshops to identify climate-related risks, opportunities and associated business implications, and developed our
climate strategy and plan.
2022: Conducted a detailed assessment of climate-related risks and opportunities.
•
67 RioCan Annual Report 2022
MANAGEMENT’S DISCUSSION AND ANALYSIS
Our Business
and Our
Business
Environment
Environmental,
Social and
Governance
(ESG)
Initiatives
Property
Portfolio
Overview
Introduction
Results of
Operations
Asset Profile
Development
Program
Capital
Resources
and Liquidity
Other
Disclosures
Non-GAAP
Measures
Risks and
Uncertainties
Climate Assessment
In 2022, RioCan initiated the process of assessing its climate-related risks and opportunities in detail.
Physical risk
•
•
In 2022, RioCan undertook an assessment to identify potential climate change impacts on its real estate investment assets.
This assessment was focused on the direct impact from climate-related hazards over four different timeframes (present day,
2030, 2050 and 2070) and utilized an array of different climate scenarios, including flooding (fluvial, pluvial and storm surge),
high winds, hailstorms, snow, forest fires, temperature extremes, earthquakes, tsunamis and rising sea levels.
Three future climate scenarios were assessed using the Shared Socioeconomic Pathways (SSPs). These pathways are
global scenarios that describe possible socio-economic conditions, land-use changes, and other human-caused climate
drivers around the globe that influence greenhouse gas emissions, thus affecting the speed of change in the climate. This
acknowledges that the future is heavily influenced by our current actions. During the assessment, RioCan focused on SSP1
– 2.6 Sustainability, SSP2 – 4.5 Middle of the Road, and SSP5 – 8.5 Fossil Fuel Development.
Transition risk
In 2022, RioCan initiated the process of conducting a more detailed assessment of its climate-related transition risks and
opportunities. Similar to the assessment of climate-related physical risks, RioCan utilized a scenario analysis approach and used
a range of global warming scenarios following guidance issued by the TCFD:
•
The main transition scenario used for the analysis was the Network for Greening the Financial System (NGFS) Net Zero
2050 Scenario which aligns with projections to keep global warming below 1.5°C by the end of the century. A comparative
analysis was also made by considering higher levels of global warming by 2100. This was done using the NGFS Delayed
Transition (below 2°C) and Current Policies (~3°C+) scenarios.
Through a series of internal workshops and focus group discussions, risks and opportunities were assessed in terms of their
impact and likelihood and rated accordingly to evaluate materiality and prioritise. The assessment was focused on RioCan’s
assets and operations in the four key provinces of Ontario, Alberta, Quebec and British Columbia, where most RioCan
properties are located.
Assessment scope included assessing both inherent and residual risk. Inherent risk relates to risk before controls are
successfully implemented (i.e. without considering RioCan’s climate-related policies, plans and actions to mitigate climate-
related risks), while residual risk relates to those after planned controls/mitigations are implemented (i.e. considering
RioCan’s climate-related responses).
•
•
We are currently analyzing the outputs of the assessment and plan to share the results in our future disclosure.
Risk Management
Since 2020, Management has identified climate change as an external enterprise risk. As a result, we have integrated climate-
related risks into our Enterprise Risk Management approach. Plans to address the risks are prepared and monitored by the team
managing the risk.
Our risk management approach considers both physical and transition climate risks. We are taking steps to address these risks:
•
Our environmental due-diligence checklist for acquisitions now includes collecting information related to topics such as
climate, resilience, greenhouse gas emissions and resource efficiency.
Our Developments follow development sustainability guidelines to embed sustainability and climate related considerations in
our design and construction of new developments.
For income producing properties, we have drafted an environmental criteria for renovations and capital expenditure projects
that include considerations for resource efficiency, choice of materials and embodied carbon.
•
•
• We committed to conduct GHG emissions scan (portfolio-wide and indirect, scope 3 emissions) to determine material
sources.
Metrics and Targets
RioCan tracks key performance indicators related to transitional risks, such as Scope 1 and Scope 2 emissions, as well as select
Scope 3 emissions and physical risks, such as total floor area of properties located in 100-year floodplain zones.
RioCan is in the process of aligning its long-term greenhouse gas emission targets to the Science Based Targets Initiative.
Additionally, RioCan has achieved the following:
•
RioCan is in compliance with Ontario’s Energy and Water Reporting and Benchmarking (EWRB) regulation;
•
•
Over 65% of the assets are BOMA BEST certified to standardize ESG performance in portfolio; and
$1.3 billion of Green Bonds raised to contribute to green projects as defined under RioCan’s Green Bond Framework.
RioCan will continue to add new metrics in our next ESG report. For details on our greenhouse gas emissions, please refer to our
2022 ESG Supplement, available on our website.
RioCan Annual Report 2022 68
MANAGEMENT’S DISCUSSION AND ANALYSIS
Our Business
and Our
Business
Environment
Environmental,
Social and
Governance
(ESG)
Initiatives
Property
Portfolio
Overview
Introduction
NON-GAAP MEASURES
Results of
Operations
Asset Profile
Development
Program
Capital
Resources
and Liquidity
Other
Disclosures
Non-GAAP
Measures
Risks and
Uncertainties
The financial statements of RioCan are prepared in accordance with IFRS. In addition to reported IFRS measures, industry
practice is to evaluate real estate entities giving consideration, in part, to certain non-GAAP financial performance measures
described below. Management believes that these measures are helpful to investors because they are widely recognized
measures of a REIT's performance and provide a relevant basis for comparison among real estate entities. In addition to the
IFRS results, we also use these measures internally to measure the operating performance of our investment property portfolio.
These non-GAAP measures, and related per unit amounts, should not be construed as alternatives to net income or comparable
metrics determined in accordance with IFRS as indicators of RioCan’s performance, liquidity, cash flows and profitability and may
not be comparable to similar measures presented by other real estate investment trusts or enterprises. These non-GAAP
measures are defined below and are cross referenced, as applicable, to a reconciliation contained within this MD&A to the most
comparable IFRS measure. Non-GAAP financial measures are not standardized financial measures under IFRS, and might not
be comparable to similar financial measures disclosed by other issuers. RioCan believes these non-GAAP financial measures
provide useful information to both management and investors in measuring the financial performance and financial condition of
the Trust for the reasons outlined below.
Non-GAAP
Financial Measure
Description
Quantitative
Reconciliation
All references to “RioCan's Proportionate Share” refer to a non-GAAP financial
measure representing RioCan’s proportionate interest of the financial condition
and results of operations of its entire portfolio, including equity-accounted
investments. Management considers certain
results presented on a
proportionate share basis to be a meaningful measure because it is consistent
with how RioCan and its partners assess the operating performance of each of
its co-owned and equity-accounted properties. The Trust currently accounts for
its investments in joint ventures and associates using the equity method of
accounting.
(i) RioCan's
Proportionate Share
RioCan's
Proportionate Share
The remaining definitions outlined below pertain to measures and/or inputs to
our financial leverage, coverage ratios and other key metrics that we use to
manage capital and to assess our liquidity, borrowing capacity and cost of
capital. Certain measures identified in the definitions that follow in this section
are calculated on the basis of both a RioCan's Proportionate Share basis and
using IFRS reported amounts to convey a more meaningful measure of financial
performance with respect to the periods reported.
RioCan's
Proportionate Share
in Equity-Accounted
Joint Ventures (EAI
JV)
or
RioCan's
Proportionate Share
in EAI JV
All references to “RioCan's Proportionate Share in Equity-Accounted Joint
Ventures” refers to a non-GAAP financial measure representing RioCan’s
proportionate interest of the financial condition and results of operations of its
entire portfolio, including Equity-Accounted Investments in Joint Ventures (EAI
JV). Management considers certain results presented on a proportionate share
basis including EAI JV to be a meaningful measure because it is consistent with
how RioCan operates and manages it's development program. The Trust
currently accounts for its investments in joint ventures using the equity method
of accounting.
Joint Arrangements
section
69 RioCan Annual Report 2022
MANAGEMENT’S DISCUSSION AND ANALYSIS
Our Business
and Our
Business
Environment
Environmental,
Social and
Governance
(ESG)
Initiatives
Property
Portfolio
Overview
Introduction
Non-GAAP
Financial Measure
Description
Results of
Operations
Asset Profile
Development
Program
Capital
Resources
and Liquidity
Other
Disclosures
Non-GAAP
Measures
Risks and
Uncertainties
Quantitative
Reconciliation
Net Operating Income
(NOI), Stabilized NOI,
NOI (RioCan's
Proportionate Share)
NOI is a non-GAAP financial measure and is defined by RioCan as rental
revenue from income properties less property operating costs.
NOI at RioCan's Proportionate Share is a non-GAAP financial measure and
includes RioCan’s proportionate interest in NOI of its entire portfolio, including
equity-accounted investments.
Stabilized NOI is a forward-looking non-GAAP financial measure based on
budgeted rents and expenses and is supported by the terms of any existing
lease, other contracts or external evidence such as current market rents for
similar properties, adjusted to incorporate allowances for estimated vacancy
rates, and management fees based on current and expected future market
conditions after expiry of any current lease. The resulting capitalized value is
then adjusted for non-recoverable capital expenditures as well as other costs,
including leasing costs, inherent in achieving and maintaining Stabilized NOI.
For the calculation of NOI, rental revenue includes all amounts earned from
tenants related to lease agreements, including property tax and operating cost
recoveries, to the extent recoverable under tenant leases. Amounts payable by
tenants to terminate their lease prior to the contractual expiry date (lease
cancellation fees) are included in rental revenue for the calculation of NOI.
(ii) NOI
Management believes that NOI is a useful non-GAAP financial measure of
operating performance of the Trust's income producing properties in addition to
the most comparable IFRS measure, which we believe is operating income.
The IFRS measure of operating income also includes residential inventory gains
and losses as well as property and asset management fees earned from co-
owners. While management considers its residential inventory and portfolio
management activities part of its business operations, and thus operating
income, such revenues are not part of how we evaluate the operating
performance of our income producing properties. As such, we report NOI as a
useful non-GAAP financial measure to report the operating performance of our
income producing properties.
NOI is an important measure of the income generated from the income
producing properties and is used by the Trust in evaluating the performance of
the portfolio, as well as a key input in determining the value of the income
producing properties portfolio.
Same Property NOI,
Same Property NOI
including completed
PUD
and
Adjusted Same
Property NOI
Same Property NOI is a non-GAAP financial measure used by RioCan to
assess the period-over-period performance of the commercial properties owned
and operated by RioCan in both periods. In calculating Same Property NOI
growth, NOI for the period is adjusted to remove the impact of lease
cancellation fees and straight-line rent revenue in order to highlight the 'cash
impact' of contractual rent increases embedded in the underlying lease
agreements. Same Property NOI also excludes NOI for a limited number of
properties undergoing significant de-leasing in preparation for redevelopment or
intensification. Same Property NOI is a meaningful measure of operating
performance because it allows management to assess rent growth and leasing
activity of its portfolio on a same property basis and the impact of capital
investments.
Same Property NOI including completed PUD starts with Same Property NOI
but adds back NOI from completed properties under development.
Adjusted Same Property NOI starts with Same Property NOI but adds back
(deducts) same property pandemic-related provision (recovery) and excludes
legal and CAM/property tax settlements.
(iii) Same Property
NOI
RioCan Annual Report 2022 70
MANAGEMENT’S DISCUSSION AND ANALYSIS
Our Business
and Our
Business
Environment
Environmental,
Social and
Governance
(ESG)
Initiatives
Property
Portfolio
Overview
Introduction
Non-GAAP
Financial Measure
Description
Results of
Operations
Asset Profile
Development
Program
Capital
Resources
and Liquidity
Other
Disclosures
Non-GAAP
Measures
Risks and
Uncertainties
Quantitative
Reconciliation
FFO is a non-GAAP financial measure of operating performance widely used by
the Canadian real estate industry based on the definition set forth by REALPAC.
It is RioCan's view that IFRS net income does not necessarily provide a
complete measure of RioCan's recurring operating performance. This is
primarily because IFRS net income includes items such as fair value changes of
investment property that are subject to market conditions and capitalization rate
fluctuations, unrealized gains or losses on marketable securities, gains and
losses on
including associated
transaction costs, which are not representative of recurring operating
performance.
investment properties,
the disposal of
Funds From
Operations (FFO)
and
FFO Adjusted
and
Excess Cash Flow
Adjusted Funds From
Operations (AFFO)
and
AFFO Adjusted
FFO and AFFO
Payout Ratios
and
FFO and AFFO
Payout Ratios
Adjusted
Adjusted G&A
Expense
Adjusted G&A
Expense as a
percentage of rental
revenue
RioCan’s method of calculating FFO is in compliance with REALPAC’s definition
of FFO except that RioCan excludes unrealized gains or losses on marketable
securities in its calculation of FFO. The Trust believes that including such
unrealized gains or losses on marketable securities in FFO does not represent
the recurring operating performance of the Trust.
FFO Adjusted starts with FFO but adds back net debt prepayment costs, one-
time compensation and restructuring costs since these costs are not indicative
of recurring operating performance. Debt prepayment costs include yield
maintenance, write-off of deferred financing costs and discounts/premiums, and
the
related swap settlements. One-time compensation costs
acceleration of certain unit-based compensation amortization expense.
Restructuring costs are related to elimination of certain positions including those
related to the outsourcing of the property management of the Trust's Quebec
portfolio.
include
RioCan regards FFO as a key measure of operating performance and as a key
measure for determining the level of employee incentive based compensation.
RioCan also uses FFO in assessing its distribution paying capacity.
FFO should not be construed as an alternative to net income or cash flows
provided by or used in operating activities determined in accordance with IFRS.
Excess Cash Flow is defined as FFO less Distributions paid to Unitholders and
maintenance capital expenditures.This metric
in
determining RioCan's Excess Cash Flow.
is a useful measure
(iv) FFO
AFFO is non-GAAP financial measure of operating performance widely used by
the real estate industry in Canada. AFFO is calculated as FFO less straight-line
rent, normalized capital expenditures and leasing costs. RioCan calculates
AFFO in accordance with the recommendations of REALPAC's January 2022
guidance, except RioCan excludes unrealized gains or losses on marketable
securities from FFO and by extension AFFO. Management considers AFFO as
a meaningful measure of recurring economic earnings and relevant in
understanding RioCan's ability to service its debt, fund capital expenditures and
determining an appropriate level of sustainable common unitholder distributions
over the long run.
AFFO Adjusted starts with AFFO but adds back net debt prepayment costs,
one-time compensation and restructuring costs since these costs are not
indicative of sustainable economic cash flow. Debt prepayment costs, one-time
compensation and restructuring costs are described in FFO above.
(v) AFFO
FFO and AFFO Payout Ratios, and FFO and AFFO Payout Ratios Adjusted are
supplementary non-GAAP measures of a REIT's distribution paying capacity.
These payout ratios are computed on a rolling twelve-month basis by dividing
total Unitholder distributions paid (including distributions paid under RioCan's
distribution reinvestment program) by FFO and AFFO, FFO Adjusted and AFFO
Adjusted, respectively, over the same period.
RioCan management uses the FFO Payout Ratio and AFFO Payout Ratio in
assessing its distribution paying capacity.
(iv) FFO and
(v) AFFO
Adjusted G&A Expense is a non-GAAP financial measure calculated as total
general and administrative expense less restructuring costs and one-time
compensation costs. Adjusted G&A Expense as a percentage of rental revenue
is a non-GAAP ratio calculated as Adjusted G&A Expense divided by rental
revenue. This ratio is a useful measure of the Trust's general and administrative
expenses as a percentage of revenue.
(vi) Adjusted G&A
Expense
71 RioCan Annual Report 2022
MANAGEMENT’S DISCUSSION AND ANALYSIS
Our Business
and Our
Business
Environment
Environmental,
Social and
Governance
(ESG)
Initiatives
Property
Portfolio
Overview
Introduction
Non-GAAP
Financial Measure
Description
Results of
Operations
Asset Profile
Development
Program
Capital
Resources
and Liquidity
Other
Disclosures
Non-GAAP
Measures
Risks and
Uncertainties
Quantitative
Reconciliation
Normalized Capital
Expenditures
Normalized Capital Expenditures are an estimate made by management of the
amount of ongoing capital investment required to maintain the condition of the
physical property and current rental revenues. Management considers a
number of factors in estimating Normalized Capital Expenditures relative to the
growth in the age and size of the Trust's property portfolio. Such factors include,
but are not limited to, a portfolio assessment to prioritize assets and the type of
capital expenditures, a review and analysis of historical capital spending,
comparison of each quarter's annualized actual spending activity to the annual
budgeted capital expenditures as approved by our Board of Trustees at the
beginning of each year and management's expectations and/or plans for the
properties. Property capital expenditures that are generally expected to add to
the overall earnings capacity of the property are considered revenue enhancing
capital expenditures by management and are also excluded in determining the
Normalized Capital Expenditures estimate.
RioCan does not obtain support from independent sources for its Normalized
Capital Expenditures but relies on internal diligence and expertise in arriving at
this management estimate. RioCan’s long-tenured management team has
extensive experience in commercial real estate and in-depth knowledge of the
property portfolio. As a result, RioCan believes that management is best suited
to make
the assessment of Normalized Capital Expenditures without
independent third-party sources.
Since actual capital expenditures can vary widely from quarter to quarter
depending on a number of factors, management believes that Normalized
Capital Expenditures are a more relevant input than actual capital expenditures
in assessing a REIT's distribution payout ratio and for determining an
appropriate level of sustainable distributions over the long run.
For 2022, the Trust determined that $50.0 million was a reasonable estimate for
its Normalized Capital Expenditures. This Normalized Capital Expenditures
estimate for 2022 did not include capital expenditures for mixed-use residential
projects given these are newly constructed buildings. The Trust's Normalized
Capital Expenditures for 2023 reflects its pursuit of its strategic objectives of
resilient retail and better serving its tenants. The Trust has determined that
$55.0 million is a reasonable Normalized Capital Expenditures estimate for
2023, although quarterly fluctuations between the $13.8 million quarterly
Normalized Capital Expenditures spend and actual spend are expected.
Capital Expenditures
on Income Properties
section
Total joint operations
and equity-accounted
investments - Income
properties, PUD,
Residential inventory,
Other, Total assets,
Total NOI
This is a non-GAAP measure which represents the sum of RioCan's interest of
joint operations and proportionate share of equity-accounted investments.
This is a useful measure of indicating the amount of Income properties, PUD,
Residential inventory, Other, Total assets and Total NOI that are jointly
controlled or where RioCan has significant influence.
Joint Arrangements
section
Development
Spending
Development Spending is a non-GAAP financial measure defined as the sum of
total development expenditures
for various properties under
incurred
development and for residential inventory and RioCan's share of Development
Spending from equity-accounted joint ventures. Development Spending is a
useful measure of development progress and investment in properties under
development and residential inventory.
Effective Q1 2022, RioCan's share of Development Spending by equity-
accounted joint ventures is included as these projects are jointly controlled.
(vii) Development
Spending
Value of Development
Deliveries
Value of Development Deliveries is a non-GAAP financial measure defined as
the sum of the fair value of PUD completions transferred to income producing
properties and revenue from residential inventory sales at interim occupancy.
Value of Development Deliveries is a useful measure of the value created from
the investment in development spend upon the completion of development
activities.
(viii) Value of
Development
Deliveries
RioCan Annual Report 2022 72
MANAGEMENT’S DISCUSSION AND ANALYSIS
Our Business
and Our
Business
Environment
Environmental,
Social and
Governance
(ESG)
Initiatives
Property
Portfolio
Overview
Introduction
Non-GAAP
Financial Measure
Description
Results of
Operations
Asset Profile
Development
Program
Capital
Resources
and Liquidity
Other
Disclosures
Non-GAAP
Measures
Risks and
Uncertainties
Total Development at
Cost
Total Development at Cost is a non-GAAP financial measure defined as the sum
of residential inventory and related prepaid selling commissions, and properties
under development, and RioCan's share of residential inventory and related
prepaid commissions, and properties under development from equity-accounted
joint ventures.
This metric is a useful measure in determining RioCan's development costs
incurred to date.
Quantitative
Reconciliation
(ix) Total
Development at Cost
Total Acquisitions
Total Acquisitions is a non-GAAP financial measure defined as the sum of total
acquisitions incurred for investment properties, residential inventory and
RioCan's share of acquisitions from equity-accounted joint ventures. Total
Acquisitions is a useful measure of RioCan's total acquisition activity.
(x) Total Acquisitions
Total Contractual
Debt
and
Total Debt (RioCan's
Proportionate Share)
and Total Contractual
Debt (RioCan's
Proportionate Share)
Total Contractual Debt is a non-GAAP financial measure defined as the sum of
contractual obligations (excluding unamortized deferred financing costs and
discounts/premiums) of mortgages payable, lines of credit and other bank loans,
mortgages on properties held for sale and debentures payable.
Total Debt (RioCan's Proportionate Share) and Total Contractual Debt (RioCan's
Proportionate Share) are non-GAAP financial measures that include RioCan’s
proportionate interest in the total debt and Total Contractual Debt of its entire
portfolio, including equity-accounted investments.
Total Contractual Debt and Total Debt (RioCan's Proportionate Share) and Total
Contractual Debt (RioCan's Proportionate Share) are useful measures of the
total debt outstanding used in measuring leverage.
(xi) Total debt and
Total Contractual Debt
Adjusted EBITDA and Adjusted EBITDA (RioCan's Proportionate Share) are
non-GAAP financial measures that are used by management as an input in
several of our debt metrics, providing information with respect to certain
financial ratios that we use in measuring our debt profile and assessing our
ability to satisfy obligations, including servicing our debt.
Adjusted EBITDA
includes RioCan’s
(RioCan's Proportionate Share)
proportionate interest in Adjusted EBITDA of its entire portfolio, including equity-
accounted investments.
Adjusted EBITDA and Adjusted EBITDA (RioCan's Proportionate Share) are
used as an alternative to IFRS net income, because they exclude major non-
cash items (including, but not limited to, depreciation and amortization expense,
unit-based compensation costs, fair value gains and losses on investment
properties, the change in unrealized gains and losses on marketable securities),
interest costs, income tax expenses and recoveries, transaction gains and
losses on the disposition of investment properties and equity-accounted
investments, transaction costs and other items that management considers
either non-operating in nature or related to the capital cost of our investment
properties, net debt prepayment costs and one-time or non-recurring items
(including, but not
to, one-time cash compensation costs and
restructuring costs).
limited
(xvi) Adjusted EBITDA
and Coverage Ratios
Total Adjusted Debt to Total Adjusted Assets is a non-GAAP ratio of our financial
leverage calculated by taking the total debt net of cash and cash equivalents
(Total Adjusted Debt) divided by total assets net of cash and cash equivalents
(Total Adjusted Assets).
Total Adjusted Debt to Total Adjusted Assets (RioCan's Proportionate Share) is a
non-GAAP ratio that uses RioCan's Proportionate Share in Total Adjusted Debt
and Total Adjusted Assets of RioCan's entire portfolio including equity-
accounted investments.
These ratios are useful measures of leverage.
(xii) Total Adjusted
Debt to Total Adjusted
Assets
Adjusted EBITDA
and
Adjusted EBITDA
(RioCan's
Proportionate Share)
Total Adjusted Debt,
Total Adjusted Assets,
Total Adjusted Debt to
Total Adjusted Assets
and
Total Adjusted Debt to
Total Adjusted Assets
(RioCan's
Proportionate Share)
73 RioCan Annual Report 2022
MANAGEMENT’S DISCUSSION AND ANALYSIS
Our Business
and Our
Business
Environment
Environmental,
Social and
Governance
(ESG)
Initiatives
Property
Portfolio
Overview
Introduction
Non-GAAP
Financial Measure
Description
Results of
Operations
Asset Profile
Development
Program
Capital
Resources
and Liquidity
Other
Disclosures
Non-GAAP
Measures
Risks and
Uncertainties
Adjusted Debt
Adjusted Debt to
Adjusted EBITDA
and
Adjusted Debt to
Adjusted EBITDA
(RioCan's
Proportionate Share)
Adjusted Debt to Adjusted EBITDA is a non-GAAP ratio of our financial leverage
calculated on a trailing twelve-month basis and is defined as our quarterly
average Total Adjusted Debt (Adjusted Debt) divided by Adjusted EBITDA.
Adjusted Debt to Adjusted EBITDA (RioCan's Proportionate Share) is a non-
GAAP ratio, calculated on a trailing twelve-month basis that uses RioCan's
Proportionate Share in Adjusted Debt of RioCan's entire portfolio, including
(RioCan's
equity-accounted
Proportionate Share).
investments divided by Adjusted EBITDA
These ratios are useful measures of the Trust's ability to satisfy debt obligations.
Quantitative
Reconciliation
(xvi) Adjusted EBITDA
and Coverage Ratios
Debt Service Cost
Debt Service
Coverage
and
Debt Service
Coverage (RioCan's
Proportionate Share)
Debt Service Coverage is a non-GAAP ratio calculated on a trailing twelve-
month basis and is defined as Adjusted EBITDA divided by the sum of total
interest costs (including interest that has been capitalized) and scheduled
mortgage principal amortization ("Debt Service Cost").
Debt Service Coverage (RioCan's Proportionate Share) is a non-GAAP ratio
calculated on a trailing twelve-month basis and is defined as Adjusted EBITDA
(RioCan's Proportionate Share) divided by RioCan's Proportionate Share in
Debt Service Cost of RioCan's entire portfolio, including equity-accounted
investments).
These ratios are useful measures of the Trust's ability to meet its debt service
obligations on a trailing twelve-month basis.
(xvi) Adjusted EBITDA
and Coverage Ratios
Interest Coverage
and
Interest Coverage
(RioCan's
Proportionate Share)
Interest Coverage is a non-GAAP ratio calculated on a trailing twelve-month
basis and is defined as Adjusted EBITDA divided by total interest costs
(including interest that has been capitalized).
Interest Coverage (RioCan's Proportionate Share) is a non-GAAP ratio
calculated on a trailing twelve-month basis and is defined as Adjusted EBITDA
(RioCan's Proportionate Share) divided by RioCan's Proportionate Share in total
interest costs (including interest that has been capitalized) of RioCan's entire
portfolio, including equity-accounted investments.
These ratios are useful measures of the Trust's ability to meet its interest cost
obligations on a trailing twelve-month basis.
(xvi) Adjusted EBITDA
and Coverage Ratios
Ratio of Floating Rate
Debt to Total Debt
(RioCan's
Proportionate Share)
and Ratio of Fixed
Rate Debt to Total
Debt (RioCan's
Proportionate Share)
Liquidity
and
Liquidity (RioCan's
Proportionate Share)
Ratio of Floating Rate Debt to Total Debt (RioCan's Proportionate Share) is a
non-GAAP ratio calculated as RioCan's Proportionate Share in total floating rate
debt of RioCan's entire portfolio, including equity-accounted investments divided
by Total Debt (RioCan's Proportionate Share).
Ratio of Fixed Rate Debt to Total Debt (RioCan's Proportionate Share) is a non-
GAAP ratio calculated as RioCan's Proportionate Share in total fixed rate debt
of RioCan's entire portfolio, including equity-accounted investments divided by
Total Debt (RioCan's Proportionate Share).
(xiii) Floating Rate
Debt and Fixed Rate
Debt
These ratios are useful measures of the Trust's relative exposure to fixed and
floating rate debt.
Liquidity is a non-GAAP measure calculated based on the sum of total cash and
cash equivalents, undrawn revolving unsecured operating lines of credit and
undrawn construction lines and other bank loans.
Liquidity (RioCan's Proportionate Share) is a non-GAAP measure that includes
RioCan's Proportionate Share in the sum of total cash and cash equivalents,
undrawn revolving unsecured operating lines of credit and undrawn construction
lines and other bank loans of RioCan's entire portfolio, including equity-
accounted investments.
These measures are useful measures of the Trust's cash resources and credit
available under committed credit facilities.
(xv) Liquidity
RioCan Annual Report 2022 74
MANAGEMENT’S DISCUSSION AND ANALYSIS
Our Business
and Our
Business
Environment
Environmental,
Social and
Governance
(ESG)
Initiatives
Property
Portfolio
Overview
Introduction
Non-GAAP
Financial Measure
Description
Results of
Operations
Asset Profile
Development
Program
Capital
Resources
and Liquidity
Other
Disclosures
Non-GAAP
Measures
Risks and
Uncertainties
Quantitative
Reconciliation
Ratio of Unsecured
Debt to Total
Contractual Debt and
Ratio of Secured Debt
to Total Contractual
Debt
and
Ratio of Unsecured
Debt to Total
Contractual Debt
(RioCan's
Proportionate Share)
and Ratio of Secured
Debt to Total
Contractual Debt
(RioCan's
Proportionate Share)
Ratio of Unsecured Debt to Total Contractual Debt is a non-GAAP ratio
calculated as total Unsecured Debt divided by Total Contractual Debt.
Ratio of Secured Debt to Total Contractual Debt is a non-GAAP ratio calculated
as total Secured Debt divided by Total Contractual Debt.
Ratio of Unsecured Debt to Total Contractual Debt (RioCan's Proportionate
Share) is a non-GAAP ratio calculated as RioCan's Proportionate Share in total
Unsecured Debt of RioCan's entire portfolio, including equity-accounted
investments divided by Total Contractual Debt (RioCan's Proportionate Share).
(xiv) Unsecured Debt
and Secured Debt
Ratio of Secured Debt to Total Contractual Debt (RioCan's Proportionate Share)
is a non-GAAP ratio calculated as RioCan's Proportionate Share in total
Secured Debt of RioCan's entire portfolio,
including equity-accounted
investments divided by Total Contractual Debt (RioCan's Proportionate Share).
These ratios are useful measures of the Trust's relative exposure to secured
and unsecured Debt.
Ratio of
Unencumbered
Assets to total
investment properties
Ratio of Unencumbered Assets to total investment properties is a non-GAAP
ratio calculated as the carrying value of all investment properties that have not
been pledged as security for debt divided by total fair value of investment
properties.
and
Ratio of
Unencumbered
Assets to total
investment properties
(RioCan's
Proportionate Share)
Ratio of Unencumbered Assets to total investment properties (RioCan's
Proportionate Share) is a non-GAAP ratio calculated as the carrying value of all
investment properties that have not been pledged as security for debt divided by
total fair value of investment properties both at RioCan's Proportionate Share
(RioCan's proportionate interest of its entire portfolio, including equity-accounted
investments).
These ratios are useful measures of investment properties that can be
mortgaged to increase Liquidity.
Percentage of
Normalized NOI
Generated from
Unencumbered
Assets
and
Percentage of
Normalized NOI
Generated from
Unencumbered
Assets (RioCan's
Proportionate Share)
Percentage of Normalized NOI Generated from Unencumbered Assets is a non-
GAAP ratio defined as NOI for the current quarter excluding lease cancellation
fees, miscellaneous revenue and percentage rent multiplied by a factor of four
(Annual Normalized NOI) from unencumbered assets as of the end of a
reporting period divided by total Annual Normalized NOI as of the end of the
same reporting period. Unencumbered assets are investment properties that
have not been pledged as security for debt.
Percentage of Normalized NOI Generated
from Unencumbered Assets
(RioCan's Proportionate Share) is a non-GAAP ratio defined as the Annual
Normalized NOI from unencumbered assets as of the end of a reporting period
divided by total Annual Normalized NOI as of the end of the same reporting
period, both at RioCan's Proportionate Share (RioCan's proportionate interest of
its entire portfolio, including equity-accounted investments).
These ratios are useful measures of the NOI that is not subject to debt servicing
obligations.
Unencumbered
Assets to Unsecured
Debt
and
Unencumbered
Assets to Unsecured
Debt (RioCan's
Proportionate Share)
Unencumbered Assets to Unsecured Debt is a non-GAAP ratio calculated as
the carrying value of all investment properties that have not been pledged as
security for debt divided by total unsecured indebtedness.
Unencumbered Assets to Unsecured Debt (RioCan's Proportionate Share) is a
non-GAAP ratio calculated as the carrying value of all investment properties that
have not been pledged as security for debt divided by total unsecured
indebtedness, both at RioCan's Proportionate Share (RioCan's proportionate
interest of its entire portfolio, including equity-accounted investments).
These ratios are useful measures of the investment properties available to
satisfy Unsecured Debt obligations.
Excess cash flows
provided by operating
activities excluding
non-cash working
capital, net of
distributions declared
This is a non-GAAP measure calculated as total cash flows provided by
the
operating activities excluding non-cash working capital
distributions declared to Unitholders.
items
less
This is a useful measure of the excess cash the Trust has retained to fund
operations, investments and capital activities.
(xvii) Unencumbered
Assets
(xvii) Unencumbered
Assets
(xvii) Unencumbered
Assets
Distributions to
Unitholders section
75 RioCan Annual Report 2022
MANAGEMENT’S DISCUSSION AND ANALYSIS
Our Business
and Our
Business
Environment
Environmental,
Social and
Governance
(ESG)
Initiatives
Property
Portfolio
Overview
Introduction
Results of
Operations
Asset Profile
Development
Program
Capital
Resources
and Liquidity
Other
Disclosures
Non-GAAP
Measures
Risks and
Uncertainties
Below are quantitative reconciliations for all non-GAAP measures indicated:
(i) RioCan's Proportionate Share
The following table reconciles the consolidated balance sheet from IFRS to RioCan's proportionate share basis as at
December 31, 2022 and 2021:
As at
December 31, 2022
December 31, 2021
(thousands of dollars)
Assets
Investment properties
Equity-accounted investments
Mortgages and loans receivable
Residential inventory
Assets held for sale
Receivables and other assets
Cash and cash equivalents
Total assets
Liabilities
Debentures payable
Mortgages payable
Lines of credit and other bank loans
IFRS basis
Equity-
accounted
investments
RioCan's
proportionate
share
IFRS basis
Equity-
accounted
investments
RioCan's
proportionate
share
$ 13,807,740 $
398,701 $ 14,206,441 $ 14,021,338 $
409,794 $ 14,431,132
364,892
269,339
272,005
42,140
259,514
86,229
$ 15,101,859 $
(364,892)
—
214,536
—
37,779
8,001
—
269,339
486,541
42,140
297,293
94,230
327,335
237,790
217,043
47,240
248,959
77,758
294,125 $ 15,395,984 $ 15,177,463 $
(327,335)
—
121,291
—
35,367
—
237,790
338,334
47,240
284,326
9,113
86,871
248,230 $ 15,425,693
$ 2,942,051 $
— $ 2,942,051 $ 2,990,692 $
— $ 2,990,692
2,659,180
1,141,112
172,100
2,831,280
2,334,016
166,368
2,500,384
89,187
1,230,299
1,285,910
48,049
1,333,959
Accounts payable and other liabilities
630,624
32,838
663,462
655,501
33,813
689,314
Total liabilities
$ 7,372,967 $
294,125 $ 7,667,092 $ 7,266,119 $
248,230 $ 7,514,349
Equity
Unitholders’ equity
7,728,892
—
7,728,892
7,911,344
—
7,911,344
Total liabilities and equity
$ 15,101,859 $
294,125 $ 15,395,984 $ 15,177,463 $
248,230 $ 15,425,693
RioCan Annual Report 2022 76
MANAGEMENT’S DISCUSSION AND ANALYSIS
Our Business
and Our
Business
Environment
Environmental,
Social and
Governance
(ESG)
Initiatives
Property
Portfolio
Overview
Introduction
RioCan's Proportionate Share (continued)
Results of
Operations
Asset Profile
Development
Program
Capital
Resources
and Liquidity
Other
Disclosures
Non-GAAP
Measures
Risks and
Uncertainties
The following table reconciles the consolidated balance sheet from IFRS to RioCan's proportionate share basis as at
December 31, 2020:
December 31, 2020
IFRS basis
Equity-
accounted
investments
RioCan's
proportionate
share
$ 14,063,022 $
243,677 $ 14,306,699
209,676
160,646
214,181
198,094
183,633
238,456
(209,676)
—
82,331
—
28,202
2,203
—
160,646
296,512
198,094
211,835
240,659
$ 15,267,708 $
146,737 $ 15,414,445
$ 3,340,278 $
— $ 3,340,278
2,797,066
108,337
2,905,403
790,539
604,852
28,716
9,684
819,255
614,536
$ 7,532,735 $
146,737 $ 7,679,472
7,734,973
—
7,734,973
$ 15,267,708 $
146,737 $ 15,414,445
As at
(in thousands of dollars)
Assets
Investment properties
Equity-accounted investments
Mortgages and loans receivable
Residential inventory
Assets held for sale
Receivables and other assets
Cash and cash equivalents
Total assets
Liabilities
Debentures payable
Mortgages payable
Lines of credit and other bank loans
Accounts payable and other liabilities
Total liabilities
Equity
Unitholders’ equity
Total liabilities and equity
77 RioCan Annual Report 2022
MANAGEMENT’S DISCUSSION AND ANALYSIS
Our Business
and Our
Business
Environment
Environmental,
Social and
Governance
(ESG)
Initiatives
Property
Portfolio
Overview
Introduction
RioCan's Proportionate Share (continued)
Results of
Operations
Asset Profile
Development
Program
Capital
Resources
and Liquidity
Other
Disclosures
Non-GAAP
Measures
Risks and
Uncertainties
The following tables reconcile the consolidated statements of income (loss) from IFRS to RioCan's proportionate share basis for
the three months and years ended December 31, 2022, 2021 and year ended December 31, 2020 :
(thousands of dollars)
Revenue
Rental revenue
Residential inventory sales
Property management and other service fees
Operating costs
Rental operating costs
Recoverable under tenant leases
Non-recoverable costs
Residential inventory cost of sales
Operating income
Other income (loss)
Interest income
Income (Loss) from equity-accounted
investments
Fair value (loss) gain on investment
properties, net
Investment and other income (loss)
Other expenses
Interest costs, net
General and administrative
Internal leasing costs
Transaction and other costs
Debt prepayment costs, net
Income (Loss) before income taxes
Current income tax recovery
Net income (loss)
$
$
Three months ended December 31, 2022 Three months ended December 31, 2021
RioCan's
proportionate
RioCan's
proportionate
IFRS basis
share IFRS basis
share
Equity-
accounted
investments
Equity-
accounted
investments
$
268,864 $
7,516 $
276,380 $
266,899 $
7,071 $
273,970
33,873
3,450
—
—
33,873
65,620
3,450
3,920
965
—
66,585
3,920
306,187
7,516
313,703
336,439
8,036
344,475
95,258
9,060
26,448
130,766
175,421
836
606
—
1,442
6,074
96,094
93,346
9,666
9,019
26,448
39,286
132,208
141,651
181,495
194,788
588
609
289
1,486
6,550
93,934
9,628
39,575
143,137
201,338
6,272
599
6,871
3,842
566
4,408
(3,864)
3,864
—
6,503
(6,503)
—
(115,507)
(8,404)
(123,911)
72,255
240
324
564
(696)
1,480
(144)
(112,859)
(3,617)
(116,476)
81,904
(4,601)
48,320
12,845
3,306
3,236
—
67,707
(5,145) $
(184)
(4,961) $
2,394
23
—
40
—
50,714
12,868
3,306
3,276
—
42,403
11,924
2,982
6,779
3,896
1,819
16
—
114
—
2,457
70,164
67,984
1,949
— $
—
— $
(5,145) $
208,708 $
(184)
(68)
(4,961) $
208,776 $
— $
—
— $
73,735
(840)
77,303
44,222
11,940
2,982
6,893
3,896
69,933
208,708
(68)
208,776
RioCan Annual Report 2022 78
MANAGEMENT’S DISCUSSION AND ANALYSIS
Our Business
and Our
Business
Environment
Environmental,
Social and
Governance
(ESG)
Initiatives
Property
Portfolio
Overview
Introduction
RioCan's Proportionate Share (continued)
(thousands of dollars)
Revenue
Rental revenue
Results of
Operations
Asset Profile
Development
Program
Capital
Resources
and Liquidity
Other
Disclosures
Non-GAAP
Measures
Risks and
Uncertainties
Year ended December 31, 2022
RioCan's
proportionate
Equity-
accounted
investments
IFRS basis
share IFRS basis
Year ended December 31, 2021
RioCan's
proportionate
Equity-
accounted
investments
share
$ 1,074,192 $
29,221 $ 1,103,413 $ 1,066,562 $
26,836 $ 1,093,398
Residential inventory sales
Property management and other service fees
118,659
20,996
936
—
119,595
20,996
93,727
14,772
6,474
100,201
—
14,772
1,213,847
30,157
1,244,004 1,175,061
33,310
1,208,371
Operating costs
Rental operating costs
Recoverable under tenant leases
Non-recoverable costs
Residential inventory cost of sales
Operating income
Other income (loss)
Interest income
376,914
27,955
96,286
501,155
712,692
2,889
2,394
422
5,705
24,452
379,803
367,297
30,349
96,708
506,860
737,144
40,753
65,346
473,396
701,665
2,089
2,544
2,371
7,004
26,306
369,386
43,297
67,717
480,400
727,971
20,902
2,326
23,228
13,666
2,160
15,826
Income from equity-accounted investments
2,349
(2,349)
—
19,189
(19,189)
—
Fair value (loss) gain on investment
properties, net
Investment and other (loss) income
Other expenses
Interest costs, net
General and administrative
Internal leasing costs
Transaction and other costs
Debt prepayment costs, net
Income before income taxes
Current income tax expense (recovery)
Net income
(241,128)
(16,208)
(257,336)
124,052
(1,113)
122,939
(1,842)
277
(1,565)
2,743
(806)
1,937
(219,719)
(15,954)
(235,673)
159,650
(18,948)
140,702
180,365
8,242
188,607
171,521
7,026
178,547
54,437
12,204
8,274
—
74
—
182
—
54,511
12,204
8,456
—
51,400
11,807
17,343
10,914
60
—
272
—
255,280
8,498
263,778
262,985
7,358
$
237,693 $
921
$
236,772 $
— $
—
— $
237,693 $
598,330 $
921
(59)
236,772 $
598,389 $
— $
—
— $
51,460
11,807
17,615
10,914
270,343
598,330
(59)
598,389
79 RioCan Annual Report 2022
MANAGEMENT’S DISCUSSION AND ANALYSIS
Our Business
and Our
Business
Environment
Environmental,
Social and
Governance
(ESG)
Initiatives
Property
Portfolio
Overview
Introduction
RioCan's Proportionate Share (continued)
(thousands of dollars)
Revenue
Rental revenue
Residential inventory sales
Property management and other service fees
Operating costs
Rental operating costs
Recoverable under tenant leases
Non-recoverable costs
Residential inventory cost of sales
Operating income
Other income
Interest income
Income from equity-accounted investments
Fair value loss on investment properties, net
Investment and other income (loss)
Other expenses
Interest costs, net
General and administrative
Internal leasing costs
Transaction and other costs
Loss before income taxes
Current income tax recovery
Deferred income tax expense
Net loss
Results of
Operations
Asset Profile
Development
Program
Capital
Resources
and Liquidity
Other
Disclosures
Non-GAAP
Measures
Risks and
Uncertainties
Year ended December 31, 2020
Equity-
accounted
investments
RioCan's
proportionate
share
IFRS basis
$ 1,090,732 $
17,162 $ 1,107,894
36,347
16,584
6,718
—
43,065
16,584
1,143,663
23,880
1,167,543
377,787
64,751
20,842
463,380
680,283
1,495
1,599
3,567
6,661
17,219
379,282
66,350
24,409
470,041
697,502
14,602
1,383
15,985
3,985
(3,985)
—
(526,775)
(9,613)
(536,388)
8,216
(166)
8,050
(499,972)
(12,381)
(512,353)
180,811
4,788
185,599
40,524
10,192
2,934
42
—
8
40,566
10,192
2,942
234,461
4,838
239,299
$
(54,150) $
— $
(54,150)
(275)
10,905
—
—
(275)
10,905
$
(64,780) $
— $
(64,780)
RioCan Annual Report 2022 80
MANAGEMENT’S DISCUSSION AND ANALYSIS
Our Business
and Our
Business
Environment
Environmental,
Social and
Governance
(ESG)
Initiatives
Property
Portfolio
Overview
Introduction
(ii) NOI
Results of
Operations
Asset Profile
Development
Program
Capital
Resources
and Liquidity
Other
Disclosures
Non-GAAP
Measures
Risks and
Uncertainties
The following table reconciles operating income to NOI for the three months ended December 31, 2022 and 2021 and years
ended December 31, 2022, 2021 and 2020:
(thousands of dollars, except where otherwise
noted)
Operating Income
Adjusted for the following:
Property management and other service fees
Residential inventory gains
Operational lease revenue from ROU assets
Three months ended
December 31
Years ended
December 31
2022
2021
2022
2021
2020
$
175,421 $
194,788 $
712,692 $
701,665 $
680,283
(3,450)
(7,425)
1,516
(3,920)
(26,334)
1,264
(20,996)
(22,373)
5,666
(14,772)
(28,381)
4,799
(16,584)
(15,505)
3,983
NOI
$
166,062 $
165,798 $
674,989 $
663,311 $
652,177
NOI at RioCan's Proportionate Share
The following table reconciles operating income to NOI for equity-accounted investments for the three months ended
December 31, 2022 and 2021 and years ended December 31, 2022, 2021 and 2020:
(thousands of dollars)
NOI at IFRS basis
Add equity-accounted investments:
Operating Income
Adjusted for the following:
Residential inventory gains
Operational lease expenses from ROU assets
NOI from equity-accounted investments
NOI at RioCan's proportionate share
$
$
$
$
Three months ended
December 31
Years ended
December 31
2022
166,062 $
2021
165,798 $
2022
674,989 $
2021
663,311 $
2020
652,177
6,074 $
6,550 $
24,452 $
26,306 $
17,219
—
(202)
5,872 $
(676)
(202)
(514)
(809)
(4,103)
(777)
5,672 $
23,129 $
21,426 $
(3,151)
(506)
13,562
171,934 $
171,470 $
698,118 $
684,737 $
665,739
81 RioCan Annual Report 2022
MANAGEMENT’S DISCUSSION AND ANALYSIS
Our Business
and Our
Business
Environment
Environmental,
Social and
Governance
(ESG)
Initiatives
Property
Portfolio
Overview
Introduction
(iii) Same Property NOI
Results of
Operations
Asset Profile
Development
Program
Capital
Resources
and Liquidity
Other
Disclosures
Non-GAAP
Measures
Risks and
Uncertainties
The following table reconciles Same Property NOI to NOI for the three months and years ended December 31, 2022 and 2021:
(thousands of dollars)
Same Property NOI
NOI from income producing properties:
Acquired (i)
Disposed (i)
NOI from completed properties under development
NOI from properties under de-leasing under development
Lease cancellation fees
Straight-line rent adjustment
NOI from residential rental
NOI (ii)
Three months ended
December 31
Years ended
December 31
2022
2021
2022
2021
$
149,771 $
146,405 $
600,529 $
575,707
85
3,665
3,750
4,867
2,458
391
806
4,019
—
9,923
9,923
3,677
2,485
394
1,050
1,864
574
26,227
26,801
16,927
10,107
5,119
1,884
13,622
110
49,699
49,809
9,683
10,669
6,457
6,928
4,058
$
166,062 $
165,798 $
674,989 $
663,311
Includes properties acquired or disposed of during the periods being compared.
(i)
(ii) Refer to (ii) NOI of this Non-GAAP Measures section of this MD&A for reconciliation from NOI to operating income.
Same Property NOI including completed PUD
(thousands of dollars)
Same Property NOI
Add:
NOI from completed properties under development
Three months ended
December 31
Years ended
December 31
2022
2021
2022
2021
$
149,771 $
146,405 $
600,529 $
575,707
4,867
3,677
16,927
9,683
Same Property NOI including completed PUD
$
154,638 $
150,082 $
617,456 $
585,390
Adjusted Same Property NOI
(thousands of dollars)
Same Property NOI
Add (exclude):
Same property pandemic-related provision (recovery)
Legal and CAM/property tax settlements
Adjusted Same Property NOI
Three months ended
December 31
Years ended
December 31
2022
2021
2022
2021
$
149,771 $
146,405 $
600,529 $
575,707
1,281
1,022
2,742
(741)
1,104
(90)
16,175
(5,929)
$
152,074 $
148,406 $
601,543 $
585,953
RioCan Annual Report 2022 82
MANAGEMENT’S DISCUSSION AND ANALYSIS
Our Business
and Our
Business
Environment
Environmental,
Social and
Governance
(ESG)
Initiatives
Property
Portfolio
Overview
Introduction
(iv) FFO
Results of
Operations
Asset Profile
Development
Program
Capital
Resources
and Liquidity
Other
Disclosures
Non-GAAP
Measures
Risks and
Uncertainties
The following table reconciles net income (loss) attributable to Unitholders to FFO for the three months and years ended
December 31, 2022 and 2021:
(thousands of dollars, except where otherwise noted)
Net income (loss) attributable to Unitholders
2022
2021
2022
2021
$
(4,961) $
208,776 $
236,772 $
598,389
Three months ended
December 31
Years ended
December 31
Add back/(Deduct):
Fair value losses (gains), net
Fair value losses (gains) included in equity-accounted
investments
Internal leasing costs
Transaction losses on investment properties, net (i)
Transaction costs on sale of investment properties
Change in unrealized fair value on marketable securities
Current income tax (recovery) expense
Operational lease revenue from ROU assets
Operational lease expenses from ROU assets in equity-accounted
investments
Capitalized interest on equity-accounted investments (ii)
FFO
Add back:
Debt prepayment costs, net
One-time compensation costs
Restructuring costs
FFO Adjusted
FFO per unit - basic
FFO per unit - diluted
FFO Adjusted per unit - diluted
Weighted average number of Units - basic (in thousands)
Weighted average number of Units - diluted (in thousands)
115,507
(72,255)
241,128
(124,052)
8,404
3,306
560
2,652
382
(184)
1,120
(12)
869
(1,480)
2,982
901
6,324
—
(68)
887
(11)
465
16,207
12,204
1,027
5,734
3,782
921
4,086
(46)
2,863
1,113
11,807
402
14,391
—
(59)
3,308
(42)
1,725
$
127,643 $
146,521 $
524,678 $
506,982
—
—
510
3,896
—
—
—
—
4,289
10,914
6,057
—
128,153 $
150,417 $
528,967 $
523,953
0.42 $
0.42 $
0.42 $
0.46 $
0.46 $
0.48 $
1.71 $
1.71 $
1.73 $
1.60
1.60
1.65
302,321
302,423
315,534
315,733
306,069
306,247
317,201
317,284
$
$
$
$
(i) Represents net transaction gains or losses connected to certain investment properties during the period.
(ii) Refer to table below.
FFO from equity-accounted investments
The following table reconciles income from equity-accounted investments to FFO from equity-accounted investments for the three
months and years ended December 31, 2022 and 2021:
(thousands of dollars, except per unit amounts)
Income (Loss) from equity-accounted investments
Fair value losses (gains) included in equity-accounted investments
Transaction costs on sale of investment properties
Operational lease expenses from ROU assets in equity-accounted
investments
Capitalized interest on equity-accounted investments (i)
Three months ended
December 31
Years ended
December 31
2022
2021
2022
$
(3,864) $
6,503 $
2,349 $
8,404
—
(12)
869
(1,480)
16,207
26
(11)
465
2
(46)
2,863
FFO from equity-accounted investments
$
5,397 $
5,503 $
21,375 $
2021
19,189
1,113
28
(42)
1,725
22,013
(i)
This amount represents the interest capitalized to RioCan's equity-accounted investment in WhiteCastle New Urban Fund, LP, WhiteCastle New
Urban Fund 2, LP, WhiteCastle New Urban Fund 3, LP, WhiteCastle New Urban Fund 4, LP, WhiteCastle New Urban Fund 5, LP, RioCan-
Fieldgate JV, RC (Queensway) LP, RC (Leaside) LP- Class B and PR Bloor Street LP. This amount is not capitalized to properties under
development under IFRS, but is allowed as an adjustment under REALPAC’s definition of FFO.
83 RioCan Annual Report 2022
MANAGEMENT’S DISCUSSION AND ANALYSIS
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and Our
Business
Environment
Environmental,
Social and
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(ESG)
Initiatives
Property
Portfolio
Overview
Introduction
Results of
Operations
Asset Profile
Development
Program
Capital
Resources
and Liquidity
Other
Disclosures
Non-GAAP
Measures
Risks and
Uncertainties
Quarterly FFO, FFO Adjusted, FFO Payout Ratio and FFO Payout Ratio Adjusted
The following tables reconcile quarterly net income (loss) attributable to Unitholders to FFO for the years ended December 31,
2022 and 2021 and for the year ended December 31, 2020:
(thousands of dollars, except per unit amounts)
Net income (loss) attributable to Unitholders
Add back/(Deduct):
Fair value losses (gains), net
Fair value losses included in equity-accounted
investments
Internal leasing costs
Transaction losses (gains) on investment
properties, net
Transaction costs on sale of investment properties
Change in unrealized fair value on marketable
securities
Current income tax expense (recovery)
Q4 2022
Q3 2022
Q2 2022
Q1 2022
Twelve months
ended December 31,
2022
$
(4,961) $
3,215 $
78,460 $ 160,058 $
236,772
115,507
118,783
42,270
(35,432)
241,128
8,404
3,306
560
2,652
382
(184)
3,537
3,088
(270)
1,769
834
3,476
2,825
790
2,985
353
713
452
985
384
600
—
(181)
946
1,999
1,401
16,207
12,204
1,027
5,734
3,782
921
4,086
Operational lease revenue from ROU assets
1,120
1,035
Operational lease expenses from ROU assets in
equity-accounted investments
Capitalized interest on equity-accounted
investments
FFO
Add back:
Debt prepayment costs, net
One-time compensation costs
Restructuring costs
FFO Adjusted
Distribution paid
FFO for last 4 quarters
FFO Adjusted for last 4 quarters
Distributions for last 4 quarters
FFO Payout Ratio
FFO Payout Ratio Adjusted
(12)
(12)
(11)
(11)
(46)
869
825
733
436
$ 127,643 $ 134,803 $ 131,657 $ 130,575 $
—
—
510
—
—
—
—
—
3,170
—
—
609
$ 128,153 $ 134,803 $ 134,827 $ 131,184 $
$
$
$
$
77,195 $
77,497 $
78,817 $
75,907 $
524,678 $
543,556 $
535,661 $
531,521
528,967 $
551,231 $
543,336 $
536,237
309,416 $
308,221 $
306,986 $
304,433
2,863
524,678
—
—
4,289
528,967
309,416
59.0 %
58.5 %
RioCan Annual Report 2022 84
MANAGEMENT’S DISCUSSION AND ANALYSIS
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and Our
Business
Environment
Environmental,
Social and
Governance
(ESG)
Initiatives
Property
Portfolio
Overview
Introduction
Results of
Operations
Asset Profile
Development
Program
Capital
Resources
and Liquidity
Other
Disclosures
Non-GAAP
Measures
Risks and
Uncertainties
Quarterly FFO, FFO Adjusted, FFO Payout Ratio and FFO Payout Ratio Adjusted (continued)
(thousands of dollars, except per unit amounts)
Net income attributable to Unitholders
Add back/(Deduct):
Fair value gains, net
Fair value (gains) losses included in equity-
accounted investments
Deferred income tax expense (recovery)
Internal leasing costs
Transaction losses (gains) on investment
properties, net
Transaction costs on sale of investment properties
Change in unrealized fair value on marketable
securities
Current income tax expense (recovery)
Operational lease revenue from ROU assets
Operational lease expenses from ROU assets in
equity-accounted investments
Capitalized interest on equity-accounted
investments
FFO
Add back:
Debt prepayment costs, net
One-time compensation costs
Restructuring costs
FFO Adjusted
Distribution paid
FFO for last 4 quarters
FFO Adjusted for last 4 quarters
Distributions for last 4 quarters
FFO Payout Ratio
FFO Payout Ratio Adjusted
Q4 2021
Q3 2021
Q2 2021
Q1 2021
Twelve months ended
December 31, 2021
$ 208,776 $ 137,610 $ 145,274 $ 106,729 $
598,389
(72,255)
(20,002)
(22,929)
(8,866)
(124,052)
(1,480)
1,386
—
—
695
—
512
—
2,982
3,206
2,767
2,852
901
234
6,324
2,751
(888)
1,678
155
3,638
—
(68)
887
—
479
834
—
(307)
824
—
(163)
763
(11)
(11)
(11)
(9)
465
421
414
425
$ 146,521 $ 126,908 $ 127,517 $ 106,036 $
3,896
—
—
—
—
—
—
211
—
7,018
5,846
—
$ 150,417 $ 126,908 $ 127,728 $ 118,900 $
$
$
$
$
76,000 $
76,262 $
76,264 $
88,971 $
506,982 $
484,565 $
486,461 $
468,847
523,953 $
497,640 $
499,536 $
481,711
317,497 $
355,882 $
393,998 $
432,121
1,113
—
11,807
402
14,391
—
(59)
3,308
(42)
1,725
506,982
10,914
6,057
—
523,953
317,497
62.6 %
60.6 %
85 RioCan Annual Report 2022
MANAGEMENT’S DISCUSSION AND ANALYSIS
Our Business
and Our
Business
Environment
Environmental,
Social and
Governance
(ESG)
Initiatives
Property
Portfolio
Overview
Introduction
Results of
Operations
Asset Profile
Development
Program
Capital
Resources
and Liquidity
Other
Disclosures
Non-GAAP
Measures
Risks and
Uncertainties
Quarterly FFO, FFO Adjusted, FFO Payout Ratio and FFO Payout Ratio Adjusted (continued)
(thousands of dollars, except per unit amounts)
Net income (loss) attributable to Unitholders
Add back/(Deduct):
Fair value losses, net
Fair value losses included in equity-accounted
investments
Deferred income tax expense (recovery)
Internal leasing costs
Transaction losses (gains) on investment
properties, net
Transaction costs (recoveries) on sale of
investment properties
Change in unrealized fair value on marketable
securities
Current income tax expense (recovery)
Operational lease revenue from ROU assets
Operational lease expenses from ROU assets in
equity-accounted investments
Capitalized interest on equity-accounted
investments
FFO
FFO Adjusted
Distribution paid
FFO Payout Ratio
FFO Payout Ratio Adjusted
Excess Cash Flow
Q4 2020
Q3 2020
Q2 2020
Q1 2020
Twelve months ended
December 31, 2020
$
65,609 $ 117,559 $ (350,770) $ 102,822 $
(64,780)
42,286
8,529
451,707
24,253
526,775
2,852
9,105
2,901
338
1,600
2,029
5,953
(800)
2,219
470
1,000
3,043
121
(616)
980
18
1,003
(1,137)
323
579
—
(711)
710
—
(300)
567
—
10,219
(548)
612
1,284
683
(7)
(7)
(8)
(6)
235
242
235
218
$ 124,104 $ 128,804 $ 109,903 $ 144,583 $
$ 124,104 $ 128,804 $ 109,903 $ 144,583 $
$ 114,385 $ 114,378 $ 114,387 $ 114,371 $
9,613
10,905
10,192
503
768
10,219
(275)
2,572
(28)
930
507,394
507,394
457,521
90.2 %
90.2 %
(thousands of dollars, except per unit amounts)
FFO (i)
Distributions paid to Unitholders
Maintenance capital expenditures
Excess Cash Flow
(i) Refer to above for reconciliation from net income to FFO.
Years ended
December 31
2022
2021
$
524,678 $
506,982
(309,416)
(317,497)
(60,495)
(52,822)
$
154,767 $
136,663
RioCan Annual Report 2022 86
MANAGEMENT’S DISCUSSION AND ANALYSIS
Our Business
and Our
Business
Environment
Environmental,
Social and
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(ESG)
Initiatives
Property
Portfolio
Overview
Introduction
(v) AFFO
Results of
Operations
Asset Profile
Development
Program
Capital
Resources
and Liquidity
Other
Disclosures
Non-GAAP
Measures
Risks and
Uncertainties
The following table reconciles FFO to AFFO for the three months and years ended December 31, 2022 and 2021:
(thousands of dollars)
FFO (i)
Add back (deduct):
Straight-line rent
Straight-line rent in equity-accounted investments
Normalized capital expenditures:
Leasing commissions and tenant improvements
Capital expenditures on recoverable from tenants
Capital expenditures not recoverable from tenants
Internal leasing costs
Internal leasing costs related to development properties
AFFO
Add back:
Debt prepayment costs, net
One-time compensation costs
Restructuring costs
AFFO Adjusted
Three months ended
December 31
Years ended
December 31
2022
2021
2022
2021
$
127,643 $
146,521 $
524,678 $
506,982
(1,884)
(1,461)
(6,928)
(1,766)
(806)
(295)
(5,625)
(5,625)
(1,250)
(3,306)
610
(1,050)
(414)
(6,750)
(3,000)
(1,500)
(2,982)
550
(22,500)
(22,500)
(5,000)
(12,204)
2,252
111,346
131,375
461,381
—
—
510
3,896
—
—
—
—
4,289
(27,000)
(12,000)
(6,000)
(11,807)
2,179
443,660
10,914
6,057
—
$
111,856 $
135,271 $
465,670 $
460,631
(i) Refer to (iv) FFO of this Non-GAAP Measures section of this MD&A for reconciliation from net income to FFO.
Quarterly AFFO, AFFO Payout Ratio and AFFO Payout Ratio Adjusted
The following tables reconcile FFO to AFFO for the years ended December 31, 2022 and 2021 and year ended December 31,
2020:
Q4 2022
Q3 2022
Q2 2022
Q1 2022
Twelve months ended
December 31, 2022
$ 127,643 $ 134,803 $ 131,657 $ 130,575 $
524,678
(thousands of dollars)
FFO (i)
Add back (deduct):
Straight-line rent
Straight-line rent in equity-accounted investments
Normalized capital expenditures:
Leasing commissions and tenant improvements
Capital expenditures on recoverable from tenants
Capital expenditures not recoverable from tenants
Internal leasing costs
Internal leasing costs related to development
properties
AFFO
Add back:
Restructuring costs
AFFO Adjusted
Distributions paid
(806)
(295)
196
(370)
(359)
(406)
(915)
(390)
(5,625)
(5,625)
(1,250)
(3,306)
(5,625)
(5,625)
(1,250)
(3,088)
(5,625)
(5,625)
(1,250)
(2,825)
(5,625)
(5,625)
(1,250)
(2,985)
610
570
521
551
$ 111,346 $ 119,611 $ 116,088 $ 114,336 $
510
—
3,170
609
$ 111,856 $ 119,611 $ 119,258 $ 114,945 $
(1,884)
(1,461)
(22,500)
(22,500)
(5,000)
(12,204)
2,252
461,381
4,289
465,670
$
77,195 $
77,497 $
78,817 $
75,907 $
309,416
AFFO last 4 quarters
$ 461,381 $ 481,410 $ 471,858 $ 467,635
AFFO Adjusted for last 4 quarters
$ 465,670 $ 489,085 $ 479,533 $ 472,351
Distributions last four quarters
$ 309,416 $ 308,221 $ 306,986 $ 304,433
AFFO Payout Ratio
AFFO Payout Ratio Adjusted
67.1 %
66.4 %
(i) Refer to (iv) FFO of this Non-GAAP Measures section of this MD&A for reconciliation from net income to FFO.
87 RioCan Annual Report 2022
MANAGEMENT’S DISCUSSION AND ANALYSIS
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and Our
Business
Environment
Environmental,
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(ESG)
Initiatives
Property
Portfolio
Overview
Introduction
Results of
Operations
Asset Profile
Development
Program
Capital
Resources
and Liquidity
Other
Disclosures
Non-GAAP
Measures
Risks and
Uncertainties
Quarterly AFFO, AFFO Payout Ratio and AFFO Payout Ratio Adjusted (continued)
Q4 2021
Q3 2021
Q2 2021
Q1 2021
Twelve months ended
December 31, 2021
$ 146,521 $ 126,908 $ 127,517 $ 106,036 $
506,982
(thousands of dollars)
FFO (i)
Add back (deduct):
Straight-line rent
(1,050)
(2,544)
(1,648)
(1,686)
Straight-line rent in equity-accounted investments
(414)
(441)
(498)
(413)
Normalized capital expenditures:
Leasing commissions and tenant improvements
Capital expenditures on recoverable from tenants
Capital expenditures not recoverable from tenants
Internal leasing costs
Internal leasing costs related to development
properties
AFFO
Add back:
Debt prepayment costs, net
One-time compensation costs
AFFO Adjusted
Distributions paid
AFFO last 4 quarters
AFFO Adjusted for last 4 quarters
Distributions last four quarters
AFFO Payout Ratio
AFFO Payout Ratio Adjusted
(6,750)
(3,000)
(1,500)
(2,982)
(6,750)
(3,000)
(1,500)
(3,206)
(6,750)
(3,000)
(1,500)
(2,767)
(6,750)
(3,000)
(1,500)
(2,852)
550
592
511
526
$ 131,375 $ 110,059 $ 111,865 $
90,361 $
3,896
—
—
—
—
211
7,018
5,846
$ 135,271 $ 110,059 $ 112,076 $ 103,225 $
$
76,000 $
76,262 $
76,264 $
88,971 $
$ 443,660 $ 422,248 $ 428,138 $ 412,550
$ 460,631 $ 435,323 $ 441,213 $ 425,414
$ 317,497 $ 355,882 $ 393,998 $ 432,121
(i) Refer to (iv) FFO of this Non-GAAP Measures section of this MD&A for reconciliation from net income to FFO.
(thousands of dollars)
FFO (i)
Add back (deduct):
Straight-line rent
(1,458)
(1,200)
(1,816)
(2,703)
Straight-line rent in equity-accounted investments
(317)
—
—
—
Normalized capital expenditures:
Leasing commissions and tenant improvements
Capital expenditures on recoverable from tenants
Capital expenditures not recoverable from tenants
Internal leasing costs
Internal leasing costs related to development
properties
AFFO
AFFO Adjusted
Distributions paid
AFFO Payout Ratio
AFFO Payout Ratio Adjusted
(4,000)
(4,500)
(1,500)
(2,901)
(4,000)
(4,500)
(1,500)
(2,029)
(4,000)
(4,500)
(1,500)
(2,219)
(4,000)
(4,500)
(1,500)
(3,043)
535
374
409
562
$ 109,963 $ 115,949 $
96,277 $ 129,399 $
$ 109,963 $ 115,949 $
96,277 $ 129,399 $
$ 114,385 $ 114,378 $ 114,387 $ 114,371 $
(i) Refer to (iv) FFO of this Non-GAAP Measures section of this MD&A for reconciliation from net income to FFO.
(6,928)
(1,766)
(27,000)
(12,000)
(6,000)
(11,807)
2,179
443,660
10,914
6,057
460,631
317,497
71.6%
68.9%
(7,177)
(317)
(16,000)
(18,000)
(6,000)
(10,192)
1,880
451,588
451,588
457,521
101.3 %
101.3 %
Q4 2020
Q3 2020
Q2 2020
Q1 2020
Twelve months ended
December 31, 2020
$ 124,104 $ 128,804 $ 109,903 $ 144,583 $
507,394
RioCan Annual Report 2022 88
MANAGEMENT’S DISCUSSION AND ANALYSIS
Our Business
and Our
Business
Environment
Environmental,
Social and
Governance
(ESG)
Initiatives
Property
Portfolio
Overview
Introduction
Results of
Operations
Asset Profile
Development
Program
Capital
Resources
and Liquidity
Other
Disclosures
Non-GAAP
Measures
Risks and
Uncertainties
(vi) Adjusted G&A Expense
(thousands of dollars)
Total G&A expense
Deduct:
One-time compensation costs
Restructuring costs
Adjusted G&A Expense
(vii) Development Spending
Three months ended December 31
Years ended December 31
2022
2021
Change
2022
2021
Change
$
12,845 $
11,924 $
921 $
54,437 $
51,400 $
3,037
—
510
—
—
—
510
—
6,057
(6,057)
4,289
—
$
12,335 $
11,924 $
411 $
50,148 $
45,343 $
4,289
4,805
Total Development Spending for the three months and years ended December 31, 2022 and 2021 are as follows:
(thousands of dollars)
Development expenditures on balance sheet:
Properties under development
Residential inventory
Three months ended
December 31
Years ended
December 31
2022
2021
2022
2021
$
78,282 $
33,631
79,457 $
14,330
298,409 $
112,597
365,120
62,351
RioCan's share of Development Spending from equity-accounted
joint ventures
2,639
1,619
16,062
10,456
Total Development Spending (i)
$
114,552 $
95,406 $
427,068 $
437,927
(i) Effective Q1 2022, the definition of total Development Spending was revised to include RioCan's share of Development Spending from equity-
accounted joint ventures accordingly, the comparative period has been restated.
(viii) Value of Development Deliveries
Total Value of Development Deliveries for the three months and years ended December 31, 2022 and 2021 are as follows:
(thousands of dollars)
Three months ended
December 31
Years ended
December 31
2022
2021
2022
2021
Transfers PUD to IPP at fair value IFRS basis
Revenue from residential inventory sales IFRS basis
Total Value of Development Deliveries
$
$
239,297 $
71,041 $
569,494 $
174,159
33,873
65,620
118,659
93,727
273,170 $
136,661 $
688,153 $
267,886
(ix) Total Development at Cost
Total Development at Cost as at December 31, 2022 are as follows:
As at
Residential inventory cost to date
IFRS basis
Commissions
Adjustments
for EAI JV
Cost
3,287
(thousands of dollars)
Projects under construction $ 195,200 $
Shovel ready development
sites
Zoning approved
Zoning application
submitted
Future developments
Development lands &
others
Total Development at
Cost
$ 272,005 $
47,256
22,112
4,150
—
(ii)
Total
16,423 $ 223,257 $ 665,941 $
IFRS
basis
Adjustments
for EAI JV
PUD cost to date
Total
Residential
inventory
and PUD
cost to
Total
date
1,390 $ 667,331 $ 890,588
—
3,287
77,374
—
77,374
80,661
10,272 57,528
91,272
—
91,272
148,800
(i)
11,634 $
—
—
—
101,798 123,910
55,818
3,991
59,809
183,719
—
—
—
4,150
97,709
—
97,709
101,859
—
—
65,783
—
65,783
65,783
11,634 $ 128,493 $ 412,132 $ 1,053,897 $
5,381 $ 1,059,278 $ 1,471,410
Total properties under development at fair value
$ 1,178,610
(i)
(ii)
Includes selling commissions which are included in prepaid expenses and other assets.
Includes $1.2 million commissions for EAI JV.
89 RioCan Annual Report 2022
MANAGEMENT’S DISCUSSION AND ANALYSIS
Our Business
and Our
Business
Environment
Environmental,
Social and
Governance
(ESG)
Initiatives
Property
Portfolio
Overview
Introduction
Results of
Operations
Asset Profile
Development
Program
Capital
Resources
and Liquidity
Other
Disclosures
Non-GAAP
Measures
Risks and
Uncertainties
(x) Total Acquisitions
Total Acquisitions for the three months and years ended December 31, 2022 and 2021 are as follows:
(thousands of dollars)
Income producing properties
Properties under development
Residential inventory
Three months ended
December 31
Years ended
December 31
2022
2021
2022
$
5,011 $
— $
96,031 $
—
—
—
—
—
—
11,946
19,440
66,497
2021
11,482
5,563
—
—
RioCan's share of acquisitions from equity-accounted joint ventures
Total Acquisitions
$
5,011 $
— $
193,914 $
17,045
(xi) Total debt and Total Contractual Debt
RioCan uses both debt and equity in its capital structure, which is summarized as follows as at December 31, 2022 and
December 31, 2021:
As at
December 31, 2022
December 31, 2021
(thousands of dollars)
Debentures payable
Mortgages payable
Lines of credit and other bank loans
Total debt
Total equity
Total capital
As at
(thousands of dollars)
Total debt
Less:
Unamortized debt financing costs,
premiums and discounts on
origination and debt assumed, and
modifications
Equity-
accounted
investments
RioCan's
proportionate
share
IFRS basis
Equity-
accounted
investments
RioCan's
proportionate
share
IFRS basis
$ 2,942,051 $
— $ 2,942,051 $ 2,990,692 $
2,659,180
1,141,112
172,100
89,187
2,831,280
1,230,299
2,334,016
1,285,910
$ 6,742,343 $
261,287 $ 7,003,630 $ 6,610,618 $
7,728,892
—
7,728,892
7,911,344
$ 14,471,235 $
261,287 $ 14,732,522 $ 14,521,962 $
— $ 2,990,692
2,500,384
166,368
48,049
1,333,959
214,417 $ 6,825,035
—
7,911,344
214,417 $ 14,736,379
December 31, 2022
December 31, 2021
Equity-
accounted
investments
RioCan's
proportionate
IFRS basis
$ 6,742,343 $
share
261,287 $ 7,003,630 $ 6,610,618 $
IFRS basis
Equity-
accounted
investments
RioCan's
proportionate
share
214,417 $ 6,825,035
(15,634)
(690)
(16,324)
(16,414)
(386)
(16,800)
Total Contractual Debt
$ 6,757,977 $
261,977 $ 7,019,954 $ 6,627,032 $
214,803 $ 6,841,835
RioCan Annual Report 2022 90
MANAGEMENT’S DISCUSSION AND ANALYSIS
Our Business
and Our
Business
Environment
Environmental,
Social and
Governance
(ESG)
Initiatives
Property
Portfolio
Overview
Introduction
Results of
Operations
Asset Profile
Development
Program
Capital
Resources
and Liquidity
Other
Disclosures
Non-GAAP
Measures
Risks and
Uncertainties
(xii) Total Adjusted Debt to Total Adjusted Assets
As at
December 31, 2022
December 31, 2021
(thousands of dollars)
Total debt
Cash and cash equivalents
IFRS basis
$ 6,742,343 $
86,229
Equity-
accounted
investments
RioCan's
proportionate
share
261,287 $ 7,003,630 $ 6,610,618 $
94,230
IFRS basis
77,758
8,001
Equity-
accounted
investments
RioCan's
proportionate
share
214,417 $ 6,825,035
9,113
86,871
Total Adjusted Debt
$ 6,656,114 $
253,286 $ 6,909,400 $ 6,532,860 $
205,304 $ 6,738,164
Total assets
Cash and cash equivalents
$ 15,101,859 $
86,229
294,125 $ 15,395,984 $ 15,177,463 $
94,230
77,758
8,001
248,230 $ 15,425,693
9,113
86,871
Total Adjusted Assets
$ 15,015,630 $
286,124 $ 15,301,754 $ 15,099,705 $
239,117 $ 15,338,822
Total Adjusted Debt to Total Adjusted
Assets
44.3 %
45.2 %
43.3 %
43.9 %
As at
December 31, 2020
(thousands of dollars)
Total debt
Cash and cash equivalents
Total Adjusted Debt
Total assets
Cash and cash equivalents
Total Adjusted Assets
Total Adjusted Debt to Total Adjusted
Assets
(xiii) Floating Rate Debt and Fixed Rate Debt
IFRS basis
$ 6,927,883 $
Equity-
accounted
investments
RioCan's
proportionate
share
137,053 $ 7,064,936
238,456
2,203
240,659
$ 6,689,427 $
134,850 $ 6,824,277
$ 15,267,708 $
146,737 $ 15,414,445
238,456
2,203
240,659
$ 15,029,252 $
144,534 $ 15,173,786
44.5 %
45.0 %
As at
December 31, 2022
December 31, 2021
Total fixed rate debt
Total floating rate debt
Total debt
Ratio of floating rate debt to total
debt
Total floating rate debt
Less:
Revolving unsecured operating line
of credit
Total floating rate debt
(excluding revolving unsecured
operating line of credit)
Ratio of floating rate debt to total
debt (excluding revolving unsecured
operating line of credit)
IFRS basis
Equity-
accounted
investments
RioCan's
proportionate
share
IFRS basis
Equity-
accounted
investments
RioCan's
proportionate
share
$ 6,301,054
$
141,720 $ 6,442,774 $ 6,024,281 $
142,383 $ 6,166,664
441,289
119,567
560,856
586,337
72,034
658,371
$ 6,742,343
$
261,287 $ 7,003,630 $ 6,610,618 $
214,417 $ 6,825,035
6.5%
8.0%
8.9%
9.6%
$ 441,289
$
119,567 $
560,856 $
586,337 $
72,034 $
658,371
131,601
—
131,601
363,732
—
363,732
$ 309,688
$
119,567 $
429,255 $
222,605 $
72,034 $
294,639
4.6 %
6.1%
3.4%
4.3%
91 RioCan Annual Report 2022
MANAGEMENT’S DISCUSSION AND ANALYSIS
Our Business
and Our
Business
Environment
Environmental,
Social and
Governance
(ESG)
Initiatives
Property
Portfolio
Overview
Introduction
(xiv) Unsecured Debt and Secured Debt
Results of
Operations
Asset Profile
Development
Program
Capital
Resources
and Liquidity
Other
Disclosures
Non-GAAP
Measures
Risks and
Uncertainties
The following table reconciles total Unsecured and Secured Debt to Total Contractual Debt as at December 31, 2022 and
December 31, 2021:
As at
December 31, 2022
December 31, 2021
(thousands of dollars, except where
otherwise noted)
Total Unsecured Debt
Total Secured Debt
Total Contractual Debt
Percentage of Total Contractual Debt:
Unsecured Debt
Secured Debt
(xv) Liquidity
IFRS basis
Equity-
accounted
investments
RioCan's
proportionate
share
IFRS basis
Equity-
accounted
investments
$
3,783,649 $
— $
3,783,649 $
4,065,920 $
— $
RioCan's
proportionate
share
4,065,920
2,974,328
261,977
3,236,305
2,561,112
214,803
2,775,915
$
6,757,977 $
261,977 $
7,019,954 $
6,627,032 $
214,803 $
6,841,835
56.0 %
44.0 %
53.9 %
46.1 %
61.4 %
38.6 %
59.4 %
40.6 %
As at December 31, 2022, RioCan had $1.5 billion of Liquidity as summarized in the following table:
As at
December 31, 2022
December 31, 2021
(thousands of dollars, except
where otherwise noted)
Undrawn revolving unsecured
operating line of credit
Undrawn construction lines and
other bank loans
Cash and cash equivalents
IFRS basis
Equity-
accounted
investments
RioCan's
proportionate
share
IFRS basis
Equity-
accounted
investments
RioCan's
proportionate
share
$ 1,116,351 $
— $ 1,116,351 $
634,080 $
— $
634,080
267,562
86,229
70,094
8,001
337,656
94,230
241,883
77,758
47,641
9,113
289,524
86,871
Liquidity
$ 1,470,142 $
78,095 $ 1,548,237 $
953,721 $
56,754 $ 1,010,475
RioCan Annual Report 2022 92
MANAGEMENT’S DISCUSSION AND ANALYSIS
Our Business
and Our
Business
Environment
Environmental,
Social and
Governance
(ESG)
Initiatives
Property
Portfolio
Overview
Introduction
(xvi) Adjusted EBITDA and Coverage Ratios
Results of
Operations
Asset Profile
Development
Program
Capital
Resources
and Liquidity
Other
Disclosures
Non-GAAP
Measures
Risks and
Uncertainties
The following table reconciles consolidated net income attributable to Unitholders to Adjusted EBITDA:
As at
December 31, 2022
December 31, 2021
12 months ended
IFRS basis
Equity-
accounted
investments
RioCan's
proportionate
share IFRS basis
Equity-
accounted
investments
RioCan's
proportionate
share
$ 236,772 $
— $
236,772 $ 598,389 $
— $
598,389
(thousands of dollars)
Net income attributable to Unitholders
Add (deduct) the following items:
Income tax expense (recovery):
Current
Fair value losses (gains) on investment
properties, net
Change in unrealized fair value on
marketable securities (i)
Internal leasing costs
Non-cash unit-based compensation expense
Interest costs, net
Debt prepayment costs, net
One-time cash compensation costs
Restructuring costs
Depreciation and amortization
Transaction losses on the sale of investment
properties, net (ii)
Transaction costs on investment properties
Operational lease revenue (expenses) from
ROU assets
Adjusted EBITDA
921
—
921
(59)
—
(59)
241,128
16,208
257,336
(124,052)
1,113
(122,939)
3,783
12,204
9,056
—
—
—
3,783
12,204
—
11,807
9,056
12,546
—
—
—
—
11,807
12,546
180,365
8,242
188,607
171,521
7,026
178,547
—
—
4,289
4,774
1,024
5,734
—
—
—
—
—
3
—
—
4,289
4,774
1,024
10,914
1,932
—
4,022
402
5,737
14,363
—
—
—
—
—
28
10,914
1,932
—
4,022
402
14,391
4,086
(46)
4,040
3,308
(42)
3,266
$ 704,136 $
24,407 $
728,543 $ 705,093 $
8,125 $
713,218
(i)
(ii)
The fair value gains and losses on marketable securities may include both the change in unrealized fair value and realized gains and losses on the
sale of marketable securities. By adding back the change in unrealized fair value on marketable securities, RioCan effectively continues to include
realized gains and losses on the sale of marketable securities in Adjusted EBITDA and excludes unrealized fair value gains and losses on
marketable securities in Adjusted EBITDA.
Includes transaction gains and losses realized on the disposition of investment properties.
93 RioCan Annual Report 2022
MANAGEMENT’S DISCUSSION AND ANALYSIS
Our Business
and Our
Business
Environment
Environmental,
Social and
Governance
(ESG)
Initiatives
Property
Portfolio
Overview
Introduction
Results of
Operations
Asset Profile
Development
Program
Capital
Resources
and Liquidity
Other
Disclosures
Non-GAAP
Measures
Risks and
Uncertainties
As at rolling 12 months ended
December 31, 2020
(thousands of dollars)
Net loss attributable to Unitholders
Add (deduct) the following items:
Income tax expense (recovery):
Current
Deferred
Fair value losses on investment properties, net
Change in unrealized fair value on marketable
securities (i)
Internal leasing costs
Non-cash unit-based compensation expense
Interest costs, net
Depreciation and amortization
Transaction losses on the sale of investment
properties, net (ii)
Transaction costs on investment properties
Operational lease revenue (expenses) from
ROU assets
Adjusted EBITDA
IFRS basis
Equity-
accounted
investments
RioCan's
proportionate
share
$
(64,780) $
— $
(64,780)
(275)
10,905
526,775
10,219
10,192
9,120
—
—
(275)
10,905
9,613
536,388
—
—
—
10,219
10,192
9,120
180,811
4,788
185,599
4,342
503
768
—
—
—
4,342
503
768
2,572
(28)
2,544
$ 691,152 $
14,373 $
705,525
(i)
(ii)
The fair value gains on marketable securities include both the change in unrealized fair value and realized gains on the sale of marketable
securities. By adding back the change in unrealized fair value on marketable securities, RioCan effectively continues to include realized gains or
losses on the sale of marketable securities in Adjusted EBITDA and excludes unrealized fair value gains (losses) on marketable securities in
Adjusted EBITDA.
Includes transaction gains and losses realized on the disposition of investment properties.
RioCan Annual Report 2022 94
MANAGEMENT’S DISCUSSION AND ANALYSIS
Our Business
and Our
Business
Environment
Environmental,
Social and
Governance
(ESG)
Initiatives
Property
Portfolio
Overview
Introduction
Adjusted EBITDA Ratios
Results of
Operations
Asset Profile
Development
Program
Capital
Resources
and Liquidity
Other
Disclosures
Non-GAAP
Measures
Risks and
Uncertainties
Adjusted Debt to Adjusted EBITDA, Interest Coverage and Debt Service Coverage ratios are calculated as follows:
As at
December 31, 2022
December 31, 2021
12 months ended
(thousands of dollars)
IFRS basis
Adjusted Debt to Adjusted EBITDA
Equity-
accounted
investments
RioCan's
proportionate
share IFRS basis
Equity-
accounted
investments
RioCan's
proportionate
share
Average total debt outstanding
$ 6,756,628 $
251,888 $ 7,008,516 $ 6,773,147 $
192,804 $ 6,965,951
Less: average cash and cash equivalents
(74,871)
(8,791)
(83,662)
(119,400)
(5,639)
(125,039)
Average Total Adjusted Debt
Adjusted EBITDA
$ 6,681,757 $
243,097 $ 6,924,854 $ 6,653,747 $
187,165 $ 6,840,912
$ 704,136 $
24,407 $
728,543 $ 705,093 $
8,125 $
713,218
Adjusted Debt to Adjusted EBITDA
9.49
9.51
9.44
9.59
Interest Coverage
Adjusted EBITDA
Interest costs, net
$ 704,136 $
24,407 $
728,543 $ 705,093 $
8,125 $
713,218
$ 180,365 $
8,242 $
188,607 $ 171,521 $
7,026 $
178,547
Interest expense capitalized to PUD
43,675
1,924
45,599
40,287
53
40,340
Gross interest costs
Interest Coverage
Debt Service Coverage
Adjusted EBITDA
$ 224,040 $
10,166 $
234,206 $ 211,808 $
7,079 $
218,887
3.14
3.11
3.33
3.26
$ 704,136 $
24,407 $
728,543 $ 705,093 $
8,125 $
713,218
Gross interest costs
Scheduled mortgage principal amortization
$ 224,040 $
10,166 $
234,206 $ 211,808 $
7,079 $
218,887
45,640
2,244
47,884
48,817
2,046
50,863
$ 269,680 $
12,410 $
282,090 $ 260,625 $
9,125 $
269,750
2.61
2.58
2.71
2.64
December 31, 2020
IFRS basis
Equity-
accounted
investments
RioCan's
proportionate
share
$ 6,667,444 $
128,270 $ 6,795,714
(111,487)
(1,920)
(113,407)
$ 6,555,957 $
126,350 $ 6,682,307
$ 691,152 $
14,373 $
705,525
9.49
9.47
$ 691,152 $
14,373 $
705,525
$ 180,811 $
4,788 $
185,599
41,782
—
41,782
$ 222,593 $
4,788 $
227,381
3.11
3.10
Debt Service Cost
Debt Service Coverage
As at 12 months ended
(thousands of dollars)
Adjusted Debt to Adjusted EBITDA
Average total debt outstanding
Less: average cash and cash equivalents
Average Total Adjusted Debt
Adjusted EBITDA
Adjusted Debt to Adjusted EBITDA
Interest Coverage
Adjusted EBITDA
Interest costs, net
Interest expense capitalized to PUD
Gross interest costs
Interest Coverage
95 RioCan Annual Report 2022
MANAGEMENT’S DISCUSSION AND ANALYSIS
Our Business
and Our
Business
Environment
Environmental,
Social and
Governance
(ESG)
Initiatives
Property
Portfolio
Overview
Introduction
(xvii) Unencumbered Assets
Results of
Operations
Asset Profile
Development
Program
Capital
Resources
and Liquidity
Other
Disclosures
Non-GAAP
Measures
Risks and
Uncertainties
The table below summarizes RioCan's Unencumbered Assets, Unsecured Debt and NOI generated from Unencumbered Assets
as at December 31, 2022 and December 31, 2021:
As at
December 31, 2022
December 31, 2021
(thousands of dollars, except
where otherwise noted)
Unencumbered Assets
Total Unsecured Debt
Unencumbered Assets to
Unsecured Debt
Annual Normalized NOI - total
portfolio (i)
Annual Normalized NOI -
Unencumbered Assets (i)
Percentage of Normalized
NOI Generated from
Unencumbered Assets
Targeted
Ratios
IFRS basis
$ 8,200,280 $
Equity-
accounted
investments
RioCan's
proportionate
share
IFRS basis
Equity-
accounted
investments
56,228 $
8,256,508 $ 9,332,833 $
59,433 $
RioCan's
proportionate
share
9,392,266
$ 3,783,649 $
— $
3,783,649 $ 4,065,920 $
— $
4,065,920
> 200%
217 %
218 %
230 %
231 %
$
$
646,540 $
23,488 $
670,028 $
649,208 $
22,688 $
671,896
370,804 $
3,440 $
374,244 $
432,820 $
3,440 $
436,260
> 50.0%
57.4 %
55.9 %
66.7 %
64.9 %
(i) Annual Normalized NOI is reconciled in the table below.
Three months ended
December 31, 2022
Three months ended
December 31, 2021
(thousands of dollars, except where
otherwise noted)
NOI (i)
IFRS basis
$
166,062 $
Equity-
accounted
investments
5,872 $
RioCan's
proportionate
share
171,934 $
IFRS basis
165,798 $
Equity-
accounted
investments
5,672 $
RioCan's
proportionate
share
171,470
Adjust the following:
Miscellaneous revenue
Percentage rent
Lease cancellation fees
Normalized NOI - total portfolio
Annual Normalized NOI - total
portfolio(ii)
NOI from Unencumbered Assets
Adjust the following for Unencumbered
Assets:
Miscellaneous revenue
Percentage rent
Lease cancellation fees
Normalized NOI -Unencumbered
Assets
Annual Normalized NOI -
unencumbered assets (ii)
$
$
$
$
$
(802)
(3,234)
(391)
—
—
—
(802)
(540)
(3,234)
(2,562)
(391)
(394)
—
—
—
(540)
(2,562)
(394)
161,635 $
5,872 $
167,507 $
162,302 $
5,672 $
167,974
646,540 $
23,488 $
670,028 $
649,208 $
22,688 $
671,896
94,957 $
860 $
95,817 $
110,517 $
860 $
111,377
(518)
(1,430)
(308)
—
—
—
(518)
(253)
(1,430)
(1,852)
(308)
(207)
—
—
—
(253)
(1,852)
(207)
92,701 $
860 $
93,561 $
108,205 $
860 $
109,065
370,804 $
3,440 $
374,244 $
432,820 $
3,440 $
436,260
(i) Refer to (ii) NOI of this Non-GAAP Measures section of this MD&A for reconciliation from NOI to operating income.
(ii) Calculated by multiplying Normalized NOI by a factor of 4.
RioCan Annual Report 2022 96
MANAGEMENT’S DISCUSSION AND ANALYSIS
Our Business
and Our
Business
Environment
Environmental,
Social and
Governance
(ESG)
Initiatives
Property
Portfolio
Overview
Introduction
Selected Quarterly Non-GAAP measures
NOI
Results of
Operations
Asset Profile
Development
Program
Capital
Resources
and Liquidity
Other
Disclosures
Non-GAAP
Measures
Risks and
Uncertainties
(thousands of dollars)
Three months ended
Operating Income
Adjusted for the following:
Property management and
other service fees
Residential inventory gains
Operational lease revenue
from ROU assets
NOI
2022
2021
Q4
Q3
Q2
Q1
Q4
Q3
Q2
Q1
$ 175,421 $ 182,492 $ 180,912 $ 173,868 $ 194,788 $ 167,970 $ 171,805 $ 167,102
(3,450)
(5,553)
(6,112)
(5,882)
(3,920)
(3,945)
(3,731)
(3,175)
(7,425)
(7,767)
(5,148)
(2,033)
(26,334)
—
(2,048)
—
1,516
1,419
1,386
1,346
1,264
1,209
1,221
1,105
$ 166,062 $ 170,591 $ 171,038 $ 167,299 $ 165,798 $ 165,234 $ 167,247 $ 165,032
Total Adjusted Debt to Total Adjusted Assets at RioCan's proportionate share
As at
(thousands of dollars)
IFRS basis:
Total debt
Cash and cash equivalents
Q4
2022
Q3
Q2
Q1
Q4
2021
Q3
Q2
Q1
$ 6,742,343 $ 6,842,235 $ 6,877,716 $ 6,710,226 $ 6,610,618 $ 6,739,530 $ 6,763,918 $ 6,823,788
79,685
102,715
98,386
53,315
71,864
86,229
85,188
77,758
Total Adjusted Debt
$ 6,656,114 $ 6,788,920 $ 6,805,852 $ 6,625,038 $ 6,532,860 $ 6,636,815 $ 6,665,532 $ 6,744,103
Add equity-accounted investments:
Total debt
$ 261,287 $ 266,679 $ 259,824 $ 257,235 $ 214,417 $ 207,725 $ 203,531 $ 201,294
Cash and cash equivalents
8,001
9,184
8,101
9,556
9,113
5,776
3,891
7,214
Total Adjusted Debt
$ 253,286 $ 257,495 $ 251,723 $ 247,679 $ 205,304 $ 201,949 $ 199,640 $ 194,080
Total Adjusted Debt - RioCan's
proportionate share
IFRS basis:
Total assets
$ 6,909,400 $ 7,046,415 $ 7,057,575 $ 6,872,717 $ 6,738,164 $ 6,838,764 $ 6,865,172 $ 6,938,183
$ 15,101,859 $ 15,324,236 $ 15,473,722 $ 15,346,426 $ 15,177,463 $ 15,291,760 $ 15,235,628 $ 15,174,530
Cash and cash equivalents
86,229
53,315
71,864
85,188
77,758
102,715
98,386
79,685
Total Adjusted Assets
$ 15,015,630 $ 15,270,921 $ 15,401,858 $ 15,261,238 $ 15,099,705 $ 15,189,045 $ 15,137,242 $ 15,094,845
Add equity-accounted investments:
Total assets
Cash and cash equivalents
$ 294,125 $ 295,798 $ 287,550 $ 286,344 $ 248,230 $ 232,001 $ 235,369 $ 229,035
7,214
8,001
3,891
8,101
9,556
9,113
5,776
9,184
Total Adjusted Assets
$ 286,124 $ 286,614 $ 279,449 $ 276,788 $ 239,117 $ 226,225 $ 231,478 $ 221,821
Total Adjusted Assets - RioCan's
proportionate share
Total Adjusted Debt to Total
Adjusted Assets - IFRS basis
Total Adjusted Debt to Total
Adjusted Assets - RioCan's
proportionate share
$ 15,301,754 $ 15,557,535 $ 15,681,307 $ 15,538,026 $ 15,338,822 $ 15,415,270 $ 15,368,720 $ 15,316,666
44.3 %
44.5 %
44.2 %
43.4 %
43.3 %
43.7 %
44.0 %
44.7 %
45.2 %
45.3 %
45.0 %
44.2 %
43.9 %
44.4 %
44.7 %
45.3 %
97 RioCan Annual Report 2022
MANAGEMENT’S DISCUSSION AND ANALYSIS
Our Business
and Our
Business
Environment
Environmental,
Social and
Governance
(ESG)
Initiatives
Property
Portfolio
Overview
Introduction
Results of
Operations
Asset Profile
Development
Program
Capital
Resources
and Liquidity
Other
Disclosures
Non-GAAP
Measures
Risks and
Uncertainties
Adjusted Debt to Adjusted EBITDA at RioCan's proportionate share
As at
(thousands of dollars)
Net income (loss) attributable to
Unitholders
Add (deduct) the following items:
Income tax expense (recovery):
Current
Deferred
Fair value losses (gains) on investment
properties, net
Change in unrealized fair value on
marketable securities
2022
2021
Q4
Q3
Q2
Q1
Q4
Q3
Q2
Q1
$ 236,772 $ 450,509 $ 584,904 $ 651,718 $ 598,389 $ 455,222 $ 435,171 $
(60,873)
921
—
1,037
—
682
—
(77)
—
(59)
—
(702)
(1,481)
(1,722)
9,105
10,705
9,905
241,128
53,366
(85,419)
(150,618)
(124,052)
(9,511)
19,020
493,656
3,783
3,400
1,401
—
—
—
—
—
Internal leasing costs
12,204
11,880
11,998
11,940
11,807
11,726
10,549
10,001
Non-cash unit-based compensation
expense
Interest costs, net
Debt prepayment costs, net
One-time cash compensation costs (i)
Restructuring costs
Depreciation and amortization
Transaction (gain) losses on the sale of
investment properties, net
Transaction costs on investment
properties
Operational lease revenue from ROU
assets
Adjusted EBITDA - IFRS basis
Add:equity-accounted investments
Fair value losses on investment
properties, net
Interest costs, net
Transaction costs on investment
properties
Operational lease expenses from ROU
assets
Adjusted EBITDA- RioCan's
proportionate share
IFRS basis:
9,056
8,729
8,254
7,575
12,546
13,476
13,832
14,053
180,365
174,448
170,184
169,363
171,521
173,959
176,600
179,332
3,896
3,896
3,896
10,914
—
—
4,289
4,774
—
3,779
5,050
—
3,779
3,897
—
609
1,932
—
7,018
1,932
—
7,018
1,932
—
7,018
1,932
—
3,986
4,022
4,079
4,143
4,256
1,024
1,367
1,871
631
402
(382)
(1,232)
636
5,734
9,379
10,360
11,323
14,363
9,069
5,179
3,826
4,086
3,851
3,651
3,491
3,308
3,131
2,864
2,652
$ 704,136 $ 730,691 $ 719,458 $ 713,837 $ 705,093 $ 678,122 $ 684,300 $ 664,672
16,208
8,242
6,321
7,667
4,172
7,303
1,391
7,327
1,113
7,026
5,447
6,381
4,397
5,724
9,657
5,058
3
29
30
30
28
1
1
1
(46)
(46)
(46)
(44)
(42)
(37)
(33)
(31)
$ 728,543 $ 744,662 $ 730,917 $ 722,541 $ 713,218 $ 689,914 $ 694,389 $ 679,357
Average total debt outstanding
$ 6,756,628 $ 6,756,065 $ 6,740,402 $ 6,729,616 $ 6,773,147 $ 6,799,684 $ 6,785,690 $ 6,754,038
Less: average cash and cash
equivalents
Average Total Adjusted Debt
Add: equity-accounted investments
(74,871)
(78,168)
(87,182)
(88,746)
(119,400)
(115,834)
(111,383)
(108,721)
$ 6,681,757 $ 6,677,897 $ 6,653,220 $ 6,640,870 $ 6,653,747 $ 6,683,850 $ 6,674,307 $ 6,645,317
Average total debt outstanding
$ 251,888 $ 241,176 $ 228,546 $ 216,840 $ 192,804 $ 176,193 $ 160,424 $ 144,307
Less: average cash and cash
equivalents
(8,791)
(8,346)
(7,288)
(7,110)
(5,639)
(4,091)
(3,166)
(2,753)
Average Total Adjusted Debt
$ 243,097 $ 232,830 $ 221,258 $ 209,730 $ 187,165 $ 172,102 $ 157,258 $ 141,554
Average Total Adjusted Debt -
RioCan's proportionate share
Adjusted Debt to Adjusted EBITDA -
RioCan's proportionate share
$ 6,924,854 $ 6,910,727 $ 6,874,478 $ 6,850,600 $ 6,840,912 $ 6,855,952 $ 6,831,565 $ 6,786,871
9.51
9.28
9.41
9.48
9.59
9.94
9.84
9.99
(i) Q1 2021 to Q3 2021 was restated to reflect one-time compensation costs occurring in Q1 2021.
RioCan Annual Report 2022 98
MANAGEMENT’S DISCUSSION AND ANALYSIS
Our Business
and Our
Business
Environment
Environmental,
Social and
Governance
(ESG)
Initiatives
Property
Portfolio
Overview
Introduction
RISKS AND UNCERTAINTIES
Results of
Operations
Asset Profile
Development
Program
Capital
Resources
and Liquidity
Other
Disclosures
Non-GAAP
Measures
Risks and
Uncertainties
The achievement of RioCan’s objectives is, in part, dependent on the successful mitigation of business risks identified. Real
estate investments are subject to a degree of risk. They are affected by various factors including changes in general economic
and local market conditions, equity and credit markets, fluctuations in interest costs, the attractiveness of the properties to
tenants, competition from other available space, the stability and creditworthiness of tenants, and various other factors.
The rights granted in RioCan’s Declaration of Trust are granted as contractual rights afforded to Unitholders (rather than as
statutory rights). Similar to other existing rights contained in the Declaration of Trust (i.e. the take-over bid provisions and conflict
of interest provisions), making these rights and remedies and certain procedures available by contract is structurally different from
the manner in which the equivalent rights and remedies or procedures (including the procedure for enforcing such remedies) are
made available to shareholders of a corporation, who benefit from those rights and remedies or procedures by the corporate
statute that governs the corporation, such as the Canada Business Corporations Act (CBCA). As such, there is no certainty how
these rights, remedies or procedures may be treated by the courts in the non-corporate context or that a Unitholder will be able to
enforce the rights and remedies in the manner contemplated by the Declaration of Trust. Furthermore, how the courts will treat
these rights, remedies and procedures will be in the discretion of the court, and the courts may choose to not accept jurisdiction
to consider any claim contemplated in the provisions.
COVID-19 Health Crisis
With global vaccination programs well advanced, governments in Canada and several other jurisdictions have eased restrictive
measures that were previously imposed to varying degrees, in an effort to contain the spread of COVID-19. This easing of
restrictions has led to a resurgence of activity in the global and domestic economies. The Trust will continue to act according to
directions provided by the Federal and respective Provincial and Municipal governments. Nevertheless, COVID-19 continues to
impose risks and uncertainties on RioCan's business, operations and financial performance.
Such continuing risks and uncertainties arising from the COVID-19 health crisis include, but are not limited to, consumer
demands for tenant's products or services; consumer foot traffic to tenant stores and RioCan properties; changing consumer
habits and level of discretionary spending; mobility restrictions; increased unemployment; tenants' ability to adequately staff their
businesses; tenants' ability to pay rent as required under their leases; the extent of tenant business closures and changes in
tenant business strategies that may impact retail real estate occupancy; changes in the creditworthiness of tenants; leasing
activities; market rents; the availability, duration and effectiveness of various support programs that are or may be offered by the
various levels of government in Canada; the availability and extent of support programs that the Trust may offer its tenants;
timelines and costs related to the Trust's development projects; the pace of property lease-up and rents and yields achieved upon
development completion, as well as the pace of maintenance capital expenditures; domestic and global supply chains; labor
supply and demand; the capitalization rates that arm's length buyers and sellers are willing to transact on properties; and risks
associated with cyber security, information technology systems and networks, which in turn could impact the Trust's business and
operations.
Many of these factors could impact RioCan's operations and financial performance, and such effects could be material. The
spread, duration and severity of COVID-19 and subsequent variants could adversely affect global economies, including credit and
capital markets, which could potentially increase the difficulty and cost of accessing capital. It could also potentially impact
RioCan’s current credit ratings, total return and distribution yield of the Trust’s Units.
Ownership of Real Estate
Tenant Concentration
In the event tenants experience financial difficulty as a result of the difficulties presented by the macro-economic environment, or
otherwise, and are unable to fulfill their lease commitments, a given geographical area suffers an economic decline, or changing
consumer/retail trends result in less demand for rental space, we could experience a decline in revenue.
RioCan strives to manage tenant concentration risk through geographical diversification and diversification of revenue sources in
order to avoid dependence on any single tenant. RioCan’s objective, as exemplified by the requirements of its Declaration of
Trust noted above, is that no individual tenant contributes a significant percentage of its gross revenue and that a considerable
portion of our revenue is earned from national and anchor tenants. RioCan attempts to lease to credit worthy tenants, will conduct
credit assessments for new tenants when considered appropriate and generally is provided security by tenants as part of
negotiated deals. RioCan attempts to reduce its risks associated with occupancy levels and lease renewal risk by having
staggered lease maturities, negotiating commercial leases with base terms between five and 10 years, and by negotiating longer-
term commercial leases with built-in minimum rent escalations where deemed appropriate.
In order to reduce RioCan’s exposure to the risks relating to credit and the financial stability of tenants, the Declaration of Trust
restricts the amount of space which can be leased to any person and that person’s affiliates, other than in respect of leases with
or guaranteed by the Government of Canada, a province of Canada, a municipality in Canada or any agency thereof and certain
corporations, the securities of which meet stated investment criteria, to a maximum premises or space having an aggregate gross
leasable area of 20% of the aggregate gross leasable area of all real property held by RioCan. As of December 31, 2022, RioCan
was in compliance with this restriction.
99 RioCan Annual Report 2022
MANAGEMENT’S DISCUSSION AND ANALYSIS
Our Business
and Our
Business
Environment
Environmental,
Social and
Governance
(ESG)
Initiatives
Property
Portfolio
Overview
Introduction
Results of
Operations
Asset Profile
Development
Program
Capital
Resources
and Liquidity
Other
Disclosures
Non-GAAP
Measures
Risks and
Uncertainties
It is common practice for a major tenant, such as Canadian Tire or Loblaws/Shoppers Drug Mart, to lease space from other
landlords similar to RioCan in addition to owning real estate either within a controlled publicly traded REIT or within its own
operating entity. Past experience and industry practice indicate that it is the strength of a location more than the ownership of the
property that drives the business decisions of RioCan’s tenants. Despite this, there may be instances where a tenant may forgo
the competitive advantage of RioCan’s property location in order to better utilize its own real estate. RioCan does not consider the
collective impact of this risk to be significant.
Tenant Bankruptcies
Several of RioCan's properties are anchored by large national tenants. The value of some of our properties, including any
improvements thereto, could be adversely affected if these anchor stores or major tenants fail to comply with their contractual
obligations, experience credit or financial instability or cease their operations.
Bankruptcy filings by retailers occur periodically in the course of normal operations for a number of factors, including, but not
limited to, increased competition, internet sales, changing population demographics, poor economic conditions, rising costs and
changing shopping trends and/or perceptions. Confirmed closures represent 0.02% and 0.14% of the total portfolio in 2022 and
2021, respectively, on a total annualized contractual gross rent basis, which is in line with RioCan's pre-pandemic levels.
Nonetheless, tenant bankruptcies or restructurings remain a risk that RioCan closely manages. RioCan continually seeks to re-
lease vacant spaces resulting from tenant terminations. The bankruptcy of a tenant, particularly an anchor tenant, may make it
more difficult to lease the remainder of the affected properties or may give rise to certain rights under existing leases with other
tenants.
Lease Renewals and Rental Increases
Growth of rental income is dependent on strong leasing markets to ensure expiring leases are renewed and new tenants are
found promptly to fill vacancies at rental rates similar to those paid by existing tenants in order for us to maintain existing
occupancy levels of our properties. It is possible that we may face a disproportionate amount of space expiring in any one period.
Additionally, rental rates could decline, tenant bankruptcies could increase and tenant renewals may not be achieved, particularly
in the event of a protracted disruption in the economy, such as a recession.
As at December 31, 2022, RioCan had a commercial NLA, at its interest, of 31,639,000 square feet of income producing
properties and a portfolio in-place occupancy rate of 96.8%. Based on our current annualized portfolio weighted average
commercial rental revenue of approximately $33.95 per square foot including CAM and tax recoveries, for every fluctuation in
occupancy by a differential of 1%, our operations would be impacted by approximately $10.7 million annually.
RioCan's aggregate net rental revenue from leases expiring over the next five years is $401.0 million based on current
contractual rental rates, excluding CAM and tax recoveries. If the leases associated with these expiring net rents are renewed
upon maturity at an aggregate rental rate differential of 100 basis points, the Trust's net income would be impacted by
approximately $4.0 million annually.
Some of our retail lease agreements include co-tenancy clauses which allow the tenant to pay a reduced rent amount and, in
certain instances, terminate the lease, if RioCan fails to maintain certain occupancy levels or retain certain anchor tenancies. In
addition, certain of our tenants have the ability to terminate their leases prior to the lease expiration date if their sales do not meet
agreed upon thresholds. If occupancy, tenancy or sales fall below certain thresholds, rents that we are entitled to receive from
tenants could be reduced.
Relative Liquidity of Real Property
Real estate investments are relatively illiquid. A large proportion of RioCan's capital is invested in physical assets which can be
difficult to sell, especially if local market conditions are poor. A lack of liquidity could limit our ability to sell components of the
portfolio promptly in response to changing economic or investment conditions. If RioCan were required to quickly liquidate its
assets, there is a risk that we would realize sale proceeds of less than the current book value of our real estate investments.
As well, certain significant expenditures involved in real property investments, such as property taxes, maintenance costs and
mortgage payments, represent obligations that must be met regardless of whether the property is producing sufficient, or any,
revenue.
Regulatory Risk
Any reintroduction of rent control legislation in the future and/or prolonged rent freezes, as a result of the pandemic or otherwise,
could impact the Trust's existing residential rental operations and also certain mixed-use development projects' future NOI growth
potential. Thus, there can be no assurance that all of our proposed residential projects as described herein would be undertaken,
and if so, with what mix of residential and commercial development and at what costs. There could also be changes to the mix of
condominium versus residential rental units or air rights sales for certain projects. As at January 1, 2023, the guideline on rent
increases for 2023 in Ontario is 2.5%.
Inclusionary zoning is a land-use planning tool in the Province of Ontario which permits municipalities to require new
developments or redevelopments to dedicate or maintain a portion of new residential units as affordable housing. The City of
Toronto approved its inclusionary zoning framework in 2021. Based on the City of Toronto’s framework, RioCan’s existing held
RioCan Annual Report 2022 100
MANAGEMENT’S DISCUSSION AND ANALYSIS
Our Business
and Our
Business
Environment
Environmental,
Social and
Governance
(ESG)
Initiatives
Property
Portfolio
Overview
Introduction
Results of
Operations
Asset Profile
Development
Program
Capital
Resources
and Liquidity
Other
Disclosures
Non-GAAP
Measures
Risks and
Uncertainties
developmental lands and projects in the City of Toronto located within identified Protected Major Transit Station Areas, intended
for development or re-development, will be subject to the City of Toronto’s inclusionary zoning requirements unless (i) complete
applications for zoning by-law amendment and site plan approval for the lands are filed with the City of Toronto, or (ii) a Section
37 Agreement is executed with the City of Toronto in regard to the lands, prior to the later of September 18, 2022 or the date of
the approval of an applicable Protected Major Transit Station Area by the Minister of Municipal Affairs and Housing. The City of
Toronto inclusionary zoning policy is being phased in, based on each project's application status. At this time, the Minister has not
approved any Protected Major Transit Station Areas in the City of Toronto and therefore inclusionary zoning is not in force in the
City of Toronto as of the date hereof. The financial impact of the new requirements on the originally contemplated development
plans remains unknown, particularly as other municipalities move forward with their own inclusionary zoning frameworks. Further,
recent legislative changes have been proposed that would potentially impact the inclusionary zoning requirements imposed by
municipalities by imposing a cap on the number of units required and limiting the affordability period for each unit.
Development Risk
As discussed in the Our Business and Our Business Environment section of this MD&A, after many years of development and
housing booms in Canada's major markets, there are a number of emerging factors that are affecting development risks that the
Trust faces. Such factors include, but are not limited to, rising construction costs and development charges, shortage of
experienced labour in certain construction related trades, rising interest rates and potential increased competition to RioCan’s
existing sites due to the lessening of restrictions related to the Greenbelt. The pandemic imposed additional risks and
uncertainties on development, some of which continue to be relevant even as the economy strives for a return to normalcy,
including, but not limited to, potential development or construction delays or shutdowns, rising costs in some cases and lower
costs in other cases, slower pace of property lease-up or condominium pre-sale, lower residential rent or condominium sales
price, and lower property valuation. The impact of development risk factors will be further assessed and observed in terms of
broader market reactions. These factors could impact certain of the Trust's mixed-use development projects' future NOI growth
potential, and profit margin or development yield potential. As a result, there can be no assurance that all of our proposed
residential projects as described herein will be undertaken, and if so, with what mix of residential and commercial development, at
what costs, and generating what profit margin or development yield. There could also be changes to the mix of condominium
versus residential rental units or air rights sales for those projects in early stages. In regard to development charges specifically,
the City of Toronto passed a new development charge by-law in 2022 which increased the development charges payable on new
residential development by 46 percent, with the increase phased in through May of 2024. The Province subsequently passed
legislation (Bill 23) which imposed a phased in reduction in the development charges imposed under existing and future
Development Charge By-laws across the province with a 20% reduction during the first year a by-law is in force, followed by a
15% reduction the second year, a 10% reduction in the third year, and 5% reduction in the fourth year. Although these reductions
mitigate against development charge increases, the cost of development charges continue to rise, particularly in the City of
Toronto.
Residential Rental Business Risk
RioCan expects to be increasingly involved in mixed-use development projects that include residential condominiums and rental
apartments. Purchaser demand for residential condominiums is cyclical and is affected by changes in general market and
economic conditions, such as consumer confidence, employment levels, availability of financing for home buyers, interest rates,
demographic trends, housing supply and housing demand. As a landlord of its properties that include rental apartments, RioCan
is subject to the risks inherent in the multi-unit residential rental business, including, but not limited to, fluctuations in occupancy
levels, individual credit risk, heightened reputation risk, tenant privacy concerns, potential changes to rent control regulations,
increases in operating costs including the costs of utilities and the imposition of new taxes or increased property taxes.
Financial and Liquidity Risk
Access to Capital
A risk to the Trust’s growth program and the refinancing of its debt upon maturity is that of not having sufficient debt and equity
capital available to RioCan. Given the relatively small size of the Canadian marketplace, there are a limited number of lenders
from which RioCan can borrow. RioCan’s financial condition and results of operations would be adversely affected if it were
unable to obtain financing or cost-effective financing.
As at December 31, 2022, RioCan’s total debt at proportionate share had a 3.36 year weighted average term to maturity bearing
interest at a weighted average contractual interest rate of 3.48% per annum.
101 RioCan Annual Report 2022
MANAGEMENT’S DISCUSSION AND ANALYSIS
Our Business
and Our
Business
Environment
Environmental,
Social and
Governance
(ESG)
Initiatives
Property
Portfolio
Overview
Introduction
Interest Rate and Financing Risk
Results of
Operations
Asset Profile
Development
Program
Capital
Resources
and Liquidity
Other
Disclosures
Non-GAAP
Measures
Risks and
Uncertainties
The terms of RioCan's credit agreements require the Trust to comply with a number of customary financial and other covenants,
such as maintaining Debt Service Coverage and leverage ratios, adequate insurance coverage and certain credit ratings. These
covenants may limit our flexibility in conducting our operations and breaches of these covenants could result in defaults under the
instruments governing the applicable indebtedness. Diversifying funding sources, maintaining a strong liquidity position, and
maintaining a well-distributed debt maturity profile mitigate (re)financing risk. RioCan’s $1.25 billion revolving unsecured line of
credit acts as a backstop to refinance maturing debt, provides financial flexibility to execute the strategic plan, provides a low cost
bridge to "permanent" financing, and safeguards against a liquidity/financial crisis. Limiting floating rate debt exposure and
maintaining a well-distributed debt maturity profile also help to mitigate interest rate risk.
RioCan’s operations are also impacted by increases in interest rates, as interest expense represents a significant cost in the
ownership of real estate investments. In an attempt to combat recent inflation through cooling demand, the Bank of Canada
continued to tighten monetary policy in Q1 2023 by increasing the overnight lending rate. A continued increase in interest rates
may result in a significant increase in the amount paid by the Trust to service debt, which could in turn adversely affect RioCan’s
financial condition and results of operations. Further, in a rising interest rate environment, the cost of acquiring, financing,
developing, expanding and renovating investment property also increases, and together with upward pressure on capitalization
rates and decreased investment property demand, the Trust’s investment property values may decline as a result.
RioCan has proactively employed a variety of financial tactics to protect against rising interest rates. The Trust seeks to reduce
interest rate risk by staggering the maturities of long-term debt and limiting the use of floating rate debt so as to minimize
exposure to interest rate fluctuations. As at December 31, 2022, 8.0% of our total debt was at floating interest rates on RioCan's
proportionate basis. From time to time, the Trust may enter into floating-for-fixed interest rate swaps as part of its strategy for
managing its exposure to interest rate risk on debt with floating interest rates. The Trust may also enter into bond forward
contracts to hedge its exposure to movements in interest rates from the time it determines it will refinance or issue a fixed rate
debt and the time the fixed rate debt is issued. The intent is to use the bond forwards to manage the change in cash flows of the
future interest payments on the anticipated fixed rate debt. As at December 31, 2022, the carrying value of our floating rate debt,
not subject to a hedging strategy, is $441.3 million. A 50 basis point increase in market interest rates would result in a $2.2 million
decrease in our net income.
Inflation Risk
Although Canada's inflation rate declined from June 2022 to December 2022, it still remains at a high level. The rate of inflation
impacts the general economic and business environment in which the Trust operates. Recent inflationary pressures experienced
domestically and globally, external supply constraints, tight labour markets and strong demand for goods and resources, together
with the imposition by governments of higher interest rates or wage and price controls as a means of curbing inflationary
increases, will put pressure on RioCan’s development, financing, operation and labour costs and could negatively impact levels of
demand for real property. Accordingly, continued inflationary pressures and the resulting economic impacts may adversely affect
RioCan’s financial condition and results of operations.
RioCan’s use of fixed price contracts allows for the Trust’s existing development projects to be insulated from fluctuations in
inflation. For the majority of RioCan’s next tranche of planned development projects, the Trust will be developing on lands that are
already owned by RioCan with in-place income, which affords the Trust with the ability to maintain discipline in a challenging
economic environment. Nonetheless, if inflation at elevated levels persists and interest rates continue to climb, an economic
contraction could be possible. Higher inflation and the prospect of moderated growth also negatively impacts the debt and equity
markets in which RioCan seeks capital, and in turn might impact RioCan’s ability to obtain capital in the future on favourable
terms, or at all. While RioCan’s portfolio and market position, as well as its strong and stable tenant base, provide the Trust
flexibility to navigate volatile economic conditions, there can be no assurances regarding the impact of a significant economic
contraction on the business, operations, and financial performance of RioCan and its tenants.
Credit Ratings
Real or anticipated changes in credit ratings on our debentures or preferred units may affect the market value thereof. In addition,
such changes can affect the cost at which we can access the debenture or preferred unit market, and the credit spreads on
unsecured lines of credit, as applicable.
Joint Ventures and Co-ownerships
RioCan participates in joint ventures, partnerships and similar arrangements that may involve risks and uncertainties not present
absent third-party involvement, including, but not limited to, RioCan's dependency on partners, co-tenants or co-venturers that
are not under our control and that might compete with RioCan for opportunities, become bankrupt or otherwise fail to fund their
share of required capital contributions, or suffer reputational damage that could have an adverse impact on the Trust. Additionally,
our partners might at any time have economic or other business interests or goals that are different than or inconsistent with
those of the Trust, and we may be required to take actions that are in the interest of the partners collectively, but not in RioCan's
sole best interests. Accordingly, we may not be able to favourably resolve issues with respect to such decisions, or we could
become engaged in a dispute with any of them that might affect our ability to operate the business or assets in question.
RioCan Annual Report 2022 102
MANAGEMENT’S DISCUSSION AND ANALYSIS
Our Business
and Our
Business
Environment
Environmental,
Social and
Governance
(ESG)
Initiatives
Property
Portfolio
Overview
Introduction
Results of
Operations
Asset Profile
Development
Program
Capital
Resources
and Liquidity
Other
Disclosures
Non-GAAP
Measures
Risks and
Uncertainties
Unexpected Costs or Liabilities Related to Acquisitions
A risk associated with a real property acquisition is that there may be an undisclosed or unknown liability concerning the acquired
properties, and RioCan may not be indemnified for some or all of these liabilities. Following an acquisition, RioCan may discover
that it has acquired undisclosed liabilities, which may be material. RioCan conducts what it believes to be an appropriate level of
investigation in connection with its acquisitions and seeks through contract to ensure that risks lie with the appropriate party.
Other Risks
Environmental Matters
Environmental and ecological related policies have become increasingly important in recent years. Under various Federal,
Provincial, and Municipal laws, RioCan, as an owner or operator of real property, could become liable for the costs of removal or
remediation of certain hazardous or toxic substances released on or in its properties or disposed of at other locations. The failure
to remove or remediate such substances, or address such matters through alternative measures prescribed by the governing
authority, may adversely affect RioCan’s ability to sell such real estate or to borrow using such real estate as collateral, and could,
potentially, also result in claims against the Trust. RioCan is not currently aware of any material non-compliance, liability or other
claim in connection with any of its properties, nor is RioCan currently aware of any environmental condition with respect to any
properties that it believes would involve material expenditures by the Trust.
It is our policy to obtain a Phase I environmental audit conducted by a qualified environmental consultant prior to acquiring any
additional property. In addition, where appropriate, tenant leases generally specify that the tenant will conduct its business in
accordance with environmental regulations and be responsible for any liabilities arising out of infractions to such regulations. It is
RioCan’s practice to regularly inspect tenant premises that may be subject to environmental risk. We maintain insurance to cover
a sudden and/or accidental environmental mishap.
Climate Change Risk
Climate change poses environmental, social and business risks. RioCan believes that climate-related risks and opportunities
should be identified, assessed and managed. To that end, RioCan has aligned our climate change strategy and disclosures with
TCFD. For details, refer to the Climate-Related Financial Disclosures section of this MD&A.
Cyber Security Risk
Cyber security continues to be an increasing area of focus as reliance on digital technologies to conduct business operations has
grown significantly. The introduction of work from home arrangements for many of the Trust's employees resulting from COVID-19
related restrictions has heightened the importance of cyber security risk management. Cyber attacks can include but are not
limited to intrusions into operating systems, cyber extortion, social engineering fraud, theft of personal or other sensitive data and
may cause disruptions to normal operations. Such cyber attacks could compromise the Trust's confidential information as well as
that of the Trust's employees, tenants and third parties with whom the Trust interacts and may result in negative consequences,
including remediation costs, loss of revenue, additional regulatory scrutiny, litigation and reputational damage.
As a result, the Trust has developed a cyber security program focused across a spectrum of preventative protective and detective
measures. These measures include, but are not limited to, active monitoring of security events, security awareness programs for
employees, regular vulnerability testing performed by both internal and external parties, establishing and maintaining a robust
disaster recovery program, implementation of a formal incident response program and enhancing email security. The Trust
continues to evolve its security tactics and defenses in response to emerging threats. The Trust also follows certain protocols
when it engages technology vendors concerning data security and access control.
Litigation
RioCan’s operations are subject to a wide variety of laws and regulations across all of its operating jurisdictions and RioCan faces
risks associated with legal and regulatory changes and litigation. In the normal course of operations, RioCan becomes involved in
various legal actions, including claims relating to personal injury, property damage, property taxes, land rights, and contractual
and other commercial disputes. The final outcome with respect to outstanding, pending or future actions cannot be predicted with
certainty, and the resolution of such actions may have an adverse effect on our financial position or results of operations. RioCan
retains external legal consultants to assist it in remaining current and compliant with legal and regulatory changes and to respond
to litigation.
Uninsured Losses
RioCan carries comprehensive general liability, environmental, fire, flood, extended coverage and rental loss insurance with
policy specifications, limits and deductibles customarily carried for similar properties. There are, however, certain types of risks
(including, but not limited to, environmental contamination or catastrophic events such as war, insurrection, rebellion, revolution,
civil war, usurped power, or action taken by a government authority in hindering, combating or defending against such an event,
nuclear reaction or nuclear radiation or radioactive contamination or acts of terrorism) which are either uninsurable, in whole or in
part, or not insurable on an economically viable basis. Should an uninsured or underinsured loss occur, the Trust could lose its
investment in, and anticipated profits and cash flows from, one or more of its properties, and the Trust would continue to be
obliged to repay any recourse mortgage indebtedness on such properties.
103 RioCan Annual Report 2022
MANAGEMENT’S DISCUSSION AND ANALYSIS
Our Business
and Our
Business
Environment
Environmental,
Social and
Governance
(ESG)
Initiatives
Property
Portfolio
Overview
Introduction
Key Personnel
Results of
Operations
Asset Profile
Development
Program
Capital
Resources
and Liquidity
Other
Disclosures
Non-GAAP
Measures
Risks and
Uncertainties
RioCan’s executive and other senior officers have a significant role in our success and oversee the execution of RioCan’s
strategy. Our ability to retain our management team or attract suitable replacements should any members of the management
group leave is dependent on, among other things, the competitive nature of the employment market. RioCan has experienced
departures of key professionals in the past and may do so in the future, and we cannot predict the impact that any such
departures will have on its ability to achieve its objectives. The loss of services from key members of the management team or a
limitation in their availability could adversely impact our financial condition and cash flow.
We rely on the services of key personnel on our executive team, including our President and Chief Executive Officer, Jonathan
Gitlin, our Chief Financial Officer, Dennis Blasutti, our Chief Operating Officer, John Ballantyne and our Chief Investment Officer,
Andrew Duncan and the loss of their services could have an adverse effect on RioCan. We mitigate key personnel risk through
succession planning, but do not maintain key personnel insurance.
Unitholder Liability
There is a risk that RioCan’s Unitholders could become subject to liability. The Trust’s Declaration provides that no Unitholder or
annuitant under a plan of which a Unitholder acts as trustee or carrier will be held to have any personal liability as such, and that
no resort shall be had to the private property of any Unitholder or annuitant for satisfaction of any obligation or claim arising out of
or in connection with any contract or obligation of RioCan. Only RioCan’s assets are intended to be subject to levy or execution.
The Declaration further provides that, whenever possible, certain written instruments signed by RioCan must contain a provision
to the effect that such obligation will not be binding upon Unitholders personally or upon any annuitant under a plan of which a
Unitholder acts as trustee or carrier. In conducting its affairs, RioCan has acquired and may acquire real property investments
subject to existing contractual obligations, including obligations under mortgages and leases that do not include such provisions.
RioCan will use its best efforts to ensure that provisions disclaiming personal liability are included in contractual obligations
related to properties acquired, and leases entered into, in the future.
Certain provinces have legislation relating to Unitholder liability protection, including British Columbia, Alberta, Saskatchewan,
Manitoba, Ontario and Quebec. To RioCan’s knowledge, certain of these statutes have not yet been judicially considered and it is
possible that reliance on such statutes by a Unitholder could be successfully challenged on jurisdictional or other grounds.
Income Taxes
RioCan currently qualifies as a mutual fund trust and for the REIT Exemption for income tax purposes. RioCan expects to
distribute the Trust’s taxable income to Unitholders such that it will not be subject to tax. From time to time, RioCan may retain
some taxable income and net capital gains in order to utilize the capital gains refund available to mutual fund trusts without
incurring any income taxes. In order to maintain RioCan’s current mutual fund trust status, the Trust is required to comply with
specific restrictions regarding its activities and the investments held by the Trust. If the Trust was to cease to qualify as a mutual
fund trust, or for the REIT Exemption for income tax purposes, the consequences could be material and adverse.
No assurance can be given that the provisions of the Tax Act regarding mutual fund trusts and the REIT Exemption will not be
changed in a manner that adversely affects RioCan and its Unitholders. From year to year, there is a risk that the taxable
allocation to Unitholders can change depending upon the Trust’s activities.
RioCan is of the view that the expenses it has claimed by it and its subsidiaries will be reasonable and deductible, that the cost
amount and capital cost allowance claims of the Trust and entities directly or indirectly owned by the Trust will have been correctly
determined, and the calculation of its tax disposition gains will be appropriate. However, there can be no assurance that the Tax
Act, or the interpretation of the Tax Act, will not change, or that the Canada Revenue Agency (the “CRA”) will agree. If the CRA
successfully challenges the deductibility and positions taken or the allocation of such income, RioCan's taxable income, and
indirectly the taxable income of Unitholders, will increase or change.
RioCan Annual Report 2022 104
Audited Annual Consolidated Financial Statements
for the Years Ended December 31, 2022 and 2021
TABLE OF CONTENTS
Management's Responsibility for Financial Reporting
Independent Auditor's Report
Consolidated Balance Sheets
Consolidated Statements of Income
Consolidated Statements of Comprehensive Income
Consolidated Statements of Changes in Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
106
107
110
111
112
113
114
115
105 RioCan Annual Report 2022
MANAGEMENT'S RESPONSIBILITY FOR FINANCIAL REPORTING
The management of RioCan Real Estate Investment Trust (the Trust or RioCan) is responsible for the preparation and fair
presentation of the accompanying annual consolidated financial statements and Management's Discussion and Analysis (MD&A).
The annual consolidated financial statements have been prepared in accordance with International Financial Reporting Standards
(IFRS) as issued by the International Accounting Standards Board.
The annual consolidated financial statements and information in the MD&A necessarily include amounts based on best estimates
and judgments by management of the expected effects of current events and transactions with the appropriate consideration
given to materiality. In addition, in preparing this financial information, we must make determinations about the relevancy of
information to be included, and estimates and assumptions that affect the reported information. The MD&A also includes
information regarding the impact of current transactions and events, sources of liquidity and capital resources, operating trends,
risks and uncertainties. Actual results in the future may differ materially from our present assessment of this information because
future events and circumstances may not occur as expected. The annual consolidated financial statements have been properly
prepared within reasonable limits of materiality and in light of information available up to February 15, 2023.
In meeting our responsibility for the integrity and fairness of the annual consolidated financial statements and MD&A and for the
accounting systems from which they are derived, management has established the necessary internal controls designed to
ensure that our financial records are reliable for preparing consolidated financial statements and other financial information,
transactions are properly authorized and recorded, and assets are safeguarded against unauthorized use or disposition.
As at December 31, 2022, our Chief Executive Officer and Chief Financial Officer evaluated, or caused an evaluation under their
direct supervision, the design and operation of our internal controls over financial reporting (as defined in National Instrument
52-109, Certification of Disclosure in Issuers’ Annual and Interim Filings) and, based on that assessment, determined that our
internal controls over financial reporting were appropriately designed and operating effectively.
The Board of Trustees oversees management’s responsibility for financial reporting through an Audit Committee, which is
composed entirely of independent trustees. The Audit Committee reviews RioCan’s annual consolidated financial statements and
MD&A with both management and the independent auditor before such statements are approved by the Board of Trustees. Other
key responsibilities of the Audit Committee include selecting RioCan’s independent auditor, reviewing and approving, with the
delegated authority from the Trustees, the interim condensed consolidated financial statements and MD&A, and monitoring
RioCan’s existing systems of internal controls.
Ernst & Young LLP, the independent auditor appointed by the Unitholders of RioCan upon the recommendation of the Board of
Trustees, has examined our 2022 and 2021 annual consolidated financial statements and has expressed their opinion upon the
completion of such examination in the following report to the Unitholders. The auditor has full and free access to, and meets at
least quarterly with, the Audit Committee to discuss their audits and related matters.
(signed) Jonathan Gitlin
(signed) Dennis Blasutti
Jonathan Gitlin
President & Chief Executive Officer
Dennis Blasutti
Chief Financial Officer
Toronto, Canada
February 15, 2023
RioCan Annual Report 2022 106
INDEPENDENT AUDITOR’S REPORT
To the Unitholders of RioCan Real Estate Investment Trust
Opinion
We have audited the consolidated financial statements of RioCan Real Estate Investment Trust and its subsidiaries (the Trust),
which comprise the consolidated balance sheets as at December 31, 2022 and 2021, and the consolidated statements of income,
consolidated statements of comprehensive income, consolidated statements of changes in equity and consolidated statements of
cash flows for the years then ended, and notes to the consolidated financial statements, including a summary of significant
accounting policies.
In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated
financial position of the Trust as at December 31, 2022 and 2021, and its consolidated financial performance and its consolidated
cash flows for the years then ended in accordance with International Financial Reporting Standards (IFRSs).
Basis for opinion
We conducted our audit in accordance with Canadian generally accepted auditing standards. Our responsibilities under those
standards are further described in the Auditor’s responsibilities for the audit of the consolidated financial statements section of our
report. We are independent of the Trust in accordance with the ethical requirements that are relevant to our audit of the
consolidated financial statements in Canada, and we have fulfilled our other ethical responsibilities in accordance with these
requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
opinion.
Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in the audit of the consolidated
financial statements of the current period. These matters were addressed in the context of the audit of the consolidated financial
statements as a whole, and in forming the auditor’s opinion thereon, and we do not provide a separate opinion on these matters.
For the matter below, our description of how our audit addressed the matter is provided in that context.
We have fulfilled the responsibilities described in the Auditor’s responsibilities for the audit of the consolidated financial
statements section of our report, including in relation to this matter. Accordingly, our audit included the performance of
procedures designed to respond to our assessment of the risks of material misstatement of the consolidated financial statements.
The results of our audit procedures, including the procedures performed to address the matter below, provide the basis for our
audit opinion on the accompanying consolidated financial statements.
107 RioCan Annual Report 2022
INDEPENDENT AUDITOR’S REPORT (continued)
Key audit matter
Valuation of investment properties
How our audit addressed the key audit matter
The Trust’s investment property portfolio comprises income
producing properties and properties under development with a
fair value of $13.8B, which represents 91% of total assets at
December 31, 2022.
With the assistance of our real estate valuation specialists, we
obtained an understanding of the valuation process, evaluated
the appropriateness of the underlying valuation methodology,
and performed the following audit procedures, among others:
in
The Trust measures the vast majority of its investment
properties using valuations prepared by an internal valuations
team, consisting of individuals with specialized industry
experience
real estate valuations. The valuation
methodology for these investment properties is primarily
the direct
based on an
capitalization method. Properties under development
-
undeveloped land is measured using a comparable sales
approach on a land value per acre or a per buildable square
foot basis. Depending on the property asset type and location,
the Trust may also obtain independent third-party valuations
from firms that employ qualified appraisers.
income approach, utilizing
Note 2.8 of the consolidated financial statements describes
the accounting policy for investment properties, and Note 3
describes the valuation method and key valuation inputs.
Note 3 of the consolidated financial statements discloses the
sensitivity of the fair value of investment properties to a
change in capitalization rates and stabilized net operating
income.
The valuation of the Trust’s investment property portfolio is a
key audit matter given the inherently subjective nature of
significant assumptions including capitalization rates, and
stabilized net operating income including occupancy and
rental rate assumptions. These assumptions are influenced by
property-specific characteristics including location, type and
quality of the properties and tenancy agreements.
the
For properties under development, depending on
complexity and stage of completion, costs to complete
construction as well as leasing and construction risk are
additional significant assumptions
final
valuation.
impact
that
the
the
We assessed
competence and objectivity of
management’s internal valuations team, and any third-party
appraisers engaged, by considering the qualifications and
expertise of the individuals involved in the preparation and
review of the valuations.
We selected a sample of properties where either the fair value
change from prior year or significant assumptions fell outside
our expectations, based on our understanding of
the
geographical real estate market for the specific asset type. For
this sample of investment properties, we evaluated the
significant assumptions by comparison to the expected real
estate market benchmark range for similar assets and
tenancies, in similar locations. We also considered whether
there were any additional asset-specific characteristics that
may impact the significant assumptions utilized and that these
were appropriately considered in the overall assessment of
fair value. We performed a look-back analysis to assess the
accuracy of management’s historical fair value estimates
through comparison to transactions to acquire and dispose of
interests in investment properties completed by the Trust
during the year.
to
in addition
For properties under development,
the
procedures performed above, we compared construction
budgets to actual expenditures and evaluated estimated costs
to complete by comparing to contractual arrangements or
reference to third party data, as applicable, on a sample basis.
We also evaluated whether the capitalization rate used to
value properties under development considered
the
complexity of the development, stage of completion, and
timing of cashflows.
We evaluated the Trust’s critical accounting policies and
related disclosures in the consolidated financial statements to
assess appropriateness and conformity with IFRS.
Other information
Management is responsible for the other information. The other information comprises:
•
•
Management’s Discussion and Analysis
The information, other than the consolidated financial statements and our auditor’s report thereon, in the Annual Report
Our opinion on the consolidated financial statements does not cover the other information and we do not express any form of
assurance conclusion thereon.
In connection with our audit of the consolidated financial statements, our responsibility is to read the other information, and in
doing so, consider whether the other information is materially inconsistent with the consolidated financial statements or our
knowledge obtained in the audit or otherwise appears to be materially misstated.
We obtained Management’s Discussion & Analysis and the Annual Report prior to the date of this auditor’s report. If, based on the
work we have performed, we conclude that there is a material misstatement of this other information, we are required to report
that fact in this auditor’s report. We have nothing to report in this regard.
RioCan Annual Report 2022 108
INDEPENDENT AUDITOR’S REPORT (continued)
Responsibilities of management and those charged with governance for the consolidated financial statements
Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with
IFRSs, and for such internal control as management determines is necessary to enable the preparation of consolidated financial
statements that are free from material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, management is responsible for assessing the Trust’s ability to continue as a
going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting
unless management either intends to liquidate the Trust or to cease operations, or has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Trust’s financial reporting process.
Auditor’s responsibilities for the audit of the consolidated financial statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from
material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable
assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Canadian generally
accepted auditing standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or
error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of these consolidated financial statements.
As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise professional judgment and
maintain professional skepticism throughout the audit. We also:
•
•
•
•
•
Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or
error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and
appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is
higher
intentional omissions,
fraud may
from error, as
misrepresentations, or the override of internal control.
for one resulting
involve collusion,
forgery,
than
Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate
in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Trust’s internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related
disclosures made by management.
Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the
audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant
doubt on the Trust’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are
required to draw attention in our auditor’s report to the related disclosures in the consolidated financial statements or, if
such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to
the date of our auditor’s report. However, future events or conditions may cause the Trust to cease to continue as a
going concern.
Evaluate the overall presentation, structure and content of the consolidated financial statements, including the
disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a
manner that achieves fair presentation.
We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit
and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant ethical requirements
regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to
bear on our independence, and where applicable, related safeguards.
From the matters communicated with those charged with governance, we determine those matters that were of most significance
in the audit of the consolidated financial statements of the current period and are therefore the key audit matters. We describe
these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely
rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of
doing so would reasonably be expected to outweigh the public interest benefits of such communication.
The engagement partner on the audit resulting in this independent auditor’s report is Mark Vrooman, CPA, CA.
Toronto, Canada
February 15, 2023
109 RioCan Annual Report 2022
RIOCAN REAL ESTATE INVESTMENT TRUST
CONSOLIDATED BALANCE SHEETS
(In thousands of Canadian dollars)
As at
Assets
Investment properties
Equity-accounted investments
Mortgages and loans receivable
Residential inventory
Assets held for sale
Receivables and other assets
Cash and cash equivalents
Total assets
Liabilities
Debentures payable
Mortgages payable
Lines of credit and other bank loans
Accounts payable and other liabilities
Total liabilities
Equity
Unitholders' equity
Total liabilities and equity
Note December 31, 2022
December 31, 2021
3, 8
$
13,807,740 $
14,021,338
4
5
6
3
7, 8
10
11
12
8, 13
$
$
$
$
364,892
269,339
272,005
42,140
259,514
86,229
327,335
237,790
217,043
47,240
248,959
77,758
15,101,859 $
15,177,463
2,942,051 $
2,659,180
1,141,112
630,624
7,372,967 $
2,990,692
2,334,016
1,285,910
655,501
7,266,119
7,728,892
15,101,859 $
7,911,344
15,177,463
The accompanying notes are an integral part of the consolidated financial statements.
Approved on behalf of the Board of Trustees
(signed) Janice Fukakusa
Janice Fukakusa
Chair of Audit Committee
Trustee
(signed) Jonathan Gitlin
Jonathan Gitlin
President and Chief Executive Officer
Trustee
RioCan Annual Report 2022 110
RIOCAN REAL ESTATE INVESTMENT TRUST
CONSOLIDATED STATEMENTS OF INCOME
(In thousands of Canadian dollars, except per unit amounts)
Years ended December 31,
Revenue
Rental revenue
Residential inventory sales
Property management and other service fees
Operating costs
Rental operating costs
Recoverable under tenant leases
Non-recoverable costs
Residential inventory cost of sales
Operating income
Other income (loss)
Interest income
Income from equity-accounted investments
Fair value (loss) gain on investment properties, net
Investment and other income (loss), net
Other expenses
Interest costs, net
General and administrative
Internal leasing costs
Transaction and other costs
Debt prepayment costs, net
Income before income taxes
Current income tax expense (recovery)
Net income
Net income
Unitholders
Net income per unit
Basic
Diluted
The accompanying notes are an integral part of the consolidated financial statements.
Note
2022
2021
17
$
1,074,192 $
1,066,562
6, 17
17
118,659
20,996
93,727
14,772
1,213,847
1,175,061
376,914
27,955
96,286
501,155
712,692
20,902
2,349
(241,128)
(1,842)
(219,719)
367,297
40,753
65,346
473,396
701,665
13,666
19,189
124,052
2,743
159,650
180,365
171,521
54,437
12,204
8,274
—
255,280
237,693
921
51,400
11,807
17,343
10,914
262,985
598,330
(59)
236,772 $
598,389
236,772 $
236,772 $
598,389
598,389
0.77 $
0.77 $
1.89
1.89
6
19
4
3
18
20
21
22
23
23
23
$
$
$
$
$
111 RioCan Annual Report 2022
RIOCAN REAL ESTATE INVESTMENT TRUST
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands of Canadian dollars)
Years ended December 31,
Net income
Other comprehensive income
Items that may be reclassified subsequently to income, net of tax:
Interest rate swap agreements:
Unrealized gain during the year
Reclassified during the year to income
Bond forward agreement:
Unrealized gain (loss) during the year
Realized gain during the year
Reclassified during the year to income
Other comprehensive income from equity-accounted investments
Item that is not to be reclassified to income, net of tax:
Actuarial gain on pension plan
Other comprehensive income, net of tax
Comprehensive income, net of tax
The accompanying notes are an integral part of the consolidated financial statements.
Note
2022
2021
$
236,772 $
598,389
14, 25
14, 25
14, 25
14, 25
14, 25
4, 14
14
43,024
1,225
6,092
37,136
(2,217)
583
3,071
88,914
20,459
21,665
(1,751)
—
—
206
1,222
41,801
$
325,686 $
640,190
RioCan Annual Report 2022 112
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B
RIOCAN REAL ESTATE INVESTMENT TRUST
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands of Canadian dollars)
Years ended December 31,
Operating activities
Net income
Items not affecting cash:
Depreciation and amortization
Amortization of straight-line rent
Amortization of bond forward hedge settlement
Amortization of deferred financing charges
Unit-based compensation expense
Income from equity-accounted investments
Fair value loss (gain) on investment properties, net
Fair value loss on marketable securities
Transaction losses, net on disposition of investment properties
Proceeds from bond forward hedge settlement
Adjustments for changes in other working capital items
Cash provided by operating activities
Investing activities
Acquisitions of investment properties
Construction expenditures on properties under development
Capital expenditures on income properties
Proceeds from sale of investment properties
Earn-outs on investment properties
Contributions to equity-accounted investments
Distributions received from equity-accounted investments
Advances of mortgages and loans receivable
Repayments of mortgages and loans receivable
Purchases of marketable securities
Proceeds from investment maturity
Lease payments received from finance lease receivables
Cash provided by (used in) investing activities
Financing activities
Proceeds from mortgage financing, net of issue costs
Repayments of mortgage principal
Advances from bank credit lines, net of issue costs
Repayment of bank credit lines
Proceeds from issuance of debentures, net of issue costs
Repayment of unsecured debentures
Distributions paid to Unitholders
Units repurchased under normal course issuer bid
Units repurchased for settlement of Unit compensation exercises and proceeds received from
issuance of Units, net of issue costs
Repayment of lease liabilities
Cash used in financing activities
Net change in cash and cash equivalents
Cash and cash equivalents, beginning of year
Cash and cash equivalents, end of year
Supplemental cash flow information
The accompanying notes are an integral part of the consolidated financial statements.
Note
2022
2021
$
236,772 $
598,389
4,774
(1,884)
(2,217)
5,314
9,056
4,022
(6,928)
—
5,467
12,546
(2,349)
(19,189)
241,128
(124,052)
3,783
1,081
37,136
—
6
—
29
(26,470)
20,136
506,124
490,397
(90,026)
(17,177)
(291,506)
(385,923)
(101,467)
(77,956)
420,970
659,979
—
(1,323)
(16,817)
(149,562)
14,565
62,510
(87,224)
(53,218)
86,826
48,107
(19,241)
—
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5,500
3,455
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94,392
345,842
388,216
(45,642)
(772,204)
177,438
(323,742)
492,553
—
248,603
447,623
(300,000)
(800,000)
(309,416)
(317,497)
(203,874)
(178,062)
(5,232)
(1,945)
(4,108)
(2,008)
(417,968)
(745,487)
8,471
(160,698)
77,758
238,456
$
86,229 $
77,758
28
RioCan Annual Report 2022 114
Notes to Consolidated Financial Statements
for the Years Ended December 31, 2022 and 2021
Canadian dollars, tabular amounts in thousands, except
per unit amounts or unless otherwise noted
TABLE OF CONTENTS
1. General Information
2.
Significant Accounting Policies
116
116
18.
Investment and Other Income (Loss)
19.
Interest Income
3.
Investment Properties
128
20.
Interest Costs
4.
Equity-accounted Investments and Joint
Arrangements
134
21. General and Administrative
5. Mortgages and Loans Receivable
136
22. Transaction and Other Costs
6.
Residential Inventory
136
23. Net Income per Unit
7.
Receivables and Other Assets
137
24. Fair Value Measurement
8.
Leases
138
25. Risk Management
9.
Income Taxes
140
26. Capital Management
10. Debentures Payable
140
27. Subsidiaries
11. Mortgages Payable
141
28. Supplemental Cash Flow Information
12. Lines of Credit and Other Bank Loans
142
29. Changes in Other Working Capital Items
13. Accounts Payable and Other Liabilities
143
30. Related Party Transactions
14. Unitholders' Equity
144
31. Employee Benefits
15. Unit-based Compensation Plans
145
32. Segmented Information
16. Distributions to Unitholders
148
33. Contingencies and Other Commitments
17. Revenue
148
34. Events after the Balance Sheet Date
149
149
149
149
149
150
150
151
154
156
156
157
157
158
158
159
159
115 RioCan Annual Report 2022
RIOCAN REAL ESTATE INVESTMENT TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2022 AND 2021
(In thousands of Canadian dollars, tabular amounts in thousands, except per unit amounts or unless otherwise noted)
1. GENERAL INFORMATION
RioCan Real Estate Investment Trust and its consolidated subsidiaries (collectively, the Trust or RioCan) own, develop and
operate one of Canada's largest portfolios of retail-focused and mixed-use properties. The parent trust, RioCan Real Estate
Investment Trust, is an unincorporated closed-end trust governed under the laws of the Province of Ontario, Canada, and
constituted pursuant to a Declaration of Trust (Declaration) dated November 30, 1993, as most recently amended and restated on
June 2, 2020. The Trust’s corporate headquarters and registered head office are located at the RioCan Yonge Eglinton Centre,
2300 Yonge Street, Toronto, Ontario, Canada.
RioCan's trust units (Units) are listed on the Toronto Stock Exchange (TSX) under the ticker symbol REI.UN.
These annual audited consolidated financial statements of the Trust for the years ended December 31, 2022 and 2021 were
authorized for issue by RioCan's Board of Trustees on February 15, 2023.
2. SIGNIFICANT ACCOUNTING POLICIES
The significant accounting policies (and any changes thereto) used in the preparation of these consolidated financial statements
are summarized below. These accounting policies have been applied consistently in all material respects in the preparation of
these consolidated financial statements. Any International Financial Reporting Standards (IFRS) issued but not yet effective for
the current accounting year are described in Note 2.28.
2.1 Statement of compliance
RioCan’s consolidated financial statements are prepared in accordance with IFRS as issued by the International Accounting
Standards Board (IASB).
2.2 Basis of presentation
These consolidated financial statements are prepared on a going concern basis using the historical cost method modified to
include the fair value measurement of investment property, including properties held for sale, and certain financial instruments, as
set out in the relevant accounting policies. These consolidated financial statements are presented in Canadian dollars, which is
the functional and presentation currency of the Trust. All dollar amounts discussed herein are in thousands of Canadian dollars,
unless otherwise stated.
The Trust presents its consolidated balance sheets based on the liquidity method, whereby all assets and liabilities are presented
in increasing order of liquidity. RioCan considers this presentation to be more relevant than a classified balance sheet as the Trust
considers its operating cycle to be longer than one year. The notes to the consolidated financial statements distinguish between
current and non-current assets and liabilities. Current assets and liabilities are those expected to be recovered or settled within
one year from the reporting period, and non-current assets and liabilities are those where the recovery or settlement is expected
to be greater than a year from the reporting period. Any IFRS issued but not yet effective up to the date of issuance of these
consolidated financial statements are described in Note 2.28. Certain comparative amounts have been reclassified to conform to
the current year's presentation.
2.3 Significant judgements
The preparation of RioCan's consolidated financial statements requires management to make significant judgments that affect the
carrying amounts of assets and liabilities, and the reported amounts of revenues and expenses. In the process of applying
RioCan's accounting policies, management was required to apply judgment in the areas discussed below.
Investment properties
RioCan's accounting policies relating to investment properties are described in Note 2.8. In applying these policies, judgment is
required in determining whether certain costs represent additions to the carrying amount of the property and in distinguishing
between tenant incentives and capital improvements.
Development properties and residential inventory
Development costs for properties under development and residential inventory are capitalized during active development in
accordance with the accounting policy in Note 2.8. Management’s judgment is required in determining when a property is in
active development, which generally begins when a development commences and ceases when a development is substantially
completed.
Leases - Classification, RioCan as lessor
The Trust makes judgments in determining whether certain leases, in particular tenant leases where the Trust is the lessor, are
either operating or finance leases. When RioCan has determined, based on an evaluation of terms and conditions of the lease
arrangements, that the Trust retains all of the significant risks and rewards of ownership of these properties, it accounts for these
arrangements as operating leases.
RioCan Annual Report 2022 116
RIOCAN REAL ESTATE INVESTMENT TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2022 AND 2021
(In thousands of Canadian dollars, tabular amounts in thousands, except per unit amounts or unless otherwise noted)
Leases - Determination of lease term of contracts
The Trust determines the lease term as the non-cancellable term of the lease, together with any periods covered by an option to
extend the lease if it is reasonably certain to be exercised by the lessee, or any periods covered by an option to terminate the
lease, if it is reasonably certain not to be exercised by the lessee, including purchase options. The Trust determines the lease
commencement date as the date on which the underlying asset is made available for use by the lessee, which is based on the
terms of the lease contract, the type and extent of tenant improvements, and, for properties under development, the state of
completion of the property. At commencement date, the Trust determines as lessee or as lessor whether there is reasonable
certainty that options to extend or cancel a lease will be exercised. To make this analysis, the Trust takes into account the
extension terms of the contract including whether the extension is likely to be below market rent, the cost to cancel a lease and
significant investments made on the property. After the commencement date, the Trust revises the lease term when an extension
or termination option is exercised and it was not previously included in the lease term.
Income taxes
The Trust uses judgment to interpret income tax rules and regulations and to determine the appropriate rates and amounts in
recording current and deferred income taxes, giving consideration to timing and probability. Actual income taxes could
significantly vary from these estimates as a result of future events, including changes in income tax law or the outcome of reviews
by tax authorities and related appeals. To the extent that the final tax outcome is different from the amounts that were initially
recorded, such difference would impact the income tax provision in the period in which such determination is made.
The recognition of deferred income tax assets and liabilities also requires significant judgment as the recognition is dependent on
RioCan's projection of future taxable profits and income tax rates that are expected to be in effect in the period the asset will be
realized or the liability settled. Any changes to this projection will result in changes in the amount of deferred tax assets and
liabilities on the consolidated balance sheets and the deferred tax expense in the consolidated statements of income.
2.4 Use of estimates and assumptions
The preparation of RioCan's consolidated financial statements requires management to make estimates and assumptions that
have a significant risk of causing a material adjustment to the reported amounts of assets, liabilities, net income and related
disclosures over the following reporting period. Estimates made by management are based on events and circumstances that
existed as at the consolidated balance sheet date. Accordingly, actual results may differ from these estimates.
Given the volatility in the current macroeconomic environment, it is difficult to predict with certainty the nature and extent of, and
the impact of higher inflation, rising interest rates and their combined effects on demand and economic growth. Estimates and
assumptions that are most subject to increased uncertainty caused by the current macroeconomic environment relate to the
valuation of investment properties (Note 3).
The amounts recorded in these annual audited consolidated financial statements are based on the latest reliable information
available to management at the time the annual audited consolidated financial statements were prepared where that information
reflects conditions at the date of the annual audited consolidated financial statements. However, given the heightened level of
uncertainty from the volatility in the current macroeconomic environment, these assumptions and estimates could result in
outcomes that could require a material adjustment to the carrying amount of the affected asset or liability in the future.
Investment property
Estimates and assumptions used in determining fair value of the Trust's investment properties include, but are not limited to,
capitalization rates, stabilized net operating income (including vacancy allowances and management fees), costs to complete and
other temporary valuation allowances, if applicable, are adjusted to reflect lease-up assumptions and construction risk, when
appropriate. The Trust examines the key assumptions at the end of each reporting period and updates these assumptions based
on recent leasing activity and external data available at the time. A change to any of these inputs may significantly alter the fair
value of an investment property. The carrying value for the Trust's investment properties reflects its best estimate for the highest
and best use as at December 31, 2022 (Note 3).
Net realizable value of residential inventory
Residential inventory is stated at the lower of cost and net realizable value. In calculating the net realizable value of residential
inventory and assessing for impairment of condominium sales receivables, the Trust estimates the selling prices based on
prevailing market prices, estimated cost to complete and selling costs.
Financial instruments
The Trust uses estimates and assumptions that affect the carrying amounts of certain financial instruments, these are described
in Note 2.15. In addition, the Trust uses estimates and assumptions for determining the fair values of financial instruments for
disclosure purposes (Note 24).
2.5 Basis of consolidation
These consolidated financial statements include the accounts of the parent trust, RioCan Real Estate Investment Trust, and its
subsidiaries, after elimination of intercompany transactions, balances, revenues and expenses.
117 RioCan Annual Report 2022
RIOCAN REAL ESTATE INVESTMENT TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2022 AND 2021
(In thousands of Canadian dollars, tabular amounts in thousands, except per unit amounts or unless otherwise noted)
(i) Subsidiaries
Subsidiaries are entities over which the Trust has control. Control is achieved when RioCan is exposed, or has rights, to
variable returns from its involvement with the investee and has the ability to affect those returns through its power over the
investee. Power may be determined on the basis of voting rights or, in the case of structured entities, other contractual
arrangements. The Trust reassesses whether or not it controls an investee based on current facts and circumstances.
All subsidiaries are consolidated from the date RioCan obtains control and continue to be consolidated until the date that
such control ceases. When RioCan does not own all of the equity in a consolidated subsidiary, the non-controlling equity
interest is presented as a separate component of total equity on the consolidated balance sheets. The net income
attributable to non-controlling interests is separately disclosed in the Trust's consolidated statements of income.
(ii) Associates and joint ventures
Associates are entities over which RioCan has significant influence but not control or joint control, generally accompanying
an ownership between 20% and 50% of the voting rights, although other factors such as the ability to impact key operating
decisions could also indicate significant influence.
Joint ventures are entities over which the Trust has joint control and whereby the parties that share joint control have rights to
the net assets of the joint venture. Joint control is the contractually agreed sharing of control of an arrangement, which exists
only when decisions about the relevant activities require unanimous consent of the parties sharing control.
Investments in associates and joint ventures are accounted for using the equity method. Under the equity method, the
investment is initially recorded at cost and adjusted by RioCan's share of the post-acquisition results of operations, of other
comprehensive income (OCI) and changes in the net assets of the associate or joint venture. The financial statements of
RioCan's associates and joint ventures are prepared for the same reporting period as the Trust, and where necessary,
adjustments are made to bring the accounting policies of such entities in line with those of the Trust.
(iii) Joint operations
A joint operation is a type of joint arrangement whereby the parties that have joint control of the arrangement have rights to
the assets and obligations for the liabilities relating to the arrangement. RioCan records only its share of the assets, liabilities
and share of the results of operations of the joint operation. The assets, liabilities and results of joint operations are included
within the respective line items of the consolidated balance sheets, consolidated statements of income and consolidated
statements of comprehensive income.
2.6 Business combinations
At the time of acquisition of property, whether through a controlling share investment or directly, the Trust considers whether the
acquisition represents the acquisition of a business. The Trust accounts for an acquisition as a business combination where an
integrated set of activities is acquired in addition to the property. More specifically, the extent to which significant processes are
acquired is taken into consideration. If no significant processes, or only insignificant processes, are acquired, the acquisition is
treated as an asset acquisition rather than a business combination.
The Trust has an option to apply a ‘concentration test’ that permits a simplified assessment of whether an acquired set of
activities and assets is not a business. The optional concentration test is met and the acquisition can be treated as an asset
acquisition, if substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or group
of similar identifiable assets.
The cost of a business combination is measured as the fair value of the assets given, equity instruments issued and liabilities
incurred or assumed at the acquisition date. Identifiable assets acquired and liabilities and contingent liabilities assumed in a
business combination are measured initially at fair value at the date of acquisition. The Trust recognizes assets or liabilities, if any,
resulting from a contingent consideration arrangement at their acquisition date fair value and such amounts form part of the cost
of the business combination. Subsequent changes in the fair value of contingent consideration arrangements are recognized in
net income.
RioCan expenses transaction costs associated with business combinations in the period incurred.
When an acquisition does not meet the criteria for a business, it is accounted for as an acquisition of a group of assets and
liabilities, the cost of which includes transaction costs that are allocated to the assets and liabilities acquired based upon their
relative fair values. No goodwill is recognized for asset acquisitions.
2.7 Fair value measurement
The Trust measures certain financial instruments, such as derivatives, and non-financial assets, such as investment properties, at
fair value as at each consolidated balance sheet date. Fair value is the price that would be received to sell an asset or paid to
transfer a liability in an orderly transaction between market participants at the measurement date. Fair value is determined by
incorporating all factors that market participants would consider in setting a price acting in their economic best interests, including
commonly accepted valuation approaches. The fair value measurement is based on the presumption that the transaction to sell
the asset or transfer the liability takes place either:
•
In the principal market for the asset or liability; or
RioCan Annual Report 2022 118
RIOCAN REAL ESTATE INVESTMENT TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2022 AND 2021
(In thousands of Canadian dollars, tabular amounts in thousands, except per unit amounts or unless otherwise noted)
•
In the absence of a principal market, in the most advantageous market for the asset or liability that is accessible by
RioCan.
A fair value measurement of a non-financial asset takes into account a market participant’s ability to generate economic benefits
by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest
and best use.
The Trust uses valuation techniques that are appropriate in the circumstances and for which sufficient data is available to
measure fair value, maximizing the use of relevant observable inputs and minimizing the use of unobservable inputs.
All assets and liabilities for which fair value is measured or disclosed in the consolidated financial statements are categorized
within the fair value hierarchy, described as follows, based on the lowest-level input that is significant to the fair value
measurement as a whole:
•
•
•
Level 1 - quoted (unadjusted) market prices in active markets for identical assets or liabilities;
Level 2 - valuation techniques for which the lowest-level input that is significant to the fair value measurement is directly
or indirectly observable; and
Level 3 - valuation techniques for which the lowest-level input that is significant to the fair value measurement is
unobservable.
For assets and liabilities that are recognized in the consolidated financial statements on a recurring basis, the Trust determines
whether transfers have occurred between levels in the hierarchy by reassessing categorization (based on the lowest-level input
that is significant to the fair value measurement as a whole) at the end of each reporting period.
For the purpose of fair value disclosures, RioCan has determined classes of assets and liabilities on the basis of the nature,
characteristics and risks of the asset or liability and the level of the fair value hierarchy as explained above.
2.8 Investment properties
Investment properties comprise income properties and property under development that are held to earn rental revenue or for
capital appreciation or both. Real estate property held under a lease is classified as investment property, if it meets the definition
of investment property, as further described in Note 2.11 A(i).
(i) Income properties
Income properties are initially measured at cost. Costs include all amounts related to acquisition, including transaction costs
related to an asset acquisition as outlined in Note 2.6, and improvements of the properties. All costs associated with
upgrading and extending the economic life of the existing facilities other than ordinary repairs and maintenance are
capitalized to investment property. Subsequent to initial recognition, income properties are recorded at fair value, in
accordance with International Accounting Standard 40, Investment Property (IAS 40). The determination of fair value is
based on, among other things, rental revenue from current leases and reasonable and supportable assumptions that
represent what knowledgeable, willing parties would assume about rental revenue from future leases in light of current
conditions, less future cash outflows in respect of tenant installation costs, income property operations and capital
expenditures. Gains or losses arising from differences between current period fair value and the sum of previously measured
fair value and capitalized costs as described above are recognized in net income in the period in which they arise.
(ii) Properties under development
Properties under development include those properties, or components thereof, that will undergo activities that will take a
substantial period of time to prepare the properties for their intended use as income properties.
The cost of a development property that is an asset acquisition comprises the amount of cash, or the fair value of other
consideration, paid to acquire the property, including transaction costs. Subsequent to the acquisition, the cost of a
development property includes costs that are directly attributable to these assets, including development costs, common
area maintenance costs, property taxes and borrowing costs on both specific and general debt (Development Carrying
Costs). Development Carrying Costs are capitalized when the activities necessary to prepare an asset for development or
redevelopment begin, and continue until the date that construction is substantially complete and the unit of the property can
operate in a manner intended by management, which may include that all necessary occupancy and related permits have
been received, whether or not the space is leased. If RioCan is required as a condition of a lease to construct tenant
improvements that enhance the value of the property, then capitalization of costs continues until improvements are
completed. Development Carrying Costs are suspended if there are prolonged periods when development activity is
interrupted.
Interest capitalized is calculated using the Trust’s weighted average cost of borrowing after adjusting for borrowing
associated with specific developments. Where borrowing is associated with specific developments, the amount capitalized is
the gross interest incurred on such borrowing less any investment income arising on temporary investment of such
borrowing.
Properties under development are also adjusted to fair value as at each consolidated balance sheet date with fair value
adjustments recognized in net income.
119 RioCan Annual Report 2022
RIOCAN REAL ESTATE INVESTMENT TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2022 AND 2021
(In thousands of Canadian dollars, tabular amounts in thousands, except per unit amounts or unless otherwise noted)
Investment properties are derecognized on disposal or when no future economic benefits are expected from their use or disposal.
2.9 Residential inventory
Residential inventory consists of assets acquired or developed that RioCan has no intention of using for rental income purposes
and plans to sell in the ordinary course of business. The Trust expects to earn a return on such assets through a combination of
property operating income earned during the holding period and sales proceeds. Residential inventory, which is developed for
sale in the ordinary course of business within the normal operating cycle is recorded at the lower of cost, including pre-
development expenditures and capitalized borrowing costs, and net realizable value. Net realizable value is the estimated selling
price in the ordinary course of business, less estimated selling costs and estimated development costs to complete. The Trust
intends to sell residential inventory projects in the ordinary course of business within the normal operating cycle, which may be
greater than 12 months from the balance sheet date.
Residential inventory is reviewed for impairment at each reporting period date. An impairment loss is recognized in net income
when the carrying value of the asset exceeds its net realizable value.
Transfers between residential inventory and investment property occur when there is a change in use. A change in use occurs
when the property meets, or ceases to meet, the definition of investment property based on management's intentions and there is
observable evidence of a change in use.
2.10 Investment properties classified as held for sale
Investment property is classified as held for sale when it is expected that the carrying amount will be recovered principally through
sale rather than from continuing use. To be classified as held for sale, the property must be available for immediate sale in its
present condition, subject only to terms that are usual and customary for sales of such property, and its sale must be highly
probable, generally within one year. Upon designation as held for sale, the investment property continues to be measured at fair
value and is presented separately on the consolidated balance sheets.
2.11 Leases
A. As a lessee
(i) Right-of-use (ROU) assets
The Trust recognizes ROU assets at the commencement date of the lease (i.e. the date the underlying asset is available to
the Trust for use). As lessee, the Trust has used the practical expedient to combine lease and non-lease components for
gross leases. At inception, the ROU assets are recognized at the present value of the future minimum lease payments, and
an equivalent amount is recognized as a lease obligation. Subsequent to initial recognition, ROU assets for property leases
are carried at fair value.
(ii) Lease liabilities
At the commencement date of the lease, the Trust recognizes lease liabilities measured at the present value of lease
payments to be made over the lease term. The lease payments include fixed payments (including in-substance fixed
payments), variable lease payments that depend on an index or a rate and amounts expected to be paid under residual
value guarantees, less any lease incentives receivable. The lease payments also include the exercise price of a purchase
option reasonably certain to be exercised by the Trust and payments of penalties for terminating a lease, if the lease term
reflects the Trust exercising the option to terminate. The variable lease payments that do not depend on an index or a rate
are recognized as expenses in the period in which the event or condition that triggers the payment occurs.
In calculating the present value of lease payments, the Trust uses the incremental borrowing rate at the lease
commencement date if the interest rate implicit in the lease is not readily determinable. After the commencement date, the
amount of lease liabilities is increased to reflect the accretion of interest and reduced for the lease payments made. In
addition, the carrying amount of lease liabilities is remeasured if there is a modification, a change in the lease term, a change
in the in-substance fixed lease payments or a change in the assessment to purchase the underlying asset.
(iii) Short-term leases and leases of low-value assets
The Trust applies the short-term lease recognition exemption to its short-term leases of machinery and equipment (i.e., those
leases that have a lease term of 12 months or less from the commencement date and do not contain a purchase option). It
also applies the lease of low-value assets recognition exemption to leases of office equipment that are considered of low
value. Lease payments on short-term leases and leases of low-value assets are recognized as an expense on a straight-line
basis over the lease term.
B. As a lessor
When the Trust acts as a lessor, it determines and classifies each lease as a finance lease or operating lease at the lease
commencement date.
When a lease transfers to the lessee substantially all the risk and rewards of ownership incidental to the ownership of the
underlying asset, the lease is classified as a finance lease; otherwise, the lease is classified as an operating lease. To make this
assessment, the Trust considers certain indicators including whether the lease is for the major part of the economic life of the
asset or the present value of lease payments is substantially all the fair value of the underlying asset.
RioCan Annual Report 2022 120
RIOCAN REAL ESTATE INVESTMENT TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2022 AND 2021
(In thousands of Canadian dollars, tabular amounts in thousands, except per unit amounts or unless otherwise noted)
When the Trust is an intermediate lessor, it accounts for its interests in the head lease and sublease separately. The Trust
assesses the sublease with reference to the ROU asset arising from the head lease.
If a lease arrangement contains lease and non-lease components, the Trust applies IFRS 15, Revenue from Contracts with
Customers to allocate the consideration to the various components of the contract.
(i) Finance lease receivables
At the commencement date of a finance lease, the Trust recognizes a finance lease receivable at the amount of its net
investment in the lease, which is measured at the present value of lease payments to be made over the lease term. The
lease payments include fixed payments (including in-substance fixed payments), variable lease payments that depend on an
index or a rate and amounts expected to be paid under residual value guarantees, less any lease incentives payable. The
lease payments also include the exercise price of a purchase option reasonably certain to be exercised by the lessee and
payments of penalties for terminating a lease, if the lease term reflects the lessee exercising the option to terminate. The
variable lease payments that do not depend on an index or a rate are recognized as rental revenue in the period on which
the event or condition that triggers the payment occurs.
In calculating the present value of lease payments, the Trust uses the interest rate implicit in the lease, or in the case of a
sublease if the rate is not readily determinable, the discount rate used for the head lease. After the commencement date, the
amount of finance lease receivables is increased to reflect the accretion of interest and reduced for the lease payments
received. In addition, the finance lease receivable is derecognized and impairment is measured in accordance with the
expected credit loss (ECL) model pursuant to IFRS 9, Financial Instruments (IFRS 9).
(ii) Lease modifications
From time to time, RioCan may agree with tenants to modify the terms of lease agreements, including changes to the
consideration under the lease. When the changes result in a reduction in amounts receivable relating to past lease periods,
RioCan applies IFRS 9 in determining whether to partially or fully derecognize those receivables. Other changes to the terms
and conditions of the lease are treated as lease modifications in accordance with IFRS 16, Leases, and the modified lease is
accounted for as a new lease from the effective date of the modification, with any prepaid or accrued lease payments relating
to the original lease included as part of the lease payments for the new lease.
2.12 Revenue
The following is a description of the principal activities from which the Trust generates its revenues, including the nature of
revenues, timing of satisfaction of performance obligations and significant payment terms.
The following specific recognition criteria must also be met before revenue is recognized:
(i) Rental revenue
The majority of the Trust's rental revenue is earned from its lease contracts with customers.
Base rent
The Trust classifies leases with its tenants as operating leases when it has not transferred substantially all of the risks and
rewards of ownership of its investment properties. Revenue recognition under a lease commences when the tenant has the
right to use the leased asset, which is typically when the tenant takes possession of, or controls, the physical use of the
leased property. Generally, this occurs on the lease commencement date. When RioCan is required to make additions to the
property in the form of tenant improvements that enhance the value of the property or when the property is still under
development, revenue recognition begins upon substantial completion of such additions or when the development is
substantially complete and in a state that can be used in the manner intended.
Tenant incentives are recognized as a reduction of rental revenue on a straight-line basis over the term of the lease contract
where it is determined that the tenant fixturing has no benefit to RioCan beyond the existing tenancy.
Realty tax and insurance recoveries
Tenant reimbursements for real estate taxes and insurance incurred by the Trust relate specifically to the leased property and
are considered to be unavoidable costs directly related to the leased asset. The Trust recognizes realty tax and insurance
recoveries as they become due.
Straight-line rent
Certain lease contracts contain rent escalation clauses or provide for tenant occupancy during periods for which no rent is
due. Certain lease contracts or lease modifications may also include lease termination options and payments. RioCan
records the total rental income on a straight-line basis, inclusive of lease termination payments if it is reasonably certain the
tenant will exercise the lease termination option, over the full term of the lease contract or modified lease contract, including
the tenant fixturing period. An accrued straight-line rent receivable is recorded from tenants for the difference between the
straight-line rent and the rent that is contractually owing.
Straight-line rent is recalculated and adjusted for modifications to existing tenant operating leases.
121 RioCan Annual Report 2022
RIOCAN REAL ESTATE INVESTMENT TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2022 AND 2021
(In thousands of Canadian dollars, tabular amounts in thousands, except per unit amounts or unless otherwise noted)
Percentage rent
Percentage rent is typically calculated based on a percentage of tenant sales over a specified threshold, which is in addition
to base rent. Percentage rents are recognized once the specified threshold has been achieved in accordance with each
tenant lease.
Common area maintenance (CAM) services
The Trust has obligations pursuant to its lease contracts with tenants to provide CAM services in exchange for CAM
recoveries, which are considered non-lease components. These CAM services are delivered to tenants during the period in
which the tenants occupy the premises, and as such, CAM recoveries are recognized in revenue over time. The Trust
receives variable consideration for the CAM recoveries to the extent of costs incurred, and revenue is recognized on this
basis as this is the best estimate of amounts earned over the period these services are performed. Revenue is constrained
by actual costs incurred and any restrictions in the lease contracts. The Trust is obligated to continue to provide CAM
services over the remainder of the lease contract term and will recognize revenue based on actual cost incurred to fulfill the
CAM services.
Lease cancellation fees
Amounts payable by tenants to terminate their lease prior to the contractual expiry date are included in rental revenue as
lease cancellation fees at the date the tenant ceases to have the right to use the asset, if the lease termination payment was
not included in the straight-line rent noted above.
Parking revenue
Parking revenue consists of fees charged for short-term or transient use of a parking space. Revenue is recognized when
the parking space is used and the fee is collected. Parking revenue pursuant to a lease is included in base rent.
(ii) Residential inventory
Revenue from contracts with customers for residential land sales, the sale of townhomes and residential condominium units
is recognized at the point in time when control over the property has been transferred, which is generally when possession
passes to the customer (i.e., the purchaser) since the customer then has the ability to direct the use and obtain substantially
all of the benefits of the respective property. Revenue is measured at the transaction price agreed to under the contract.
Funds received from the customer prior to the customer taking possession are recognized as deferred revenue (a contract
liability). Non-refundable sales commissions paid by the Trust prior to the customer taking possession are capitalized as
contract assets and expensed when the residential inventory revenue is recognized.
Directly attributable marketing and disposition costs are expensed as incurred.
(iii) Property management and other service fees
RioCan has interests in various investment properties through joint arrangements and investments in associates. The Trust
provides property management services, construction and development services, finance arranging services and leasing
services to co-owners, partners and third parties for which it earns market-based fees.
Fees for property management services, construction and development services are generally recognized as revenue over
the period of performance of those services. Amounts are determined and revenue is recognized based on the agreed
transaction price in each contract.
Finance arranging and leasing service fees are recognized as revenue in the period in which the service is received by the
customer. Amounts are determined and revenue is recognized based on the agreed transaction price in each contract.
2.13 Investment and other income and transaction and other costs
Transaction gains included in investment and other income (loss), net, and transaction losses included in transaction and other
costs on the consolidated statements of income, are recognized on the settlement date or on the settlement of post-transaction
adjustments and represent the excess proceeds of disposition relating to subsidiaries, investments or assets over their carrying
values in the case of transaction gains, and the excess carrying value of assets over proceeds of disposition in the case of
transaction losses. Transaction gains and losses may also arise from the settlement of liabilities for more or less than their
carrying values.
2.14 Unit-based compensation
RioCan and its subsidiaries issue unit-based equity-settled awards to certain employees and trustees. The cost of these unit-
based payments equals the fair value of each tranche of awards at their grant date. The cost of the unit-based equity settled
awards is recognized on a proportionate basis consistent with the vesting features of each tranche of the grant.
Prior to January 1, 2021, RioCan had unit-based cash-settled compensation plans for independent trustees. The cost of these
unit-based payments was measured at fair value and expensed over the vesting period with the recognition of a corresponding
liability. The liability was remeasured at fair value at each reporting period date with the vested changes in fair value recorded in
the consolidated statements of income. Effective January 1, 2021, the unit-based cash-settled compensation plan for
RioCan Annual Report 2022 122
RIOCAN REAL ESTATE INVESTMENT TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2022 AND 2021
(In thousands of Canadian dollars, tabular amounts in thousands, except per unit amounts or unless otherwise noted)
independent trustees was amended and each trustee provided irrevocable elections such that all units granted, vested and
outstanding shall be redeemed and settled only by the issuance of Units, and as such, this became a unit-based equity-settled
award.
2.15 Recognition and measurement of financial instruments
Financial assets include RioCan's net contractual rents and other tenant receivables, mortgages and loans receivable, cash and
cash equivalents, amounts due on condominium final closings, funds held in trust, marketable securities, derivative contracts,
cash held for banker's acceptance and other receivables. Financial liabilities include RioCan's operating lines of credit, mortgages
payable, debentures payable, accounts payable related to property operating costs, and capital expenditures and leasing
commissions, trade payables and accruals, deposits received from customers on residential inventory, cash collateralized
banker's acceptance, bond forward agreement and certain other liabilities.
The Trust determines the classification of its financial assets and financial liabilities at initial recognition. The classification of
financial instruments depends on the purpose for which they were acquired or incurred. Financial instruments are initially
recorded at fair value and, in the case of financial assets or financial liabilities carried at amortized cost, adjusted for directly
attributable transaction costs.
The fair value of a financial instrument is the amount of consideration that could be agreed upon in an arm’s length transaction
between knowledgeable, willing parties who are under no compulsion to act. In certain circumstances, however, the initial fair
value may be based on other observable current market transactions in the same instrument without modification or on a
valuation technique using market-based inputs.
Financial assets and financial liabilities are recognized when the Trust becomes party to the contractual provisions of the
instrument. Financial assets are no longer recognized when the rights to receive cash flows from the assets have expired or are
assigned and all the risks and rewards of ownership have been transferred to a third party. Financial liabilities are no longer
recognized when the related obligation expires, or is discharged or cancelled.
The Trust's derivative instruments are recorded on the consolidated balance sheets at fair value. Changes in fair value of the
derivative instruments are recognized in net income, except for derivatives that are designated as effective hedges. Changes in
fair value for the effective portion of such hedging relationships are recognized in OCI. See Note 2.19 for further discussion
regarding hedge accounting policies.
Financial Instruments
Financial assets
Cash and cash equivalents (i)
Marketable securities (ii)
Other investments (ii)
Receivables and other assets (iii)
Mortgages and loans receivable
Interest rate swap assets (iv)
Financial liabilities
Debentures payable
Mortgages payable
Lines of credit and other bank loans
Interest rate swap liabilities (iv)
Bond forward agreement (v)
Accounts payable and other liabilities (vi)
IFRS 9 Classification
Amortized cost
FVTPL
FVTPL
Amortized cost
Amortized cost or FVTPL
FVTPL
Amortized cost
Amortized cost
Amortized cost
FVTPL
FVTPL
Amortized cost
(i) As at December 31, 2022 and 2021 cash equivalents were $Nil.
(ii)
(iii) Financial instruments in receivables and other assets that are classified as amortized cost include net contractual rents and other tenant
Included in receivables and other assets on the consolidated balance sheet.
(iv)
receivables, amounts due on condominium final closings, funds held in trust, other receivables and cash held for banker's acceptance settlement.
Interest rate swaps are derivative financial instruments that are recorded at fair value on the consolidated balance sheet as interest rate swap
assets or interest rate swap liabilities. The effective portion of the fair value gains (losses) is recorded in other comprehensive income as they are
designated in an effective cash flow hedging relationship.
(v) The bond forward agreement is a derivative financial instrument that is recorded at fair value on the consolidated balance sheet as bond forward
asset or bond forward liability. The effective portion of the fair value gains (losses) is recorded in other comprehensive income as it is designated in
an effective cash flow hedging relationship.
(vi) Financial instruments in accounts payable and other liabilities that are classified as amortized cost include accounts payable related to property
operating costs, capital expenditures and leasing commissions, trade payables and accruals, deposits received from customers on residential
inventory, and cash collateralized banker's acceptance.
123 RioCan Annual Report 2022
RIOCAN REAL ESTATE INVESTMENT TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2022 AND 2021
(In thousands of Canadian dollars, tabular amounts in thousands, except per unit amounts or unless otherwise noted)
The amortized cost method referenced in the table above uses an effective interest rate that discounts estimated future cash
receipts or payments through the expected life of the financial asset or liability to the net carrying amount of the financial asset or
liability.
Financial assets
The Trust's financial assets are classified and measured on the basis of both the business model in which the assets are
managed and the contractual cash flow characteristics of the asset. Financial assets subsequent to initial recognition are
classified and measured based on three categories: (i) amortized cost, (ii) fair value through other comprehensive income
(FVOCI) with fair value gains or losses recycled to net income on derecognition for loans and receivables only, or (iii) fair value
through profit or loss (FVTPL). The Trust does not have any financial assets classified as FVOCI.
(i) Financial assets at amortized cost
Financial assets are recorded at amortized cost when financial assets are held with the objective of collecting contractual
cash flows and those cash flows represent solely payments of principal and interest (SPPI) and are not designated as
FVTPL. These assets are measured at amortized cost subsequent to initial recognition using the effective interest rate
method. The amortized cost is reduced by impairment losses, if any. Interest income and impairment losses are recognized
in profit or loss. Any gain or loss on derecognition is recognized in profit or loss.
(ii) Financial assets at FVTPL
These financial assets are neither held at amortized cost nor at FVOCI as they are managed and evaluated on a fair value
basis. These financial assets are measured at fair value subsequent to initial recognition. Net gains and losses, including any
interest or dividend income, are recognized in profit or loss unless they are derivative instruments designated in an effective
hedging relationship.
Financial liabilities
Financial liabilities are initially measured at fair value and subsequent to initial recognition are classified and measured based on
two categories: (i) amortized cost or (ii) FVTPL.
(i) Financial liabilities at amortized cost
Financial liabilities are subsequently measured at amortized cost using the effective interest rate method. Interest expense is
recognized in profit or loss. Any modification that results in the substantially different terms or in a 10% change in carrying
value is accounted for as an extinguishment or derecognition of the original financial liability and the recognition of a new
financial liability. Any gain or loss on derecognition is recognized in profit or loss.
(ii) Financial liabilities at FVTPL
A financial liability is classified as FVTPL if it is classified as held for trading, it is a derivative or designated as FVTPL on
initial recognition. Financial liabilities at FVTPL are subsequently measured at fair value and net gains and losses, including
any interest expenses, are recognized in profit or loss unless they are derivative instruments designated in an effective
hedging relationship.
2.16 Impairment of financial assets
At each reporting date, each financial asset measured at amortized cost is assessed for impairment under an ECL model. The
Trust applies the simplified approach, which uses lifetime ECLs, for net contractual rents and other tenant receivables, and the
general approach for all other financial assets measured at amortized cost. Under the general approach, the ECL model uses a
staged methodology that requires the recognition of credit losses based on up to 12 months of expected losses for performing
loans (Stage 1) and the recognition of lifetime expected losses on performing loans that have experienced a significant increase
in credit risk since origination (Stage 2). Stage 3 requires the recognition of lifetime losses for all credit-impaired assets.
Mortgages and loans receivable, amounts due on condominium final closings and finance lease receivables are classified as
impaired when there is objective evidence that the full carrying amount of the loans and receivables is not collectible.
The Trust uses an accounts receivable aging provision matrix to measure the ECL for net contractual rents and other tenant
receivables and applies loss factors accordingly, incorporating forward-looking information including assessing the viability of
retail tenants.
ECLs for all other financial assets measured at amortized cost are based on the difference in cash flows the Trust expects to
receive and the contractual cash flows due in accordance with the contract, discounted at the asset’s original effective interest
rate (if applicable). Any changes in impairment are recognized in net income. For interest-bearing financial assets, once these
financial assets are identified as impaired, the Trust continues to recognize interest income based on the original effective interest
rate on the loan amount net of its related allowance. In the periods following the recognition of impairment, adjustments to the
allowance for these financial assets reflecting the time value of money are recognized and presented as interest income.
Financial assets together with the associated allowance, are written off when there is no realistic prospect of future recovery and
all collateral has been realized or has been transferred to RioCan.
RioCan Annual Report 2022 124
RIOCAN REAL ESTATE INVESTMENT TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2022 AND 2021
(In thousands of Canadian dollars, tabular amounts in thousands, except per unit amounts or unless otherwise noted)
2.17 Financial guarantee contracts
Financial guarantee contracts are contracts issued by RioCan that contingently require the Trust to make specified payments to
reimburse the holder for a loss it incurs because the specified debtor fails to make payment when due in accordance with the
terms of a debt instrument. Financial guarantees are recognized on the consolidated balance sheets initially as a liability
measured at the fair value of the obligation undertaken in issuing the guarantee, which is generally equal to the guarantee fee
received, adjusted for transaction costs that are directly attributable to the issuance of the guarantee. Subsequently, the liability is
measured at the higher of (i) the amount initially recognized less amortization for the passage of time; and (ii) the loss allowance
measured using an ECL model.
2.18 Offsetting of financial instruments
Financial assets and financial liabilities are offset and the net amounts are reported in the consolidated balance sheets if there is
an enforceable legal right to offset the recognized amounts and there is an intention to settle on a net basis, or to realize the
assets and settle the liabilities simultaneously.
2.19 Hedges
From time to time, the Trust may enter into interest rate swaps or bond forward contracts to hedge its interest rate risks. Such
derivative financial instruments are initially recognized at fair value on the date on which a derivative contract is entered into and
are subsequently remeasured at fair value. Derivatives are carried as financial assets when the fair value is positive and as
financial liabilities when the fair value is negative.
At the inception of a hedging relationship, RioCan formally designates and documents the hedging relationship to which the Trust
is applying hedge accounting and the risk management objective and strategy for undertaking the hedge. The documentation
includes identification of the hedging instrument, the hedged item or transaction, the nature of the risk being hedged, the hedge
ratio and how the Trust will assess the hedging instrument’s effectiveness in offsetting the exposure to changes in the hedged
item’s cash flows attributable to the hedged risk. Such hedges are expected to be highly effective in achieving offsetting changes
in cash flows and are assessed on an ongoing basis to determine that there is a continuing economic relationship between the
hedged item and hedging instrument. For the Trust's purposes of hedge accounting, interest rate swap hedges and bond forward
contract hedges are classified as cash flow hedges.
Cash flow hedges
A cash flow hedge is a hedge of the exposure to variability in cash flows that is attributable to a particular risk associated with a
recognized asset or liability or a highly probable forecast transaction. In a cash flow hedging relationship, the effective portion of
the gain or loss on the hedging instrument is recognized in OCI and accumulated in the cash flow hedge reserve within equity.
The ineffective portion is recognized immediately in net income.
For continuing cash flow hedge arrangements, amounts accumulated in the cash flow hedge reserve are reclassified from the
cash flow hedge reserve as a reclassification adjustment in the same periods during which the hedged future cash flow affects
the consolidated statements of income. Hedge accounting ceases when the hedging instrument expires or is sold, terminated or
exercised without replacement or rollover (as part of the hedging strategy); or when it no longer qualifies for hedge accounting.
Amounts accumulated in the cash flow hedge reserve at that time remain in equity if the forecasted transaction is still expected to
occur and reclassified from OCI and into the consolidated statements of income in the period the forecasted transaction occurs.
When a forecast transaction is no longer expected to occur, the gain or loss accumulated in the cash flow hedge reserve is
immediately reclassified from OCI to the consolidated statements of income.
2.20 Comprehensive income
Comprehensive income comprises net income and OCI, which generally would include changes in the fair value of the effective
portion of cash flow hedging instruments, actuarial gains and losses related to RioCan's defined benefit pension plans and other
comprehensive income of equity-accounted investments. The Trust reports consolidated statements of comprehensive income
comprising net income and OCI for the year.
2.21 Income taxes
The Trust qualifies as a mutual fund trust and a “real estate investment trust” (REIT Exemption) for income tax purposes. The
Trust intends to distribute all of its taxable income to Unitholders and is entitled to deduct such distributions for income tax
purposes. From time to time, RioCan may retain some taxable income and net capital gains in order to utilize the capital gains
refund available to mutual fund trusts without incurring any income taxes. The Trust is therefore considered, in substance, tax
exempt and does not account for income taxes, except for amounts incurred in its incorporated Canadian taxable subsidiaries
that continue to be subject to income taxes. These taxable subsidiaries account for income taxes as follows:
Current income tax assets and liabilities are measured at the amount expected to be received from or paid to tax authorities
based on the tax rates and laws enacted or substantively enacted as at the consolidated balance sheet dates.
Deferred tax liabilities are measured by applying the appropriate tax rate to taxable temporary differences between the carrying
amounts of assets and liabilities, and their respective tax basis. The appropriate tax rate is determined by reference to the rates
that are expected to apply to the year and the jurisdiction in which the assets are expected to be realized or the liabilities settled.
Deferred tax assets are recorded for all deductible temporary differences, carryforward of unused tax credits and unused tax
125 RioCan Annual Report 2022
RIOCAN REAL ESTATE INVESTMENT TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2022 AND 2021
(In thousands of Canadian dollars, tabular amounts in thousands, except per unit amounts or unless otherwise noted)
losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences,
unused tax credits and unused tax losses can be utilized. Current and deferred income taxes are recognized in correlation to the
underlying transaction either in OCI or directly in equity.
2.22 Equipment and leasehold improvements
Equipment and leasehold improvements are stated at cost less accumulated depreciation and accumulated impairment in value,
if any. Depreciation is recorded on a straight-line basis over the following expected useful lives:
Computer hardware
Furniture and equipment
Management information systems
Leasehold improvements
2.23 Intangible assets
3 to 5 years
5 years
5 to 10 years
Lease term plus first renewal, if renewal is reasonably assured
The Trust’s intangible assets comprise its management information systems and computer application software that is initially
recognized at cost and amortized over its estimated useful life (5 to 10 years) on a straight-line basis. The cost of self-built
management information systems and software includes the cost of materials, direct labour and interest expense. Capitalization
ceases and depreciation commences once the asset is in the location and condition necessary for it to be capable of operating in
the manner intended by management.
2.24 Cash and cash equivalents
Cash and cash equivalents comprise cash and short-term investments with original maturities from the date of acquisition for
three months or less.
2.25 Provisions
Provisions are recognized when the Trust has a present obligation (legal or constructive) as a result of a past event, when it is
probable that an outflow of resources embodying economic benefits will be required to settle the obligation, and a reliable
estimate can be made of the amount of the obligation. Where the Trust expects some or all of a provision to be reimbursed, for
example under an insurance contract, the reimbursement is recognized as a separate asset but only when the reimbursement is
virtually certain. The expense relating to any provision is presented in net income, net of any reimbursement. If the effect of the
time value of money is material, provisions are discounted using a current rate that reflects, where appropriate, the risks specific
to the liability. Where discounting is used, the increase in the provision due to the passage of time is recognized as a finance cost.
2.26 Employee future benefits
The Trust operates a defined contribution pension plan and three defined benefit pension plans for certain employees.
The cost of providing benefits under the defined benefit plans is determined separately for each plan. Actuarial gains and losses
for the defined benefit plans are recognized in OCI, in full, in the period in which they occur and are not reclassified to profit or
loss in subsequent periods. Past service costs are recognized as an expense on a straight-line basis over the average period
until the benefits become vested. If the benefits have already vested, immediately following the introduction of, or changes to, a
pension plan, past service costs are recognized immediately.
The defined benefit asset or liability comprises the present value of the defined benefit obligation (using a discount rate based on
non-callable investment-grade fixed income securities), less unamortized past service costs and less the fair value of plan assets
out of which the obligations are to be settled.
The Trust expenses its required contributions to the defined contribution pension plan.
RioCan Annual Report 2022 126
RIOCAN REAL ESTATE INVESTMENT TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2022 AND 2021
(In thousands of Canadian dollars, tabular amounts in thousands, except per unit amounts or unless otherwise noted)
2.27 Changes in accounting policies
The accounting policies used in the preparation of the consolidated financial statements are consistent with those of the prior
year, except for the adoption of new standards and interpretations effective January 1, 2022 as follows:
Amendments to IFRS 9, Financial Instruments, Fees in the 10 per cent test for derecognition of financial liabilities
As part of its 2018 - 2020 annual improvements to the IFRS process, the IASB issued an amendment to IFRS 9. The amendment
clarifies the types of fees that an entity includes when assessing whether the terms of a new or modified financial liability are
substantially different from the terms of the original financial liability. The amendment specifies that only fees paid or received
between the borrower and the lender, including fees paid or received by either the borrower or lender on the other’s behalf,
should be included. An entity applies the amendment to financial liabilities that are modified or exchanged on or after the
beginning of the annual reporting period in which the entity first applies the amendment. The amendment is effective January 1,
2022, with earlier adoption permitted.
The Trust applied the standard on financial liabilities modified or exchanged after January 1, 2022. These amendments did not
impact the Trust's consolidated financial statements upon adoption.
2.28 Future changes in accounting policies
RioCan monitors the potential changes proposed by the IASB and analyzes the effect that changes in the standards may have on
RioCan’s operations.
Standards issued but not yet effective up to the date of issuance of these consolidated financial statements are described below.
This description is of the standards and interpretations issued that the Trust reasonably expects to be applicable at a future date.
The Trust intends to adopt these standards when they become effective.
Amendments to IAS 1 and IFRS Practice Statement 2
In February 2021, the IASB issued amendments to IAS 1 and IFRS Practice Statement 2, Making Materiality Judgements, in
which it provides guidance and examples to help entities apply materiality judgments to account policy disclosures.The
amendments aim to help entities provide accounting policy disclosures that are more useful by replacing the requirement for
entities to disclose their "significant" accounting policies with a requirement to disclose their material accounting policies and
adding guidance on how entities apply the concept of materiality in making decisions about accounting policy disclosures.
The amendments are applicable January 1, 2023, with early adoption permitted. Since the amendments to the IFRS Practice
Statement 2 provide non-mandatory guidance on the application of the definition of material to accounting policy information, an
effective date for these amendments is not necessary.
Management is currently reviewing the Trust's accounting policy disclosures to ensure consistency with the amended
requirements.
Amendments to IAS 8, Definition of Accounting Estimates
In February 2021, the IASB issued amendments to IAS 8, in which it introduces a definition of ‘accounting estimates’. The
amendments clarify the distinction between changes in accounting estimates and changes in accounting policies and the
correction of errors. Also, they clarify how entities use measurement techniques and inputs to develop accounting estimates. The
amendments are effective January 1, 2023, with early adoption permitted. Management is currently assessing the impact of these
amendments.
Amendment to IAS 1, Presentation of Financial Statements - Classification of Liabilities as Current or Non-Current
In January 2020 and October 2022, the IASB issued amendments to paragraphs 69 - 76 of IAS 1 to clarify the requirements for
classifying liabilities as current or non-current. The amendments specify that the conditions which exist at the end of a reporting
period are those which will be used to determine if a right to defer settlement of a liability exists. The amendments also clarify the
situations that are considered a settlement of a liability. The amendments are effective January 1, 2024, with early adoption
permitted. The amendments are to be applied retrospectively. Management is currently assessing the impact of these
amendments.
127 RioCan Annual Report 2022
RIOCAN REAL ESTATE INVESTMENT TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2022 AND 2021
(In thousands of Canadian dollars, tabular amounts in thousands, except per unit amounts or unless otherwise noted)
3. INVESTMENT PROPERTIES
As at
Income properties
Properties under development
Year ended December 31, 2022
Balance, beginning of year
Acquisitions
Dispositions
Development expenditures
Capital expenditures:
Recoverable and non-recoverable expenditures
Leasing commissions and tenant improvements
Transfers, net (i)
Transfers to residential inventory (ii)
Fair value loss, net
Straight-line rent (iii)
Transfers to finance lease receivables
Transfer to equity-accounted investment (iv)
Other changes
Earn-out consideration
Balance, end of year
Investment properties
Properties held for sale
December 31, 2022
December 31, 2021
$
$
12,635,332 $
1,172,408
13,807,740 $
12,573,286
1,448,052
14,021,338
Income
properties
Properties
under
development
Total (v)
$
12,611,276 $
1,457,302 $
14,068,578
96,031
(425,491)
—
63,666
45,147
544,193
—
(239,417)
1,884
(3,669)
(17,500)
303
228
11,946
(34,277)
298,409
—
—
(544,193)
(14,247)
(1,711)
—
—
—
—
—
107,977
(459,768)
298,409
63,666
45,147
—
(14,247)
(241,128)
1,884
(3,669)
(17,500)
303
228
$
$
$
12,676,651 $
1,173,229 $
13,849,880
12,635,332 $
1,172,408 $
13,807,740
41,319
821
42,140
12,676,651 $
1,173,229 $
13,849,880
(i) During the year ended December 31, 2022, transfers to income properties from properties under development totalled $569.5 million, reflecting
completed developments. Transfers from income properties to properties under development totalled $25.3 million, reflecting the commencement
of active development on certain income properties during the year.
(ii) During the year ended December 31, 2022, the residential portion of the discrete parcel under development at RioCan Durham Centre was
transferred to residential inventory from investment property as appropriate evidence of a change in use was established. In addition, in
conjunction with the closing of the land transaction, RioCan transferred pre-acquisition costs incurred at Queen & Ashbridge (QA) to residential
inventory from investment property.
Included in investment properties is $115.8 million of net rents receivable arising from the recognition of rental revenue on a straight-line basis over
the lease term (December 31, 2021 - $119.1 million).
(iii)
(iv) On March 14, 2022, RioCan disposed of a 100% ownership interest in 85 Bloor Street West for $35.0 million to PR Bloor Street LP (Note 4) as part
of the consideration to obtain a 50.0% interest in the joint venture.
Included in investment properties are 12 properties held as right-of-use assets as at December 31, 2022. Refer to Note 8.
(v)
RioCan Annual Report 2022 128
RIOCAN REAL ESTATE INVESTMENT TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2022 AND 2021
(In thousands of Canadian dollars, tabular amounts in thousands, except per unit amounts or unless otherwise noted)
Year ended December 31, 2021
Balance, beginning of year
Acquisitions
Dispositions
Development expenditures
Capital expenditures:
Recoverable and non-recoverable expenditures
Leasing commissions and tenant improvements
Transfers, net (i)
Transfers to residential inventory (ii)
Fair value gain, net
Straight-line rent (iii)
Transfers to finance lease receivables
Other changes
Earn-out consideration
Balance, end of year
Investment properties
Properties held for sale
Income properties
Properties under
development
Total (iv)
$
12,907,134 $
1,353,982 $
14,261,116
11,482
(658,369)
—
34,240
53,577
146,570
—
116,965
6,928
(5,148)
(2,103)
—
5,563
(107,652)
365,120
—
—
(146,570)
(21,816)
7,087
—
—
(572)
2,160
17,045
(766,021)
365,120
34,240
53,577
—
(21,816)
124,052
6,928
(5,148)
(2,675)
2,160
$
$
$
12,611,276 $
1,457,302 $
14,068,578
12,573,286 $
1,448,052 $
14,021,338
37,990
9,250
47,240
12,611,276 $
1,457,302 $
14,068,578
(i) During the year ended December 31, 2021, transfers to income properties from properties under development totalled $174.2 million, reflecting
completed developments. Transfers from income properties to properties under development totalled $27.6 million, reflecting the commencement
of active development on certain income properties during the year.
(ii) During the year ended December 31, 2021, a portion of Les Galeries Lachine and the residential portion of the discrete parcel under
redevelopment at Sandalwood Square were transferred to residential inventory from investment property as appropriate evidence of a change in
use was established.
Included in investment properties is $119.1 million of net rents receivable arising from the recognition of rental revenue on a straight-line basis over
the lease term (December 31, 2020 - $116.5 million).
Included in investment properties are 12 properties held as ROU assets as at December 31, 2021. Refer to Note 8.
(iv)
(iii)
129 RioCan Annual Report 2022
RIOCAN REAL ESTATE INVESTMENT TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2022 AND 2021
(In thousands of Canadian dollars, tabular amounts in thousands, except per unit amounts or unless otherwise noted)
Acquisitions
The following table summarizes the Trust's acquisitions of properties:
For the years ended December 31,
Properties acquired during the year:
Total consideration
Vendor take-back mortgage (VTB) or debt assumed
Purchase price payable
Total consideration, net of VTB, purchase price payable and/or
debt assumed
Investment properties acquisitions
Property name and location
Q4 2022
Income properties
Properties under development
2022
2021
2022
2021
$
96,031 $
11,482 $
11,946 $
5,563
—
—
—
—
(9,191)
(2,368)
—
—
$
96,031 $
11,482 $
387 $
5,563
Date
acquired
Interest
acquired
IPP
purchase
price (i)
PUD
purchase
price (i)
VTB mortgage,
purchase price
payable and/or
debt assumed
Building at South Cambridge SC, Cambridge, ON (ii)
November 22
100.0 % $
5,011 $
$
5,011 $
Q3 2022
4980 Boulevard des Sources, Pierrefonds, QC
August 8
100.0 % $
1,072 $
$
1,072 $
— $
— $
— $
— $
—
—
—
—
Q2 2022 - no acquisitions
Q1 2022
Queen & Ashbridge (QA), Toronto, ON (iii)
February 17
50.0 % $
— $ 11,946 $
11,559
3302 Dufferin Street, Toronto, ON
Market, Laval, QC
February 11
100.0 %
22,218
February 8
90.0 %
48,349
Bloor Street West & Lansdowne Ave Portfolio, Toronto, ON (iv)
January 28
100.0 %
19,381
—
—
—
—
—
—
Total acquisitions for the year ended December 31, 2022
$
$
89,948 $ 11,946 $
11,559
96,031 $ 11,946 $
11,559
(i) Purchase price includes transaction costs.
(ii) RioCan acquired a tenant-owned building located at the property, and converted the tenant lease into a land and building lease.
(iii) The Queen & Ashbridge (QA) acquisition included both property under development and residential inventory components, and was allocated as
$11.9 million and $19.4 million, respectively. Vendor take-back mortgage plus purchase price payable on the acquisition totalled $30.4 million, of
which $11.6 million was allocated towards properties under development and $18.8 million towards residential inventory.
(iv) Bloor Street West & Lansdowne Ave Portfolio acquisition comprises four properties, which are part of a larger land assembly.
Purchase obligations
The Trust has agreed to purchase its partners' interest in the retail portion of the Yorkville project upon completion, currently
estimated to be during 2025, at a 6.0% capitalization rate.
The Trust has agreed to purchase its partners' interest in the retail and residential rental components of Queen & Ashbridge,
currently estimated to be during 2025, at the greater of pre-determined capitalization rates of 4.75% and 4.15%, respectively, or
total cost plus 5%.
RioCan Annual Report 2022 130
RIOCAN REAL ESTATE INVESTMENT TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2022 AND 2021
(In thousands of Canadian dollars, tabular amounts in thousands, except per unit amounts or unless otherwise noted)
Dispositions
The following table summarizes the Trust's dispositions of investment properties:
For the years ended December 31,
Properties disposed during the year:
Total consideration
Income properties
Properties under development
2022
2021
2022
2021
$
425,491 $
658,369 $
34,277 $
107,652
Mortgages associated with investment property dispositions
Vendor take-back mortgages receivable on dispositions
—
(22,286)
(82,636)
(3,000)
—
—
Total consideration, net of related debt
$
403,205 $
572,733 $
34,277 $
—
(23,720)
83,932
Investment properties dispositions
Property name and location
Q4 2022
Abbotsford Power Centre, Abbotsford, BC
Mill Woods Town Centre, Edmonton, AB
Fallingbrook Shopping Centre, Ottawa, ON (i)
Shoppes on Queen West, Toronto, ON
Chahko Mika Mall, Nelson, BC
Q3 2022
Parkwood Place, Prince George, BC
RioCan Greenfield, Greenfield Park, QC
Trinity Conception Square,Carbonear, NFLD
107th Avenue Northwest, Edmonton, AB
Q2 2022
Lethbridge Walmart Centre, Lethbridge, AB
RioCan Centre Vaughan, Vaughan, ON
Q1 2022
Mega Centre Notre-Dame, Sainte-Dorothée, QC (ii) (iii)
Highbury Shopping Plaza, London, ON
97th Street Northwest, Edmonton, AB
Eastcourt Mall, Cornwall, ON
Timiskaming Square, New Liskeard, ON
85 Bloor Street West, Toronto, ON (ii) (iv)
The Well (Building C), Toronto, ON (v)
Total dispositions for the year ended December 31, 2022
Date
disposed
Interest
disposed
IPP
sales proceeds
PUD
sales proceeds
December 19
December 15
December 6
December 1
November 28
100 % $
100 %
100 %
100 %
100 %
$
September 13
100 % $
September 8
August 29
July 7
June 6
May 3
March 30
March 29
March 17
March 14
March 14
March 14
January 24
100 %
100 %
100 %
$
100 % $
100 %
$
50 % $
100 %
100 %
50 %
50 %
50 %
40 %
$
$
53,000 $
58,269
38,856
51,218
28,312
229,655 $
30,500 $
47,838
14,900
3,400
96,638 $
27,625 $
—
27,625 $
32,728 $
10,750
2,000
6,945
1,650
17,500
—
71,573 $
425,491 $
—
10,470
—
—
—
10,470
—
—
—
—
—
—
9,300
9,300
—
—
—
—
—
—
14,507
14,507
34,277
(i) RioCan provided a vendor take-back mortgage with a fair value of $22.3 million related to this transaction.
(ii) The following represent partial interest dispositions. RioCan retained the remaining ownership interest in these properties.
(iii)
(iv) RioCan disposed of a 100% ownership interest in 85 Bloor Street West for $35.0 million to PR Bloor Street LP (Note 4) as part of the consideration
Includes Desserte Ouest located in Sainte-Dorothée, QC.
to obtain a 50.0% interest in the joint venture.
(v) The Well (Building C) disposition includes cost recoveries of $1.1 million.
131 RioCan Annual Report 2022
RIOCAN REAL ESTATE INVESTMENT TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2022 AND 2021
(In thousands of Canadian dollars, tabular amounts in thousands, except per unit amounts or unless otherwise noted)
Properties held for sale
Presented below are details of the Trust's properties held for sale:
As at
Assets
Income properties
Properties under development
Total assets held for sale
December 31, 2022
December 31, 2021
$
$
41,319 $
821
42,140 $
37,990
9,250
47,240
As at December 31, 2022, RioCan has two investment properties held for sale with a carrying value of $42.1 million. As at
December 31, 2021, RioCan had five investment properties held for sale with a carrying value of $47.2 million.
Valuation methodology
Fair value
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market
participants at the measurement date (i.e., an exit price). Expectations about future improvements or modifications to be made to
the investment property to reflect its highest and best use may be considered in the valuation.
Investment properties and properties held for sale are carried at fair value, and the Trust uses significant unobservable inputs to
estimate fair value of these assets at each reporting date. See below for further description of inputs used by the Trust in
estimating the fair value of its properties. Significant unobservable inputs are classified as Level 3 inputs under IFRS. See Note
24 for further details.
Quoted market prices in active markets are the best evidence of fair value and are used as the basis for fair value measurement,
when available. When quoted market prices are not available, judgment is required to estimate fair value based on the best
information available, including prices for similar assets and the use of other valuation techniques. These valuation techniques
are consistent with the objective of measuring fair value and involve a degree of estimation depending on the availability of
market-based information.
Valuation processes
Internal valuations
The Trust's Valuations Committee is responsible for approving any fair value changes to the investment properties and consists of
senior management of the Trust including the Chief Investment Officer, Chief Operating Officer, the Chief Financial Officer and
other executive members.
RioCan measures the vast majority of its investment properties, including co-owned properties, using valuations prepared by its
internal valuation team. This team consists of individuals who are knowledgeable and have specialized industry experience in real
estate valuations and report directly to a senior member of the Trust's management. The internal valuation team's processes and
results are reviewed and approved by the Valuations Committee on a quarterly basis, in line with the Trust's quarterly reporting
dates.
External valuations
Depending on the property asset type and location, management may opt to obtain independent third-party valuations from firms
that employ experienced valuation professionals having the required qualifications in property appraisals for purposes of adopting
such appraised values in the case of land parcels or assessing the reasonableness of its internal investment property valuations.
The internal valuation team also verifies all major inputs used by the external valuator in preparing the valuation report, assesses
changes to fair value by comparing the current year fair value against the fair value determined in the prior year valuation report,
and holds discussions with the external valuator.
During the year, the Trust obtained a total of 29 external property appraisals (including 3 vacant land parcels), which supported an
IFRS fair value of approximately $2.5 billion, or 18.0% of the Trust's investment property portfolio (at 100% interest), as at
December 31, 2022. In 2023, the Trust intends to select approximately six income properties for external appraisal on a quarterly
basis.
Valuation techniques
Income properties
The internal valuation team estimates the fair value of each income property based on a valuation technique known as the direct
capitalization income approach. The fair value is determined by applying a capitalization rate to stabilized net operating income
(SNOI). The significant unobservable inputs are based on the following:
•
SNOI is based on budgeted rents and expenses and supported by the terms of any existing lease, other contracts or external
evidence such as current market rents for similar properties, adjusted to incorporate allowances for estimated vacancy rates,
management fees based on current and expected future market conditions after expiry of any current lease. The resulting
RioCan Annual Report 2022 132
RIOCAN REAL ESTATE INVESTMENT TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2022 AND 2021
(In thousands of Canadian dollars, tabular amounts in thousands, except per unit amounts or unless otherwise noted)
capitalized value is then adjusted for non-recoverable capital expenditures as well as other costs, including leasing costs,
inherent in achieving and maintaining SNOI.
•
The capitalization rate is based on the location and quality of the properties and takes into account market data at the
valuation date.
Properties under development
Management uses an internal valuation process to estimate the fair value of properties under development that consist of
undeveloped land on a land value per acre or per buildable square foot basis using the particular attributes of the project with
respect to zoning and pre-development work performed on the site. Where a site is partially developed and meets certain
thresholds, the direct capitalization method is applied to capitalize the pro forma net operating income (NOI), stabilized with
market allowances, from which the costs to complete the development are deducted. The significant unobservable inputs are
based on the following:
•
•
•
Pro forma SNOI is based on the location, type and quality of the properties and supported by the terms of actual or
anticipated future leases, other contracts or external evidence such as current market rents for similar properties, adjusted
for estimated vacancy rates based on expected future market conditions and estimated maintenance costs, which are
consistent with internal budgets, based on management's experience and knowledge of the market conditions.
Costs to complete are derived from internal budgets based on management's experience and knowledge of the market
conditions.
The capitalization rate is based on the location and quality of the properties and takes into account market data at the
valuation date.
The primary method of valuation for undeveloped land is the comparable sales approach, which considers recent sales activity for
similar land parcels in the same or similar markets. Land values are estimated using either a per acre or per buildable square foot
basis based on highest and best use. Such values are applied to RioCan's properties after adjusting for factors specific to the
site, including its location, intended use, zoning, servicing and configuration.
For certain properties under development with multi-phased and mixed-use attributes, the Trust employs a corroborative
approach using a discounted cash flow valuation method.
The table below summarizes the classification, valuation approach and inter-relationship between the Level 3 key unobservable
inputs and fair value measurements for the Trust's investment properties:
Classification
Valuation
approach
Key
unobservable
input
Capitalization rate
Relationship between key unobservable inputs
and fair value measurement
There
the
capitalization rate and the fair value; in other words,
the higher the capitalization rate, the lower the
estimated fair value.
relationship between
inverse
is an
Income producing properties/
Properties under development
Direct capitalization
income approach
SNOI
Costs to complete
Generally, an increase in SNOI will result in an
increase in the estimated fair value of the properties.
There is an inverse relationship between costs to
complete and fair value; in other words, the higher the
costs to complete, the lower the estimated fair value.
Properties under development -
undeveloped land
Comparable sales
approach
Market
comparison
Land value is in line with market trends.
As at December 31, 2022, the weighted average capitalization rate for the Trust's investment properties and properties held for
sale is 5.33% (December 31, 2021 - 5.29%). The carrying value of the Trust's investment properties reflects its best estimate for
the highest and best use as at December 31, 2022.
The Trust has reviewed the valuation of its properties in light of the difficulty in anticipating the impact of the current global
macroeconomic environment on property cash flows and capitalization rates. The impact of higher inflation, rising interest rates
and their effect on demand and economic growth continue to be uncertain. Such effects could be material to investment
properties valuations. As events associated with the current macroeconomic environment continue to unfold, further adjustments
to the Trust's IFRS value of investment properties, which could be negative or positive, may be required. Refer to below for a
sensitivity analysis of investment properties valuations.
133 RioCan Annual Report 2022
RIOCAN REAL ESTATE INVESTMENT TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2022 AND 2021
(In thousands of Canadian dollars, tabular amounts in thousands, except per unit amounts or unless otherwise noted)
Sensitivity analysis of changes in stabilized net operating income (SNOI), capitalization rates and costs to complete
The following table is a sensitivity analysis applied to the portion of the Trust's investment properties and properties held for sale
carrying value that is measured using the direct capitalization approach and, therefore, is sensitive to changes in capitalization
rates:
Capitalization rate sensitivity increase (decrease)
Weighted average
capitalization rate Fair value variance
(1.00%)
(0.75%)
(0.50%)
(0.25%)
December 31, 2022
0.25%
0.50%
0.75%
1.00%
4.33 % $
4.58 %
4.83 %
5.08 %
5.33 %
5.58 %
5.83 %
6.08 %
6.33 %
3,555,506
2,471,526
1,544,531
728,386
—
(654,334)
(1,247,066)
(1,785,476)
(2,277,761)
A 0.25% increase in capitalization rate would result in a lower portfolio fair value of $654.3 million. A 0.25% decrease in
capitalization rate would result in a higher portfolio fair value of $728.4 million. In addition, a 1% increase in SNOI would result in
a higher portfolio fair value of $136.1 million. A 1% decrease in SNOI would result in a lower portfolio fair value of $136.4 million.
A 1% increase in SNOI coupled with a 0.25% decrease in capitalization rates would result in a higher portfolio fair value of
$872.5 million. A 1% decrease in SNOI coupled with a 0.25% increase in capitalization rates would result in a lower portfolio fair
value of $784.7 million. A 1% increase in costs to complete for the development properties would result in a lower portfolio fair
value of $2.9 million, and a 1% decrease in costs to complete for the development properties would result in a higher portfolio fair
value of $2.9 million.
4. EQUITY-ACCOUNTED INVESTMENTS AND JOINT ARRANGEMENTS
Equity-accounted investments
The Trust has certain equity-accounted investments in associates and joint ventures. The following table details the Trust's
ownership interest in each equity investee:
Principal activity
Development and sale of residential inventory
December 31, 2022 December 31, 2021
— %
50.0 %
Equity investee
PR Bloor Street LP
RioCan-Fieldgate LP
Dawson-Yonge LP
RioCan-HBC JV
RC (Queensway) LP
RC (Leaside) LP - Class B
WhiteCastle New Urban Fund, LP (WNUF 1)
WhiteCastle New Urban Fund 2, LP (WNUF 2)
Development and sale of residential inventory
Owns and operates an income property
Owns and operates income properties
Development and sale of residential inventory
Development and sale of residential inventory
WhiteCastle New Urban Fund 3, LP (WNUF 3)
Development and sale of residential inventory
WhiteCastle New Urban Fund 4, LP (WNUF 4)
WhiteCastle New Urban Fund 5, LP (WNUF 5)
50.0 %
40.0 %
20.2 %
20.0 %
25.0 %
14.2 %
19.3 %
20.0 %
18.4 %
14.2 %
50.0 %
40.0 %
20.2 %
20.0 %
25.0 %
14.2 %
19.3 %
20.0 %
18.4 %
14.2 %
RioCan Annual Report 2022 134
RIOCAN REAL ESTATE INVESTMENT TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2022 AND 2021
(In thousands of Canadian dollars, tabular amounts in thousands, except per unit amounts or unless otherwise noted)
The following table shows the changes in the aggregate carrying value of RioCan's investment in associates and joint ventures:
Years ended December 31,
Balance, beginning of year
Contributions
Distributions
Total cash flow activities
Non-cash contributions:
Contribution accrual
Investment properties (i)
Transfer from residential inventory
Share of net income
Other comprehensive income from equity-accounted investments
Other
Balance, end of year
2022
$
327,335 $
16,817
(14,565)
2,252
100
34,462
—
2,349
583
(2,189)
$
364,892 $
2021
209,676
149,562
(62,510)
87,052
—
—
9,712
19,189
206
1,500
327,335
(i) Represents $35.0 million of investment property contribution (50% disposition and 50% transfer of investment property in Note 3) and additional
$0.8 million of development costs, net of a $1.4 million equalization payment. Refer to PR Bloor Street LP below.
Financial results of equity-accounted investees
The following tables present the financial results of RioCan's equity-accounted investees on a 100% basis:
As at
December 31, 2022
December 31, 2021
Current assets (i)
Non-current assets (ii)
Current liabilities (iii)
Non-current liabilities (iv)
Net assets
Equity-accounted investments
RioCan-HBC JV
Other
Total
RioCan-HBC JV
Other
Total
$
7,702 $
849,520 $
857,222
$
7,840 $
640,397 $
648,237
1,924,339
38,521
1,962,860
1,993,503
29,218
2,022,721
162,581
242,788
405,369
486,103
153,377
639,480
633,003
258,949
891,952
325,911
229,788
555,699
$
$
1,136,457 $
386,304 $
1,522,761
256,588 $
108,304 $
364,892
$
$
1,189,329 $
286,450 $
1,475,779
267,266 $
60,069 $
327,335
Years ended December 31
2022
2021
Revenue
Operating expenses
Fair value (losses) gains
Interest expense
Net income
Income from equity-accounted investments
RioCan-HBC JV
Other
Total
RioCan-HBC JV
Other
Total
$
142,383 $
21,536 $
163,919
$
142,429 $
27,808 $
170,237
21,608
13,496
35,104
(81,596)
39,921
(742) $
(153) $
785
407
8,418 $
2,502 $
$
$
(80,811)
40,328
22,011
(5,537)
35,342
7,411
18
411
7,676
2,349
$
$
79,539 $
20,004 $
15,368 $
3,821 $
29,422
(5,519)
35,753
99,543
19,189
(i) As at December 31, 2022, total current assets include $793.2 million of residential inventory (December 31, 2021 - $577.9 million), for which the
expected completion and sale may be greater than 12 months.
(ii) RioCan-HBC JV non-current assets include ten investment properties and two finance lease receivables. During the year, RioCan-HBC JV
obtained total of eight external valuations for investment properties, which supported an IFRS fair value of $1.6 billion, or 90.6% of the JV's
investment property portfolio.
(iii) As at December 31, 2022, total current liabilities include $329.9 million of mortgages payable and other loans (December 31, 2021 - $556.1
million).
(iv) As at December 31, 2022, total non-current liabilities include $810.3 million of mortgages payable and lines of credit with maturities beyond twelve
months (December 31, 2021 - $487.4 million).
135 RioCan Annual Report 2022
RIOCAN REAL ESTATE INVESTMENT TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2022 AND 2021
(In thousands of Canadian dollars, tabular amounts in thousands, except per unit amounts or unless otherwise noted)
PR Bloor Street LP
On December 10, 2021, RioCan and Parallax formed a new jointly controlled 50/50 partnership, PR Bloor Street LP, for the
purpose of acquiring a number of properties to allow for the development of a mixed-use high-rise condominium project. On
March 14, 2022, in exchange for partnership units, RioCan and Parallax sold 100% interest in their respective properties, 85
Bloor Street West and 93 Bloor Street West, to the partnership at agreed-upon prices of $35.0 million and $20.0 million,
respectively. In addition, Parallax contributed an equalization payment of $13.6 million, and RioCan received an equalization
payment of $1.4 million. On March 14, 2022, the partnership acquired 83 Bloor Street, 89-91, 95 and 95 A Bloor Street for an
aggregate purchase price of $105.0 million or $52.5 million at RioCan's ownership interest, excluding transaction costs. The
partnership financed a portion of the acquisitions with a land loan of $96.0 million or $48.0 million at RioCan's ownership interest.
Joint operations
RioCan has co-ownership interests in investment properties, where it has joint control and owns an undivided interest in the
assets and liabilities with the co-owners, representing joint operations under IFRS 11, Joint Arrangements. As at December 31,
2022, the Trust had 45 such joint operations, of which one is considered individually significant: RioCan's 50% ownership interest
in the commercial component of The Well, located in Toronto, Canada.
5. MORTGAGES AND LOANS RECEIVABLE
For the years ended December 31,
Current
Non-current
Mortgages and loans receivable measured at amortized cost
$
$
2022
100,581 $
168,758
269,339 $
2021
90,110
147,680
237,790
As at December 31, 2022, mortgages and loans receivable bear interest at a weighted average effective and contractual rate of
8.26% and 7.73% per annum, respectively (December 31, 2021 - 5.74% and 5.40%, respectively) and mature between 2023 and
2033.
Future repayments of mortgages and loans receivables by year of maturity are as follows:
2023
2024
2025
2026
2027
Thereafter
$
100,581
1,261
7,466
43,055
31,605
85,371
$
269,339
6. RESIDENTIAL INVENTORY
Residential inventory consists of assets that are developed by RioCan for sale in the ordinary course of business. The following
table shows the changes in the aggregate carrying value of RioCan's residential inventory:
Years ended December 31,
Balance, beginning of year
Acquisitions (i)
Dispositions
Development expenditures
Transfers from investment properties (ii)
Transfers to equity-accounted investments
Balance, end of year
$
2022
217,043 $
19,440
(91,322)
112,597
14,247
—
$
272,005 $
2021
214,181
—
(65,032)
62,351
21,816
(16,273)
217,043
(i) On February 17, 2022, RioCan acquired 50% interest in Queen & Ashbridge (QA) property for total purchase price of $31.4 million, including
transaction costs, which included both property under development and residential inventory components and was allocated as $11.9 million and
$19.4 million, respectively. Total vendor take-back mortgage and purchase price payable on the acquisition totalled $30.4 million, of which
$11.6 million was allocated towards properties under development and $18.8 million towards residential inventory.
(ii) During the year ended December 31, 2022, the residential portion of the discrete parcel under development at RioCan Durham Centre was
transferred to residential inventory from investment property as appropriate evidence of a change in use was established. In addition, in
conjunction with the closing of the land transaction, RioCan transferred pre-acquisition costs incurred at Queen & Ashbridge (QA) to residential
inventory from investment property.
RioCan Annual Report 2022 136
RIOCAN REAL ESTATE INVESTMENT TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2022 AND 2021
(In thousands of Canadian dollars, tabular amounts in thousands, except per unit amounts or unless otherwise noted)
The following table provides detail on residential inventory gains for the years ended December 31, 2022 and 2021:
Years ended December 31
Residential inventory sales
Residential inventory cost of sales:
Dispositions
Commission cost and other
Residential inventory cost of sales
Residential inventory gains
$
2022
118,659 $
91,322
4,964
96,286
$
22,373 $
2021
93,727
65,032
314
65,346
28,381
7. RECEIVABLES AND OTHER ASSETS
The following table details the Trust's receivables and other assets as at December 31, 2022 and December 31, 2021:
As at
December 31, 2022
Current
Non-
current
December 31, 2021
Total
Current
Non-
current
Total
Prepaid expenses and other assets
$
52,855 $
19,570 $
72,425 $
30,218 $
18,124 $
48,342
Net contractual rents and other tenant
receivables
Finance lease receivables
Amounts due on condominium final closings
Other receivables (i)
Funds held in trust
Interest rate swap agreements
Cash held for banker's acceptance
settlement (ii)
Bond forward agreements
27,639
4,709
3,018
9,527
30,948
3,428
—
4,341
29,011
—
3,961
38,197
—
36,883
—
20,445
26,765
19,386
27,639
41,592
3,018
29,972
57,713
22,814
10,168
16,610
29,685
42
29,011
42,158
10,168
31,873
29,685
94
57,628
—
—
15,263
—
52
—
—
—
—
—
57,628
4,341
—
$
136,465 $
123,049 $
259,514 $
177,323 $
71,636 $
248,959
(i) Other receivables primarily include fees and cost reimbursements receivable from partners, and disposition proceeds receivable, including
$11.3 million of proceeds to be received related to the Q3 2020 50% interest disposition in Dufferin Plaza, which is expected to be paid upon the
completion of several pre-construction development phases.
(ii) The Trust prepaid an amount due on January 4, 2022, to settle an outstanding banker's acceptance. The liability was extinguished on the maturity
date.
Prepaid expenses and other assets
Prepaid expenses and other assets primarily include other investments, prepaid property taxes, office furniture and equipment,
and management information systems.
RioCan pays certain upfront non-refundable selling commissions with respect to the sale of residential inventory, which are
included in other assets when it is probable that future economic benefits will flow to the Trust. No amortization prior to the
recognition of revenue is recognized but, rather, a charge to income occurs when the revenue associated with the sale is
recognized.
Selling commissions (contract costs)
The following table shows the change in selling commissions:
Years ended December 31,
Balance, beginning of year
Additions
Selling commissions expensed during the year
Balance, end of year
Contractual rents receivable
$
$
2022
10,612 $
4,955
(4,964)
10,603 $
2021
7,447
3,479
(314)
10,612
Contractual rents receivable, including common area maintenance, realty tax and insurance recoveries, are presented net of an
allowance for doubtful accounts of $13.5 million as at December 31, 2022 (December 31, 2021 - $16.6 million).
RioCan determines its allowance for doubtful accounts using the simplified lifetime ECL model for contractual rents receivable.
The Trust uses an accounts receivable aging provision matrix to assess the ECL and applies loss factors based on historical loss
experience calibrated with forward-looking information to its aging buckets.
137 RioCan Annual Report 2022
RIOCAN REAL ESTATE INVESTMENT TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2022 AND 2021
(In thousands of Canadian dollars, tabular amounts in thousands, except per unit amounts or unless otherwise noted)
The Trust recognized a $1.2 million net provision of rent abatements and bad debts for the year ended December 31, 2022 (year
ended December 31, 2021 - provision of $17.2 million). These provisions (recoveries) are recorded to non-recoverable operating
costs.
The following table summarizes the Trust's movement in allowance for doubtful accounts:
Years ended December 31,
Allowance for doubtful accounts, beginning of year
Provision for credit losses
Write-offs, net of recoveries
Allowance for doubtful accounts, end of year
Funds held in trust
$
$
2022
16,604 $
1,218
(4,353)
13,469 $
2021
12,515
17,214
(13,125)
16,604
Funds held in trust include property-specific deposits held by the Trust's solicitors in the name of the Trust. These funds will be
released upon funding the construction of the residential inventory projects, after posting the requisite security, or upon final
closing of units within such projects. Funds held in trust may also relate to certain funds held in escrow pursuant to agreements of
purchase and sale, which are to be used for the acquisition of investment properties.
8. LEASES
A. As lessee
Real estate leases
Included in investment properties are 12 properties held as ROU assets arising from land and/or building leases where RioCan is
the lessee as at December 31, 2022 (December 31, 2021 - 12 properties).
The real estate lease may be a lease for a portion of a property (including access roads and parking lots) or the entire property
(including land and building). The carrying value of total investment properties related to these leases, including the portions
relating to RioCan's leasehold building interests, and certain other property or related property interests, and excluding sublease
finance lease receivables (refer to Note 7) is $215.4 million (December 31, 2021 - $250.6 million). The corresponding lease
liability in accounts payable and other liabilities is $36.6 million (December 31, 2021 - $38.0 million).
The following table shows the change in lease liabilities during the year:
Years ended December 31
Balance, beginning of year
Renewal of leases of properties held under lease and other changes in estimates
Repayments of lease liabilities
Balance, end of year
Future lease payments under these leases are as follows:
$
$
2022
37,975 $
542
(1,945)
36,572 $
For the years ended December 31,
Within twelve months
Two to five years
Over five years
Total future lease payments (inclusive of renewal options) (i)
Less: Future interest costs
Present value of lease payments (inclusive of renewal options)
$
$
$
(i) Includes all renewal options at current fixed payment amounts; excludes variable rent payments (percentage rent) on two properties.
The following are the amounts recognized in net income:
Years ended December 31
Revenue from subleasing ROU assets (i)
Interest expense on lease liabilities
Office equipment lease payments
$
2022
22,540 $
(1,883)
(1,122)
2021
40,725
(742)
(2,008)
37,975
2022
8,535
12,657
56,982
78,174
41,602
36,572
2021
22,613
(1,885)
(1,175)
(i) Includes variable lease payments and excludes finance lease interest income, disclosed below as lessor.
During the year ended December 31, 2022, the Trust had total cash outflows for leases of $6.1 million (December 31, 2021 - $6.2
million), including office equipment lease payments and variable lease payments of $2.3 million (December 31, 2021 - $2.4
million).
RioCan Annual Report 2022 138
RIOCAN REAL ESTATE INVESTMENT TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2022 AND 2021
(In thousands of Canadian dollars, tabular amounts in thousands, except per unit amounts or unless otherwise noted)
B. As lessor
Finance lease receivable
RioCan has real estate subleases that are classified as finance leases and that are included in receivables and other assets on
the consolidated balance sheets.
The following table shows the change in finance lease receivables during the year:
Years ended December 31,
Balance, beginning of year
New sublease arrangements classified as finance leases
Repayments of finance lease receivables
Balance, end of year
$
$
2022
42,158 $
3,669
(4,235)
41,592 $
2021
40,465
5,148
(3,455)
42,158
Future minimum lease payments under these finance leases for the first five years and remaining thereafter are as follows:
For the years ended December 31,
2023
2024
2025
2026
2027
Thereafter
Total minimum lease payments
Less: Future interest income
Present value of minimum lease payments
Lease commitments
$
$
$
2022
6,978
7,173
7,242
7,335
7,465
14,467
50,660
9,068
41,592
The Trust as lessor has entered into leases on its property portfolio. The leases typically have lease terms between five and
twenty years and include clauses to enable periodic upward revision of the rental charge according to prevailing market
conditions. Some leases contain options to terminate before the end of the lease term.
Future minimum lease payments under non-cancellable operating leases in the aggregate and for each of the following periods
are as follows:
For the years ended December 31,
2023
2024
2025
2026
2027
Thereafter
Total
$
$
2022
664,160
582,130
488,186
409,017
329,173
1,272,656
3,745,322
Supplemental lease disclosures in addition to Note 17 regarding income from lease contracts in which the Trust is a lessor is as
follows:
Years ended December 31
Variable lease payments from realty tax and insurance recoveries (i)
Variable lease payments from percentage and contractual rent credits (i)
$
Interest income from finance subleases
(i) For tenant operating and finance leases, and subleases.
2022
199,437 $
9,092
2,514
2021
203,384
6,585
2,425
139 RioCan Annual Report 2022
RIOCAN REAL ESTATE INVESTMENT TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2022 AND 2021
(In thousands of Canadian dollars, tabular amounts in thousands, except per unit amounts or unless otherwise noted)
9. INCOME TAXES
The Trust qualifies for the REIT Exemption for Canadian income tax purposes; therefore, it will be entitled to deduct distributions
for income tax purposes. The Trust expects to distribute its taxable income to Unitholders such that it will not be subject to tax.
From time to time, RioCan may retain some taxable income and net capital gains in order to utilize the capital gains refund
available to mutual fund trusts without incurring any income taxes. Accordingly, no provision for Canadian current income taxes
payable is required, except for amounts incurred in its incorporated Canadian subsidiaries.
Where an entity does not qualify for the REIT Exemption for Canadian income tax purposes, certain distributions will not be
deductible by that entity in computing its income for Canadian tax purposes. As a result, the entity will be subject to tax at a rate
substantially equivalent to the general corporate income tax rate on distributed taxable income. Distributions paid in excess of
taxable income will continue to be treated as a return of capital to Unitholders. Undistributed taxable income is generally subject
to the top marginal personal tax rate. The Trust consolidates certain wholly owned incorporated entities that remain subject to tax.
The tax disclosures and expense relate only to these entities.
10. DEBENTURES PAYABLE
As at
Current
Non-current
December 31, 2022
$
$
500,000 $
2,442,051
2,942,051 $
December 31, 2021
300,000
2,690,692
2,990,692
As at December 31, 2022, total debentures payable bear interest at weighted average contractual interest rates of 2.99% and a
weighted average effective interest rate of 3.06% inclusive of bond forward hedges (December 31, 2021 - 2.84% and 2.97%,
respectively).
Issuance and redemption activity
On April 18, 2022, RioCan issued $250.0 million of Series AF senior unsecured debentures. These debentures were issued at a
coupon rate of 4.628% per annum and will mature on May 1, 2029. Inclusive of the benefit of bond forward hedges, the all-in rate
is 3.870%.
On October 3, 2022, RioCan redeemed, in full, its $300.0 million, 2.830% Series Y unsecured debenture upon maturity. The
repayment was primarily funded through six mortgages totalling $295.5 million at a weighted average hedged interest rate of
3.667%, of which, $86.0 million was funded in September at a weighted average hedge interest rate of 4.220%, and the
remaining funded in October at a weighted average hedged interest rate of 3.440%.
The Trust has the following series of senior unsecured debentures outstanding as at December 31, 2022 and 2021:
(thousands of dollars)
As at
Series
Y
T
AA
W
AB
I
Maturity date
October 3, 2022
April 18, 2023
September 29, 2023
February 12, 2024
February 12, 2025
February 6, 2026
AD
AC
AE
AF
June 15, 2026
March 10, 2027
November 8, 2028
May 1, 2029
Coupon rate
2.83 %
3.73 %
3.21 %
3.29 %
2.58 %
5.95 %
1.97 %
2.36 %
2.83 %
4.63 %
Interest payment frequency
Semi-annual
Semi-annual
Semi-annual
Semi-annual
Semi-annual
Semi-annual
Semi-annual
Semi-annual
Semi-annual
Semi-annual
December 31,
2022
$
— $
200,000
300,000
300,000
500,000
100,000
500,000
350,000
450,000
250,000
December 31,
2021
300,000
200,000
300,000
300,000
500,000
100,000
500,000
350,000
450,000
—
Contractual obligations
$
2,950,000 $
3,000,000
RioCan Annual Report 2022 140
RIOCAN REAL ESTATE INVESTMENT TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2022 AND 2021
(In thousands of Canadian dollars, tabular amounts in thousands, except per unit amounts or unless otherwise noted)
Future repayments are as follows:
Years ending December 31:
Contractual obligations
Unamortized debt financing costs
Covenant compliance
2023
2024
2025
2026
2027
Thereafter
Weighted average
contractual interest rate
3.42 % $
3.29 %
2.58 %
2.64 %
2.36 %
3.47 %
$
Principal
maturities
500,000
300,000
500,000
600,000
350,000
700,000
2,950,000
(7,949)
2,942,051
The debentures have covenants relating to RioCan’s leverage limit of up to 60% of aggregate assets as set out in the Declaration
and applicable supplemental indenture. In addition, under the indenture the Trust is required to maintain a $1.0 billion Adjusted
Book Equity (as defined in the indenture) and an interest coverage ratio of 1.65 times or greater. There are no requirements
under the unsecured debenture covenants for RioCan to maintain unencumbered assets. RioCan has the right, at any time, to
convert the Series I debentures to mortgage debt, subject to the acceptability of the security given to the debenture holders. In
such an event, the covenants relating to the 60% leverage limit, minimum book equity and interest coverage ratio would be
eliminated for those debentures. As at and during the year ended December 31, 2022, the Trust was in compliance with its
covenants pursuant to the Declaration and debenture indentures.
11. MORTGAGES PAYABLE
Mortgages payable, net of deferred financing costs, consist of the following:
As at
Current
Non-current
December 31, 2022
December 31, 2021
$
$
320,177 $
2,339,003
2,659,180 $
54,386
2,279,630
2,334,016
Future repayments of mortgages payable by year of maturity are as follows:
Year
2023
2024
2025
2026
2027
Thereafter
Weighted
average
contractual
interest rate (i)
Scheduled
principal
amortization
Principal
maturities
Total
repayments
3.55 % $
48,232 $
271,945 $
3.44 %
3.32 %
3.55 %
2.55 %
3.48 %
44,218
40,101
35,869
34,791
194,495
487,890
102,571
162,832
320,177
238,713
527,991
138,440
197,623
50,990
1,190,706
1,241,696
Unamortized debt financing costs, net of premiums, discounts, market
interest rate differential on debt assumed and debt modification losses
3.39 % $
254,201 $
2,410,439 $
2,664,640
(5,460)
$
2,659,180
(i) Inclusive of interest rate swap hedges.
As at December 31, 2022, total mortgages payable bear interest at a weighted average contractual interest rate of 3.39%, and a
weighted average effective interest rate of 3.29% inclusive of bond forward hedges (December 31, 2021 - 3.18% and 3.22%,
respectively), and mature between 2023 and 2034.
During the year ended December 31, 2022, RioCan completed new term mortgage borrowings of $347.6 million at a weighted
average interest rate of 3.58% including the benefit of bond forward hedges and a weighted average term of eight years, and
assumed vendor take-back mortgage of $24.2 million. During the year ended December 31, 2022, repayments of mortgage
balances and scheduled amortization amounted to $45.6 million.
141 RioCan Annual Report 2022
RIOCAN REAL ESTATE INVESTMENT TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2022 AND 2021
(In thousands of Canadian dollars, tabular amounts in thousands, except per unit amounts or unless otherwise noted)
Pledged properties
As at December 31, 2022, $5.9 billion of the aggregate carrying value of investment properties, properties held for sale,
residential inventory and certain other assets serve as security for RioCan's mortgages payable (December 31, 2021 - $5.0
billion).
12. LINES OF CREDIT AND OTHER BANK LOANS
The Trust's revolving unsecured operating line of credit and secured construction lines and other bank loans, net of deferred
financing costs, are as follows:
As at
Revolving unsecured operating line of credit
Non-revolving unsecured credit facilities
Construction lines and other bank loans
Current
Non-current
December 31, 2022
December 31, 2021
$
$
$
$
131,601 $
699,823
309,688
363,732
699,573
222,605
1,141,112 $
1,285,910
332,461 $
808,651
1,141,112 $
94,073
1,191,837
1,285,910
Revolving unsecured operating line of credit
During the year, the Trust increased the credit limit on its revolving unsecured operating line of credit by $250.0 million to $1.25
billion and extended the maturity till May 31, 2027. All other terms and conditions remained the same.
As at December 31, 2022, RioCan had a drawn balance of $133.6 million and $1,116.4 million of credit available to be drawn
from this revolving unsecured operating line of credit (December 31, 2021 - $365.9 million and $634.1 million, respectively). The
weighted average contractual interest rate on amounts drawn under this facility was 6.34% as at December 31, 2022
(December 31, 2021 - 1.90%).
Non-revolving unsecured credit facilities
The Trust has a $200 million non-revolving unsecured credit facility with two financial institutions (consisting of a Schedule I and a
Schedule III bank), with a maturity date of January 31, 2023 and a weighted average annual all-in fixed interest rate of 3.53%
(December 31, 2021 - 3.28%) through interest rate swaps.
In addition, the Trust has a $150 million non-revolving unsecured credit facility with two financial institutions (consisting of a
Schedule I and a Schedule III bank), with a maturity date of June 27, 2024 and an annual all-in fixed interest rate of 3.68%
(December 31, 2021 - 3.43%) through interest rate swaps.
The Trust also has a $350.0 million five-year non-revolving unsecured credit facility with three financial institutions (consisting of
two Schedule I banks and one Schedule III bank). This credit facility matures on February 7, 2024 and, through interest rate
swaps, bears an annual all-in fixed interest rate of 3.59% (December 31, 2021 - 3.34%).
As at December 31, 2022, all of the Trust's non-revolving unsecured credit facilities are fully drawn. The underlying spreads for
the unsecured credit facilities are based on the Trust's credit ratings. Effective January 2022, the all-in fixed interest rates of these
facilities increased 25 basis points due to changes in the credit spread as a result of a credit rating change on December 1, 2021.
The non-revolving unsecured credit facility agreements require the Trust to maintain certain financial covenants similar to those of
RioCan's $1.25 billion revolving unsecured operating line of credit. Refer to Note 26 for additional details.
Construction lines of credit and other bank loans
In addition to the revolving unsecured operating line of credit and non-revolving unsecured credit facilities, the Trust has secured
credit facilities and other bank loans, which include variable rate non-revolving secured construction and acquisition facilities for
the funding of certain development properties. As at December 31, 2022, these facilities have an aggregate maximum borrowing
capacity of $577.3 million (December 31, 2021 - $464.5 million) and mature between December 2023 to February 2026, of which
the Trust had drawn $309.7 million (December 31, 2021 - $222.6 million). The weighted average contractual interest rate on
amounts outstanding is 5.89% (December 31, 2021 - 1.75%).
RioCan Annual Report 2022 142
RIOCAN REAL ESTATE INVESTMENT TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2022 AND 2021
(In thousands of Canadian dollars, tabular amounts in th,ousands, except per unit amounts or unless otherwise noted)
13. ACCOUNTS PAYABLE AND OTHER LIABILITIES
As at
December 31, 2022
December 31, 2021
Current
Non-
current
Total
Current
Non-
current
Total
Property operating costs (i)
$
88,616 $
39,312 $ 127,928 $
92,253 $
36,506 $ 128,759
Development expenditures
Capital expenditures and leasing commissions on
income properties
Deferred revenue
Unitholder distributions payable
Interest payable
Lease liability (ii)
Income taxes payable
Unfunded employee future benefits
Contingent consideration
Interest rate swap agreements
Bond forward agreement
Other payables and accruals
Cash collateralized banker's acceptance (iii)
149,549
—
149,549
120,102
—
120,102
41,688
—
41,688
34,342
—
34,342
41,359
118,896
160,255
55,435
97,050
152,485
25,528
28,745
—
—
25,528
24,781
28,745
28,879
—
—
6,777
29,795
36,572
6,727
31,248
14,357
—
14,357
13,504
—
—
—
—
—
35,626
—
10,148
10,148
228
—
—
—
—
228
—
—
—
—
—
1,751
35,626
20,197
—
57,628
13,568
—
21,530
—
—
—
24,781
28,879
37,975
13,504
13,568
—
21,530
1,751
20,197
57,628
Includes amounts billed in advance for common area maintenance, realty taxes and insurance recoveries.
(i)
(ii) Refer to Note 8 for further details.
(iii) Refer to Note 7 for further details.
$ 432,245 $ 198,379 $ 630,624 $ 455,599 $ 199,902 $ 655,501
Deferred revenue
Deferred revenue consists of the following:
As at
Deposits received on residential inventory sales (contract liabilities)
Other deferred revenue (i)
December 31, 2022
December 31, 2021
$
$
129,400 $
30,855
160,255 $
118,288
34,197
152,485
(i)
Includes prepaid rental income from tenants to be recognized over time.
Deposits received from customers on residential inventory sales (contract liabilities)
The following table shows the change in deposits received from customers (contract liabilities):
As at
Balance, beginning of year
Amounts deferred from new contracts with customers during the year
Recognized as revenue during the year
Balance, end of year
December 31, 2022
December 31, 2021
$
$
118,288 $
33,235
(22,123)
129,400 $
70,105
49,951
(1,768)
118,288
During the year ended December 31, 2022, $22.1 million of deposits received from customers on condominium and townhouse
sales (contract liabilities) were recognized in revenue upon the purchasers taking possession of units (December 31, 2021 -
$1.8 million).
Income taxes payable
Income taxes payable relate primarily to the realized gain on sale of the Trust's U.S income property portfolio during May 2016.
143 RioCan Annual Report 2022
RIOCAN REAL ESTATE INVESTMENT TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2022 AND 2021
(In thousands of Canadian dollars, tabular amounts in thousands, except per unit amounts or unless otherwise noted)
14. UNITHOLDERS' EQUITY
Trust Units
The Trust is authorized to issue an unlimited number of Units. The Units are entitled to distributions, as and when declared by the
Board (and upon liquidation), and to a pro rata share of the residual net assets remaining after the preferential claims, thereon, of
debt holders and preferred Unitholders. As the Trust is a closed-end trust, the Units are not puttable.
The following represents the number of Units issued and outstanding, and the related carrying value of Unitholders' equity, for the
years ended December 31, 2022 and 2021:
Years ended December 31
Balance, beginning of year
Units issued:
Unit-based compensation exercises, net of Units
repurchased for settlement of Unit exercises
Direct purchase plan
Exchangeable limited partnership units
Units repurchased and cancelled
Balance, end of year
2022
Units
$
2021
Units
$
309,797 $
4,696,785
317,748 $
4,815,230
88
14
—
(9,540)
300,359 $
4,415
304
—
(144,721)
4,556,783
—
16
6
(7,973)
309,797 $
2,004
327
101
(120,877)
4,696,785
Included in Units outstanding as at December 31, 2022 are exchangeable limited partnership Units totalling 0.5 million
(December 31, 2021 - 0.5 million Units) of three limited partnerships that are subsidiaries of the Trust (the LP Units), which were
issued to vendors as partial consideration for income properties acquired by RioCan. RioCan is the general partner of the limited
partnerships. The LP Units are entitled to distributions equivalent to distributions on RioCan Units and are exchangeable for
RioCan Units on a one-for-one basis at any time at the option of the holder.
Normal course issuer bid (NCIB)
On October 15, 2021, RioCan received TSX approval of its notice of intention to renew its NCIB (the 2021/2022 NCIB), to acquire
up to a maximum of 31,616,150 Units, or approximately 10% of the public float as at October 13, 2021, for cancellation or to
satisfy RioCan's obligation to deliver Units under the REU and PEU plans, over the next 12 months, effective October 22, 2021.
On November 3, 2022, RioCan received TSX approval of its notice of intention to renew its NCIB (the 2022/2023 NCIB), to
acquire up to a maximum of 30,247,803 Units, or approximately 10% of the public float as at October 31, 2022, for cancellation or
to satisfy RioCan's obligation to deliver Units under the REU and PEU Plans, over the next 12 months, effective November 7,
2022.
The number of Units that can be purchased pursuant to the 2022/2023 NCIB is subject to a current daily maximum of 207,826
Units (which is equal to 25% of 831,305, being the average daily trading volume of Units during the last six months), subject to
RioCan’s ability to make one block purchase of Units per calendar week that exceeds such limits. RioCan intends to fund the
purchases out of its available cash and undrawn credit facilities.
During 2022, 9,539,675 Units were acquired and cancelled at a weighted average purchase price of $21.36 per Unit for a total
cost of $203.9 million. The excess of the purchase price over the carrying amount of the Units purchased, representing the unit
price increase over the weighted average historical unit issuance price, was recorded as a reduction to retained earnings of $59.2
million.
On December 12, 2022, RioCan established an automatic securities purchase plan (“ASPP”) in connection with its previously
announced 2022/2023 NCIB applicable to its outstanding Units. The ASPP is intended to allow for the purchase of Units under
the NCIB at times when RioCan would ordinarily not be permitted to purchase Units due to regulatory restrictions and customary
self-imposed blackout periods. Pursuant to the ASPP, purchases will be made by RioCan's designated broker based on
periodically pre-established purchasing parameters, in accordance with the rules of the TSX and applicable securities laws.
Outside of pre-determined blackout periods, Units may be purchased under the NCIB at such times as RioCan determines to be
appropriate in compliance with TSX rules and applicable securities laws.
Contributed surplus
Awards under the restricted equity unit plans and performance equity unit plan of RioCan and its consolidated subsidiaries are
settled by the delivery of Units purchased on the secondary market, net of applicable withholdings as further described in Note
15. The fair values of these equity-settled awards are recognized as an expense over the vesting period with a corresponding
increase to contributed surplus, which is presented as a separate component of total Unitholders' equity.
For the year ended December 31, 2022, RioCan recorded $11.1 million in unit-based compensation costs (year ended
December 31, 2021 - $14.7 million). In addition, for the year ended December 31, 2021, $7.6 million of previously recognized
unit-based compensation costs were derecognized from unit-based compensation payable and recorded to contributed surplus
as a result of an amendment to the Deferred Unit Plan, refer to Note 15.
RioCan Annual Report 2022 144
RIOCAN REAL ESTATE INVESTMENT TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2022 AND 2021
(In thousands of Canadian dollars, tabular amounts in thousands, except per unit amounts or unless otherwise noted)
Accumulated other comprehensive income (loss)
Accumulated other comprehensive income (loss) as at and for the year ended December 31, 2022 consists of the following
amounts:
Actuarial loss on
pension plan
Interest rate
swap agreements
(hedge reserve)
Equity-accounted
investments
Bond forward
agreement
(hedge reserve)
As at December 31, 2021
Other comprehensive income
As at December 31, 2022
$
$
(3,517) $
3,071
(446) $
(20,946) $
44,249
23,303 $
(327) $
583
256 $
(1,751) $
41,011
39,260 $
Total
(26,541)
88,914
62,373
15. UNIT-BASED COMPENSATION PLANS
Restricted Equity Unit Plans (REU Plans)
Senior Executive REU Plan
As at December 31, 2022, 439,174 Senior Executive REUs are outstanding (December 31, 2021 - 434,621), of which 148,864
are vested (December 31, 2021 - 100,905). The Senior Executive REU Plan provides for the allotment of REUs to the President
and Chief Executive Officer (CEO), Chief Investment Officer, Chief Operating Officer, and Chief Financial Officer of the Trust, and
such other officers or executive employees of the Trust that are determined by the CEO and approved by RioCan's People,
Culture and Compensation Committee. Each REU notionally represents the value of one Unit of the Trust on the date of grant.
Unit distributions paid during the period from grant date until settlement date will be credited to each REU participant in the form
of additional REUs.
The number of REUs granted shall vest one-third on each of the first, second and third anniversary of the grant date, provided
however that all vested REUs are only eligible for settlement upon the third anniversary of the grant date (the Settlement Date).
Settlement of vested REUs is generally made within 30 days after the Settlement Date by the delivery of an equivalent number of
trust Units purchased on the secondary market, net of applicable withholdings.
During the year ended December 31, 2022, the Trust granted 114,697 REUs under its Senior Executive REU Plan. The weighted
average grant date price was $24.35 per unit, with each grant price based on the five-day volume weighted average market price
of RioCan's Units traded on the TSX prior to the grant date, resulting in an aggregate fair value of $2.8 million.
Employee REU Plan
As at December 31, 2022, 410,447 Employee REUs are unvested and outstanding (December 31, 2021 - 351,943). The
Employee REU Plan provides for the allotment of REUs to certain senior-level employees of the Trust that do not participate in
the Senior Executive REU Plan. Each REU notionally represents the value of one Unit of the Trust on the date of grant. Unit
distributions paid during the period from grant date until settlement date will be credited to each REU participant in the form of
additional REUs.
The number of REUs granted shall vest fully on the third anniversary of the grant date (the Settlement Date), including distribution
equivalents that have accumulated during the vesting period. Settlement of vested REUs is generally made within 30 days after
the Settlement Date by the delivery of an equivalent number of trust Units purchased on the secondary market, net of applicable
withholdings.
During the year ended December 31, 2022, the Trust granted 171,666 REUs under its Employee REU Plan. The weighted
average grant date price was $23.95 per unit, with each grant price based on the five-day volume weighted average market price
of RioCan's Units traded on the TSX prior to the grant date, resulting in an aggregate fair value of $4.1 million.
Performance Equity Unit Plan (PEU Plan)
As at December 31, 2022, 419,137 PEUs are unvested and outstanding (December 31, 2021 - 502,770). PEUs are awarded to
certain officers and senior management of the Trust, subject to Board approval. Each PEU notionally represents the value of one
Unit of the Trust on the date of grant. PEUs issued contain a multiplier factor and the final number of PEUs that will be paid out
upon vesting will vary based on the achievement of certain performance targets over a three-year period from the year the award
was granted. The performance targets attributable to PEUs are set by the Trust at the time the awards are granted, or from time
to time adjusted as permitted under the terms of the PEU plan. The performance targets may vary between grants. Unit
distributions paid during the period from grant date until settlement date will be credited to each PEU participant in the form of
additional PEUs.
The PEUs vest on the Financial Statement Approval Date immediately following the last year in the three-year period and are
generally settled within 30 days after the vesting date by the delivery of an equivalent number of trust units to be acquired on the
secondary market, net of applicable withholdings.
On February 22, 2022, the Trust granted 114,697 PEUs under its PEU Plan at a fair value of $3.4 million.
145 RioCan Annual Report 2022
RIOCAN REAL ESTATE INVESTMENT TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2022 AND 2021
(In thousands of Canadian dollars, tabular amounts in thousands, except per unit amounts or unless otherwise noted)
The grant date fair value assumptions using a Monte-Carlo simulation model are as follows:
Years ended December 31,
Fair value of PEUs granted
PEUs granted (in thousands)
Weighted average grant date fair value per unit
Weighted average expected risk-free interest rate (i)
Weighted average expected unit price volatility (ii)
Weighted average initial total Unitholder return (iii)
$
$
2022
3,363 $
115
29.32 $
1.6%
32.0%
11.0%
2021
4,106
193
21.25
0.3%
30.5%
10.9%
(i) Derived using the yield on Government of Canada benchmark bonds with an average term similar to the PEU vesting period.
(ii) Expected unit price volatility is calculated based on the average of the actual daily closing price of RioCan's trust Units measured over a three-year
historical period up to the grant date.
(iii) PEUs are subject to certain internal and external measures of performance. The 2022 PEU grants will vest based on the following performance
metrics: 40% is subject to internal performance hurdle over three-year funds from operations (FFO) per unit growth, 40% is subject to a relative
total Unitholder return (TUR) performance hurdle over a three-year performance period where vesting is dependent upon RioCan's TUR
performance relative to a comparative group of peer companies, 10% is subject to internal performance hurdle over three-year cumulative average
net asset value (NAV) per Unit growth and 10% is subject to internal hurdle on ESG objectives.
The initial TUR performance has incorporated actual historical TUR performance for RioCan and each entity in the comparator group over the
period from January 1, 2022 to February 22, 2022 for the 2022 PEU grants.
Units Purchased for Settlement
During the year ended December 31, 2022, RioCan purchased 149,639 Units at an average price of $24.11, for satisfying
RioCan's existing obligations under the REU and PEU Plans (December 31, 2021 - 109,953 Units at average price of $18.84).
Incentive Unit Option Plan
The Trust provides long-term incentives to certain employees by granting options through the incentive Unit option plan (Plan).
RioCan is authorized to issue up to a maximum of 22 million Unit options under the Plan. As at December 31, 2022, 13.5 million
Unit options remain available to be granted under the Plan. Pursuant to a board resolution in October 2021, the Board has
committed to no longer issue Unit options as part of RioCan’s long-term incentive plan ("LTIP") or as special awards.
The exercise price for each option is equal to the volume weighted average trading price of the units on the TSX for the five
trading days immediately preceding the dates of grant.
Options granted prior to February 2021 have a contractual life of ten years and vest at 25% per annum commencing on the first
anniversary of the grant date, and become fully vested after four years.
The Unit options granted on February 23, 2021 have a term of seven years and the following vesting conditions:
•
•
500,000 Unit options have vesting conditions that are time-based and will vest 50% on April 1, 2022 and 50% on April 1,
2023; and
800,000 Unit options have vesting conditions that are 50% time-based service condition only (Time-Based Options) and 50%
with a time-based service condition and market-based performance condition (Performance Options). The Time-Based
Options will vest 50% on February 23, 2023 and 50% on February 23, 2025. Vesting of the Performance Options depends
on achieving certain performance measures based on 20 consecutive trading days (the 20-day VWAP) and only when
certain time-vesting conditions are also met as follows: (i) 50% of the Performance Options shall be exercisable on or after
the second anniversary of the Grant Date provided that the 20-day VWAP is equal to or greater than $20, at any point during
the seven-year term; and (ii) 50% of the Performance Options shall be exercisable on or after the fourth anniversary of the
Grant Date provided that the 20-day VWAP is equal to or greater than $24, at any point during the seven-year term.
The Trust accounts for this Plan by estimating the fair value of each tranche of an award at the grant date and subsequently
recognizing the compensation expense over the vesting period.
For the year ended December 31, 2022, there were no Unit options granted to senior management (year ended December 31,
2021 - 1.3 million).
RioCan Annual Report 2022 146
RIOCAN REAL ESTATE INVESTMENT TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2022 AND 2021
(In thousands of Canadian dollars, tabular amounts in thousands, except per unit amounts or unless otherwise noted)
The following summarizes the changes in Unit options outstanding during the years ended December 31, 2022 and 2021:
Years ended December 31,
2022
2021
Options
Outstanding, beginning of year
Granted
Exercised
Expired
Forfeited
Outstanding, end of year
Options exercisable at end of year
Average fair value per unit of
options granted during the year
Units
(in thousands)
Weighted
average
exercise price
Units
(in thousands)
Weighted
average
exercise price
7,336 $
—
(88)
(943)
(614)
5,691 $
4,641 $
25.27
—
24.00
26.77
25.30
25.03
26.41
6,367 $
1,300
—
(301)
(30)
7,336 $
5,698 $
$
—
$
26.71
18.13
—
24.74
27.17
25.27
26.88
1.93
The following table summarizes the Trust's outstanding options and related exercise price ranges of units granted under the plan:
Outstanding options
Vested options
Number of Units
issuable
(in thousands)
Weighted average
exercise price per
unit
Weighted average
remaining life
(years)
Number of Units
issuable
(in thousands)
Weighted average
exercise price per
unit
1,200 $
1,548
927
834
1,182
5,691 $
18.13
25.38
26.55
27.48
28.66
25.03
5.1
3.6
3.4
0.9
1.3
3.0
250 $
1,548
827
834
1,182
4,641 $
18.13
25.38
26.56
27.48
28.66
26.41
Exercise price range ($/unit)
As at December 31, 2022
$18.13 to $21.07
$21.08 to $26.14
$26.15 to $27.32
$27.33 to $27.60
$27.61 to $29.31
Trustee Unit Plan
Deferred Unit Plan (DU Plan)
The Deferred Unit Plan was introduced in 2014 for non-employee Trustees of the Trust (Trustees). Trustees may be awarded
deferred Units, each of which is economically equivalent to one Unit, from time to time at the discretion of the Board of Trustees
upon recommendation from management, subject to a maximum annual grant not to exceed that number of deferred Units that is
$150,000 divided by the average market price of a Unit on the award date. Trustees may also elect to receive up to 100% of his
or her annual retainer and meeting fees for a calendar year otherwise payable in cash in the form of deferred Units. Trustees
have up to two years after ceasing to be a Trustee to redeem Units. The maximum number of Units reserved for issuance under
the Deferred Unit Plan at any time is 750,000. Unit distributions paid during the period from grant date until settlement date will be
credited to each DU Plan participant in the form of additional deferred Units.
The Board approved an amendment effective January 1, 2021 to the DU Plan to provide that, on or after the date upon which a
Trustee ceases to be a Trustee of the Trust (Termination Date), all vested deferred Units issued after January 1, 2021 shall be
redeemed and settled only by the issuance of Units. Effective January 1, 2021, each of the Trustees also provided an irrevocable
election with respect to the outstanding deferred Units held by such Trustee such that all such vested deferred Units shall be
redeemed and settled only by the issuance of Units upon each Trustee's respective Termination Date. As a result, during the year
ended December 31, 2021, the deferred unit liability of $7.6 million was derecognized from unit-based compensation payable and
$7.6 million was recognized in contributed surplus.
As at December 31, 2022, there are 648,207 deferred Units vested and outstanding (December 31, 2021 - 549,807).
During the year ended December 31, 2022, 70,490 deferred Units were granted at weighted average grant price of $22.17 per
unit, with each grant price based on the five-day volume weighted average market price of RioCan's Units traded on the TSX prior
to each grant date, resulting in an aggregate fair value of $1.6 million, and no deferred Units were exercised (year ended
December 31, 2021 - 73,026 deferred Units granted and no deferred Units exercised).
147 RioCan Annual Report 2022
RIOCAN REAL ESTATE INVESTMENT TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2022 AND 2021
(In thousands of Canadian dollars, tabular amounts in thousands, except per unit amounts or unless otherwise noted)
16. DISTRIBUTIONS TO UNITHOLDERS
Total distributions declared to Unitholders are as follows:
Years ended December 31
Distributions declared to Unitholders
Distributions per unit
$
$
2022
310,163 $
1.0150 $
2021
304,153
0.9600
Commencing with the February 2022 distribution, payable on March 7, 2022, the Trust increased its monthly distribution by
$0.005 per unit to $0.085 per unit or $1.02 per unit on an annualized basis.
On January 16, 2023, RioCan declared a distribution payable of $0.085 per unit for the month of January 2023, which will be paid
on February 7, 2023 to Unitholders of record as at January 31, 2023.
17. REVENUE
Rental revenue
Years ended December 31
Base rent
Realty tax and insurance recoveries
Common area maintenance recoveries
Percentage rent
Straight-line rent
Lease cancellation fees
Parking revenue
Rental revenue
2022
$
687,459 $
199,437
168,144
9,092
1,884
5,119
3,057
2021
681,333
203,384
159,980
6,579
6,928
6,457
1,901
$
1,074,192 $
1,066,562
The following tables provide additional disclosure of the Trust's various revenue streams.
Revenue from contracts with customers
Revenue from contracts with customers includes common area maintenance recoveries and parking revenue that are included in
rental revenue:
Years ended December 31
Common area maintenance recoveries
Property management and other service fees
Parking revenue
Residential inventory sales
Revenue from contracts with customers
Property management and other service fees
Property management and other service fees consist of the following:
Years ended December 31
Property management fees (i)
Construction and development fees (i)
Leasing fees (ii)
Financing arrangement fees (ii)
Other (iii)
$
$
$
2022
168,144 $
20,996
3,057
118,659
310,856 $
2022
3,031 $
12,492
515
3,194
1,764
2021
159,980
14,772
1,901
93,727
270,380
2021
2,754
6,782
342
1,607
3,287
Property management and other service fees
$
20,996 $
14,772
(i) Recognized over time.
(ii) Recognized at a point in time.
(iii) During the year ended December 31, 2022, $1.6 million is recognized over time and $0.2 million is recognized at a point in time (year ended
December 31, 2021 - $1.8 million and $1.5 million, respectively).
RioCan Annual Report 2022 148
RIOCAN REAL ESTATE INVESTMENT TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2022 AND 2021
(In thousands of Canadian dollars, tabular amounts in thousands, except per unit amounts or unless otherwise noted)
Residential inventory sales
The following table identifies estimated revenue from residential inventory sales to be recognized in future periods at the point in
time when purchasers take possession of their respective residential units based on pre-sold condominiums and townhouses as
at December 31, 2022 and 2021:
As at
Within one year
More than one year
Total
18. INVESTMENT AND OTHER INCOME (LOSS)
Years ended December 31
Income earned on marketable securities
Fair value loss on marketable securities
Transaction gains and other income, net
December 31, 2022 December 31, 2021
$
$
$
$
27,455 $
739,876
767,331 $
115,708
645,191
760,899
2022
491 $
(3,783)
1,450
(1,842) $
2021
—
—
2,743
2,743
The following table breaks down the fair value loss on marketable securities for the years ended December 31, 2022 and 2021:
Years ended December 31
Change in unrealized fair value on marketable securities during the year
Fair value loss on marketable securities during the year
19. INTEREST INCOME
Years ended December 31
Interest income from mortgages and loans receivable (i)
Other interest income (ii)
$
$
$
$
2022
(3,783) $
(3,783) $
2022
17,356 $
3,546
20,902 $
2021
—
—
2021
10,664
3,002
13,666
(i) Measured at amortized cost.
(ii)
Includes interest from finance subleases of $2.5 million for the year ended December 31, 2022 (December 31, 2021 - $2.4 million).
20. INTEREST COSTS
Years ended December 31
Total interest (i)
Less: Interest capitalized
$
$
2022
224,040 $
(43,675)
180,365 $
2021
211,808
(40,287)
171,521
(i)
Includes interest from lease liabilities of $1.9 million for the year ended December 31, 2022 (December 31, 2021 - $1.9 million).
For the year ended December 31, 2022, interest was capitalized to properties under development and residential inventory at a
weighted average effective interest rate of 3.33% (December 31, 2021 - 3.08%).
21. GENERAL AND ADMINISTRATIVE
Years ended December 31
Salaries and benefits
Unit-based compensation expense
Depreciation and amortization
Other general and administrative expense
$
$
2022
26,228 $
6,998
4,774
16,437
54,437 $
2021
23,823
10,580
4,022
12,975
51,400
Other general and administrative costs include information technology costs, public company costs, professional fees, travel
expenses, occupancy costs, donations, advertising, promotion and marketing costs.
22. TRANSACTION AND OTHER COSTS
For the year ended December 31, 2022, transaction and other costs were $8.3 million, and primarily include property acquisition
and disposition costs (December 31, 2021 - $17.3 million).
149 RioCan Annual Report 2022
RIOCAN REAL ESTATE INVESTMENT TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2022 AND 2021
(In thousands of Canadian dollars, tabular amounts in thousands, except per unit amounts or unless otherwise noted)
23. NET INCOME PER UNIT
Net income per basic and diluted unit is calculated based on net income available to Unitholders divided by the weighted average
number of Units outstanding taking into account the dilution effect of Unit options.
Years ended December 31
Net income attributable to Unitholders
Weighted average number of Units outstanding (in thousands):
Basic
Dilutive effect of Unit options (i)
Diluted
Net income per unit (basic)
Net income per unit (diluted)
2022
$
236,772 $
306,069
178
306,247
0.77 $
0.77 $
$
$
2021
598,389
317,201
83
317,284
1.89
1.89
(i) The calculation of diluted weighted average number of Units outstanding excludes 5.0 million Unit options for the year ended December 31, 2022
(year ended December 31, 2021 - 6.2 million Unit options), as the exercise price of these Unit options was greater than the average market price of
Units.
24. FAIR VALUE MEASUREMENT
The fair value hierarchy of assets and liabilities measured at fair value on a recurring basis in the consolidated balance sheets is
as follows:
As at
Assets measured at fair value:
Marketable securities
Other investments
Investment properties:
Income properties
Properties under development
Properties held for sale
Interest rate swaps
Bond forward agreement
December 31, 2022
December 31, 2021
Level 1
Level 2
Level 3
Level 1
Level 2
Level 3
$
15,887 $
—
—
—
—
—
—
— $
—
— $
8,932
— 12,635,332
— 1,172,408
—
42,140
22,814
4,341
—
—
— $
—
—
—
—
—
—
— $
—
—
7,521
— 12,573,286
— 1,448,052
—
94
—
47,240
—
—
Total assets measured at fair value
$
15,887 $
27,155 $ 13,858,812 $
— $
94 $ 14,076,099
Liabilities measured at fair value:
Interest rate swaps
Bond forward agreement
Total liabilities measured at fair value
$
—
—
— $
—
—
— $
—
—
— $
—
—
— $
21,530
1,751
23,281 $
—
—
—
For assets and liabilities measured at fair value as at December 31, 2022, there were no transfers between Level 1, Level 2 and
Level 3 during the year ended December 31, 2022. For changes in fair value measurements of investment properties and
properties held for sale included in Level 3 of the fair value hierarchy, refer to Note 3 for details on the changes in beginning and
ending balances.
Fair value of financial instruments
The following presents the carrying values and fair values of the Trust's financial instruments, excluding those classified as
amortized cost and whose carrying value reasonably approximates their fair value and lease liabilities. Financial instruments that
are classified as amortized cost and whose carrying value reasonably approximates their fair value include net contractual rents
and other tenant receivables, amounts due on condominium final closings, funds held in trust, other receivables, accounts
payable related to property operating costs, and capital expenditures and leasing commissions, trade payables and accruals, and
deposits received from customers on residential inventory.
RioCan Annual Report 2022 150
RIOCAN REAL ESTATE INVESTMENT TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2022 AND 2021
(In thousands of Canadian dollars, tabular amounts in thousands, except per unit amounts or unless otherwise noted)
As at
Financial assets:
Marketable securities
Other investments
Finance lease receivables
Mortgages and loans receivable
Interest rate swap assets
Bond forward agreement
Financial liabilities:
Debentures payable
Mortgages payable
Lines of credit and other bank loans
Interest rate swap liabilities
Bond forward agreement
December 31, 2022
December 31, 2021
Carrying value
Fair value
Carrying value
Fair value
$
15,887 $
15,887 $
— $
8,932
41,592
269,339
22,814
4,341
8,932
41,592
266,121
22,814
4,341
7,521
42,158
237,790
94
—
$
2,942,051 $
2,719,995 $
2,990,692 $
2,659,180
1,141,112
2,485,578
1,141,112
—
—
—
—
2,334,016
1,285,910
21,530
1,751
—
7,521
42,158
241,956
94
—
3,036,020
2,366,442
1,285,910
21,530
1,751
The fair values of the Trust's financial instruments were determined as follows:
Finance lease receivables
The fair value of finance lease receivables is determined by the discounted cash flow method using applicable inputs such as
prevailing discount rates. Fair value measurements of these instruments were estimated using Level 3 inputs.
Mortgages and loans receivable
The fair value of mortgages and loans receivable is determined by the discounted cash flow method using applicable inputs such
as prevailing interest rates, contractual rates and discounts and considers the fair value of the underlying collateral. Fair value
measurements of these instruments were estimated using Level 3 inputs. The carrying values of short-term and variable rate
loans generally approximate their fair values.
Mortgages payable, lines of credit and other bank loans and debentures payable
The fair values of these instruments are estimates made at a specific point in time, based on relevant market information. These
estimates are based on quoted market prices for the same or similar issues or on the current rates offered to the Trust for similar
financial instruments subject to similar risk and maturities. Fair value measurements of these instruments were estimated using
Level 2 inputs. The carrying values of short-term and variable rate debt generally approximate their fair values.
Interest rate swaps
The fair values of the interest rate swaps reported in receivables and other assets, and accounts payable and other liabilities on
the consolidated balance sheets represent estimates at a specific point in time using financial models, based on interest rates
that reflect current market conditions, the credit quality of counterparties and interest rate curves.
Bond forward agreement
The fair values of the bond forward agreement reported in accounts payable and other liabilities on the consolidated balance
sheets represent estimates at a specific point in time using financial models, based on interest rates that reflect current market
conditions, the credit quality of counterparties and interest rate curves.
25. RISK MANAGEMENT
The main risks arising from the Trust's financial instruments are interest rate risk, liquidity risk and credit risk. The Trust's
approach to managing these risks is summarized below.
Interest rate risk
The Trust is exposed to interest rate risk on its borrowings and could be adversely affected if it were unable to obtain cost-
effective financing. The majority of the Trust's debt is financed at fixed rates with maturities staggered over a number of years,
thereby mitigating its exposure to changes in interest rates and financing risks. As at December 31, 2022, approximately 6.5%
(December 31, 2021 - 8.9%) of the Trust's debt is financed at variable rates (including mortgage debt related to properties held
for sale, if applicable, and excluding debt that has been hedged to fixed rates), exposing the Trust to interest rate risk.
From time to time, the Trust may enter into floating-for-fixed interest rate swaps as part of its strategy for managing its exposure
to interest rate risk on debt with floating interest rates. The Trust may also enter into bond forward contracts to hedge its exposure
to movements in interest rates from the time it determines it will refinance or issue a fixed rate debt and the time the fixed rate
debt is issued. The intent is to use the bond forwards to manage the change in cash flows of the future interest payments on the
anticipated fixed rate debt.
151 RioCan Annual Report 2022
RIOCAN REAL ESTATE INVESTMENT TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2022 AND 2021
(In thousands of Canadian dollars, tabular amounts in thousands, except per unit amounts or unless otherwise noted)
Hedge effectiveness is determined at the inception of the hedge relationship, and through quarterly effectiveness assessments to
ensure that an economic relationship exists between hedged item and hedging instrument. The hedge ratio is set at a ratio of 1:1
for the specific portions of floating rate debt that have been designated as the hedged item or at a ratio of 1:1 for the specific
portion of forecasted debenture issuance.
The Trust enters into floating-for-fixed interest rate swap hedge relationships where the critical terms of the hedging instrument
match with the terms of the hedged item; as a result, the Trust does not expect any sources of hedge ineffectiveness, except from
changes in credit risk of the Trust and the counterparty. For bond forward contracts, sources of ineffectiveness include differences
in the timing of duration and maturities, and changes in credit risk of the Trust and the counterparty.
The Trust has applied hedge accounting and recorded the changes in fair value for the effective portion of these derivatives in
other comprehensive income (OCI) accumulated in the cash flow hedge reserve in equity from the date of hedge designation.
Accumulated amounts are reclassified from OCI to net income in the periods where the forecasted cash flows impact net income.
For any interest rate swaps for which the Trust does not apply hedge accounting, the change in fair value of the swap contracts is
recognized in net income.
As at December 31, 2022, the outstanding notional amount of the floating-for-fixed interest rate swaps is $1.0 billion
(December 31, 2021 - $1.0 billion) and the term to maturity of these agreements ranges from January 2023 to November 2028.
The outstanding interest rate swaps by year of maturity are as follows:
Maturity
2023
2024
2025
2026
2027
Thereafter
Notional outstanding principal amount Weighted average effective fixed interest rate
3.58 %
3.59 %
— %
— %
— %
3.94 %
392,220
525,737
—
—
—
100,000
1,017,957
$
$
As at December 31, 2022, the Trust had bond forward contracts with an aggregate notional of $200.0 million outstanding, with a
maturity on these agreements in April 2023 (December 31, 2021 - $300.0 million, maturity in September 2022). The bond forward
contracts outstanding at December 31, 2022, were entered into on November 24, 2022, to sell on April 3, 2023 $200.0 million
Government of Canada Bonds due June 1, 2030 with an effective bond yield of 2.876%, to hedge its exposure to movements in
underlying risk-free interest rates on highly probable anticipated fixed rate debt issuances.
On February 1, 2022, the Trust entered into bond forward contracts to sell on April 28, 2022 $200.0 million Government of
Canada Bonds due June 1, 2029 with an effective bond yield of 1.71%, to hedge its exposure to movements in underlying risk-
free interest rates on highly probable anticipated fixed rate debt issuances.
During 2022, the Trust settled a total of $500 million of bond forward contracts, which resulted in a weighted average hedged
interest rate of 3.68% for $507.5 million of 7-year debt, including the benefit of the $37.1 million realized bond forward gain.
The Trust assessed the effectiveness of its continuing hedging relationships and determined all such designated hedging
relationships were effective as at December 31, 2022. As at December 31, 2022, the fair value of the interest rate swaps and
bond forward agreements are, in aggregate, a net financial asset of approximately $27.2 million (December 31, 2021 - net
financial liability of approximately $23.2 million).
As at December 31, 2022, the carrying value of the Trust's floating rate debt that is not subject to a hedging strategy is $441.3
million and a 50 basis point increase in market interest rates would result in an annualized decrease of $2.2 million in the Trust's
net income.
RioCan Annual Report 2022 152
RIOCAN REAL ESTATE INVESTMENT TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2022 AND 2021
(In thousands of Canadian dollars, tabular amounts in thousands, except per unit amounts or unless otherwise noted)
The amounts relating to items designated as hedging instruments and hedge ineffectiveness were as follows:
2022
Carry amount of the hedging
instrument
Assets
Liabilities
Nominal
amount of
hedging
instrument
Interest
rate swaps
$1,017,957
$22,814
$—
Bond
forward
agreement
$200,000
$4,341
$—
2021
Carry amount of the hedging
instrument
Assets
Liabilities
Nominal
amount of
hedging
instrument
Interest
rate swaps
$1,030,826
$94
$21,530
Bond
forward
agreement
$300,000
$—
$1,751
Line item in the
consolidated
balance sheet
Receivables and
other assets
(assets),
Accounts
payable and
other liabilities
(liabilities)
Receivables and
other assets
(assets),
Accounts
payable and
other liabilities
(liabilities)
Line item in the
consolidated
balance sheet
Receivables and
other assets
(assets),
Accounts
payable and
other liabilities
(liabilities)
Receivables and
other assets
(assets),
Accounts
payable and
other liabilities
(liabilities)
During the year - 2022
Fair value
gain (loss)
recognized in
OCI
Hedge
ineffectiveness
gain
recognized in
profit or loss
Amounts
reclassified
from the hedge
reserve to
profit or loss
Line item in
profit or loss
affected by
reclassification/
ineffectiveness
$43,024
$—
$1,225
Interest costs
$43,228
$725
$(2,217)
Interest costs/
Other income
During the year - 2021
Fair value
gain (loss)
recognized in
OCI
Hedge
ineffectiveness
recognized in
profit or loss
Amounts
reclassified
from the hedge
reserve to
profit or loss
Line item in
profit or loss
affected by
reclassification/
ineffectiveness
$20,459
$2,680
$21,665
Interest costs/
Debt
prepayment
costs, net
$(1,751)
$—
$—
Interest costs
The amounts at the reporting date relating to items designated as hedged items were as follows:
2022
2021
Fair value gain
(loss) used for
calculating hedge
ineffectiveness
during the year
Cash flow hedge
(loss) reserve for
continuing
hedges
Balance in cash
flow hedge
reserve for
discontinued
hedges
Fair value gain
(loss) used for
calculating hedge
ineffectiveness
during the year
Cash flow hedge
(loss) reserve for
continuing
hedges
Balance in cash
flow hedge
reserve for
discontinued
hedges
Interest rate risk
Variable rate mortgages
and lines of credit and the
bank loans
$43,024
$23,303
$—
$20,459
$(20,946)
Bond forward agreement
$43,228
$4,341
$34,919
$(1,751)
$(1,751)
$—
$—
The Trust has evaluated the extent to which its cash flow hedging relationships are subject to uncertainty driven by IBOR reform
as at December 31, 2022. The Trust's hedged items and hedging instruments for interest rate swaps continue to be indexed to
one-month CDOR. Under IBOR reform, a new risk-free benchmark interest rate has been introduced as a fallback rate to CDOR,
however, the one-month CDOR is expected to continue to exist as a benchmark rate until June 30, 2024. As at December 31,
2022, the Trust had one interest rate swap with a notional amount of $100.0 million that will mature after June 30, 2024. The Trust
will update its hedge documentation and adjust effective interest rates as the new benchmark rate is implemented.
The Trust’s exposure to interest rate benchmark reform as at December 31, 2022 include the following floating rate financial
liabilities that will mature after June 30, 2024 and have not transitioned to an alternative benchmark interest rate:
Financial liabilities
Mortgages payable
Revolving unsecured operating line of credit
Construction lines and other bank loans
153 RioCan Annual Report 2022
December 31, 2022
99,823
131,601
145,555
376,979
$
$
RIOCAN REAL ESTATE INVESTMENT TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2022 AND 2021
(In thousands of Canadian dollars, tabular amounts in thousands, except per unit amounts or unless otherwise noted)
Liquidity risk
Liquidity risk is the risk that the Trust may not have access to sufficient debt and equity capital to meet its financial obligations as
they become due. The Trust mitigates its liquidity risk by staggering the maturity dates of its long-term debt, actively renewing
expiring credit arrangements, utilizing undrawn operating lines of credit, maintaining a large number of assets unencumbered by
debt and issuing equity when considered appropriate.
• For the current and non-current scheduled repayments of mortgages, and funds drawn against the Trust's lines of credit and
other bank loans, refer to Notes 12 and 11 for details.
• For current and non-current scheduled repayments of debentures, refer to Note 10 for details.
The Trust expects to continue financing future acquisitions, development, debt obligations and other financing requirements
through existing cash balances, internally generated cash flows, refinancing maturing debt, utilization of its operating line of
credit, credit facilities, construction financing facilities, mortgaging unencumbered assets, issuance of unsecured debentures, the
sale of non-core assets, sales proceeds from residential inventory or air rights sales, strategic development partnerships and the
issuance of equity when considered appropriate.
Credit risk
Credit risk is the risk of financial loss to RioCan that arises from the possibility that:
• Tenants may experience financial difficulty and are unable to fulfill their lease commitments or tenants fail to occupy and pay
rent in accordance with existing lease agreements, some of which are conditional.
• Borrowers, typically through co-ownership arrangements, default on the repayment of their mortgages or loans receivable to
the Trust.
• Third parties default on the repayment of debt whereby RioCan has provided guarantees, including guarantees by RioCan on
behalf of its co-owners and on behalf of purchasers who assumed mortgages on property dispositions.
The Trust mitigates tenant credit risk through geographical diversification, staggered lease maturities, diversification of revenue
sources resulting from a large tenant base, avoiding dependence on any single tenant by ensuring no individual tenant
contributes a significant percentage of the Trust’s gross revenue, ensuring a considerable portion of the Trust’s revenue is earned
from national and anchor tenants and conducting credit assessments for new tenants. Furthermore, RioCan holds security
deposits and letters of credit from a number of tenants, which can serve to offset rents owed on a tenant-by-tenant basis in the
unfortunate event of unresolved tenant defaults.
Management reviews contractual rent receivables on a regular basis and reduces carrying amounts through the use of an
allowance for doubtful accounts recognizing the amount of any loss in the consolidated statements of income within non-
recoverable property operating costs.
As at December 31, 2022 and December 31, 2021, the allowance for doubtful accounts totals $13.5 million and $16.6 million,
respectively. RioCan holds approximately $35.6 million of security deposits and approximately $4.1 million in letters of credit from
a number of tenants, which could be used to offset rents owed on a tenant-by-tenant basis in the event of unresolved tenant
defaults.
Credit risk relating to mortgages and loans receivable and third-party guarantees is mitigated through recourse against such
counterparties and/or the underlying real estate. These financial instruments are considered to have low credit risk. The Trust
monitors the debt service ability and the fair value of the properties underlying the mortgages and loans receivable and third-party
guarantees to assess for changes in credit risk. Credit risk relating to finance lease receivables is mitigated through recourse
against such counterparties and/or re-recognition of the forfeited leased unit as investment property. Refer to Note 33 for third-
party guarantees.
RioCan’s Declaration of Trust contains provisions that have the effect of limiting the amount of space that can be leased to one
tenant and its investment in mortgages and loans receivable.
The maximum exposure to credit risk on financial assets on the consolidated balance sheets is their carrying values.
26. CAPITAL MANAGEMENT
The Trust defines capital as the aggregate of Unitholders’ equity and debt. The Trust’s capital management framework is
designed to maintain a level of capital that complies with investment and debt restrictions pursuant to RioCan’s Declaration,
complies with existing debt covenants, enables the Trust to achieve target credit ratings, implements its business strategies and
builds long-term unitholder value. The key elements of RioCan’s capital management framework are approved by its Unitholders
via the Trust’s Declaration of Trust and by its Board through their annual review of the Trust’s strategic plan and budget,
supplemented by periodic Board and Board Committee meetings. Capital adequacy is monitored by the Trust by assessing
performance against the approved annual plan throughout the year, which is updated accordingly, and by monitoring adherence
to investment and debt restrictions contained in the Declaration and debt covenants.
RioCan’s Declaration provides for maximum total debt levels up to 60% of Aggregate Assets (as defined in the Declaration). The
Trust is in compliance with this restriction.
RioCan Annual Report 2022 154
RIOCAN REAL ESTATE INVESTMENT TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2022 AND 2021
(In thousands of Canadian dollars, tabular amounts in thousands, except per unit amounts or unless otherwise noted)
Additionally, RioCan’s Declaration contains provisions that have the effect of limiting capital expended by the Trust for, among
other items, the following:
• direct and indirect investments (net of related mortgages payable) in non-income-producing properties (including greenfield
developments and mortgages receivable to fund the Trust’s co-owners’ share of such developments) to no more than 15% of
the Adjusted Unitholders’ Equity of the Trust (herein referred to as the Basket Ratio with Adjusted Unitholders’ Equity as defined
in the Declaration);
• total investment by the Trust in mortgages receivable, other than mortgages taken back by the Trust on the sale of its
properties, to no more than 30% of the Adjusted Unitholders’ Equity of the Trust;
• any property acquired by the Trust, directly or indirectly, if the cost to the Trust of such acquisition (net of the amount of
mortgages payable assumed) exceeds 10% of the Adjusted Unitholders’ Equity of the Trust;
• subject to the Basket Ratio, securities of an entity, other than to the extent that such securities would, for the purpose of the
Declaration, constitute an investment in real estate; and
• the amount of space that can be leased or subleased to any tenant, with certain exceptions, to a maximum space having an
aggregate gross leasable area of 20% of the aggregate gross leasable area of all real estate investments held by the Trust.
The Trust is in compliance with each of the above-noted restrictions as at and for the year ended December 31, 2022. The Trust
intends, but is not contractually obligated, to distribute to its Unitholders in each year an amount not less than the Trust’s income
for the year, as calculated in accordance with the Income Tax Act (Canada) (the Tax Act) after all permitted deductions under the
Tax Act have been taken. RioCan’s Trustees rely upon forward-looking cash flow information, including forecasts and budgets
and the future business prospects of RioCan, to establish the level of cash distributions.
The Trust’s debentures payable have covenants that are consistent with the Debt to Aggregate Assets ratio as discussed above,
maintenance of at least $1 billion of Adjusted Book Equity (defined in the indenture), and maintenance of at least an interest
coverage ratio (defined in the indenture) of 1.65x for a rolling twelve-month period. As at and for the year ended December 31,
2022, the Trust was in compliance with these covenants.
The following table presents RioCan's capital structure:
For the years ended December 31,
Debentures payable
Mortgages payable
Lines of credit and other bank loans
Total debt
Unitholders’ equity
Total capital
Note
10 $
11
12
2022
2,942,051 $
2,659,180
1,141,112
6,742,343
7,728,892
2021
2,990,692
2,334,016
1,285,910
6,610,618
7,911,344
$
14,471,235 $
14,521,962
Revolving unsecured operating line of credit and non-revolving unsecured credit facilities
The Trust is subject to certain key financial covenants pursuant to the agreement governing its revolving unsecured operating line
of credit and non-revolving unsecured credit facilities, which are calculated on a rolling twelve-month basis. As at and for the year
ended December 31, 2022, the Trust is in compliance with all applicable financial covenants.
The following table summarizes the Trust's performance relative to these key financial covenants:
Total indebtedness (i) (vi)
Secured indebtedness (ii) (vi)
Debt service coverage (iii) (vi)
Minimum unitholders' equity (in millions)
Ratio of unencumbered property assets to unsecured indebtedness (iv) (v) (vi)
Properties held for development as a percentage of consolidated gross book value of assets
Key covenant
< 60%
< 40%
> 1.5x
> $5,000
> 1.5x
< 15%
December 31, 2022
48.4 %
21.3 %
2.4 x
$7,729
1.8 x
9.6 %
(i)
Total indebtedness consists of the contractual amounts outstanding on mortgages payable, lines of credit and other bank loans, debentures
payable, capital lease obligations, contingent liabilities and the maximum exposure to loss for all third-party debt where RioCan has provided a
financial guarantee.
(ii) Secured indebtedness includes mortgages payable, secured construction lines and other bank loans and capital lease obligations, which are
secured against investment properties.
(iii) Debt service includes regular mortgage principal and interest payments, including interest capitalized on properties under development.
(iv) Unsecured indebtedness includes the contractual amounts outstanding of the revolving unsecured operating line of credit, non-revolving
unsecured credit facilities, debentures and any third-party debt amounts guaranteed by RioCan.
(v) Unencumbered property assets consist of properties that have not been pledged as security for debt. The unencumbered property asset to
unsecured indebtedness ratio is calculated as unencumbered assets divided by unsecured indebtedness.
(vi) These ratios include inputs from proportionately consolidated equity-accounted investments.
155 RioCan Annual Report 2022
RIOCAN REAL ESTATE INVESTMENT TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2022 AND 2021
(In thousands of Canadian dollars, tabular amounts in thousands, except per unit amounts or unless otherwise noted)
27. SUBSIDIARIES
The subsidiaries listed below are wholly owned and reflect significant entities of the Trust and are located in Canada:
Name
RioCan Management (BC) Inc.
RioCan Management Inc.
RioCan (KS) Management LP
RioCan (Festival Hall) Trust
Timmins Square Limited Partnership
Shoppers World Brampton Investment Trust
RioCan Realty Investments Partnership Four LP
RioCan Realty Investments Partnership Seven LP
RioCan Realty Investments Partnership Eleven LP
RioCan Realty Investments Partnership Twelve LP
RioCan Realty Investments Partnership Fifteen LP
RioCan Realty Investments Partnership Twenty LP
RioCan Realty Investments Partnership Twenty-Two LP
RioCan Realty Investments Partnership Twenty-Three LP
RioCan Realty Investments Partnership Twenty-Four LP
Name
RC Mill Woods LP
RC Coxwell LP
RC 3180 Dufferin LP
RC 2290 Lawrence (White Shield) LP
RC Well Commercial LP
RC Kirkland Trust
RC Eglinton Avenue LP
RC Sheppard Centre LP
RC Condo Management Trust
RC Durham Centre LP
RC Grand Park LP
RC Scarborough Centre LP
RioCan (Bloor/St. Thomas) LP
RC Clarkson LP
RC Yorkville LP
RioCan Realty Investments Partnership Twenty-Five LP
RC Windfield Farms LP
RioCan Realty Investments Partnership Twenty-Six LP
RioCan Realty Investments Partnership Twenty-Eight LP
RioCan (GH) Limited Partnership
RioCan Property Services Trust
RioCan White Shield Limited Partnership
RC NA Property 5 LP
RC Elmvale Acres LP
RC Westgate LP
RC Lincoln Fields LP
RC Strawberry Hills LP
RC Yonge Roehampton LP
RC Dufferin LP
RC Lachine Trust
RC Sandalwood LP
RC Holding I LP
RC Holding II LP
RC Rental IPP LP
RioCan Living LP
RC Bloor-Lansdowne LP
RC Lender LP
RC Pierrefonds Trust
RC Condo Development Trust
The Trust has investments in certain joint ventures that are structured using entities that separate the investor and the investee.
As a result, the Trust only has rights to and is liable for the net assets of the investee for these joint ventures.
Refer to Note 4 for the financial information of PR Bloor Street LP, RioCan-Fieldgate LP (2915-2943 Bloor Street West LP),
RioCan-HBC JV, Dawson-Yonge LP, RC (Queensway) LP, RC (Leaside) LP - Class B, WhiteCastle New Urban Fund, LP (WNUF
1), WhiteCastle New Urban Fund 2, LP (WNUF 2), WhiteCastle New Urban Fund 3, LP (WNUF 3), WhiteCastle New Urban Fund
4, LP (WNUF 4), WhiteCastle New Urban Fund 5, LP (WNUF 5), which are the Trust's 11 associates and joint ventures that are
accounted for using the equity method as at December 31, 2022.
28. SUPPLEMENTAL CASH FLOW INFORMATION
Operating activities
Years ended December 31,
Interest received
Interest paid
Investing activities
$
2022
9,376 $
(220,723)
2021
11,128
(214,113)
The following table provides a reconciliation of capital expenditures on income properties:
Years ended December 31,
Recoverable and non-recoverable costs
Tenant improvements and external leasing commissions
Capital expenditures on income properties
$
$
2022
(52,869) $
(48,598)
(101,467) $
2021
(35,121)
(42,835)
(77,956)
RioCan Annual Report 2022 156
RIOCAN REAL ESTATE INVESTMENT TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2022 AND 2021
(In thousands of Canadian dollars, tabular amounts in thousands, except per unit amounts or unless otherwise noted)
Financing activities
Years ended December 31,
Distributions paid:
Distributions declared during the year
Distributions declared in the prior year paid in the current year
Distributions declared in current year paid in the next year
Distributions paid
The following provides a reconciliation of liabilities arising from financing activities:
2022
2021
$
$
(310,163) $
(24,781)
25,528
(309,416) $
(304,153)
(38,125)
24,781
(317,497)
Year ended December 31, 2022
Balance, beginning of year
Proceeds/advances, net
Repayments
Non-cash changes:
Deferred financing costs and premiums and discounts
VTB mortgage or contractual principal assumed on
acquisition/disposition, net
Balance, end of year
Year ended December 31, 2021
Balance, beginning of year
Proceeds/advances, net
Repayments
Non-cash changes:
Deferred financing costs and premiums and discounts
VTB mortgage or contractual principal disposed on
acquisition/disposition, net
Balance, end of year
$
$
$
Mortgages payable
Lines of credit and
other bank loans
$
2,334,016 $
1,285,910 $
345,842
(45,642)
814
24,150
177,438
(323,742)
1,506
—
Debentures
2,990,692
248,603
(300,000)
2,756
—
2,659,180 $
1,141,112 $
2,942,051
Mortgages payable
Lines of credit and
other bank loans
2,797,066 $
388,216
(772,204)
3,574
(82,636)
2,334,016 $
790,539 $
492,553
—
2,818
—
Debentures
3,340,278
447,623
(800,000)
2,791
—
1,285,910 $
2,990,692
29. CHANGES IN OTHER WORKING CAPITAL ITEMS
Years ended December 31,
Receivables and other assets
Mortgage receivable interest
Residential inventory
Accounts payable and other liabilities
Other
Net change in other working capital items
$
$
2022
27,074 $
(10,482)
(25,849)
(20,087)
2,874
(26,470) $
2021
(70,085)
(1,810)
(33,744)
122,755
3,020
20,136
30. RELATED PARTY TRANSACTIONS
RioCan's related parties include the following persons and/or entities:
•
•
Associates, joint ventures or entities that are controlled or significantly influenced by the Trust; and
Key management personnel including the Trustees and those persons having the authority and responsibility for planning,
directing and controlling the activities of RioCan, directly or indirectly.
Activity and transactions with associates and joint ventures are disclosed in Note 4.
Key management personnel are defined by the Trust as those individuals that have the authority and responsibility for planning,
directing and controlling the Trust's activities, directly or indirectly.
157 RioCan Annual Report 2022
RIOCAN REAL ESTATE INVESTMENT TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2022 AND 2021
(In thousands of Canadian dollars, tabular amounts in thousands, except per unit amounts or unless otherwise noted)
Effective January 1, 2022, Mr. John Ballantyne was appointed as Chief Operating Officer of RioCan and included as key
management personnel. As at December 31, 2022, the Trust’s key management personnel include each of the Trustees and the
following individuals: President and Chief Executive Officer, Jonathan Gitlin; Chief Financial Officer, Dennis Blasutti; Chief
Investment Officer, Andrew Duncan and Chief Operating Officer, John Ballantyne. As at December 31, 2021, the Trust’s key
management personnel include each of the Trustees and the following individuals: President and Chief Executive Officer,
Jonathan Gitlin; Chief Financial Officer, Dennis Blasutti; Chief Investment Officer, Andrew Duncan.
Remuneration of the Trust’s Trustees and Key Executives during the years ended December 31, 2022 and 2021 is as follows:
Trustees
2022
420 $
2,058
—
2,478 $
2021
249 $
1,966
—
2,215 $
Key Executives
2022
4,597 $
3,500
176
8,273 $
2021
6,367
7,496
175
14,038
$
$
Compensation and benefits
Unit-based compensation
Post-employment benefit costs
31. EMPLOYEE BENEFITS
Plan characteristics
RioCan sponsors a defined contribution plan and three defined benefit plans that provide pension and certain post-employment
benefits to eligible employees. Plan members are not required, nor are they permitted, to contribute to these plans. The defined
benefit plans are closed to new members and any new employees are generally eligible to join the defined contribution pension
plan. All plans are administered by separate funds that are legally segregated from RioCan.
Defined contribution plan
The Trust's defined contribution pension plan provides pension benefits based on accumulated RioCan contributions. RioCan's
contributions are based on a percentage of an employee’s annual earnings. For the year ended December 31, 2022, RioCan's
contributions to the defined contribution plan were $2.8 million (December 31, 2021 - $2.8 million).
Defined benefit plan
RioCan's defined benefit pension plans, one of which is a registered plan and two of which are supplemental unregistered plans,
provide pension benefits mostly based on years of credited service, the average of the highest five years of earnings and the age
of the member at retirement.
The Trust measures its benefit obligations and pension assets as at December 31 each year. All plans are valued using the
projected unit-credit method. The Trust funds its registered defined benefit pension plans in accordance with actuarially
determined amounts required to satisfy employee benefit obligations under current pension regulations. The most recent funding
actuarial valuation for the Trust's defined benefit plans was completed as at January 1, 2022, and the next valuation is scheduled
for January 1, 2025.
The fair value of the registered plan assets as at December 31, 2022 is $3.8 million (December 31, 2021 - $3.6 million). The
recognized pension obligation (net of plan assets) as at December 31, 2022 is $10.1 million (December 31, 2021 - $13.6 million).
Pension costs of $0.2 million were recorded in net income for the year ended December 31, 2022 (pension costs for the year
ended December 31, 2021 - $0.3 million). The discount rate used was 4.8% (December 31, 2021 - 2.9%), the compensation
growth rate was 4.0% (December 31, 2021 - 4.0%) and the expected long-term rate of return on plan assets was 4.8%
(December 31, 2021 - 2.9%).
Actuarial gains and losses for the defined benefit plans are recognized in full in the period in which they occur in OCI and are not
reclassified to income in subsequent periods.
32. SEGMENTED INFORMATION
RioCan primarily owns, develops, manages and operates retail-focused properties, and mixed-use developments located in
Canada. In measuring its performance, the Trust does not distinguish or group its operations on a geographical or other basis
and, accordingly, has a single reportable segment. Management has applied judgment by aggregating its operating segments into
one reportable segment for disclosure purposes. Such judgment considers the nature of property operations, tenant mix and an
expectation that operating segments within a reportable segment have similar long-term economic characteristics. The Trust's
President and Chief Executive Officer is the chief operating decision-maker and regularly reviews RioCan's operations and
performance on an individual property basis. RioCan does not have any single major tenant or a significant group of tenants.
RioCan Annual Report 2022 158
RIOCAN REAL ESTATE INVESTMENT TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2022 AND 2021
(In thousands of Canadian dollars, tabular amounts in thousands, except per unit amounts or unless otherwise noted)
33. CONTINGENCIES AND OTHER COMMITMENTS
Third-party guarantees
As at December 31, 2022, RioCan is contingently liable, as guarantor for debt, for approximately $284.7 million (December 31,
2021 - $255.4 million), which expires between 2023 and 2030, and which includes guarantees of $255.4 million (December 31,
2021 - $225.4 million) on behalf of co-owners. Debt guaranteed by RioCan that relates to the assumption of mortgages on
property dispositions is $29.3 million (December 31, 2021 - $30.0 million). There have been no defaults by the primary obligors
for debts on which the Trust has provided its guarantees and no provision for expected losses on these guarantees has been
recognized in the annual audited consolidated financial statements.
Expiry of guarantees by year is as follows:
2023
2024
2025
2026
2027
Thereafter
Total
$
$
125,939
—
79,945
—
—
78,805
284,689
Letters of credit and surety bonds
The Trust has aggregate letter of credit facilities with certain Schedule I banks totalling $111.6 million (December 31, 2021 -
$94.9 million). As at December 31, 2022, the Trust’s outstanding letters of credit under these facilities were $53.0 million
(December 31, 2021 - $58.1 million).
The Trust is contingently liable for surety bonds that have been provided to support condominium developments and warranties
in the amount of $147.7 million (December 31, 2021 - $110.5 million).
Investment commitments
As at December 31, 2022, the Trust has total unfunded investment commitments of $96.2 million relating to equity-accounted
investments (December 31, 2021 - $105.3 million). In addition, within RioCan's investment in equity-accounted investments there
are $35.1 million construction commitments at RioCan's ownership interest pertaining to development activities.
Construction commitments
RioCan has entered into commitments for development activity and building renovations from leasing activity. As at December 31,
2022, the commitments for investment properties and residential inventory were $366.7 million.
Litigation
The Trust is involved with litigation and claims that arise from time to time in the normal course of business. In the opinion of
management, any liability that may arise from such contingencies will not have a significant adverse effect on the Trust’s annual
audited consolidated financial statements.
34. EVENTS AFTER THE BALANCE SHEET DATE
Non-revolving unsecured credit facility
On January 31, 2023, RioCan refinanced its $200 million non-revolving unsecured credit facility with a weighted average annual
all-in fixed rate of 4.93% through interest rate swaps and a maturity date of February 5, 2025 with an option to extend to January
30, 2026, all other terms were similar to the matured facility.
Dispositions
On January 16, 2023 and February 2, 2023, RioCan disposed 100% interest in two properties located in Calgary, Alberta and
London, Ontario for sales proceeds of $42.1 million.
Unit distributions
On February 15, 2023, RioCan's Board of Trustees approved an increase to its per unit monthly distributions to Unitholders from
$0.085 to $0.090 beginning with the distribution declared in February 2023 bringing RioCan's annualized distribution to $1.08 per
unit.
159 RioCan Annual Report 2022
CORPORATE
INFORMATION
Senior Management
Jonathan Gitlin, President & Chief Executive Officer
Dennis Blasutti, Chief Financial Officer
John Ballantyne, Chief Operating Officer
Andrew Duncan, Chief Investment Officer
Terri Andrianopoulos, Senior Vice President, People & Brand
Oliver Harrison, Senior Vice President, Leasing and Tenant Experience
Franca Smith, Senior Vice President, Finance
Jennifer Suess, Senior Vice President, General Counsel, ESG & Corporate Secretary
Board of Trustees
Edward Sonshine, O.Ont., Q.C.
Non-Executive Chairman
Siim A. Vanaselja (2),(3)
Lead Trustee and Chair of the Nominating, Environmental,
Social and Governance Committee
Bonnie R. Brooks, C.M.(1),(4)
Richard Dansereau (2),(3)
Janice Fukakusa, C.M.(3)
Chair of the Audit Committee
Jonathan Gitlin
Marie-Josée Lamothe (1)
Dale H. Lastman, C.M., O.Ont.
Jane Marshall (1),(4)
Chair of the People, Culture and Compensation Committee
Charles M. Winograd (2)
Chair of the Investment Committee
Unitholder Information
Investor Contact
Head Office
RioCan Real Estate Investment Trust
RioCan Yonge Eglinton Centre
2300 Yonge Street, Suite 500
P.O. Box 2386, Toronto, Ontario M4P 1E4
Tel: (416) 866-3033 or 1 (800) 465-2733 | Fax: (416) 866-3020
Website: www.riocan.com | Email: ir@riocan.com
Kim Lee, Vice President, Investor Relations
Tel: (416) 646-8326 | Email: klee@riocan.com
Transfer Agent and Registrar
Stock Exchange Listing
The Toronto Stock Exchange
Trading Symbol: Trust Units – REI.UN
TSX Trust Company
P.O. Box 700, Station B
Montreal, Quebec H3B 3K3
Canada and United States: 1 (800) 387-0825
Outside North America: 1 (416) 682-3860
Fax: 1 (888) 486-7660 or 1 (514) 285-8457
Website: www.tsxtrust.com | Email: shareholderinquiries@tmx.com
1 Member of the Nominating and Environmental, Social and Governance Committee
2 Member of the Audit Committee
3 Member of the People, Culture and Compensation Committee
4 Member of the Investment Committee
Head Office
RioCan Yonge Eglinton Centre | 2300 Yonge Street, Suite 500
P.O. Box 2386 | Toronto, Ontario M4P 1E4