ABOUT
RIOCAN
Built over 30 years, RioCan has established a well-positioned
portfolio and a strong track-record of value creation.
RioCan owns, manages and develops retail-focused, increasingly mixed-use
properties concentrated in prime, high-density, transit-oriented areas where
Canadians want to shop, live and work.
As of December 31, 2023, our portfolio is comprised of 188 properties with an
aggregate net leasable area of approximately 33 million square feet, consisting
primarily of retail, residential, and mixed-use properties.
High-quality portfolio
with embedded growth
opportunities
Located in Canada’s most
in-demand markets
De-risked and modular
development pipeline
Conservative balance
sheet management
FINANCIALS
$714.4M
Operating Income
$1.77
FFO/Unit1,3
4.8%
Commercial SPNOI Growth2,3
60.5%
FFO Payout Ratio3
$2.0B
In Available Liquidity3,4
$8.1B
Unencumbered Assets3,4
1 FFO: Funds From Operations
2 Commercial SPNOI: Commercial Same Property Net Operating Income
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, 2023.
4 RioCan's proportionate share
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TABLE OF
CONTENTS
03
07
08
09
10
Letter from the President & CEO
Major Market Advantage
Traffic-Drawing Tenant Mix
Spotlight on The WellTM
Development Pipeline
11
13
15
18
Dedicated ESG Program
Financial Review
Key Performance Indicators
Management Discussion and Analysis
107
Audited Annual Consolidated
Financial Statements
RioCan Brentwood/Brio
Calgary, AB
2
LETTER FROM THE
PRESIDENT & CEO
Dear Fellow Unitholders,
This year marks 30 years since RioCan debuted as one of Canada’s
founding real estate investment trusts and went public on the
Toronto Stock Exchange. The irreplaceable portfolio of high-
quality assets curated over our history cements our position as
Canada’s premier REIT and a valuable long-term investment.
During the last three decades, we used every opportunity to
strengthen our portfolio, foster strategic growth, and create value
for our Unitholders.
In 2023, our operations were strong and we achieved our financial
objectives. These accomplishments were due in large part to the
commitment of our team, which responsibly manages every facet
of our business over which we have control. Highlights include
strong leasing velocity, standout leasing spreads, increasing
average net rents, and record occupancy, contributing to another
year with Same Property NOI growth from our commercial
business exceeding our target range.
We are experiencing some of the most favourable retail real estate
dynamics in memory including limited supply, healthy tenant
retention and ongoing retailer expansions. Combined with our
proactive and talented team and the quality of our portfolio,
RioCan produced some of the best operational results in our
history. RioCan’s distribution increase to $1.11 per unit annualized,
effective with the February 2024 distribution, reflects our
confidence in delivering continued operational excellence.
While we maintained a steadfast focus on operations and
development, we were also recognized for our ongoing industry-
leading commitments to sustainability, ethical governance, and
our people and culture. RioCan continues to take steps to mitigate
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the impact of climate change and has set an overall target to
reach net-zero greenhouse gas (GHG) emissions across the value
chain by 2050. We are pleased to confirm that our targets were
approved by the Science Based Targets initiative (SBTi) this year –
a significant validation of our commitment.
Executing on our vision and building
vibrant communities
Among our most significant achievements in 2023 was the launch
of the retail and residential components at The Well, our flagship
mixed-use property in downtown Toronto.
Jointly managed by RioCan and our partner, Allied Properties
REIT, The Well represents all that makes RioCan’s portfolio
strong and desirable, and on an unprecedented scale within the
Canadian landscape. Spread across nearly eight acres in the
densely populated area of Toronto King West, The Well comprises
320,000 square feet of elevated retail and food service space,
1,700 residential suites including 592 units at our residential tower,
FourFifty The WellTM, and 1.2 million square feet of office.
The Well exemplifies how RioCan combines great retail and
innovative development to further diversify and accelerate income
growth. It features the key tenets of our portfolio: an ideal mix
of strong and stable tenants, major market located, transit-
oriented, and underscored by superior demographics. In short,
The Well demonstrates our ability to deliver Unitholder value while
simultaneously building and servicing communities.
A dynamic portfolio of high-quality assets
RioCan’s assets are located in Canada’s six major markets, in
densely populated areas with an average household income
of $140,000 and an average population of 260,000 within a
five-kilometer radius. We continue to use dispositions and
developments to thoughtfully and meaningfully shift our
demographic profile, which makes RioCan centres the indisputable
and desirable choice for retailers.
Our portfolio has never been more defensive. Key to our stable
income is our necessity-based tenant mix. We fill our open air
shopping centres with tenants that complement the growth of
e-commerce and add to our already large roster of strong and
stable tenants. The vast majority of our rental revenue comes
from creditworthy, nationally recognized brands such as Walmart,
Loblaws, Canadian Tire, Dollarama, and Winners, each with a
balance sheet that allows them to navigate through almost any
type of crisis.
We also complement our core growth with new projects that
deliver exceptional mixed-use residential properties. Through
RioCan Living, our multi-residential footprint continues to grow
with best-in-class rental units and condominiums across the
country. Our projects already underway will provide development
deliveries that bolster RioCan’s growth by generating new income
and recapturing capital that will enhance our balance sheet. At the
same time, we continue to advance future projects to be shovel
ready and poised to break ground to begin construction in a more
favourable cost and interest rate environment.
DENSE POPULATION1
154,000
people in 2017
260,000
people in 2023
69%
STRONG HOUSEHOLD INCOME1
$102,000
$140,000
avg. household
income in 2017
37%
avg. household
income in 2023
1 Within 5km radius. Data updated once a year as annual statistics become available each spring.
Source: DemoStats - 2023 - Trends, 2023 Environics Analytics
COMMITTED OCCUPANCY
Portfolio
Retail
98.4%
97.9%
97.4%
97.4%
97.2%
96.8%
2021
2022
2023
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BLENDED LEASING SPREADS
Poised to succeed in any
market environment
While we are mindful that the real estate sector and the larger
economy are sensitive to interest rates, we are well prepared to
succeed no matter the rate environment. We remain confident in
our disciplined approach to capital management and do everything
we can to offset the impact of higher interest rates. This includes
maximizing rent, reducing debt, and maintaining diligent control of
our general & administrative expenses and capital expenditures.
What remains consistent is the resilient nature of our core retail
business and the favourable Canadian retail real estate landscape.
We operate in Canada’s most desirable markets where there is a
limited supply of high-quality retail spaces and it is often cost-
prohibitive to build new retail locations. As Canada’s population
grows, so too does the demand for places to shop. These supply-
and-demand dynamics work in our favour in any economic
environment and present meaningful and sustainable demand for
RioCan’s well-located and well-diversified assets.
As a result, we continue to seek opportunities to high-grade
our tenant mix. Turnover is normal course in real estate; in fact,
it provides RioCan an opportunity to engage in positive lease
negotiations with strong, stable tenants that will backfill vacated
spaces, increase revenues and enhance the shopping centre and
customer experience.
2024 outlook:
Executing from a position of strength
As we look ahead to 2024, our team remains committed to
our strategy and delivering long-term value for Unitholders. Our
balance sheet is strong, and we will continue to strategically and
responsibly manage our capital. As part of this, we will begin
implementing a new Yardi-based ERP system in the first half of
2024, allowing us to manage our operations and standardize key
business processes more effectively. We are taking this current
market opportunity to further enhance our strengths and future-
proof our portfolio to accelerate our growth trajectory when the
market stabilizes.
I want to thank our RioCan team, tenants, and Unitholders for your
invaluable support over the past 30 years. We work every day to
deliver value – and will continue to do so for decades to come.
Jonathan Gitlin
President and Chief Executive Officer
9.0%
10.7%
6.3%
2021
2022
2023
RENT PER OCCUPIED SQUARE FOOT
$20.98
$21.51
$20.16
2021
2022
2023
COMMERCIAL SAME
PROPERTY NOI GROWTH1
4.3%
4.8%
3.4%
2021
2022
2023
11 This is a non-GAAP measurement. For more information, refer to the Non-GAAP Measures section in the
This is a non-GAAP measurement. For more information, refer to the Non-GAAP Measures section in the
MD&A for the year ended December 31, 2023
MD&A for the year ended December 31, 2023
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The Well
Toronto, ON
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PUTTING CAPITAL
TO WORK. REINFORCING
PORTFOLIO RESILIENCY
AND GROWTH PROSPECTS
RioCan’s portfolio has never been more desirable.
Through our history, RioCan has allocated capital to
enhance our portfolio quality and accelerate its growth
trajectory. Focused on serving Canada’s most densely
populated urban and surrounding suburban areas, we have
strategically disposed of assets where there was little to no
population growth. At the same time, we further expanded
our major market presence with new mixed-use residential
developments on our existing major market sites.
$3.5B of assets sold since
2017, including $1.9B
from secondary markets,
repatriated for higher
growth opportunities.
MAJOR MARKET
ADVANTAGE
RioCan’s properties are concentrated in prime, high-
density, and transit-oriented areas where people want
to shop, live, and work. The vast majority of our revenue
is generated from properties in Canada’s six major
urban centres – high-growth markets with attractive
demographics that present meaningful demand drivers for
our business. With Canada’s welcoming immigration policy,
many new Canadians are choosing to live in urban centres,
where our tenants are further expanding to service the
growing population. Similarly, major markets are where
both residential and quality retail space are most supply
constrained, making RioCan’s existing presence even more
coveted in these locations.
95% of total fair value1
generated from Canada’s
six major markets,
compared to 81% in 2017.
1 At RioCan’s interest for income producing properties
DYNAMIC
MIXED-USE PORTFOLIO
RioCan’s diverse property mix includes retail, residential and
office assets, which provide income stability, reduced risk,
and a higher-quality portfolio. Through our RioCan Living
team, we are making exciting progress on our residential
program of mixed-use developments, which create
profitable projects that revitalize urban spaces, add much
need housing supply and enhance the quality and security
of our income.
2,7381 residential rental units
in operations across 13 buildings
with more than 800,0001 sq. ft.
of residential rental constructed
since 2019.
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Property
Mix2
Grocery
Anchored
Centre
55.6%
Mixed-Use
/ Urban3
32.2%
Open Air
Centre
12.2%
1 Residential units at 100% ownership interest and square footage at RioCan’s interest
2 Percentage of total fair value
3 Mixed-Use / Urban includes approximately 1.2 million square feet of residential
rental NLA and the corresponding fair value.
TRAFFIC-DRAWING
TENANT MIX
RioCan’s portfolio is dominated by resilient assets with a
curated and diversified tenant base that aligns with changing
consumer spending patterns. We are increasingly shifting
towards necessity-based tenants, including grocery, pharmacy,
and value retailers, which drive stable traffic to our properties.
The other tenant categories contribute to the overall retail
mix, providing convenience and complementary uses for the
communities we serve and the residents of our mixed-use
buildings. We strive to create deep tenant relationships and
provide superior amenities and services to meet the needs of
our tenants, now and in the future.
~73% of our annualized rental
revenue from necessity-based
and value tenants.
1 Percentage of annualized net rental revenue; as of Q4 2023, Other Essential Retailer includes Pet, Hardware,
Office Supplies and Other Tenants includes Apparel and Department Stores
Tenant Mix
87.5%
annualized net rent from
Strong & Stable tenants
Strong & Stable
Strong
& Stable
87.5%
Compelling Traffic Drivers
Compelling
Traffic Drivers
9.7%
Transitional
Transitional
2.8%
Grocery/
Pharmacy/Liquor
20.1%1
Essential
Personal Services
16.5%1
Other Essential
Retailers
8.9%1
Furniture
and Home
6.0%1
Experiential
10.3%1
Quick Service
Restaurants
7.4%1
Other Tenants
5.1%1
Value
Retailers
12.1%1
Specialty
Retailers
7.8%1
Personal
Services
5.8%1
RioCan Kanata
Ottawa, ON
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RIOCAN’S QUALITY EVOLUTION:
THE WELL AS A SYMBOL
2023 marked a significant milestone for RioCan – the completion of
The Well, our flagship development in downtown Toronto. The Well is the
physical embodiment of RioCan’s strategy, reflecting our major market
focus, development of dynamic retail and our vision to create large-scale,
community-building projects that are the future of real estate in Canada.
Conceived more than 10 years ago, the development is a one-of-a-kind
partnership between RioCan and Allied Properties REIT.
The Well combines an elevated retail complex, distinct office space, and
modern residences to deliver meaningful experiences that create a successful
community. It is expected to draw 22,000 daily visitors, including the
approximately 11,000 residents and employees that will live and work at the
property. At the heart of The Well is a three-level retail complex housing a mix
of innovative, experiential and service-oriented retailers, and inspired food
service offerings that Toronto has been waiting for.
Centrally located in downtown
Toronto, serving 1.3 million
people within 10 km
Six residential towers offering
1,700 condominium and
purpose-built rental suites
Spans 7.7 acres, with more than
3 million square feet of retail,
residential and office space
Impressive tenant roster of
beloved local brands, innovative
concepts, and strong and stable
multi-nationals
Content to be provided
Content to be provided
Content to be provided
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The Well
Toronto, ON
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DISCIPLINED DEVELOPMENT
DRIVES VALUE CREATION
RioCan has built a best-in-class development team to action
the transformation of our existing retail properties into world-
class mixed-use communities. Along with RioCan Living, we have
established a cadence of development deliveries capitalizing on
one of the largest, most advanced development pipelines in the
Canadian REIT space. In addition to completing projects already
underway, we are focused on moving projects through the
various stages of the development process to get them shovel
ready. We add value through the development progression in a
de-risked way with the flexibility to start projects under optimal
market conditions as existing assets continue to generate
in-place income. In addition, our condominium and townhome
projects help to accelerate capital recycling with sales proceeds
used for accretive opportunities including strengthening our
balance sheet and funding development.
Development pipeline includes
17.4M square feet of zoned
density, 84% of which is
designated residential.
RioCan Westgate/Rhythm
Ottawa, ON
ENHANCING OUR COMPETITIVE
ADVANTAGES WITH
EXCEPTIONAL BALANCE
SHEET MANAGEMENT
As we continue to enhance the quality of our portfolio and
foster embedded growth, we take a disciplined approach
to managing our capital, striking the right balance between
opportunity and risk. We manage this in an intentional
manner with the overall goal of generating returns on a
risk-adjusted basis. Our straight-forward approach includes
maintaining an appropriate debt and equity mix, diversifying
debt funding sources, and keeping a strong liquidity position
to reduce financing risk.
The Well
Toronto, ON
Adjusted Debt to
Adjusted EBITDA1,2
Liquidity1
$1.01B
9.59x
$1.55B
9.51x
$1.96B
9.28x
1 Non-GAAP measurements calculated at RioCan’s proportionate share.
2 Calculated on a trailing 12-month basis.
For more information, refer to the Non-GAAP Measures section in the MD&A for the year ended December 31, 2023
2021
2022
2023
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DRIVING LONG-TERM VALUE THROUGH
A DEDICATED ESG PROGRAM
RioCan is proud to be among the leaders in ESG for Canadian real
estate. We embed ESG and sustainability best practices and grow
responsibly by operating a resilient business, forming strategic
partnerships, and creating a positive impact for our environment
and communities.
Our strategy guides our company-wide approach to ESG and
serves as a blueprint to track and report our commitments and
progress. For more information on RioCan’s ESG program and to
read our 2023 ESG Report, visit www.riocan.com.
RIOCAN’S ESG
COMMITMENTS
Resilient Business
Future proofing our business through best-in-class
governance and climate-resilient assets.
Purposeful Impact
Pursuing sustainable economic growth by purposefully
creating value and impact for our environment, people,
and communities.
Strategic Partnerships
Collaborating with our partners to address the
pertinent challenges facing our society.
This year, through RioCan Cares, we proudly
committed $25,000 to the Indigo Love of
Reading Foundation to provide 2,500 books
to high-needs Indigenous communities in
Canada. This achievement was a collective
effort. RioCan shopping centres held numerous
back-to-school community events and
donated $20,000 to the foundation. Events
included hosting storytelling with acclaimed
Indigenous author David A. Robertson, while
RioCan donated a book for every employee
who wore an Orange Shirt on September 30th,
contributing an additional 500 books.
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LEADING THE WAY TO A NET-ZERO ECONOMY:
RIOCAN SECURES SBTi APPROVAL OF
GHG EMISSIONS REDUCTION TARGETS
RioCan commits to reach net-zero greenhouse gas (GHG)
emissions across the value chain by 2050. In 2023, the Science
Based Targets initiative (SBTi) validated that the GHG emissions
reduction targets submitted by RioCan conform with the SBTi
Criteria and Recommendations (Criteria version 5.0). SBTi is a
partnership between CDP, the United Nations Global Compact,
World Resources Institute and the World Wide Fund for Nature.
RIOCAN’S TARGETS:
Near-term
With 2019 as the baseline year, reduce absolute scope 1 and 2
emissions by 46.2%, reduce absolute scope 3 emissions from
downstream-leased assets by 28.0% and to reduce scope 3
emissions from capital goods1 by 55.0% per square foot by
2030. The SBTi has classified RioCan’s scope 1 and 2 target
ambition to be in line with a 1.5°C trajectory.
Long-term
Reduce absolute scope 1, 2 and 3 GHG emissions 90.0% by
2050 with 2019 as the baseline year.
RioCan used the SBTi Corporate Net-Zero Standard as a
framework to guide our commitment and inform our targets.
The Corporate Net-Zero Standard establishes criteria for
near-term and long-term goals that align with the ambition that
climate scientists consider essential to mitigate the most severe
consequences of climate change.
11 Refers to embodied carbon emissions associated with the materials and construction of buildings.
Refers to embodied carbon emissions associated with the materials and construction of buildings.
The Well uses a thermal energy storage system
from Enwave Energy Corp. that provides year-
round, low-carbon cooling and heating to
The Well and surrounding Toronto communities.
It’s one example of RioCan’s innovative
thinking and strategic partnerships designed
to deliver sustainable energy solutions and
reduce GHG emissions.
Construction of Enwave Deep
Lake Water Cooling System
The Well
Toronto, ON
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FINANCIAL
FINANCIAL
REVIEW
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
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20
22
23
24
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30
31
31
32
32
34
35
36
37
38
39
39
40
42
Joint Arrangements
Capital Expenditures on Income Properties
Development Program
Development Pipeline
Completed Developments
2022-2026 Development Deliveries
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
Accounting Policies and Estimates
Adoption of New Accounting Standards
Future Changes in Accounting Policies
Controls and Procedures
Climate-Related Financial Disclosures
Non-GAAP Measures
Risks and Uncertainties
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RioCan Annual Report 2023 14
KEY PERFORMANCE INDICATORS
(In thousands of dollars, except percentages, square feet and per unit values)
FINANCIAL
Rental Revenue
Q4 2023
$276,510
Year 2023
$1,091,105
to higher occupancy,
Rental revenue for the year and quarter increased
rental growth,
mainly due
development completions, higher recoveries, higher
straight-line rent and parking revenue, partially offset by
asset dispositions.
Q4 2022
$268,864
+2.8%
Year 2022 $1,074,192 +1.6%
Commercial Same Property NOI (i) (vi)
Q4 2023
$150,698
Q4 2022
Year 2023
$596,558
Year 2022 $569,416
$142,019
+6.1%
Commercial SPNOI increased by 4.8% and 6.1% on an
annual and quarterly basis respectively, primarily due to
increases in occupancy, rent growth from contractual
rent steps, rent upon renewal and the recovery of
provisions for credit losses.
+4.8%
Operating Income
Q4 2023
Year 2023
$186,074
$714,408
Q4 2022
$175,421
+6.1%
Year 2022 $712,692
+0.2%
FFO Per Unit - Diluted (i)
Q4 2023
Year 2023
$0.44
$1.77
Q4 2022
$0.42
+4.8%
Year 2022 $1.71
+3.5%
FFO Payout Ratio (i)
AFFO Payout Ratio (i)
Q4 2023
Q4 2023
60.5%
70.0%
Q4 2022
59.0%
+1.5%
Q4 2022
67.1%
+2.9%
Net Income (Loss)
Q4 2023
$(117,659)
Year 2023
$38,802
Q4 2022
$(4,961)
nm
Year 2022 $236,772
-83.6%
15 RioCan Annual Report 2023
The increase in operating income for the year was
primarily driven by higher Net Operating Income(i),
partially offset by lower residential inventory gains due
to timing of condominium/townhouse sales and lower
management and other service fee revenue. For the
quarter,
impacted
operating income, except for management and other
service fees, which were higher.
items noted above
the same
FFO per unit was $0.06 and $0.02 higher for the year
and quarter, respectively, when compared to the same
periods last year. Improved property fundamentals
drove Commercial SPNOI higher. NOI from residential
properties and NOI from completed properties under
development also grew, partially offset by reduced NOI
the sale of commercial properties. Lower
from
residential inventory gains were mostly offset by higher
income
investments, which
included a gain on the sale of a portion of the Trust's
interest in 11YV project attributable to the underlying
residential inventory in that investment. FFO per unit
was lower from higher interest expense but was
positively impacted in the year by the accretive benefit
of prior year unit buybacks.
from equity-accounted
The FFO Payout Ratio is within the Trust's long-term
target range of 55% to 65%. FFO and AFFO Payout
Ratios increased when compared to the same period
last year mainly due to a $0.06 per unit per annum
increase in distributions effective February 2022 and
2023, partially offset by the impact of units repurchased
in prior years. RioCan's Board of Trustees approved a
2.8% increase to its monthly per unit distribution to
Unitholders from $0.09 to $0.0925 commencing with the
distribution declared
in February 2024, bringing
RioCan's annualized distribution to $1.11 per unit.
fair value
losses primarily
Higher
increased
capitalization rates to reflect current market conditions
partially offset by higher stabilized NOI, resulted in a
higher loss for the quarter and lower net income for the
year when compared to the same respective periods
last year.
from
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 2023
97.4%
Q4 2023
97.1%
Q4 2022
97.4%
—%
Q4 2022
96.8%
+0.3%
New Leasing Spread (iv)
Q4 2023
13.2%
Year 2023
14.7%
Q4 2022
11.8%
+1.4%
Year 2022 12.3%
+2.4%
Renewal Leasing Spread (iv)
Q4 2023
8.7%
Year 2023
9.8%
Q4 2022
8.3%
+0.4%
Year 2022 8.2%
+1.6%
Blended Leasing Spread (iv)
Q4 2023
9.0%
Year 2023
10.7%
Q4 2022
8.8%
+0.2%
Year 2022 9.0%
+1.7%
DEVELOPMENT
Development Spending (i)
Q4 2023
Year 2023
$94,365
$399,946
Q4 2022
$114,552
-17.6%
Year 2022 $427,068
-6.4%
Development NLA Completions (sq. ft.) (v)
Q4 2023
Year 2023
272,000
599,000
Q4 2022
258,000
+5.4%
Year 2022 651,000
-8.0%
Committed occupancy remained unchanged and in-
place occupancy increased compared to Q4 2022
driven by improvement in retail occupancy. Retail
committed occupancy improved to an all-time high of
98.4% and continues to reflect the ongoing solid
demand for the Trust’s quality retail assets.
The Trust generated double-digit new leasing spreads
for the year and quarter due to high-quality locations,
peak retail occupancy levels, and low supply/high
demand market dynamics.
Approximately 2,395,000 and 552,000 square feet of
renewals were at market rental rates for the year and
quarter, respectively, each representing more than half
of all renewals. Excluding fixed-rate renewals, the
renewal leasing spread would be 11.2% for the quarter
and 11.4% for the full year.
New and renewal leasing spreads both contributed to
the higher blended leasing spread. The benefits from a
favourable retail environment, demand for well-located
space and a tenant-centric approach are reflected in the
blended leasing spread.
Full year Development Spending of $399.9 million was
at the low end of the anticipated range for 2023 of $400
million to $450 million due to timing differences with
some costs moving out a quarter. As cost of financing
conditions persist, RioCan does not
to
commence new physical construction of mixed-use
properties in 2024.
intend
The 599,000 square feet of property under development
completions for the year surpassed expectations and
included the delivery of 123,000 square feet of purpose-
built rental at FourFifty The WellTM and 337,000 square
feet of commercial space at The WellTM. The combined
year-to-date transfer related to The Well was 460,000
square feet. In addition, 32 townhouse units were
completed and sold at U.C. Towns 2 in the quarter,
generating a $4.8 million inventory gain.
RioCan Annual Report 2023 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 2023
Q4 2023
$1,964,018
$8,089,927
Q4 2022
$1,548,237 +26.9%
Q4 2022
$8,256,508 -2.0%
Adjusted Debt to Adjusted
EBITDA (i)(ii)
Q4 2023
Total Debt (i)(ii)
Q4 2023
9.28x
$7,251,368
At year end 2023, we have full availability of our $1.3
billion revolving line of credit in addition to $0.6 billion
undrawn construction lines and other bank loans and
$0.1 billion cash and cash equivalents. Liquidity
increased by $415.8 million when compared to the prior
year, due to timing of asset sales and financing
activities. Current liquidity levels are more than sufficient
to cover
financing and
construction obligations of the Trust.
the next 12 months of
formerly unencumbered assets and
The Unencumbered Assets decreased from Q4 2022
mainly from dispositions, mortgage financing obtained
on
fair value
changes, partially offset by repayment of certain
maturing mortgages and acquisition of Unencumbered
fair value
the year. Excluding
Assets during
changes, Unencumbered Assets would have remained
relatively unchanged on a year-over-year basis.
Unencumbered Assets generated 55.8% of RioCan's
Annual Normalized NOI(i)
.
the
The improvement in Adjusted Debt to Adjusted EBITDA
was primarily due to the higher Adjusted EBITDA
partially offset by higher Average Total Adjusted Debt
driven by development spending, partially offset from
funds from asset sales.
Total Debt increased from Q4 2022 as development
activities were partly funded with incremental debt.
Q4 2022
9.51x
-0.23x
Q4 2022
$7,003,630 +3.5%
(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) NLA for development completions includes properties under development (PUD) only and excludes residential inventory.
(vi) For commercial portfolio only.
17 RioCan Annual Report 2023
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, 2023 (Q4 2023 and
YTD 2023, respectively) is dated February 13, 2024 and should be read in conjunction with the annual audited consolidated
financial statements and related notes for the year ended December 31, 2023 (2023 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.sedarplus.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 can generally 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; expected annual Development Spending and capital
expenditures during 2024; completion of construction and estimated project costs in connection with residential inventory and Properties Under
Development (“PUD”); estimated FFO per unit growth and the FFO Payout Ratio; continued demand for space in our target markets; RioCan’s
internal forecast; the creation of future value; NOI and growth from PUD; 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, cost 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: growth of the retail environment; a changing 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: interest rate and financing
risk; inflation risk; operations and the financial condition of RioCan and its tenants, as well as on consumer behaviours and the economy in general;
financial and liquidity risks; 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 2023 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.
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, 2023, the portfolio was comprised of 100% owned and co-owned properties as follows:
(thousands of sq. ft., except where
otherwise noted)
100% owned properties
Co-owned properties
Total
NLA at RioCan's
Interest
Income producing
properties
27,718
4,868
32,586
141
38
179
Property Count
Properties under
development
3
6
9
Total
144
44
188
In addition, the Trust owns partial interests in 16 properties through seven joint ventures, representing 1.6 million square feet, that
are accounted for as equity-accounted investments. 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,
2023, our retail portfolio accounts for 85.7% of the Trust's annualized contractual gross rent, followed by office at 10.3% and
residential at 4.0%.
Strategy
RioCan’s long-term strategy builds on its differentiated advantages that offer an exceptional balance of quality and growth. The
Trust’s high-quality portfolio is comprised of well-positioned assets located in Canada’s six largest, most densely populated
markets that are predominantly transit-oriented. The average population within five kilometres of the Trust’s properties is
260,000(i), with an average household income of $140,000(i). The portfolio generates resilient and growing income from a strong
and stable base of tenants, anchored by necessity uses such as grocery stores, pharmacies and value retailers. Grocery
anchored centres and mixed-use urban sites represent 55.6% and 32.2% of RioCan’s income producing properties' fair value,
respectively. Strong and stable tenants who can reliably pay rent through challenging economic cycles generate 87.5% of
annualized net rent. In addition to attracting consumer traffic and best-in-class tenants, RioCan’s desirable locations offer highest
and best-use development opportunities targeted to accelerate growth, diversify income and create net asset value over the
longer-term. RioCan's sizeable and advanced development pipeline includes 17.4 million square feet of excess density already
zoned for development. All of the Trust’s development opportunities are located in Canada’s six major markets, most of which are
located on a transit route and primarily focused on residential development. The utilization of its pipeline has allowed for
consistent NOI growth and an improved portfolio. In 2023 alone, RioCan delivered approximately 600,000 square feet of newly
developed mixed-use and retail assets.
RioCan's strategy is anchored in four pillars:
• Resilient Retail - A strong, stable retail core that delivers reliable income and steady growth through a relentless commitment
to customer centrism and operational excellence;
• Disciplined Capital Management - A prudent approach to capital allocation that drives growth without compromising balance
sheet strength;
•
Intelligent Diversification - Responsibly diversified asset base, income streams and overall tenant mix; and
• Responsible Growth - Industry leadership in ESG and corporate culture.
Guided by its strategic pillars, RioCan remains committed to enhance its strong and stable retail core and deliver reliable income
and steady growth while continuously improving its tenant mix, maximizing leasing spreads and opportunistically divesting of
slower growth assets.
RioCan's portfolio is dominated by resilient assets with a curated and diversified tenant base that aligns with changing consumer
patterns. We are increasingly shifting towards necessity-based tenants, including grocery, pharmacy, and value retailers, which
drive stable traffic to our properties. We strive to create deep tenant relationships and provide superior amenities and services to
meet the needs of our tenants, now and in the future.
(i) Data updated once a year as annual statistics become available each spring.
19 RioCan Annual Report 2023
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 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.
RioCan also 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.
To further enhance the quality, stability and growth of its income, RioCan is diversifying its asset base, tenants and income
sources. Intelligent Diversification initiatives include optimizing its tenant mix, expanding its residential portfolio through
development that is supplemented by select acquisitions, generating ancillary revenue and maximizing alternative income
streams. Capital recycling is also an avenue through which the Trust continuously improves asset quality, diversifies its income
streams and funds its development program. RioCan’s residential inventory serves specific market demand for housing
ownership and enables the Trust to accelerate capital recycling. In addition, the Trust expects to continue to attract and establish
long-term relationships to recycle capital through sales of density and capital partnerships with recognized investors. This
strategic approach provides multiple benefits to RioCan, including diversified risk, efficient use of capital and value crystallization
of its zoned excess density.
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 culture roadmap by evaluating and refining existing processes,
policies and initiatives to create a more diverse, united and productive workforce. RioCan is also a leader within the Canadian
real estate industry in 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.
Operating Environment
Canadian Retail Environment
The current macroeconomic volatility will impact retail tenants to varying degrees. The majority of the Trust’s tenants are
considered to be strong and stable and are largely comprised of national, necessity-based retailers with strong covenants. These
well-established tenants are expected to navigate successfully through various economic cycles. Strong, well-positioned retail
assets, such as those owned by RioCan, have proven and will continue to prove resilient.
As consumers navigate inflation, their priorities remain anchored in necessities, value and convenience. Retailers are increasingly
combining physical spaces and digital channels to create a robust omnichannel experience. Brick and mortar store networks will
continue to be the backbone of cost-effective distribution channels particularly within Canadian cities.
Physical store networks deeply situated in well-populated neighbourhoods are forms of last kilometre distribution or facilitation
centres. As a responsible and forward-thinking commercial landlord, RioCan will continue to pursue opportunities 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.
Retailers, especially those offering every day conveniences and essential goods and services, continue to expand their footprint
in Canada. Fueled by immigration, Canada is the fastest growing country in the G7 with a population that exceeded the 40 million
population milestone in June of 2023. Population growth is expected to continue with the Canadian federal government's
immigration policy targeting 500,000 permanent immigrants a year by 2025. Many of the new Canadians are expected to land in
or migrate to urban markets, especially the Greater Toronto Area (GTA). In addition, the country offers a favourable retail
operating environment. Relative to other countries, Canada has low retail space per capita and a limited number of retailers within
each retail category, fostering a more stable pool of retail participants.
On the supply side, very little new retail space has been built over the past decade. The lack of investment over the past few
years from tight building zoning controls and high costs of new construction will become more prevalent with increasing
replacement costs that are generally well above market values. The supply/demand imbalance creates positive tension in lease
negotiations and can result in increased rental rates and property values. It can also result 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. Furthermore, retailers are reluctant to relocate given the potential disruption to their businesses since customers value
the convenience and familiarity of incumbent locations and are loath to break their existing shopping patterns.
All of the above factors contribute to RioCan's resilient base of quality retail centres. The attributes of RioCan's portfolio, such as
proximity to transit, an exceptional demographic profile and high visibility at key intersections and major thoroughfares, will not
lose their appeal.
RioCan Annual Report 2023 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
Development Environment and Residential Real Estate Market
The Trust continues to monitor market trends and 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 construction activity over the last few years, mainly in non-retail sectors including housing. Recently,
rising interest rates have impacted the affordability of home ownership and are keeping would-be buyers in the rental market.
Residential development has struggled to keep up with demand and the country’s housing shortage has continued to intensify as
its population grows. Most recently, skilled labour shortages, higher interest costs and increasing fees, taxes and charges by
municipalities have presented challenges for new developments. While higher demand for purpose-built residential rental, and
therefore higher rents, has provided a partial offset to cost inflation and higher interest rates, this has yet to be sufficient to avoid
deferred or cancelled projects, exacerbating the housing supply shortage. Fewer units coming to market will further increase
pressure on the housing supply/demand imbalance driving a long-term tailwind for residential assets.
As cost of financing conditions persist, RioCan does not intend to commence any new physical construction of mixed-use
properties in 2024. However, RioCan continues to pursue value creation by moving projects through the development process to
optimize density and use in order to improve project economics.
The various levels of government recognize the housing supply/demand imbalance and have introduced several initiatives which
generally aim to speed up the planning and delivery of housing and increase the supply and choice of housing, including
affordable housing. Following the federal government's enhanced GST rental rebate announcement, several provinces followed
suit, committing to eliminate the HST to incentivize the construction of new purpose-built rental housing. The Trust is reviewing its
residential rental development projected returns in light of the GST/HST cost relief. The Trust continues to monitor new
announcements by both the federal and provincial governments as details of initiatives emerge.
RioCan’s dedicated residential team, RioCan LivingTM, and in-house development experts prioritize and selectively undertake
projects within the major markets in which RioCan's portfolio is situated. RioCan can choose to start projects 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. 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 projects. 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. Approximately 86% of our condominium/townhouse projects
currently under construction are pre-sold and have achieved 95% of pro forma total gross revenue. Significant deposits provide
security against default by homebuyers.
Over the long-term, RioCan is confident that its high-quality residential offering will be in high demand given its age, 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
The Canadian economy stalled in the second half of 2023 as consumer spending fell, business investment tightened and labour
market vacancies increased. Inflationary pressures continue to be at a high level as the economy slows, making it likely that the
Bank of Canada (BOC) will keep interest rates higher for longer than originally expected. At its latest meeting, the BOC
maintained the overnight lending rate of 5.0%.
Market volatility continued with the longer-term Government of Canada bond yields fluctuating significantly throughout 2023.
Credit in the Canadian financial markets continues to be available, notwithstanding higher costs and signs of flight-to-quality.
RioCan's balance sheet and portfolio provide the Trust with the flexibility needed to navigate volatile economic conditions
including an inflationary environment. 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. Our RioCan Living residential portfolio provides a diversified source of revenue, and the short-
term nature of residential leases allow rents to keep pace with annual inflation. Our projects under construction are largely
insulated from inflation as the majority of costs are already secured with fixed-rate contracts. For the majority of our next wave of
projects, we have the option of constructing on lands we own with existing income. We are not penalized for deferring
construction until conditions are appropriate.
21 RioCan Annual Report 2023
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
Higher interest rates, which are used in the fight against high inflation, have increased the cost of capital, resulting in upward
pressure on expected capitalization rates and a slowdown in the transaction market. Robust NOI growth from solid operating
fundamentals and a limited supply of high-quality assets serve as an offset to these rising interest rate pressures. We have been
adjusting our IFRS investment property values with changing economic conditions and recorded $450.4 million in cumulative fair
value net losses in 2023. We also have not fully reversed the IFRS value reductions that were recorded in 2020 as a result of the
pandemic.
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 where possible, use of bond forward hedges, and maintaining
a well-distributed debt maturity profile. Ample Liquidity of $2.0 billion and Unencumbered Assets of $8.1 billion provide additional
financial flexibility to the Trust in the current economic environment.
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 advancement 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 2024, we anticipate FFO per unit to be within the range of $1.79 to $1.82, Commercial SPNOI growth of ~ 3%, and an FFO
Payout Ratio of between 55% to 65%. Development Spending on mixed-use projects is expected to be between $250 million to
$300 million and $50 million to $60 million for the construction of retail projects.
The Trust continuously reviews its longer-term targets in the context of ever-evolving macroeconomic and business
environments. These targets include FFO per unit growth targets and capital allocation plans presented at our Investor Day in
February 2022. Since then, the operating environment for our business has been very strong, with operating metrics either in-line
or ahead of our expectations. However, as a result of the Bank of Canada’s efforts to address high inflation, actual interest rates
have been significantly higher than the consensus-based assumptions that were used to formulate our 2026 FFO targets. Current
consensus predicts interest rates to remain relatively elevated for the near to medium term. In this context, the 2026 FFO per unit
growth target provided is no longer practical. Likewise, we had provided a target for Development Spending on a forward-looking
basis. In this higher interest rate environment, we have responsibly determined that capital is better allocated to other
opportunities, including continuously improving our balance sheet, resulting in below target Development Spending in 2024. We
will re-assess allocation of capital towards construction and other uses in future years. We will continue to track all of the critical
operational and balance sheet key performance metrics against our long-term objectives and for FFO and development spend,
we will focus on providing annual guidance.
RioCan Annual Report 2023 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 is a leader in ESG and 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, cost savings 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 is executing a multi-year plan that includes commitments and targets as well as actions 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 fifth annual ESG report in 2023 which 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. Council members sponsor and provide guidance on ESG
initiatives within the organization and enable performance measurement. 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. For RioCan's ESG
policy and additional information about its strategy and plan, visit RioCan's website.
RioCan launched its ESG program in 2016. Key accomplishments include the following:
Environmental
•
•
First rank amongst its Canadian peers in 2023 GRESB Real Estate Assessment with a score of 84;
First rank amongst its Canadian peers in the GRESB Public Disclosure Assessment with A rating for the fifth consecutive
year;
Increased the number of properties achieving Building Owners and Managers Association Building Environmental Standards
(BOMA BEST) certifications, representing 70% of GLA (at 100% for commercial);
•
•
•
• Won BOMA Toronto's race2reduce Commercial Real Estate Trailblazers (CREST) Award for emission reduction at three
properties Mixed-Use, Open Air Centre and enclosed retail categories. These BOMA awards honour participants that have
demonstrated continual commitment to improve building performance and reduce emissions;
Yonge Sheppard Centre was honoured with BOMA Canada's prestigious 2023 International 'The Outstanding Building of the
Year' (TOBY®) Award in the Renovated Buildings category, recognizing excellence in commercial building management and
operations within the commercial real estate industry; and
Received Science Based Targets initiative (SBTi) validation that the GHG emissions reduction targets submitted by RioCan
conform with the SBTi Criteria and Recommendations. RioCan’s science based targets are:
◦
◦
Overall Net-Zero Target: To reach net-zero GHG emissions across the value chain by 2050.
Near-term targets: With 2019 as the baseline year, reduce absolute scope 1 and 2 emissions by 46.2%, reduce absolute
scope 3 emissions from downstream-leased assets by 28.0% and to reduce scope 3 emissions from capital goods(i) by
55.0% per square foot by 2030.
Long-Term Targets: Reduce absolute scope 1, 2 and 3 GHG emissions 90.0% by 2050 with 2019 as the baseline year.
Recognized as one of Greater Toronto’s Top 100 Employers by Mediacorp Canada Inc.;
Achieved a top decile ranking on our Employee Engagement survey for the second consecutive year, relative to a
benchmark of similar-sized Canadian companies.
Kicked off our inaugural partnership with Indigo Love of Reading by hosting two storytelling sessions at Burlington Centre
and Yonge Eglinton Centre featuring an acclaimed Indigenous author in advance of Truth and Reconciliation Day. RioCan
Cares committed to Indigo Love of Reading, which provided 2,500 books to high needs Indigenous communities across
Canada;
Collaborated with the BlackNorth Initiative to offer a Canadian Real Estate & Trades Bursary for Black high school students;
and
Hosted a Holiday Market at RioCan Yonge Eglinton Centre to help local entrepreneurs test their ideas and/or products, as
part of the Inclusive Local Economic Opportunity (ILEO) Initiative co-convened by BMO Financial Group and United Way
Greater Toronto.
•
•
•
Governance
•
•
•
•
Achieved an ESG rating of 'A' by Morgan Stanley Capital International (MSCI);
Maintained “Prime” status by Institutional Shareholder Services (ISS);
Improved our Sustainalytics risk score for the third consecutive year; and
Conducted our first RioCan ESG Investor Forum, dedicated to educating unitholders about our ESG program and engaging
in a two-way dialogue with unitholders on RioCan’s ESG initiatives and achievements. The Forum concluded with a tour of
The Well.
(i) Refers to embodied carbon emissions associated with the materials and construction of buildings
23 RioCan Annual Report 2023
◦
Social
•
•
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, 2023:
(thousands of sq. ft., except where otherwise noted)
NLA at RioCan's Interest
Total Portfolio
Retail
Office
Total
Commercial
Residential
Rental (iii)
NLA
Property
Count
Income producing properties (i)
Properties under development (ii)
Total NLA
28,296
2,641
30,937
1,175
32,112
210
97
307
167
474
28,506
2,738
31,244
1,342
32,586
179
9
188
(i)
(ii)
Includes NLA that was occupied or available for occupancy on or before December 31, 2023. Excludes 11 income producing properties that are
owned through joint ventures and reported under equity-accounted investment and includes 74 thousand square feet of legacy residential rental.
Includes 1.1 million NLA of Development Projects Under Construction, excluding 5 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, 2023.
(iii) See the Property Portfolio Overview - Property Operations - Residential Rental section of this MD&A for further details.
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 or Costco are included in this category. Examples of these properties include:
Clarkson Crossing and RioCan Durham Centre.
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: Yonge Sheppard Centre and Yonge Eglinton 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.
Total Portfolio
At RioCan’s Interest
As at December 31
Greater Toronto Area (i)
Ottawa (ii)
Calgary
Montreal
Edmonton
Vancouver (iii)
Other
Total Portfolio
% of NLA
% of total fair value of income
producing properties
2023
51.4 %
14.9 %
10.9 %
6.0 %
5.5 %
3.4 %
7.9 %
2022
49.1 %
14.9 %
11.2 %
5.5 %
5.4 %
4.4 %
9.5 %
2023
57.2 %
12.9 %
11.9 %
3.3 %
5.0 %
4.7 %
5.0 %
2022
55.4 %
13.0 %
12.2 %
2.9 %
5.2 %
5.8 %
5.5 %
100.0 %
100.0 %
100.0 %
100.0 %
(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.
RioCan Annual Report 2023 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, 2023, RioCan's portfolio of income producing properties consisted of the following:
(i) Mixed-Use / Urban includes approximately 1.2 million square feet of residential rental NLA and the corresponding fair value.
The majority of the Trust's portfolio is comprised of formats that are attractive to tenants and are more resilient in the face of
economic fluctuations and evolving retail trends. During Q4 2023, there was a slight increase in Mixed-Use / Urban as a portion of
FourFifty The Well and additional commercial NLA at The Well were completed.
Tenant Composition
The Trust strategically manages its tenant mix by segmenting its tenants into the following three categories: strong and stable,
compelling traffic drivers and transitional tenants. Defining tenant mix using these three categories helps to guide decision-
making with respect to tenancies.
Based on annualized net rent as at December 31, 2023, approximately 87.5% of the Trust's tenants are classified as "strong and
stable", an increase over the prior quarter and 100 basis points higher when compared to the prior year, primarily driven by the
replacement of transitional tenants with strong tenants, based on the strong retail leasing environment.
(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 which have covenants of lesser quality than Strong and Stable tenants.
(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 2023
NLA by Property Mix 65.4%20.5%14.1%Fair Value by Property Mix55.6%32.2%12.2%Grocery Anchored Centre Mixed-Use / Urban (i) Open Air Centre % of Annualized Net Rent by Tenant Composition87.5%9.7%2.8%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
RioCan reduces its exposure to rental revenue risk in its portfolio through major market geographical diversification, staggered
lease maturities, 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, 2023, RioCan’s 30 largest commercial tenants measured by annualized
contractual gross rent are as follows:
Rank Tenant name
1
2
3
4
Canadian Tire Corporation (ii)
The TJX Companies, Inc. (iii)
Loblaws/Shoppers Drug Mart (iv)
Cineplex (v)
5 Metro/Jean Coutu (vi)
6 Walmart
7
Sobeys/Safeway (vii)
8
9
Dollarama
Shopify
10 Michaels
11 GoodLife Fitness
12 Recipe Unlimited (viii)
13 Staples/Business Depot
14 Rona+
15 TD Bank
16 PetSmart
17 Chapters/Indigo
18 Bank Of Montreal
19 Value Village
20
Liquor Control Board of Ontario (LCBO)
21 DSW/The Shoe Company
22
Leon's/The Brick
23 Restaurant Brands International (ix)
24
LA Fitness
25 Best Buy
26 The Bank Of Nova Scotia
27 Gap Inc (x)
28 Canadian Imperial Bank of Commerce
29 Rexall Pharma Plus
30 Carter's Oshkosh
Top 30 Commercial Tenants
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)
4.4 %
4.2 %
3.9 %
2.8 %
2.4 %
2.2 %
1.9 %
1.8 %
1.4 %
1.4 %
1.3 %
1.3 %
1.2 %
1.2 %
1.2 %
1.0 %
1.0 %
0.8 %
0.8 %
0.7 %
0.7 %
0.7 %
0.6 %
0.6 %
0.6 %
0.6 %
0.6 %
0.5 %
0.5 %
0.4 %
60
60
51
17
31
12
23
67
2
22
23
66
25
7
44
22
15
31
12
21
27
9
56
6
10
23
20
17
9
25
1,676
1,721
1,386
971
1,222
1,613
796
642
261
485
506
300
501
915
230
334
283
158
322
186
211
228
128
265
209
109
188
99
98
111
5.4 %
5.6 %
4.5 %
3.1 %
4.0 %
5.2 %
2.6 %
2.1 %
0.8 %
1.6 %
1.6 %
1.0 %
1.6 %
3.0 %
0.7 %
1.1 %
0.9 %
0.5 %
1.0 %
0.6 %
0.7 %
0.7 %
0.4 %
0.9 %
0.7 %
0.4 %
0.6 %
0.3 %
0.3 %
0.4 %
42.7 %
813
16,154
52.3 %
6.2
5.0
8.2
5.5
7.7
6.0
10.9
6.9
11.5
5.0
9.2
5.8
7.1
6.2
5.9
5.3
7.4
4.8
8.2
7.9
4.6
5.4
6.5
11.4
4.8
4.7
4.2
3.8
6.0
3.7
6.7
7.9
(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, Maxi and T&T Supermarket.
(v) Cineplex includes Galaxy Cinemas.
(vi) Metro/Jean Coutu includes Super C, Loeb, Food Basics and Adonis.
(vii) Sobeys/Safeway includes Farm Boy, Longo's and FreshCo.
(viii) Recipe Unlimited includes Montana's, Harvey's, Swiss Chalet, Kelseys, The Keg and East Side Mario's, among others.
(ix) Restaurant Brands International includes Tim Hortons, Burger King, Popeyes and Firehouse Subs.
(x) Gap Inc. includes The Gap, Old Navy and Banana Republic banners.
RioCan Annual Report 2023 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
2023
97.2 %
99.4 %
98.4 %
94.6 %
95.6 %
100.0 %
96.1 %
97.4 %
2022
97.0 %
99.2 %
98.4 %
96.6 %
93.7 %
99.8 %
96.8 %
97.4 %
2023
96.9 %
99.2 %
98.0 %
94.6 %
94.7 %
99.0 %
95.6 %
97.1 %
2022
96.6 %
99.0 %
98.0 %
94.9 %
92.3 %
99.3 %
95.8 %
96.8 %
(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 move Barrie from GTA to the Other category.
The following table summarizes the Trust's committed and in-place occupancy rates by retail and office as at December 31, 2023
and December 31, 2022.
As at
Total Portfolio
Committed Occupancy
In-Place Occupancy
December 31, 2023
December 31, 2022
Retail
98.4 %
98.0 %
Office
87.5 %
87.4 %
Total
Commercial
97.4 %
97.1 %
Retail
97.9 %
97.4 %
Office
90.6 %
89.9 %
Total
Commercial
97.4 %
96.8 %
Committed occupancy remained unchanged and in-place occupancy increased by 30 basis points when compared to the same
period last year, driven by improvements in retail. When compared to Q3 2023, committed occupancy decreased by 10 basis
points and in-place occupancy increased by 20 basis points.
Retail committed occupancy continued to climb, reaching an all-time high of 98.4% at year end, reflecting 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.
In-place occupancy increased year-over-year, driven by strong demand for retail space. When compared to Q3 2023, retail in-
place occupancy increased by 40 basis points due to tenants taking possession of their spaces in Q4 2023, narrowing the spread
between committed and in-place occupancy by 30 basis points. Overall, leasing for vacant space has been robust.
The decline of 310 and 250 basis points, in office committed and in-place occupancy, respectively, during the year was primarily
driven by vacancy of a large financial institution tenant at Yonge Sheppard Centre, which is in the process of being backfilled. A
large tenant vacancy in a secondary market in Alberta in Q4 2023 drove office committed and in-place occupancy down by 160
and 150 basis points when compared to Q3 2023, respectively and also added to the annual decline.
Future Lease Commencements
On a prospective basis, we expect to generate approximately $5.1 million of annualized gross incremental rent, on an IFRS basis,
from tenants that have signed leases but have not taken possession of the space as at December 31, 2023. 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.
$
$
$
2023
21.51 $
21.22 $
24.97 $
2022
20.98
20.91
21.98
Average net rent per occupied square foot increased when compared to the prior year mainly due to contractual rent steps, rent
increases upon renewals, higher than average net rent per occupied square foot on new deals and development completions
including The Well.
27 RioCan Annual Report 2023
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
2023
122
30.53 $
29.54 $
34.06 $
2022
222
24.10 $
21.06 $
42.31 $
2023
1,029
27.75 $
25.61 $
42.93 $
2022
1,258
28.30
21.96
45.09
$
$
$
(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, 2023 totalled 122,000 and 1,029,000 square feet at an
average rate of $30.53 and $27.75 per square foot, respectively. Lower new lease volumes for the quarter and year are mainly
due to higher average in-place retail occupancy levels when compared to the same periods last year. On a year-to-date basis,
lower new leasing volumes from developments due to project completions also contributed to the year-over-year decline. Higher
occupancy levels limit the amount of available space to lease and allow the Trust to exercise more discretion in tenant selection,
improving our tenant mix and the quality of the portfolio.
Average net rent per square foot for new leasing for the quarter is approximately $9.02 per square foot above our portfolio
average net rent per occupied square foot.
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)
$
$
2023
552
510
1,062
23.60 $
1.89 $
2022
455
247
702
19.01 $
1.45 $
2023
2,395
1,349
3,744
23.36 $
2.08 $
Retention ratio
93.4%
93.5%
87.7%
2022
2,058
1,675
3,733
19.89
1.51
91.5%
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.
A high proportion of leases expiring in the year were renewed at market rates, resulting in a strong renewal leasing spread. For
the year, the retention ratio of 87.7% included the impact of one large vacancy at a property in Ottawa which was backfilled by a
tenant who took immediate possession of the vacant space. Excluding this vacancy, the retention ratio for the year ended
December 31, 2023 would have been 90.8%.
Leasing Spreads
New leasing spread (i)
Renewal leasing spread
Blended leasing spread (ii)
Three months ended December 31
Years ended December 31
2023
2022
2023
13.2%
8.7%
9.0%
11.8%
8.3%
8.8%
14.7%
9.8%
10.7%
2022
12.3%
8.2%
9.0%
(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.
A favourable retail environment and demand for well-located space continued into Q4 2023, the benefits of which were reflected
in the blended leasing spread. Excluding fixed-rate renewals, the renewal leasing spread would be 11.2% for the quarter and
11.4% for the year-to-date.
RioCan Annual Report 2023 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
30,937
$
2024
3,102
10.0 %
22.47 $
2025
4,019
13.0 %
20.15 $
2026
3,754
12.1 %
21.31 $
2027
3,798
12.3 %
22.62 $
2028
3,641
11.8 %
23.93
Certain of our leases provide periodic increases in rates during the lease terms which contribute to growth in Commercial 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
2024
9,256 $
2025
7,121 $
2026
6,182 $
2027
5,020 $
2028
3,697
$
The contractual rent increases noted above are based on existing leases as at December 31, 2023 and are on a year-over-year
incremental increase basis. The contractual rent increases in 2024 reflect more market rent changes as a result of new leasing
and renewals completed in 2023 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 2023
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 condominium and townhouse developments, as further discussed in the Development Program and Asset Profile - Joint
Arrangements sections of this MD&A.
Strong demand for well-located, professionally-managed, amenity-rich rental accommodations with easy access to transit
continued in the quarter. Demand for RioCan Living residential rental units was further bolstered by the ongoing supply
constraints.
RioCan Living's residential rental portfolio consists of 2,738 residential rental units in operation, including 124 income producing
residential rental units acquired by RioCan on May 29, 2023 through its purchase of a 100% interest in Phase One and Two of
Bellevue, a newly built luxury residential rental complex located in Montreal, Quebec. Upon stabilization, RioCan will acquire an
additional 60 units in Phase Three at Bellevue which are currently under construction and a 90% interest in 297 units in Phase
Two/Three at Market, also located in Montreal, which are in lease-up, provided certain conditions are met. While RioCan is
focused on organically growing its multi-unit residential holdings through development, it will strategically participate in
acquisitions from time-to-time to further enhance the RioCan Living portfolio and achieve the desired scale.
At FourFifty The Well, construction of 395 of 592 units were completed as at December 31, 2023 and occupancy commenced on
August 1, 2023.
Approximately 97% of the residential rental portfolio is exempt from rent controls and prescribed rents.
Occupancy and Leasing
Residential Rental Buildings in Operation
Stabilized (11 properties)
In lease-up
Rhythm (Ottawa)
FourFifty The Well (Toronto) (ii)
Occupancy as at
December 31,
2023
% of occupied
units
Leasing as of
February 13,
2024
% of leased
units
97.4 %
96.5 %
Date of lease
launch
December 2018 to
March 2022
June 2022
March 2023
93.0 %
30.4 %
93.9 %
45.8 %
Number of
total units (i)
2,129
214
592
(i) Number of units are at 100% ownership interest and all buildings are 50% owned except for Market which is 90% owned and Bellevue which is
100% owned.
(ii) As at December 31, 2023, 395 rental residential units were completed and 197 units are under development. Completion of the remaining units
under development will continue to early 2024. Pre-leasing commenced in late Q1 2023.
Average Market Rent
As at December 31
Market units average monthly rent per occupied square foot - same property (i) (ii)
$
2023
3.48 $
2022
3.26
(i) Market units average monthly rent per occupied square foot on a same property basis is calculated as monthly gross rents as at December 31,
2023 (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) Market units average monthly rent per occupied square foot - same property includes only properties that are owned and stabilized as at the end
of 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, 2023 and 2022, seven properties (eCentralTM, PivotTM,
Litho.TM and StradaTM located in Toronto, Ontario, FrontierTM located in Ottawa, Ontario, BrioTM located in Calgary, Alberta and Market located in
Montreal, Quebec) are included as same properties.
Market units average monthly rent per occupied square foot on a same property basis increased by 6.7% when compared to
December 31, 2022 due to new leasing and renewals at higher rents.
In the GTA, on a total stabilized portfolio basis, market units average monthly rent per occupied square foot was $4.19 as at
December 31, 2023, an increase of 10.3% over the same period last year.
The increase in market units average monthly rent per unit that were turned over or renewed was 7.0% on a same property basis
for the year ended December 31, 2023.
RioCan Annual Report 2023 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
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 - basic
Net income - 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
Adjusted Debt to Adjusted EBITDA (RioCan's Proportionate Share) (i) (ii)
Weighted average contractual interest rate (iv)
Weighted average effective interest rate (iv) (v)
Net book value per unit
2023
2022
2021
1,123,871 $
38,802
714,408
697,353
724,217
531,281
1,213,847 $
236,772
712,692
674,989
698,118
524,678
532,649
528,967
1,175,061
598,389
701,665
663,311
684,737
506,982
523,953
300,392
300,479
306,069
306,247
317,201
317,284
0.13 $
0.13 $
1.77 $
1.77 $
1.08 $
60.5 %
60.3 %
70.0 %
69.7 %
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 %
13,561,718 $
14,842,281
6,861,113
7,437,770
13,807,740 $
15,101,859
6,742,343
7,728,892
14,021,338
15,177,463
6,610,618
7,911,344
9.28
3.78%
3.74%
24.76 $
9.51
3.41%
3.40%
25.73 $
9.59
2.92 %
3.00 %
25.54
$
$
$
$
$
$
$
$
(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 and Adjusted Debt to Adjusted
EBITDA (RioCan's Proportionate Share) refer to the Non-GAAP Measures section in this MD&A.
(iii) Effective February 2023, the distribution was increased to $1.08 from $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 magnitude and pace of development expenditures and project completions, the timing and
magnitude of its various residential condominium and townhouse projects closings and property dispositions. 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. Unitholder distributions were within the targeted FFO Payout ratio of 55% to 65% and increased
accordingly year-over-year. NCIB purchases completed in 2021 and 2022 reduced the number of Units outstanding and had an
accretive impact on FFO per Unit. 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 2023
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 2023 and 2023 variances discussed in the following sections compare the respective 2023 results to the same
comparable periods in 2022, unless otherwise noted.
Revenue
The revenue for the three months and years ended December 31, 2023 and 2022 is as follows:
(thousands of dollars)
Rental revenue
Residential inventory sales
Three months ended December 31
Years ended December 31
2023
2022
Change
2023
2022
Change
$ 276,510 $ 268,864 $
7,646 $ 1,091,105 $ 1,074,192 $
16,913
13,789
33,873
(20,084)
13,789
118,659
(104,870)
Property management and other service fees
6,611
3,450
3,161
18,977
20,996
(2,019)
Revenue
$ 296,910 $ 306,187 $
(9,277) $ 1,123,871 $ 1,213,847 $
(89,976)
The rental revenue for the three months and years ended December 31, 2023 and 2022 is as follows:
Realty tax and insurance recoveries
49,538
49,013
525
200,858
199,437
Common area maintenance recoveries
46,253
43,842
2,411
176,080
168,144
Three months ended December 31
Years ended December 31
2023
2022
Change
2023
2022
Change
$ 174,393 $ 170,791 $
3,602 $ 689,609 $ 687,459 $
2,339
2,638
70
1,279
3,234
806
391
787
(895)
1,832
(321)
492
8,424
5,898
5,253
4,983
9,092
1,884
5,119
3,057
$ 276,510 $ 268,864 $
7,646 $ 1,091,105 $ 1,074,192 $
16,913
2,150
1,421
7,936
(668)
4,014
134
1,926
(thousands of dollars)
Base rent
Percentage rent
Straight-line rent
Lease cancellation fees
Parking revenue
Rental revenue
2023
The decrease in revenue was mainly due to lower residential inventory sales partially offset by higher rental revenue.
Rental revenue increased mainly from higher occupancy, rental growth, development completions, higher recoveries, higher
straight-line rent and higher parking revenue, partially offset by the impact of asset dispositions.
Residential inventory sales decreased primarily due to the timing of condominium and townhouse sales. Property management
and other service fees decreased primarily due to lower construction and development fees.
Q4 2023
The decrease in revenue was mainly due to lower residential inventory sales, partially offset by higher rental revenue and higher
property management and other service fees.
The increase in rental revenue was mainly due to higher occupancy, rental growth, development completions, higher recoveries
and higher straight-line rent, partially offset by the impact of asset dispositions.
Residential inventory sales decreased primarily due to timing of condominium and townhouse sales. Property management and
other service fees increased primarily due to higher financing arrangement fees.
Operating Income and Net Operating Income (NOI)
The operating income and NOI for the three months and years ended December 31, 2023 and 2022 is as follows:
(thousands of dollars)
Operating income
NOI (i)
Three months ended December 31
Years ended December 31
2023
2022
Change
2023
2022
Change
$ 186,074 $ 175,421 $
10,653 $ 714,408 $ 712,692 $
1,716
$ 176,306 $ 166,062 $
10,244 $ 697,353 $ 674,989 $
22,364
NOI (RioCan's proportionate share) (i)
$ 182,722 $ 171,934 $
10,788 $ 724,217 $ 698,118 $
26,099
NOI
Commercial
Residential
Total NOI
$ 169,860 $ 162,043 $
7,817 $ 675,876 $ 661,367 $
14,509
6,446
4,019
2,427
21,477
13,622
7,855
$ 176,306 $ 166,062 $
10,244 $ 697,353 $ 674,989 $
22,364
(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.
RioCan Annual Report 2023 32
MANAGEMENT’S DISCUSSION AND ANALYSIS
Our Business
and Our
Business
Environment
Environmental,
Social and
Governance
(ESG)
Initiatives
Property
Portfolio
Overview
Introduction
2023
Results of
Operations
Asset Profile
Development
Program
Capital
Resources
and Liquidity
Other
Disclosures
Non-GAAP
Measures
Risks and
Uncertainties
The increase in operating income was largely the combined effect of $22.4 million higher NOI, partially offset by $17.6 million
lower inventory gains primarily due to timing of condominium and townhouse sales, and $2.0 million in lower property
management and other service fee revenue mainly from lower construction and development fees. The lower residential
inventory gains were partially offset by a $12.1 million gain on the disposition of an equity-accounted joint venture predominantly
attributable to the residential inventory in that investment. Refer to the Other Income (Loss) section of this MD&A for more details.
The increase in commercial NOI was largely due to Commercial Same Property NOI growth of 4.8% or $27.1 million; $15.0
million higher NOI from completed developments; and $4.0 million higher straight-line rent, partially offset by $31.4 million lower
NOI due to asset dispositions and $2.0 million lower NOI from properties under de-leasing.
Residential NOI increased primarily due to acquisitions and strong leasing progress in the residential rental portfolio.
Q4 2023
The increase in operating income was largely due to $10.2 million higher NOI, $3.2 million higher management and other service
fee revenue mainly from higher financing arrangement fees, partially offset by $2.6 million in lower residential inventory gains due
to timing of condominium and townhouse sales. The lower residential inventory gains were partially offset by a $2.0 million gain
on disposition of an equity-accounted joint venture. Refer to the Other Income (Loss) section of this MD&A for more details.
The increase in commercial NOI was largely due to Commercial Same Property NOI growth of 6.1% or $8.7 million, $4.3 million
higher NOI from completed developments and $1.8 million higher straight-line rent, partially offset by $6.3 million lower NOI due
to asset dispositions and $0.9 million lower NOI from properties under de-leasing.
Residential NOI increased primarily due to acquisitions and strong leasing progress in the residential rental portfolio.
Same Property NOI
Same Property NOI for commercial and residential portfolio for the three months and years ended December 31, 2023 and 2022
is as follows:
Three months ended December 31
Years ended December 31
(thousands of dollars)
Commercial Same Property NOI (i)
Residential Same Property NOI (i)
Same Property NOI (i)
2023
2022 % change
2022 % change
$ 150,698 $ 142,019
$
4,088 $
3,507
2023
6.1 % $ 596,558 $ 569,416
6,260
7,123 $
16.6 % $
$ 154,786 $ 145,526
6.4 % $ 603,681 $ 575,676
4.8 %
13.8 %
4.9 %
Adjusted Commercial Same Property NOI (i)
$ 148,291 $ 144,366
2.7 % $ 584,868 $ 570,081
2.6 %
(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.
33 RioCan Annual Report 2023
MANAGEMENT’S DISCUSSION AND ANALYSIS
Our Business
and Our
Business
Environment
Environmental,
Social and
Governance
(ESG)
Initiatives
Property
Portfolio
Overview
Introduction
2023
Results of
Operations
Asset Profile
Development
Program
Capital
Resources
and Liquidity
Other
Disclosures
Non-GAAP
Measures
Risks and
Uncertainties
Commercial Same Property NOI increased primarily due to increases in rent growth from contractual rent steps, rent upon
renewal and occupancy, and a recovery of credit losses resulting in a $5.6 million provision reversal compared to $1.2 million
additional provision last year, on a same property basis.
Continued strong performance and leasing environment for our stabilized properties drove Residential Same Property NOI growth
of 13.8% in 2023.
Adjusted Commercial Same Property NOI, which adjusts for the impact of the provision for credit losses and legal and CAM/
property tax settlements, increased by 2.6%.
Q4 2023
Commercial Same Property NOI increased primarily due to increases in rent growth from contractual rent steps, rent upon
renewal, occupancy and a recovery of credit losses resulting in a $0.8 million provision reversal compared to $1.3 million
additional provision in the comparative quarter, on a same property basis.
Residential Same Property NOI increased by 16.6%, for the same reasons described above.
Adjusted Commercial Same Property NOI increased by 2.7%.
Other Income (Loss)
(thousands of dollars)
Interest income
Three months ended December 31
Years ended December 31
2023
2022
Change
2023
2022
Change
$
6,401 $
6,272 $
129 $
25,131 $
20,902 $
4,229
Income from equity-accounted investments
(7,190)
(3,864)
(3,326)
18,383
2,349
16,034
Fair value loss on investment properties, net
(222,921)
(115,507)
(107,414)
(450,408)
(241,128)
(209,280)
Investment and other income (loss), net
4,459
240
4,219
8,501
(1,842)
10,343
Other income (loss)
$ (219,251) $ (112,859) $ (106,392) $ (398,393) $ (219,719) $ (178,674)
2023
Interest income increased mainly due to higher effective interest rates and higher other interest from cash on deposit.
RioCan's share of FFO from equity-accounted investments was $37.1 million, $15.7 million higher than the comparative period in
2022, primarily due to a $12.1 million gain from disposition of 12.5% of its interest in the 11YV project, generated predominantly
from the underlying gains on the residential inventory component, $0.8 million higher FFO from the RioCan-HBC joint venture and
$1.9 million higher capitalized interest from additional equity-accounted investments in 2023. For further details on the results of
operations of the RioCan-HBC joint venture and the gains from the disposition of the 12.5% interest in the 11YV project, refer to
the Joint Arrangements section of this MD&A.
The Trust recognized a fair value loss of $450.4 million on investment properties including assets held for sale compared to a fair
value loss of $241.1 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) increased due to $6.9 million higher transaction gains and other income primarily from bond
forward hedge ineffectiveness gains, income from the investment in e2 (a development adjacent to ePlace), income from a real
estate debt investment, a $2.9 million increase in the change in unrealized fair value on marketable securities (which does not
impact FFO), and higher income earned and realized gain on sale of marketable securities.
Q4 2023
Interest income was higher primarily due to higher effective interest rates and higher other interest from cash on deposit.
RioCan's share of FFO from equity-accounted investments was $8.1 million, $2.7 million higher than the comparative period,
primarily due to a $2.0 million gain from the disposition of an additional 4.2% interest in the 11YV project and $1.0 million higher
capitalized interest from additional equity-accounted investments in 2023, partially offset by $0.1 million lower FFO from the
RioCan-HBC joint venture.
The Trust recognized a fair value loss of $222.9 million on investment properties including assets held for sale, compared to a fair
value loss of $115.5 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 a $2.2 million increase in the change in unrealized fair value on marketable
securities (which does not impact FFO), $1.8 million in higher transaction gains and other income, higher income earned and
realized gain on sale of marketable securities, and income from the investment in e2.
RioCan Annual Report 2023 34
MANAGEMENT’S DISCUSSION AND ANALYSIS
Our Business
and Our
Business
Environment
Environmental,
Social and
Governance
(ESG)
Initiatives
Property
Portfolio
Overview
Introduction
Other Expenses
(thousands of dollars)
Interest costs, net
General and administrative
Internal leasing costs
Transaction and other costs
Other expenses
Interest Costs
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
2023
2022
Change
2023
2022
Change
$
58,940 $
48,320 $
10,620 $ 208,948 $ 180,365 $
28,583
15,459
12,845
2,614
60,367
54,437
3,156
6,945
3,306
3,236
(150)
11,919
12,204
3,709
9,344
8,274
5,930
(285)
1,070
$
84,500 $
67,707 $
16,793 $ 290,578 $ 255,280 $
35,298
(thousands of dollars, except where otherwise
noted)
Total interest
Interest costs capitalized (i)
Interest costs, net
Three months ended December 31
Years ended December 31
2023
2022
Change
2023
2022
Change
$
66,679 $
60,015 $
6,664 $ 250,537 $ 224,040 $
26,497
(7,739)
(11,695)
3,956
(41,589)
(43,675)
2,086
$
58,940 $
48,320 $
10,620 $ 208,948 $ 180,365 $
28,583
Capitalized interest as percentage of total interest
11.6%
19.5%
(7.9)%
16.6%
19.5%
(2.9)%
(i) Includes amounts capitalized to properties under development and residential inventory.
2023
Total interest costs increased mainly due to higher average debt balances and higher average cost of debt. As at December 31,
2023, the weighted average effective interest rate of our total debt is 3.74% (December 31, 2022 – 3.40%).
Interest was capitalized to properties under development and residential inventory at a weighted average effective interest rate of
3.88% for the year ended December 31, 2023 (year ended December 31, 2022 – 3.33%).
Q4 2023
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
3.90% for the three months ended December 31, 2023 (three months ended December 31, 2022 – 3.78%).
General and Administrative (G&A)
(thousands of dollars, except where otherwise
noted)
Non-recoverable salaries and benefits, net
Unit-based compensation expense
Depreciation and amortization
Other G&A expense (i)
G&A expense before Enterprise Resource
Planning (ERP) implementation costs
ERP implementation costs (ii)
Total G&A expense (iii)
Adjusted G&A Expense as a percentage of rental
revenue (iv)
Three months ended December 31
Years ended December 31
2023
2022
Change
2023
2022
Change
$
5,305 $
5,715 $
(410) $
22,438 $
26,228 $
(3,790)
1,882
1,796
646
726
86
(80)
7,807
2,632
6,998
4,774
4,123
4,608
(485)
15,458
16,437
809
(2,142)
(979)
11,956
12,845
(889)
48,335
54,437
(6,102)
3,503
—
3,503
12,032
—
12,032
$
15,459 $
12,845 $
2,614 $
60,367 $
54,437 $
5,930
4.3%
4.6%
(0.3)%
4.3%
4.7%
(0.4)%
(i) Primarily includes information technology costs, public company costs, travel, marketing, legal and professional fees, as well as trustee costs.
(ii) ERP implementation costs includes salaries and benefits, and consultant and licensing costs.
(iii) G&A expenses are presented net of recoverable expenses and expenses capitalized to development and residential inventory.
(iv) Adjusted G&A Expense 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.
35 RioCan Annual Report 2023
MANAGEMENT’S DISCUSSION AND ANALYSIS
Our Business
and Our
Business
Environment
Environmental,
Social and
Governance
(ESG)
Initiatives
Property
Portfolio
Overview
Introduction
2023
Results of
Operations
Asset Profile
Development
Program
Capital
Resources
and Liquidity
Other
Disclosures
Non-GAAP
Measures
Risks and
Uncertainties
G&A expenses increased primarily due to a $12.0 million increase in ERP implementation costs, partially offset by a $3.0 million
decrease in compensation costs mainly from lower restructuring charges and accrued bonuses, and a $2.1 million decrease in
depreciation and amortization expense from the acceleration of amortization of certain software intangible assets in 2022.
RioCan is replacing its current ERP system to more efficiently manage its business operations, including but not limited to, its
accounting and leasing functions. This initiative will enable RioCan to simplify, standardize and automate certain key business
processes. The launch of the new ERP system is expected to be in the first half of 2024.
Adjusted G&A Expense as a percentage of rental revenue decreased from the prior year due to higher rental revenue, a decrease
in discretionary expenses and accelerated amortization of certain software intangible assets in 2022.
Q4 2023
G&A expenses increased primarily due to a $3.5 million increase in ERP implementation costs, partially offset by a $0.5 million
decrease in other G&A expenses primarily due to lower information technology costs and $0.3 million decrease in compensation
costs mainly from lower restructuring costs and accrued bonuses.
Adjusted G&A Expense as a percentage of rental revenue decreased, for the same reasons as described above.
Internal Leasing Costs and Transaction Costs
(thousands of dollars)
Internal leasing costs (i)
Transaction and other costs (ii)
Three months ended December 31
Years ended December 31
2023
2022
Change
2023
2022
Change
$
$
3,156 $
3,306 $
(150) $
11,919 $
12,204 $
(285)
6,945 $
3,236 $
3,709 $
9,344 $
8,274 $
1,070
(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.
2023
Transaction and other costs increased mainly due to higher marketing costs. The Trust incurred $2.9 million in marketing costs for
the year ended December 31, 2023 (year ended December 31, 2022 - $1.7 million).
Q4 2023
Transaction and other costs increased due to higher marketing costs and higher disposition activities during the quarter. The Trust
incurred $1.7 million in marketing costs for the three months ended December 31, 2023 (three months ended December 31, 2022
- $0.4 million).
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)
2023
Three months ended December 31
Years ended December 31
2023
2022
Change
2023
2022
Change
$ (117,659) $
(4,961) $ (112,698) $
38,802 $ 236,772 $ (197,970)
$
$
(0.39) $
(0.02) $
(0.37) $
0.13 $
0.77 $
(0.64)
(0.39) $
(0.02) $
(0.37) $
0.13 $
0.77 $
(0.64)
Net income attributable to Unitholders decreased largely as a result of $178.7 million lower other income inclusive of a $209.3
million unfavourable change in fair value on investment properties, an increase in income from equity-accounted investments of
$16.0 million, and a $10.3 million increase in investment and other income. The increase in other expenses of $35.3 million,
predominantly net interest costs, were partially offset by the increase in operating income of $1.7 million and $13.4 million current
income tax recovery from the reversal of certain tax accruals. Refer to the Results of Operations - Operating Income and Net
Operating Income (NOI), Results of Operations - Other Income (Loss) and Results of Operations - Other Expenses sections of
this MD&A for further details.
Q4 2023
Net income (loss) attributable to Unitholders decreased largely as a result of $106.4 million lower other income inclusive of a
$107.4 million unfavourable change in fair value on investment properties and decrease in income from equity-accounted
investments of $3.3 million. The increase in other expenses of $16.8 million, predominantly net interest costs, were partially offset
by $10.7 million increase in operating income. Refer to the Results of Operations - Operating Income and Net Operating Income
(NOI), Results of Operations - Other Income (Loss) and Results of Operations - Other Expenses sections of this MD&A for further
details.
RioCan Annual Report 2023 36
MANAGEMENT’S DISCUSSION AND ANALYSIS
Our Business
and Our
Business
Environment
Environmental,
Social and
Governance
(ESG)
Initiatives
Property
Portfolio
Overview
Introduction
Funds From Operations (FFO)
Results of
Operations
Asset Profile
Development
Program
Capital
Resources
and Liquidity
Other
Disclosures
Non-GAAP
Measures
Risks and
Uncertainties
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 and ERP implementation costs (net of amortization) 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
2023
2022
Change
2023
2022
Change
$ 132,890 $ 127,643 $
5,247 $ 531,281 $ 524,678 $
$ 132,914 $ 128,153 $
4,761 $ 532,649 $ 528,967 $
$
$
$
0.44 $
0.44 $
0.44 $
0.42 $
0.42 $
0.42 $
0.02 $
0.02 $
0.02 $
1.77 $
1.77 $
1.77 $
1.71 $
1.71 $
1.73 $
6,603
3,682
0.06
0.06
0.04
300,417
302,321
(1,904)
300,392
306,069
(5,677)
300,417
302,423
(2,006)
300,479
306,247
(5,768)
60.5%
60.3%
59.0%
58.5%
1.5%
1.8%
(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.
2023
FFO increased by $6.6 million and FFO Adjusted increased by $3.7 million over the respective same period last year. On a
diluted per unit basis, FFO and FFO Adjusted increased by $0.06, or 3.5% and $0.04 or 2.3%, respectively. The change in FFO
Adjusted excludes a $2.9 million decrease in restructuring costs.
The $3.7 million increase in FFO Adjusted resulted mainly from a $15.7 million higher FFO from equity-accounted investments,
$7.6 million in higher investment and other income, $4.2 million increase in interest income, $3.2 million lower Adjusted G&A
Expense, $1.7 million increase in operating income, partially offset by higher net interest costs of $28.6 million. The increase in
operating income was primarily due to $22.4 million improvement in NOI, net of a $17.6 million lower residential inventory gains
due to timing and $2.0 million lower management and other service fee revenue. The improvement in NOI pertaining to our
commercial properties was primarily driven by $27.1 million higher SPNOI, a $15.0 million increase from completed commercial
developments, $4.0 million higher straight-line rent, partially offset by $31.4 million lower NOI due to asset dispositions and $2.0
million lower NOI from properties under de-leasing. Continued strong performance and leasing environment for our residential
properties increased residential NOI by $7.9 million.
FFO per unit improved by $0.06 including the accretive benefit of unit buybacks and the items described above.
Q4 2023
FFO increased by $5.2 million and FFO Adjusted increased by $4.8 million when compared to the same respective period last
year. On a diluted per unit basis, FFO and FFO Adjusted increased by $0.02 or 4.8%. The change in FFO Adjusted excludes $0.5
million in decreased restructuring costs.
The $4.8 million increase in FFO Adjusted resulted mainly from a $10.7 million increase in operating income, $2.7 million higher
FFO from equity-accounted investments, $2.6 million higher invesment and other income, and $0.4 million lower Adjusted G&A
Expense, partially offset by higher net interest costs of $10.6 million and $1.3 million higher transaction and other costs. The
increase in operating income was primarily due to a $10.2 million improvement in NOI, $3.2 million higher management and other
service fee revenue, partially offset by $2.6 million lower residential inventory gains due to timing. The improvement in NOI
pertaining to our commercial properties was mainly driven by $8.7 million higher SPNOI, a $4.3 million increase from completed
commercial developments and $1.8 million higher straight-line rent, partially offset by $6.3 million lower NOI due to asset
dispositions and $0.9 million lower NOI from properties under de-leasing. Continued strong performance and leasing environment
for our residential properties increased residential NOI by $2.4 million.
FFO per unit increased by $0.02 as a result of the items described above.
FFO Payout Ratio
The FFO Payout Ratio was 60.5% for the twelve-month period ended December 31, 2023 compared to 59.0% in 2022. The
increase in the FFO Payout Ratio relative to last year is mainly due to a $0.06 per unit per annum increase in distributions
effective February 2022 and February 2023, partially offset by the impact of units repurchased in prior years under NCIBs.
37 RioCan Annual Report 2023
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 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 and ERP implementation costs (net of amortization) and continues
to include realized gains or losses on marketable securities in its calculation of FFO and by extension AFFO.
(thousands of dollars, except where otherwise
noted)
AFFO
AFFO Adjusted
Three months ended December 31
Years ended December 31
2023
2022
Change
2023
2022
Change
$ 113,670 $ 111,346 $
$ 113,694 $ 111,856 $
2,324 $ 459,483 $ 461,381 $
1,838 $ 460,851 $ 465,670 $
(1,898)
(4,819)
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)
$
$
$
0.38 $
0.38 $
0.38 $
0.37 $
0.37 $
0.37 $
0.01 $
0.01 $
0.01 $
1.53 $
1.53 $
1.53 $
1.51 $
1.51 $
1.52 $
0.02
0.02
0.01
300,417
302,321
(1,904)
300,392
306,069
(5,677)
300,417
302,423
(2,006)
300,479
306,247
(5,768)
70.0%
69.7%
67.1%
66.4%
2.9%
3.3%
(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.
2023
AFFO decreased by $1.9 million and AFFO Adjusted decreased by $4.8 million over the comparable period. On a diluted per unit
basis, AFFO and AFFO Adjusted increased by $0.02 or 1.3% and $0.01 or 0.7%, respectively.
The $4.8 million decrease in AFFO Adjusted was primarily due to higher normalized capital expenditures, partially offset by higher
FFO Adjusted, net of higher straight-line rent. Refer to the Results of Operations - Funds From Operations (FFO) section of this
MD&A for further details.
The improvement in AFFO per unit and AFFO Adjusted per unit on a diluted basis of $0.02 and $0.01, respectively included the
accretive benefit of unit buybacks.
Q4 2023
AFFO increased by $2.3 million and AFFO Adjusted increased by $1.8 million over the comparable period. On a diluted per unit
basis, AFFO and AFFO Adjusted increased by $0.01 or 2.7%.
The $1.8 million increase in AFFO Adjusted was primarily due to higher FFO Adjusted, net of higher straight-line rent, partially
offset by higher normalized capital expenditures. Refer to the Results of Operations - Funds From Operations (FFO) section of
this MD&A for further details.
AFFO Payout Ratio
The AFFO Payout Ratio was 70.0% for the twelve-month period ended December 31, 2023 compared to 67.1% in 2022. The
increase compared to last year was primarily due to a $0.06 per unit per annum increase in distributions effective February 2022
and February 2023, partially offset by the impact of units repurchased in prior years under the NCIBs.
RioCan Annual Report 2023 38
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 2023 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 $222.9 million and $450.4 million, including assets held for sale, for the three months
and year ended December 31, 2023, respectively. The fair value losses in the current quarter and year-to-date were primarily due
to revisions to capitalization rates to reflect current market conditions resulting from rising interest rates, partially offset by higher
stabilized NOI.
Capitalization Rates
The weighted average 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 weighted 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
2023
5.40 %
(0.05) %
— %
— %
0.06 %
5.41 %
2022
5.37 %
(0.10) %
— %
— %
0.06 %
5.33 %
2023
5.33 %
(0.05) %
(0.01) %
— %
0.14 %
5.41 %
2022
5.29 %
(0.11) %
(0.01) %
(0.01) %
0.17 %
5.33 %
At December 31, 2023, the weighted average capitalization rate of the Trust's investment portfolio increased by 1 basis point and
8 basis points when compared to September 30, 2023 and December 31, 2022, respectively. The carrying value of investment
properties reflects the Trust's best estimate for the highest and best use as at December 31, 2023.
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 higher 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 including recent transactions in which we have participated. Refer to Note 3 of the 2023 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 Risks and
Uncertainties - Inflation Risk sections of this MD&A for discussions on these risks and uncertainties.
Valuation Processes
Internal Valuations
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.
39 RioCan Annual Report 2023
MANAGEMENT’S DISCUSSION AND ANALYSIS
Our Business
and Our
Business
Environment
Environmental,
Social and
Governance
(ESG)
Initiatives
Property
Portfolio
Overview
Introduction
External Valuations
Results of
Operations
Asset Profile
Development
Program
Capital
Resources
and Liquidity
Other
Disclosures
Non-GAAP
Measures
Risks and
Uncertainties
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, 2023, the Trust obtained a total of 26 external property appraisals which supported an IFRS
fair value of approximately $1.7 billion or 12.2% of the Trust's investment property portfolio as at December 31, 2023. 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.
Acquisitions and Dispositions
Acquisitions
Acquisitions for the year ended December 31, 2023 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.)
Property name and location
Q4 2023 - No Acquisitions
Q3 2023
2973 Bloor Street West, Toronto, ON (ii)
July 31 100.0 % $ 5,202 $
$ 5,202 $
Q2 2023
18154-18162 Yonge Street, East Gwillimbury, ON
June 29 100.0 % $ 8,214 $
King & Sherbourne Portfolio, Toronto, ON (iii)
June 26
50.0 % 10,613
— $
— $
— $
—
— $ 5,202 $
— $ 5,202 $
—
—
— $ 8,214 $
—
— 10,613
2,799
Bellevue Phase One, Two & Four, Montreal, QC(iv)
May 29 100.0 % 51,444
2,061
— 53,505
38,049
1303 Bloor Street West, Toronto, ON (ii)
April 12 100.0 %
—
3,675
$ 70,271 $ 5,736 $
3,675
—
— $ 76,007 $ 40,848
—
Q1 2023
508 Lansdowne Avenue, Toronto, ON (ii)
March 1 100.0 % $
— $ 2,209 $
— $ 2,209 $
Parking lease at RioCan Hall, Toronto, ON (v)
January 13 100.0 %
— 26,638
— 26,638
$
— $ 28,847 $
— $ 28,847 $
—
—
—
3
3
16
8
115
—
139
—
—
—
Total 2023 acquisitions
$ 75,473 $ 34,583 $
— $ 110,056 $ 40,848
142
(i) Purchase price includes transaction costs of $1.4 million in aggregate.
(ii) Part of land assembly.
(iii) RioCan assumed $2.1 million in mortgage payable and $0.7 million in vendor take-back mortgage.
(iv) Gross purchase price before transaction costs of $2.4 million was $55.3 million, of which $51.1 million was allocated to investment properties and
$4.2 million was allocated to mortgage payable. The mortgage payable assumed on closing was for Phase One and Two and had an aggregate
contractual balance of $42.2 million.
(v) RioCan acquired the parking lease located at the property.
Subsequent to year end, the Trust purchased a 50% interest of an urban grocery anchored centre in Toronto, Ontario which is
currently undergoing re-zoning to create additional density. The Trust will manage the property and the development process,
earning fees for these activities. On closing, the purchase was settled with $13.2 million cash, the assumption of $46.1 million of
debt at a weighted average contractual interest rate of 3.20%, and an accrual for future consideration for rezoned density
currently estimated to be $40.9 million to be paid as various development milestones are met, for a total purchase price of $100.2
million. Development milestones include 1) the earlier of (i) 2.5 years following ZBA submission or (ii) ZBA approval, and 2)
various SPA submissions and approvals for each phase of the redevelopment.
The Trust also purchased a 50% interest in a stabilized and operating mixed-use residential rental property for $52.9 million in
Calgary. RioCan assumed a total of $32.7 million of debt consisting of both CMHC insured and conventional mortgages, with a
blended contractual fixed interest rate of 1.97% and a blended weighted average remaining term to maturity of 6.7 years.
RioCan Annual Report 2023 40
MANAGEMENT’S DISCUSSION AND ANALYSIS
Our Business
and Our
Business
Environment
Environmental,
Social and
Governance
(ESG)
Initiatives
Property
Portfolio
Overview
Introduction
Purchase obligations
Results of
Operations
Asset Profile
Development
Program
Capital
Resources
and Liquidity
Other
Disclosures
Non-GAAP
Measures
Risks and
Uncertainties
The Trust has agreed to purchase 100% of the retail portion of the 11YV project upon completion, currently estimated to be during
2025, at a 6.0% capitalization rate. The Trust currently owns a 37.5% interest in the project through an equity-accounted
investment. Refer to the Asset Profile - Joint Arrangements section of this MD&A for further detail.
The Trust has agreed to purchase its partners' interest in the retail and residential rental components of Queen & Ashbridge upon
stabilization, currently estimated to be during 2026, at the greater of pre-determined capitalization rates of 4.75% and 4.15%,
respectively, or total cost plus 5%.
The Trust has agreed to purchase a 100% interest in Bellevue Phase Three provided certain conditions are met, currently
estimated to be during 2026, at a pre-determined capitalization rate.
The Trust has agreed to purchase, provided certain conditions are met, a 50% interest in a mixed-use residential rental property
located in Calgary, Alberta in Q1 2025 for an estimated purchase price of $6.0 million plus 50% of development costs incurred at
the time of closing and a vendor promote that will be paid upon stabilization.
Dispositions
Dispositions for the year ended December 31, 2023 are as follows:
(in thousands of dollars or sq. ft., except where otherwise
noted)
Gross sales proceeds
(at RioCan's interest)
Property name and location
Date
disposed
Ownership
interest
disposed
IPP
PUD
Residential
Inventory
Total
Debt
associated
with
property
NLA
disposed
at
RioCan's
Interest
Q4 2023
Strawberry Hill Shopping Centre, Surrey, BC December 14
Silver City Hull, Gatineau, QC (i)
November 1
100.0 % $ 147,913 $ 7,087 $
— $ 155,000 $
100.0 % 12,250
—
—
— 12,250
— 61,000
Garden City Shopping Centre, Winnipeg, MB
October 25
100.0 % 61,000
$ 221,163 $ 7,087 $
— $ 228,250 $
Q3 2023 - No Dispositions
Q2 2023
RioCan West Ridge, Orillia, ON
May 1
100.0 % $ 23,464 $ 1,577 $
— $ 25,041 $
$ 23,464 $ 1,577 $
— $ 25,041 $
Q1 2023
Hamilton Highbury Plaza, London, ON
Southland Crossing Shopping Centre,
Calgary, AB
February 2
100.0 % $
115 $
— $
— $
115 $
January 16
100.0 % 41,179
821
— 42,000
$ 41,294 $
821 $
— $ 42,115 $
—
—
—
—
—
—
—
—
—
341
85
376
802
164
164
5
132
137
Total 2023 dispositions
$ 285,921 $ 9,485 $
— $ 295,406 $
—
1,103
(i) RioCan provided a vendor take-back mortgage of $6.0 million.
In 2023, the Trust completed $295.4 million of dispositions at a weighted average capitalization rate of 6.92%, a testament to the
quality of and demand for the Trust's assets, which include $285.9 million of income producing assets at a weighted average
capitalization rate of 7.15% and $9.5 million of development properties with no in-place income.
As of February 13, 2024, the Trust has firm deals to sell full or partial interests in a number of properties totalling $31.1 million
including two secondary market assets, one of which was cinema-anchored, and a piece of non-core development land.
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.
41 RioCan Annual Report 2023
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, 2023 and December 31, 2022 are comprised of the following:
(thousands of dollars, except where
otherwise noted)
As at
Mezzanine financing and other
Vendor take-back
Total
Floating rate loans (ii)
Fixed rate loans (iii)
Total
Weighted average
Contractual
interest rate (i)
Effective
interest rate (i)
10.26 %
4.25 %
11.33 %
5.91 %
10.26 %
5.98 %
11.33 %
6.87 %
Weighted average contractual interest rate
Weighted average effective interest rate
Weighted average terms to maturity (years)
Terms to
maturity
(in years) (i) December 31, 2023 December 31, 2022
2.8 $
2.9
$
2.7 $
3.0
$
207,814 $
81,719
289,533 $
142,009 $
147,524
289,533 $
8.57 %
9.06 %
2.9
197,537
71,802
269,339
75,020
194,319
269,339
7.73 %
8.26 %
3.8
Information presented as at December 31, 2023.
(i)
(ii) As at December 31, 2022, contractual interest rates and effective interest rates were 9.87% and 9.87%, respectively.
(iii) As at December 31, 2023, $11.1 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, 2022 - $10.4 million).
All of the $289.5 million of mortgages and loans receivable as at December 31, 2023 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 2023 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 44 properties in joint operations and 16 properties in 7 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 Capital Management (Woodbourne); and Sun Life Financial. The Trust also has partial
interests in 16 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 2023 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 $341.2 million as at December 31, 2023 on behalf of co-owners/
partners (December 31, 2022 - $255.4 million).
In addition to the 7 joint ventures, the Trust has significant influence over 4 limited partnerships, and, as a result, these are also
equity-accounted investments. The total aggregate carrying-value of equity-accounted investments was $383.9 million as at
December 31, 2023 (December 31, 2022 – $364.9 million), of which the most significant equity-accounted investments were
RioCan-HBC JV $248.6 million, PR Bloor Street LP $48.9 million and the combined WhiteCastle New Urban Fund LPs $44.6
million (December 31, 2022 - $256.6 million, $42.3 million and $36.0 million, respectively).
RioCan Annual Report 2023 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
9,647
17,477
18,593
10,336
90,372
—
564,027
94,990
659,017
Total Assets
(thousands of dollars)
As at December 31, 2023
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
RC Yorkville LP
Income
properties
Residential
PUD
inventory Other (i)
Total
assets
Total assets as
at December 31,
2022
$ 2,403,530 $ 321,303 $ 182,269 $ 78,119 $ 2,985,221 $
3,108,503
$ 384,303 $
— $
— $ 30,676 $ 414,979 $
417,602
9,491
—
—
172
9,663
—
—
—
—
—
2,031
3,052
16,435
217
18,683
26,391
2,873
32,316
—
10,288
85
10,373
2,130
10,804
91,677
143,779
3,256
11,818
97,063
166,401
Total assets of equity-accounted joint ventures (ii) $ 393,794 $ 18,017 $ 288,570 $ 49,097 $ 749,478 $
Other equity-accounted investments (ii)
128,761
119,376
9,385
—
—
Total assets of equity-accounted investments (ii)
$ 393,794 $ 18,017 $ 407,946 $ 58,482 $ 878,239 $
Total joint operations and equity-accounted
investments (ii)
$ 2,797,324 $ 339,320 $ 590,215 $ 136,601 $ 3,863,460 $
3,767,520
(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
2023
2022
2023
2022
Total NOI from proportionately consolidated joint operations
$
28,737 $
21,358 $
102,117 $
73,249
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
RC Yorkville LP
Total NOI of equity-accounted joint ventures
Other equity-accounted investments
Total NOI of equity-accounted investments (i)
Total NOI of joint operations and equity-accounted
investments
$
6,012 $
5,424 $
25,181 $
21,389
130
—
—
245
—
123
4
—
258
—
509
24
(19)
1,016
—
486
28
29
914
—
$
$
$
6,387 $
5,809 $
26,711 $
22,846
29
63
153
283
6,416 $
5,872 $
26,864 $
23,129
35,153 $
27,230 $
128,981 $
96,378
(i)
Total FFO from equity-accounted investments was $8.1 million and $37.1 million, respectively, for the three months and year ended December 31,
2023 (December 31, 2022 - $5.4 million and $21.4 million, respectively), of which $2.0 million and $12.1 million was related to the gain on
disposition of RC Yorkville LP for the quarter and year-to-date in 2023, respectively. The remaining FFO from equity-accounted investments is
predominantly from the RioCan-HBC JV, which contributed $3.7 million and $17.1 million of FFO, respectively, for the quarter and year-to-date
2023 (December 31, 2022 - $3.8 million and $16.3 million, respectively).
43 RioCan Annual Report 2023
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
WhiteCastle New Urban Fund, LP (WNUF 1)
On March 29, 2023, WNUF 1, one of the Trust's equity-accounted investments, was dissolved and final proceeds were distributed
to the partners.
RioCan-HBC JV
During the second quarter of 2023, the Trust's ownership interest increased to 22.0% (December 31, 2022 - 20.2%).
On November 30, 2023, RioCan advanced a $30.0 million bridge financing loan to the RioCan-HBC JV, which was subsequently
repaid on January 26, 2024.
RC Yorkville LP
On September 28, 2023, RioCan entered into a series of transactions whereby certain previously consolidated subsidiaries which
held various interests in 11 YV, including RC Yorkville LP, became jointly controlled. RioCan subsequently sold 20.8% of its units
and reduced its ownership in RC Yorkville LP from 100.0% to 79.2% or from 50.0% to 39.6% in the underlying 11YV project.
As a result, the Trust ceased consolidating these subsidiaries and an equity-accounted joint venture investment was created with
a carrying value of $12.2 million. Upon the sale of its 20.8% interest to new investors, RioCan received $12.2 million of proceeds,
which resulted in a gain of $10.1 million.
On October 3, 2023, RioCan sold an additional 4.2% interest in RC Yorkville LP, for proceeds of $2.4 million, recognizing a $2.0
million gain on sale and reducing its interest to 75.0% or 37.5% in the underlying 11YV project.
RioCan provided loans in the aggregate amount of $10.2 million to the above noted investors to finance their respective
acquisition of the units from RC Yorkville LP.
On January 1, 2024, RioCan sold an additional 25.0% interest in the units of RC Yorkville LP and reduced its interest to 50.0% or
25.0% in the underlying 11YV project.
RioCan Annual Report 2023 44
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 numerous 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.
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, as discussed in the Non-GAAP Measures section of this MD&A, using Normalized Capital Expenditures as an input in
assessing a REIT's recurring economic earnings is 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 invests capital on a regular basis to physically maintain its income properties. Typical costs incurred are for
expenditures such as roof replacement programs and resurfacing 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)
2023
2022
Change
2023
2022
Change
2023
2024
$
9,590 $
9,928 $
(338) $ 29,512 $ 33,450 $
(3,938) $ 28,300 $ 26,000
7,505
1,549
5,056
2,449
28,545
21,680
6,865 23,500 27,000
962
587
6,447
5,365
1,082
3,200
2,000
$ 18,644 $ 15,946 $
2,698 $ 64,504 $ 60,495 $
4,009 $ 55,000 $ 55,000
24,319
18,220
6,099
61,350
40,972
20,378
$ 42,963 $ 34,166 $
8,797 $ 125,854 $ 101,467 $ 24,387
(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, 2023 was $64.5 million, $9.5 million higher
than the Normalized Capital Expenditures estimate of $55.0 million, primarily due to higher recoverable and non-recoverable
capital expenditures. For 2024, 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. Revenue enhancing capital expenditures of $15.0 million to $20.0 million are expected in 2024, a reduction
from 2023 as the Trust is preserving capital by reducing spend.
45 RioCan Annual Report 2023
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 PROGRAM
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 provide excess density for potential intensification. All
development sites are well-located, transit-oriented locations in Canada's six largest metropolitan markets with 81.3% 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, development planning, zoning, design, construction management oversight, product delivery, and
operations. The Trust has a track record of successfully executing development projects and over 30 years of experience in the
Canadian commercial real estate landscape.
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
Description
Development projects under active construction or anticipated 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.
Development Pipeline
RioCan's development pipeline on a proportionate share basis in equity-accounted joint ventures as at December 31, 2023 is
summarized below:
(in thousands of dollars or sq. ft. and
at RioCan's interest unless otherwise
noted)
Projects under construction (vi)
Shovel ready development sites
Zoning approved
Zoning application submitted
Future developments
Development lands & others
Total Development at Cost
Estimated GFA (i)
Investment
Commercial Residential (ii) Total (iii)
Residential
units at 100%
ownership
(i)(ii)
Residential
inventory
cost to
date(iv)(v)
PUD cost
to date (iv)
Estimated
cost to
complete
Estimated
total
232
904
1,622
200
1,938
—
1,003
1,235
3,096 $
309,452 $ 380,164 $ 444,554 $ 1,134,170
801
1,705
1,389
3,823
173,151
12,883 14,505
17,566
158,194
167,919
3,740
3,940
6,029
44,588
69,987
19,177 21,115
16,593
4,267
102,415
—
—
—
—
24,644
—
—
—
—
—
176,974
326,113
114,575
106,682
24,644
4,896
37,604 42,500
44,673 $
520,324 $ 918,280 $ 444,554 $ 1,883,158
Total properties under development at fair value
$ 947,573
Includes residential condominiums, townhouses, and residential rental development.
(i) Estimated GFA and the number of residential units are based on current development plans; final square footage and units may differ.
(ii)
(iii) Estimated total square footage includes 4.7 million square feet of NLA currently income producing.
(iv) 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.
RioCan Annual Report 2023 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
(v) Residential inventory cost to date includes commissions.
(vi) Estimated NLA on projects under construction approximates 1.1 million square feet by applying a 90% GFA conversion factor.
Completed Developments
For the year ended December 31, 2023, RioCan transferred a total of 599,000 square feet of new development NLA. In Q4 2023,
progress continued with the Trust delivering 117,000 square feet of commercial space at The Well, 159 residential units at
FourFifty The Well as residential occupancy continued and five completed retail developments totalling 98,000 square feet.
The following table details RioCan’s development completions in the year ended December 31, 2023:
(in thousands and at RioCan's interest unless
otherwise noted)
NLA (in '000 sq. ft.)
Project / Location
Mixed-use
Luma, Ottawa, ON
Residential
units at
100%
ownership
%
Ownership
Q1
Q2
Q3
Q4
Total
Tenants
50 %
n/a
3
—
—
—
3 Quesada, Pet Valu
5th & THIRD East Village, Calgary, AB
100 %
n/a
—
11
—
—
11 Shoppers Drug Mart
The Well, Toronto, ON
50 %
n/a
60
97
63
117
337
Shopify, Unity Technologies,
Index Exchange, Warner Music
Canada, Bank of Montreal, Point
Click Care, Indigo, Middlefield,
Adidas; Konrad, Sweat & Tonic,
Shoppers Drug Mart, Oliver &
Bonacini, various tenants
FourFifty The Well, Toronto, ON
Rhythm, Ottawa, ON
Subtotal mixed-use
Retail
Georgian Mall, Barrie, ON
University Plaza, Hamilton, ON
RioCan Windfields Phase One,
Oshawa, ON
Sage Hill Crossing, Calgary, AB
RioCan Windfields Phase Two,
Oshawa, ON
Yonge Eglinton Centre, Toronto, ON
Five Points Shopping Centre,
Oshawa, ON
East Hills Shopping Centre, Calgary,
AB
Subtotal retail
Total completed developments
50 %
50 %
395
n/a
—
—
—
—
72
—
51
123 Residential rental units
6
6
TD Bank, Pet Valu, Capital
Optical
395
63
108
135
174
480
50 %
100 %
100 %
100 %
100 %
100 %
100 %
40 %
n/a
n/a
n/a
n/a
3
—
—
—
—
2
—
—
—
—
16
—
—
—
—
37
3 Chick-fil-A
2 Valvoline
16 Service Canada
37 Planet Fitness, Value Village
n/a
—
—
—
25
25
BMO, Sleep Country, One
Planet, Popeye's, Domino's,
Subway, various tenants
n/a
—
—
—
24
24 Goodlife Fitness
n/a
—
—
—
9
9
Mr. Lube, Mary Brown's,
Rajdhani Restaurant, Pizzeria,
Chorizo
n/a
—
395
—
3
—
2
—
16
3
98
66
110
151
272
3 Firehall
119
599
For the year ended December 31, 2023, RioCan completed a townhouse development delivering 32 residential units, recognizing
a total inventory gain of $4.8 million on a total investment of $8.6 million.
The following table details RioCan’s townhouse completions in the year ended December 31, 2023:
(in thousands of dollars and at RioCan's
interest unless otherwise noted)
Project / Location
Townhouses
U.C. Towns 2, Oshawa, ON (i)
Total townhouse development
%
Ownership
Units at 100%
ownership
Revenue
Cost
Commissions
Inventory gain
50 %
32 $
32 $
13,789 $
13,789 $
8,602 $
8,602 $
392 $
392 $
4,795
4,795
(i)
Total development is comprised of 65 units, the remaining 33 units are expected to close in the first half of 2024.
47 RioCan Annual Report 2023
MANAGEMENT’S DISCUSSION AND ANALYSIS
Our Business
and Our
Business
Environment
Environmental,
Social and
Governance
(ESG)
Initiatives
Property
Portfolio
Overview
Introduction
2022-2026 Development Deliveries
Results of
Operations
Asset Profile
Development
Program
Capital
Resources
and Liquidity
Other
Disclosures
Non-GAAP
Measures
Risks and
Uncertainties
RioCan's five-year development pipeline from 2022-2026 inclusive is expected to deliver approximately 3 million square feet of
GFA The following table details the Trust's development deliveries:
(in thousands of
dollars and
RioCan's interest
unless otherwise
noted)
Completion year
2022
2023 (vi)
2024
2025 - 2026
Total
Development Completion (i)
Residential Inventory Completion (i)(ii)
GFA
(in sq. ft.)
Residential
units at 100%
ownership
IFRS cost
transfer from
PUD to IPP
Net cost
transfer from
PUD to IPP(iii)
(iv)
Stabilized
cash NOI(v)
GFA
(in sq. ft.)
721,800
653,900
265,500
432,200
650 $
565,520 $
504,967 $
24,132
254,110
395
197
326
530,600
466,800
27,200
25,000
316,900
272,400
10,500
143,400
299,500
217,900
9,600
652,800
2,073,400
1,568 $
1,712,520 $
1,462,067 $
71,432 1,075,300
Residential
units at
100%
ownership
608 $
32
Total residential
inventory sales
revenue
118,659
13,789
366
2,207
3,213
110,000 - 116,000
670,000 - 676,000
$912,000 - $924,000
2022-2023 represents actual completions. Figures for 2024-2026 are estimates and represent forward-looking information.
(i)
(ii) Residential inventory includes condominium and townhouse units.
(iii) Net cost transfer is expressed on a cash basis. It excludes vacant land costs and invested costs on retail redevelopment at date of transfer. It is
also net of proceeds from land sales, applicable interim income or fee income earned, capitalized interest on invested equity, and fair value on
initial amounts transferred into properties under development.
(iv) Refer to the Non-GAAP Measures section of this MD&A for further information on net cost transfers from PUD to IPP during 2023 and 2022.
(v) 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 further information on NOI.
(vi) 2023 completions of 653,900 square feet of GFA represents an estimated 599,000 square feet of NLA.
RioCan Annual Report 2023 48
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 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 approximately 232,000 square feet of commercial space and 3,096 residential
units, including 2,540 condominium units, and 33 townhouses.
The following table details RioCan's development projects under construction on a proportionate share basis including equity-
accounted joint ventures as at December 31, 2023:
(in thousands of dollars and at RioCan's
interest unless otherwise noted)
Estimated GFA
('000 sq. ft.) (i)
Investment
Estimated
Residential
units at
100%
ownership
(i) Residential Commercial
%
Ownership
Residential
inventory
cost to
date (ii) (iii)
PUD
cost to
date (ii)
Estimated
cost to
complete
Estimated
total (iii)
Estimated
residential
inventory
sales
revenue
Estimated
completion period
(iv)
Mixed-use
The Well, Toronto, ON
FourFifty The Well, Toronto, ON
(Rental)
Luma, Ottawa, ON
Rhythm, Ottawa, ON
U.C. Towns 2, Oshawa, ON
(Townhouse)
5th & THIRD East Village,
Calgary, AB
11 YV, Toronto, ON
(Condominium) (v)
11 YV, Toronto, ON (Rental) (v)
Queen & Ashbridge, Toronto, ON
(Condominium)
Queen & Ashbridge, Toronto, ON
(Rental)
U.C. Tower 2, Oshawa, ON
(Condominium)
U.C. Tower 3, Oshawa, ON
(Condominium)
Verge, Toronto, ON
(Condominium) (v)
Verge, Toronto, ON (Rental) (v)
50 %
50 %
50 %
50 %
50 %
100 %
38 %
38 %
—
197
—
—
33
—
617
81
50 %
399
50 %
233
50 %
606
50 %
386
20 %
20 %
532
12
—
79
—
—
26
—
176
21
144
104
228
138
85
2
152 $
— $ 233,126 $ 23,947 $ 257,073
n/a
2024 Q1 - 2024 Q4
—
2
4
—
10
—
10
—
10
—
—
—
6
—
33,636
21,635
55,271
—
—
1,650
1,690
118
2,347
1,768
4,037
n/a
n/a
n/a
2024 Q1 - 2024 Q2
2024 Q2
2024 Q1- 2024 Q2
5,360
—
3,911
9,271
$13,000 -
$15,000
2024 Q1- 2024 Q2
—
7,352
29
7,381
n/a
2024 Q3
148,726
—
60,845
209,571
$256,000 -
$258,00
2024 Q4 - 2025 Q4
—
23,997
14,774
38,771
n/a
2024 Q4 - 2025 Q4
64,863
—
68,074
132,937
$151,000 -
$153,000
2025 Q2 - 2026 Q1
—
37,141
41,630
78,771
n/a
2025 Q2 - 2026 Q1
46,309
—
78,742
125,051
16,080
—
73,953
90,033
28,114
—
37,174
65,288
$156,000 -
$158,000
$126,000 -
$128,000
$78,000 -
$80,000
2024 Q4 - 2025 Q2
2025 Q3 - 2026 Q2
2025 Q1 - 2025 Q4
—
2,019
3,852
5,871
n/a
2025 Q1 - 2025 Q4
Subtotal mixed-use
3,096
1,003
194 $ 309,452 $ 340,611 $ 431,031 $ 1,081,094
$780,000 -
$792,000
Retail
Yonge & Eglinton Centre,
Toronto, ON (vi)
RioCan Windfields Phase Two,
Oshawa, ON
Subtotal retail
100 %
100 %
n/a
n/a
—
—
—
—
25
13
38
n/a 31,764
5,411
37,175
n/a
7,789
8,112
—
39,553
13,523
15,901
53,076
2024 Q2
2024 Q1 - 2025 Q2
n/a
n/a
—
Total projects under construction
3,096
1,003
232 $ 309,452 $ 380,164 $ 444,554 $ 1,134,170
$780,000 -
$792,000
(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
closing.
(iv) Estimated completion period on condominium developments represent interim closing period upon occupancy. Final closings are expected to
occur approximately 9 to 12 months following the first interim closing.
(v) Equity-accounted investments.
(vi) Total estimated costs include historical carrying amounts of $30.4 million transferred from IPP for redevelopment.
49 RioCan Annual Report 2023
MANAGEMENT’S DISCUSSION AND ANALYSIS
Our Business
and Our
Business
Environment
Environmental,
Social and
Governance
(ESG)
Initiatives
Property
Portfolio
Overview
Introduction
The Well, Toronto, ON
Results of
Operations
Asset Profile
Development
Program
Capital
Resources
and Liquidity
Other
Disclosures
Non-GAAP
Measures
Risks and
Uncertainties
As an extension of the vibrant King West neighbourhood of Toronto, this mixed-use development is expected to deliver at
RioCan's share approximately 747,000 square feet of commercial space with a total expected investment of $951.6 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, 2023, the Trust has completed 629,000 square feet of commercial space and anticipates full project
completion in 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 begin 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. As at February 13, 2024, approximately 96% of the total commercial space at The Well
has been leased.
As at December 31, 2023
Estimated NLA (sq. ft.)
Investment
(in thousands of dollars and at
RioCan's interest)
Completed
PUD
Total
Completed
PUD
cost to date
Estimated cost
to complete
Estimated total
cost
Adjustments
to cash basis
Estimated total
net cost (i)
Investment Property
629,000 118,000 747,000 $
694,517 $ 233,126 $
23,947 $
951,590 $
(69,377) $
882,213
(i) Non-GAAP financial measure. Net cost transfer is expressed on a cash basis. It excludes vacant land costs and invested costs on retail
redevelopment at date of transfer. It is also net of proceeds from land sales, applicable interim income or fee income earned, 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 building comprised of 592 units. This building provides its residents with
direct access through its retail podium to The Well's superior amenities, which offer a one-stop source for living, shopping,
working and entertainment. In Q4 2023, the Trust completed 159 residential rental units, bringing the total number of units
completed in 2023 to 395. The remaining 197 units are expected to be completed in early 2024 with a full lease-up by the end of
2024.
As at December 31, 2023
Estimated GFA (sq. ft.)
Investment
(in thousands of dollars and at
RioCan's interest)
Completed
PUD
Total
Completed
PUD
cost to date
Estimated cost
to complete
Estimated total
cost
Adjustments
to cash basis
Estimated total
net cost (i)
Investment Property
131,000 79,000 210,000 $
94,595 $
33,636 $
21,635 $
149,866 $
(9,229) $
140,637
(i) Non-GAAP financial measure. Net cost transfer is expressed on a cash basis. It excludes vacant land costs and invested costs on retail
redevelopment at date of transfer. It is also net of proceeds from land sales, applicable interim income or fee income earned, 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 U.C. Tower 3, Oshawa, ON
Located in North Oshawa with close proximity to Ontario Highway 407, this multi-phase condominium and townhouse
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. In Q4 2023, the Trust closed on 32 units at U.C. Towns 2.
The remaining 33 units are expected to close in the first half of 2024. U.C. Tower 2 and U.C. Tower 3 are under construction. As
at December 31, 2023, on a combined basis, 95% of units at U.C. Tower 2 and U.C. Tower 3 have been released to market, of
which 78% are pre-sold.
11 YV, Toronto, ON
11 YV is a 65-storey mixed-use development offering 617 luxury condominium units, 81 rental replacement residential units and
approximately 34,000 square feet of retail space at 100% ownership. 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. In Q2 2023, zoning was successfully amended resulting in expanded density for a
site already underway in the form of three incremental storeys or 30 condominium units. During the year, the Trust sold 25.0% of
its interest in RC Yorkville LP or a 12.5% interest in the 11YV project, recognizing a gain of $12.1 million. Subsequent to the year-
end, the Trust further reduced its interest in the project to 25.0% by selling an additional 12.5% interest. As at December 31,
2023, above grade construction continues and 95% of condominium units have been released to market of which 99% of units
pre-sold. The Trust anticipates interim occupancy of 15% of the condominium units will occur in Q4 2024. Occupancy of the
remaining units is expected throughout 2025.
RioCan Annual Report 2023 50
MANAGEMENT’S DISCUSSION AND ANALYSIS
Our Business
and Our
Business
Environment
Environmental,
Social and
Governance
(ESG)
Initiatives
Property
Portfolio
Overview
Introduction
Queen & AshbridgeTM, Toronto, ON
Results of
Operations
Asset Profile
Development
Program
Capital
Resources
and Liquidity
Other
Disclosures
Non-GAAP
Measures
Risks and
Uncertainties
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. As at December 31, 2023, above grade construction continues and
all condominium units have been released to market with 96% of units pre-sold.
VergeTM, 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. As at December 31, 2023, above grade construction continues and 100% of
condominium units have been released to market, of which 90% of units are pre-sold.
Development Projects in Planning
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.
In Q4 2023, the Trust obtained zoning approvals for 0.9 million square feet of mixed-use development at RioCan Hall in
downtown Toronto. As of December 31, 2023, RioCan has 15.3 million square feet of zoned mixed-use development sites in
planning, of which 0.8 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 3.9 million
square feet of mixed-use developments.
51 RioCan Annual Report 2023
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 following table details RioCan's development projects in planning including equity-accounted joint ventures as at
December 31, 2023:
(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 (v) Shoppers World Brampton, ON - Phase One
Gloucester, Ottawa, ON
RioCan Windfields, Oshawa, ON
7 projects (vi)
Subtotal shovel ready sites
Zoning approved development sites
F5 (v) Shoppers World Brampton, ON - Future phases
F5 (v) RioCan Hall, Toronto, ON
F5 (v) RioCan Leaside Centre, Toronto, ON (iii)
F5 (v) RioCan Scarborough Centre, Toronto, ON - Golden Mile
Phases One & Two
83 Bloor Street West, Toronto, ON
2955 Bloor Street West, Toronto, ON
2323 Yonge Street, Toronto, ON
Dufferin Plaza, Toronto, ON
RioCan Markington, Toronto, ON
RioCan Durham, Ajax, ON
Clarkson Village, Mississauga, ON
RioCan Grand Park, Mississauga, ON
RioCan Elmvale, Ottawa, ON
RioCan Westgate, Ottawa, ON
East Hills South Block, Calgary, AB
RioCan Brentwood, Calgary, AB
Jasper Gates, Edmonton, AB
Subtotal zoning approved sites
Zoning application submitted development sites
2345 Yonge Street, Toronto, ON
2990 Eglinton Avenue East, Toronto, ON
2939 Bloor Street West, Toronto, ON
3180 Dufferin Street, Toronto, ON
Bloor Street West & Lansdowne Avenue, Toronto, ON
Above, Mississauga, ON
Sandalwood Square, Mississauga, ON
1650 - 1660 Carling Avenue, Ottawa, ON
Subtotal zoning application submitted sites
Future developments
F5 (v) RioCan Scarborough Centre, Toronto, ON - Golden Mile
Future phases (iv)
F5 (v) RioCan Colossus Centre, Vaughan, ON
12 projects
Subtotal future developments
Total development projects in planning
Mixed-use
Mixed-use
Retail
Retail
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
Mixed-use
Mixed-use
Mixed-use
Mixed-use
Mixed-use
Mixed-use
Mixed-use
Mixed-use
Mixed-use
Mixed-use
Mixed-use
Mixed-use
100 %
50 %
100 %
various
100 %
100 %
100% Rental
25% Condo
—
10
548
346
904
429
328
544
257
—
—
544
267
548
346
759 $ 7,277
630
3,747
— 58,061
— 107,889
801
1,705
1,389 $ 176,974
3,156
3,585
3,969 $
—
530
858
693 40,442
178
812
990
1,452 96,665
100 %
50 %
100 %
50 %
50 %
100 %
100 %
100 %
100 %
100 %
100 %
40 %
100 %
100 %
50 %
100 %
50 %
50 %
100 %
50 %
100 %
100 %
55
1,945
2,000
1,797 29,397
9
8
36
8
79
28
24
17
113
67
—
—
374
98
130
240
904
613
480
221
344
524
790
810
383
106
166
248
983
641
504
238
457
591
790
810
243
912
1,155
1,118 93,885
126
1,685
352
1,405
606 19,707
1,209
1,498
754 10,425
591 20,977
272
2,748
848
643
—
—
2,136
6,641
1,000
—
—
638
1,622
12,883 14,505
17,566 $ 326,113
68
6
8
8
3
7
—
100
200
159
788
991
214
737
69
211
195
198
916
282
743
77
219
198
205
916
1,200
1,300
648 $ 1,254
935
2,781
242 18,209
555 34,872
230 28,895
577 28,249
1,127
1,715
—
315
3,740
3,940
6,029 $ 114,575
2,111
2,270
3,186 $ 1,133
9,212 10,000
11,270 19,859
7,854
8,845
2,137 85,690
1,938
19,177 21,115
16,593 $ 106,682
4,664
36,601 41,265
41,577 $ 724,344
Mixed-use
Mixed-use
Mixed-use
100 %
100 %
various
(i) Potential GFA and residential units are estimates based 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
Includes residential inventory and properties under development cost to date.
25%.
(iv) Potential GFA achieved through Golden Mile Secondary Plan.
(v) F5 denotes RioCan's Focus Five large scale projects. See project descriptions in the following section.
(vi)
Includes historical carrying amounts transferred from IPP for certain redevelopment projects.
RioCan Annual Report 2023 52
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 prioritized its
efforts on five projects. These Focus Five sites are large scale, transit-oriented, mixed-use developments in the GTA that the
Trust is currently advancing through the zoning and site plan approval process. The projects will be built in phases and 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. The following are RioCan's
Focus Five development projects:
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.
RioCan Leaside Centre, Toronto, ON
RioCan Leaside Centre is an 8.8-acre real estate development situated at the southeast corner of Eglinton East and 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.
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 comprised of 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 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. Zoning By-law Amendment was approved for the first two phases of
the development totalling approximately 2.0 million square feet. The Trust anticipates Site Plan Application submission to the City
of Toronto in the first half of 2024.
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
totalling 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.
53 RioCan Annual Report 2023
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, 2023 December 31, 2022 December 31, 2023 December 31, 2022
$
$
6,861,113 $
6,742,343 $
7,251,368 $
7,437,770
7,728,892
7,437,770
7,003,630
7,728,892
14,298,883 $
14,471,235 $
14,689,138 $
14,732,522
(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 compliance with 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, conventional mortgages and CMHC
financing, sale of non-core properties or sale of partial interests in developments or air rights, sale of condominium / townhouse
units and through public offerings of debt and common equity or 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 3.25 years, as market conditions permit. This transition is expected to take time and will be balanced with credit rating
implications, cost of debt, debt maturity composition and liquidity needs.
Declaration of Trust and Debt 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, a debt service coverage ratio, minimum unitholders' equity, a 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 but 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" which, along with Adjusted Unitholders' Equity, is defined in the Declaration of Trust). As at December 31, 2023,
the Basket Ratio was 7.2%. These and other covenants and restrictions are more fully described in Note 26 of the 2023 Annual
Consolidated Financial Statements.
As at December 31, 2023, the Trust was in compliance with all of the restrictions under the Declaration of Trust and all covenants
pursuant to its various debt agreements.
RioCan Annual Report 2023 54
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
Debt Metrics
In addition to financial and non-financial covenants and the restrictions under the Declaration of Trust and various debt
agreements, the Trust utilizes management-targeted debt metrics to assess performance against RioCan’s objectives and
adherence with its capital management framework. Certain management-targeted debt metrics which were previously disclosed
in the table below, including Total Adjusted Debt to Total Adjusted Assets, Debt Service Coverage and Interest Coverage have
been removed, as management is solely managing to the corresponding debt covenants that are calculated and presented in
accordance with debt agreements. These debt covenants include Total Indebtedness and Debt Service Coverage ratios pursuant
to the unsecured credit facility agreements and an Interest Coverage ratio pursuant to Trust Indentures as disclosed in Note 26 of
the 2023 Annual Consolidated Financial Statements. As at December 31, 2023, the Trust was in compliance with all debt
covenants.
The following table summarizes the Trust's long-term management targets for debt metrics, presented on both an IFRS and
RioCan's proportionate share basis:
Adjusted EBITDA (i)
Adjusted Debt to Adjusted EBITDA (i)
Ratio of floating rate debt to total debt (ii)
Ratio of Unsecured Debt to Total Contractual Debt
(i) (ii)
Weighted average term to maturity (in years) (ii)
Weighted average effective interest rate (ii) (iii)
Long-term
targets
8.0x - 9.0x
<15.0%
70.0%
Rolling 12 months ended
IFRS basis
RioCan's proportionate share (i)
December 31, December 31, December 31, December 31,
$
2023
735,665 $
9.19
2022
704,136 $
9.49
2023
760,990 $
9.28
4.6%
57.4%
3.25
3.74%
6.5%
56.0%
3.45
3.40%
6.8%
54.3%
2.97
3.87%
2022
728,543
9.51
8.0%
53.9%
3.36
3.47%
(i)
(ii)
(iii)
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.
Information is as of respective period end.
Inclusive of hedges.
Adjusted EBITDA at RioCan's Proportionate Share increased for the rolling twelve months ended December 31, 2023 when
compared to December 31, 2022 as a result of higher NOI mainly from higher in-place occupancy, rent growth and completed
developments partially offset by dispositions, higher investment and other income and higher income from equity-accounted
investments, net of lower inventory gains.
The decrease in Adjusted Debt to Adjusted EBITDA at RioCan's Proportionate Share for the rolling twelve months ended
December 31, 2023 when compared to December 31, 2022 was primarily due to the higher Adjusted EBITDA partially offset by
higher Average Total Adjusted Debt.
The floating interest rate debt exposure decreased from December 31, 2022 mainly due to lower drawn amounts on the Trust's
revolving unsecured line of credit and hedging of certain floating rate construction facilities, partially offset by maturing interest
rate swaps.
The weighted average term to maturity decreased from December 31, 2022, mainly due to a large number of scheduled debt
maturities in early 2024. As at February 13, 2024 the Trust has refinanced or repaid $857.9 million of debt maturing in 2024 at a
weighted average term of approximately 5.1 years, contributing to an improved weighted average term to maturity of RioCan’s
Proportionate Share of debt to approximately 3.5 years.
Credit Ratings
RioCan is committed to maintaining strong debt-to-EBITDA and interest and debt service coverage 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.
The following table summarizes RioCan’s credit ratings as at December 31, 2023:
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.
55 RioCan Annual Report 2023
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:
Principal maturities and interest rates
Debentures
payable
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)
$ 300,000
3.29 % $ 398,406
4.74 % $ 567,015
4.01 % $ 1,265,421
500,000
900,000
550,000
450,000
550,000
2.58 %
532,886
3.33 %
200,000
4.93 % 1,232,886
3.92 %
143,171
3.58 %
102,077
6.65 % 1,145,248
3.54 %
201,882
2.83 %
405,559
2.59 %
3.17 %
—
—
— %
— %
751,882
855,559
5.36 % 1,071,941
3.83 %
12,195
3.07 % 1,634,136
$ 3,250,000
3.68 % $ 2,753,845
3.66 % $ 881,287
4.51 % $ 6,885,132
4.07 %
3.28 %
4.12 %
3.29 %
2.99 %
4.34 %
3.78 %
(9,057)
(12,921)
(2,041)
(24,019)
(thousands of dollars, except
otherwise noted)
Year of debt maturity
2024
2025
2026
2027
2028
Thereafter
Total Contractual Debt (i) (ii)
Unamortized debt financing
costs, premiums and
discounts on origination and
debt assumed, and
modifications
Total debt (iii)
$ 3,240,943
3.65 % $ 2,740,924
3.59% $ 879,246
4.52 % $ 6,861,113
3.74 %
(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 weighted average contractual interest rate per annum reflects the fixed rate in the interest swap. Including the
benefit of bond forward hedges, the weighted average contractual interest rate for total debentures is 3.54%, total mortgages is 3.34% and total
debt is 3.66%.
(iii) Weighted average interest rate reflects the effective interest rate, inclusive of the benefit of bond forward hedges.
The Total Contractual Debt continuity schedule for the year ended December 31, 2023 is as follows:
(thousands of dollars, except otherwise noted)
Year ended December 31, 2023
Total Contractual Debt, beginning of year
Borrowings
Debt assumed and vendor take-back mortgage
Scheduled amortization
Repayments
Transfer to equity-accounted investments (i)
Total Contractual Debt, end of year
Interest rates of new borrowings, debt
assumed and vendor take-back mortgage
Weighted average contractual interest rate (ii)
Weighted average effective interest rate (iii)
Debentures
Payable
Mortgages
Payable
Lines of Credit and
Other Bank Loans
$
2,950,000 $
2,664,640 $
1,143,336 $
800,000
—
—
(500,000)
—
217,157
45,017
(49,421)
(123,548)
—
Total
6,757,976
1,338,029
45,017
(49,421)
320,872
—
—
(471,136)
(111,785)
(1,094,684)
(111,785)
$
3,250,000 $
2,753,845 $
881,287 $
6,885,132
6.07 %
5.83 %
4.53 %
4.80 %
6.40 %
6.40 %
5.85 %
5.76 %
(i) Related to the 11YV transaction. Refer to the Joint Arrangements section in this MD&A for further details.
(ii) For hedged floating rate debt, the contractual interest rate per annum reflects the fixed rate in the interest rate swap. Including the benefit of bond
forward hedges, the weighted average contractual interest rate for new debentures is 5.71% and total contractual debt is 5.64%. For floating rate
new borrowings the interest rate reflects the floating rate at the end of the period.
(iii) Weighted average interest rate reflects the effective interest rate, inclusive of the benefit of bond forward hedges.
RioCan Annual Report 2023 56
MANAGEMENT’S DISCUSSION AND ANALYSIS
Our Business
and Our
Business
Environment
Environmental,
Social and
Governance
(ESG)
Initiatives
Property
Portfolio
Overview
Introduction
Debentures Payable
(thousands of dollars, except otherwise noted)
As at
Debentures payable (i)
Weighted average effective interest rate (ii)
Weighted average term to maturity (years)
Results of
Operations
Asset Profile
Development
Program
Capital
Resources
and Liquidity
Other
Disclosures
Non-GAAP
Measures
Risks and
Uncertainties
December 31, 2023 December 31, 2022
$
3,240,943 $
2,942,051
3.65 %
3.1
3.06 %
3.2
(i) Amount outstanding deducts a total of $9.1 million as at December 31, 2023 (December 31, 2022 - $7.9 million) in unamortized financing costs.
(ii)
Inclusive of the benefit of bond forward hedges.
Issuance
On March 6, 2023, RioCan issued $200.0 million of Series AG senior unsecured debentures. These debentures were issued at a
coupon rate of 5.611% per annum and will mature on October 6, 2027. Inclusive of the benefit of bond forward hedges, the all-in
rate is 5.184%.
On June 26, 2023, RioCan issued $300.0 million of Series AH senior unsecured debentures. These debentures were issued at a
coupon rate of 5.962% per annum and will mature on October 1, 2029. Inclusive of the benefit of bond forward hedges, the all-in
rate is 5.284%.
On September 29, 2023, RioCan issued $300.0 million of Series AI senior unsecured debentures. These debentures were issued
at a coupon rate of 6.488% per annum and will mature on September 29, 2026. RioCan will have the option to repay Series AI
debentures at par, in whole or in part, on or after September 29, 2024.
Subsequent to year end, on February 12, 2024, RioCan issued $300.0 million Series AJ senior unsecured debentures. These
debentures were issued at a coupon rate 5.470% per annum and will mature on March 1, 2030. Inclusive of the benefit of bond
forward hedges, the all-in rate is 5.452%.
Redemption
On April 18, 2023, RioCan redeemed, in full, its $200.0 million, 3.725% Series T unsecured debentures upon maturity.
On September 29, 2023, RioCan redeemed, in full, its $300.0 million, 3.210% Series AA unsecured debentures upon maturity.
Subsequent to year end, on February 12, 2024, RioCan repaid, in full, its $300.0 million, 3.29% Series W unsecured debenture
upon maturity.
RioCan’s debenture maturity profile and future repayments are as outlined below:
(thousands of dollars)
As at
Maturity date
April 18, 2023
September 29, 2023
February 12, 2024
February 12, 2025
February 6, 2026
June 15, 2026
September 29, 2026
March 10, 2027
October 6, 2027
November 8, 2028
May 1, 2029
October 1, 2029
Series
T
AA
W
AB
I
AD
AI
AC
AG
AE
AF
AH
Contractual obligations
Unamortized debt financing costs
Balance, end of year
Coupon rate
3.73 %
3.21 %
3.29 %
2.58 %
5.95 %
1.97 %
6.49 %
2.36 %
5.61 %
2.83 %
4.63 %
5.96 %
Interest payment frequency
Semi-annual
Semi-annual
Semi-annual
Semi-annual
Semi-annual
Semi-annual
Semi-annual
Semi-annual
Semi-annual
Semi-annual
Semi-annual
Semi-annual
December 31, 2023 December 31, 2022
200,000
— $
$
300,000
—
300,000
300,000
500,000
500,000
100,000
100,000
500,000
500,000
—
300,000
350,000
350,000
—
200,000
450,000
450,000
250,000
250,000
—
300,000
2,950,000
3,250,000 $
(7,949)
2,942,051
3,240,943 $
(9,057)
$
$
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, and minimum Adjusted Unitholders'
Equity ratio would be eliminated for this series of debentures.
57 RioCan Annual Report 2023
MANAGEMENT’S DISCUSSION AND ANALYSIS
Our Business
and Our
Business
Environment
Environmental,
Social and
Governance
(ESG)
Initiatives
Property
Portfolio
Overview
Introduction
Mortgages Payable
Mortgages payable consist of the following:
(thousands of dollars, except otherwise noted)
As at
Fixed rate mortgages - Conventional (ii) (iii)
Fixed rate mortgages - CMHC (iii)
Floating rate mortgages - Conventional
Total (iii)
Weighted average effective interest rate (iv)(ii)
Weighted average term to maturity (years)
Results of
Operations
Asset Profile
Development
Program
Capital
Resources
and Liquidity
Other
Disclosures
Non-GAAP
Measures
Risks and
Uncertainties
December 31, 2023 December 31, 2022
Weighted average
effective
interest rate (i)(iv)
Weighted average
term to maturity
(years)(i)
3.42%
3.30%
6.80%
3.9 $
7.7
0.1
$
Total
2,210,175 $
379,957
150,792
Total
2,422,295
236,885
—
2,740,924 $
2,659,180
3.59 %
4.2
3.29 %
4.9
Information presented as at December 31, 2023.
Includes hedged floating rate mortgages, interest rate reflects the fixed rate in the interest rate swaps.
(i)
(ii)
(iii) Amount outstanding deducts a total of $12.9 million as at December 31, 2023 (December 31, 2022 - $5.5 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.
Inclusive of the bond forward hedges.
(iv)
At the outset of 2023, RioCan had $320.2 million of mortgage principal maturing in 2023 at a weighted average contractual
interest rate of 3.55%. For the year ended December 31, 2023, RioCan completed new term mortgage borrowings of $217.2
million and mortgage renewals of $8.4 million at a combined weighted average interest rate of 4.90% and a weighted average
term of nine years; assumed contractual debt and a vendor take-back mortgage of $45.0 million at a weighted average interest
rate of 2.67% and a remaining weighted average term of eight years; and repaid $173.0 million of mortgage balances and
scheduled amortization.
Maximizing Canada Mortgage and Housing Corporation (CMHC) insured mortgages is a key component of the Trust’s debt
strategy as they provide access to an alternative source of financing and lowers the overall cost of debt.
The majority of our mortgage debt provides recourse to the assets of the Trust or certain subsidiaries 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.
Subsequent to year end, $146.5 million of floating rate conventional mortgages were refinanced with fixed rate mortgages,
reducing the floating rate exposure, and improving the weighted average term to maturity of the Trust’s mortgage portfolio.
RioCan Annual Report 2023 58
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, except otherwise noted)
As at
December 31,
2023
December 31,
2022
Weighted
average
interest
rate (i)(iii)
Available
facility (i)
Maturity
Date (i)
Amounts
drawn
Amounts
drawn
Revolving unsecured operating line of credit (ii)(v) (vii) $ 1,250,000
6.68 %
May 31, 2028 $
— $
133,649
Non-revolving unsecured credit facilities (ii) (vi)
200,000
4.93 % February 3, 2025
Non-revolving unsecured credit facilities (ii)
350,000
3.59 % February 7, 2024
Non-revolving unsecured credit facilities (ii)
150,000
3.68 %
June 27, 2024
Non-revolving unsecured credit facilities (ii)
—
— % January 31, 2023
Construction lines and other bank loans (iv)
567,000
6.51 %
January 2024 to
March 2033
200,000
350,000
150,000
—
—
350,000
150,000
200,000
181,287
309,688
$ 2,517,000
$
881,287 $
1,143,337
Total Contractual
Unamortized debt financing costs, premiums and
discounts on origination and debt assumed, and
modifications
Total
$ 2,517,000
Weighted average effective interest rate (iii)
(2,041)
(2,225)
$
879,246 $
1,141,112
4.52 %
4.54 %
Information presented as at December 31, 2023.
(i)
(ii) 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.
Inclusive of interest rate swaps used to hedge floating rate debt.
Includes $63.0 million construction facilities that are fixed rate or have been hedged to a fixed rate, of which $12.2 million have been drawn at a
weighted average fixed interest of 3.07%. Decrease in construction lines and other bank loan amounts drawn compared to Q4 2022 includes the
impact of the 11YV transaction. Refer to the Joint Arrangements section in this MD&A for further details.
(iii)
(iv)
(v) On May 4, 2023, the maturity of the revolving unsecured operating line of credit was extended to May 31, 2028. All material terms and conditions
remain the same.
(vi) The Trust has the option to extend this term loan to January 30, 2026.
(vii) The weighted average interest rate represents the one-month Banker's Acceptance (BA) rate as at December 31, 2023 plus credit spread.
On January 31, 2023, RioCan refinanced its $200 million non-revolving unsecured credit facility with two Schedule I financial
institutions, with a weighted average annual all-in fixed rate of 4.93% through interest rate swaps and a maturity date of February
3, 2025 with an option to extend to January 30, 2026. All other terms were similar to the facility it replaced.
On February 24, 2023, RioCan, along with its partner Context Development, locked in the interest rate on a $126.0 million ($63.0
million at RioCan’s share) construction (converting to term upon stabilization) loan provided by CMHC for the rental component of
the Queen & Ashbridge development in Toronto. The interest rate on both the construction advances and the term component
was fixed at 3.07%. The term of the loan is 10 years and the amortization period upon conversion to a term loan is 50 years. In
addition to the CMHC construction loan, a $188.0 million non-revolving construction facility ($94.0 million at RioCan's share) for
the condominium component of the project was closed in Q3 2023.
On February 7, 2024, RioCan repaid its $350.0 million non-revolving unsecured credit facility upon maturity, in accordance with its
terms.
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 flexibility and 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 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.
59 RioCan Annual Report 2023
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, 2023, RioCan had $2.0 billion of Liquidity as summarized in the following table:
(thousands of dollars)
As at
Undrawn revolving unsecured operating line of credit
Undrawn construction lines and other bank loans
Cash and cash equivalents
Liquidity (i)
IFRS basis
RioCan's proportionate share (i)
December 31, December 31, December 31, December 31,
2023
2022
2023
2022
$
1,250,000 $
1,116,351 $
1,250,000 $
1,116,351
385,715
124,234
267,562
86,229
575,278
138,740
337,656
94,230
$
1,759,949 $
1,470,142 $
1,964,018 $
1,548,237
(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 $415.8 million increase in Liquidity on a proportionate share basis over the prior year end was primarily due to a higher
undrawn revolving line of credit balance and undrawn construction lines. Our liquidity improved as a result of issuing $800.0
million senior unsecured debentures, while repaying $500.0 million senior unsecured debentures upon maturity, arranging new
construction facilities for two projects and higher cash on hand as a result of asset dispositions.
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. Unencumbered investment property assets as at December 31, 2023 were as follows:
IFRS basis
RioCan's proportionate share (i)
(thousands of dollars, except where otherwise noted)
As at
Unencumbered Assets
Targeted
Ratios
December 31, December 31, December 31, December 31,
2023
8,030,541 $
2022
8,200,280 $
2023
8,089,927 $
2022
8,256,508
$
Percentage of Normalized NOI Generated from
Unencumbered Assets (i)
> 50.0%
57.3 %
57.4 %
55.8 %
55.9 %
(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.
Consistent with the discussion regarding management-targeted ratios in the Debt Metrics section of this MD&A, the
management-targeted ratio Unencumbered Assets to Unsecured Debt previously presented in the table above has been removed
as the Trust is solely managing to the corresponding Unencumbered Assets to Unsecured Debt ratio calculated pursuant to
unsecured credit facility agreements. Refer to Note 26 of the 2023 Annual Consolidated Financial Statements. As at
December 31, 2023, the Trust was in compliance with all financial covenants.
Compared to December 31, 2022, Unencumbered Assets decreased by $166.6 million mainly from dispositions, mortgage
financing obtained on formerly unencumbered assets and fair value changes, partially offset by repayment of certain maturing
mortgages and acquisition of Unencumbered Assets during the year. Excluding the fair value changes, Unencumbered Assets
would have remained relatively unchanged on a year-over-year basis.
Compared to Q3 2023, Unencumbered Assets decreased by $459.5 million mainly from investment property dispositions in
addition to the aforementioned mortgage financing of an unencumbered asset.
RioCan Annual Report 2023 60
MANAGEMENT’S DISCUSSION AND ANALYSIS
Our Business
and Our
Business
Environment
Environmental,
Social and
Governance
(ESG)
Initiatives
Property
Portfolio
Overview
Introduction
Contractual Commitments
Results of
Operations
Asset Profile
Development
Program
Capital
Resources
and Liquidity
Other
Disclosures
Non-GAAP
Measures
Risks and
Uncertainties
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:
2024
2025
2026
2027
2028
Thereafter
Total
Lines of credit and other bank loans
$ 567,015 $ 200,000 $ 102,077 $
— $
— $
12,195 $ 881,287
Mortgages payable
Debentures payable
Lease liabilities (i)
398,406
532,886
143,171
201,882
405,559 1,071,941 2,753,845
300,000
500,000
900,000
550,000
450,000
550,000 3,250,000
6,793
1,758
1,824
1,930
1,980
20,765
35,050
Other operating lease obligations
588
272
179
60
30
6
1,135
Total Contractual Obligations
$ 1,272,802 $ 1,234,916 $ 1,147,251 $ 753,872 $ 857,569 $ 1,654,907 $ 6,921,317
Total estimated cost-to-complete
projects under construction (ii) (iii)
248,120
166,686
28,963
785
—
—
444,554
Total Commitments (iv)
$ 1,520,922 $ 1,401,602 $ 1,176,214 $ 754,657 $ 857,569 $ 1,654,907 $ 7,365,871
(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 the Development Program - 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 $84.7 million relating to equity-accounted investments for which timing is
unknown.
The Trust's contractual debt obligations and total estimated cost-to-complete projects under construction can be funded by
existing cash on hand, net proceeds from the sale of assets (including, but not limited to, sale of excess land and development
density), proceeds from mortgage refinancing, the revolving unsecured operating line of credit, proceeds from the issuance of
unsecured debentures and other similar debt instruments or issuance of equity Units.
RioCan has also entered into firm purchase obligations to acquire interests in certain investment properties in future periods as
further described in Note 3 of the 2023 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.
Off-Balance Sheet Arrangements
Guarantees
As at December 31, 2023, the maximum exposure to credit loss resulting from the Trust's debt guarantees, on behalf of certain of
our co-owners' interests and mortgages assumed by purchasers on property dispositions, is $341.2 million (December 31, 2022 -
$284.7 million), with expiries between 2024 and 2033. The maximum exposure to credit risk relating to a guarantee is the
maximum risk of loss if there was a total default, without consideration of recoveries under recourse provisions against the
aforementioned parties or the properties secured.
As at and for the year ended December 31, 2023, 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 2023 Annual
Consolidated Financial Statements.
61 RioCan Annual Report 2023
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 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
December 31, 2023 December 31, 2022
$
$
$
76,740 $
163,619
19,600
81,286
341,245 $
—
341,245 $
122,770
79,945
21,700
30,988
255,403
29,286
284,689
Letter of Credit Facilities and Surety Bonds
The Trust has aggregate letter of credit facilities with certain Schedule I banks totalling $91.3 million (December 31, 2022 - $111.6
million). As at December 31, 2023, the Trust’s outstanding letters of credit under these facilities was $40.2 million (December 31,
2022 - $53.0 million).
The Trust is contingently liable for surety bonds that have been provided to support condominium developments and warranties
in the amount of $184.4 million (December 31, 2022 - $147.7 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 risk. As at December 31, 2023, approximately 4.6%
(December 31, 2022 - 6.5%) 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. In addition,
the Trust is exposed to interest rate risk on fixed rate debt upon refinancing at maturity. The current portion of fixed rate long-term
debt is $1.0 billion as at December 31, 2023.
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. The Trust will generally consider entering into bond forward contracts to reduce interest rate risk
during periods of interest rate volatility. For the $500.0 million bond forward contracts settled during the year ended December 31,
2023 (December 31, 2022 - $500.0 million), the Trust has realized $19.6 million of gains (December 31, 2022 - $37.9 million), of
which $16.8 million (December 31, 2022 - $37.1 million) was considered effective and will offset interest expense over the term
of the hedged debt, and $2.8 million (December 31, 2022 - $0.7 million) was considered ineffective and was immediately
recognized in other income. The $500.0 million of settled bond forward contracts were comprised of $200.0 million of bond
forward contracts entered into on November 24, 2022, which were settled on March 6, 2023 in conjunction with the offering of the
Series AG Debenture, and $300.0 million of bond forward contracts entered into on March 13, 2023, which were settled on June
26, 2023 in conjunction with the offering of the Series AH debenture.
As at December 31, 2023, the outstanding notional amount of floating-to-fixed interest rate swaps was $0.8 billion (December 31,
2022 – $1.0 billion) with the term to maturity of these swap agreements ranging from February 2024 to November 2028; and the
outstanding notional amount of bond forwards was $150.0 million with a maturity in February 2024 (December 31, 2022 - $200
million, with a maturity in April 2023). The fair value of the interest rate swaps and bond forwards is, in aggregate, a net financial
asset of approximately $6.8 million (December 31, 2022 - net financial asset of approximately $27.2 million).
On January 11, 2024, in conjunction with the offering of the Series AJ debenture, the Trust settled $150.0 million of bond forward
contracts entered into on December 14, 2023 generating a $0.3 million realized bond forward gain which will be recognized
through lower interest expense over the term of the debenture.
The Trust assesses the effectiveness of its continuing hedging relationships on a quarterly basis and has determined all such
designated hedging relationships were effective as at December 31, 2023. Refer to Note 25 of the 2023 Annual Consolidated
Financial Statements for further details.
RioCan Annual Report 2023 62
MANAGEMENT’S DISCUSSION AND ANALYSIS
Our Business
and Our
Business
Environment
Environmental,
Social and
Governance
(ESG)
Initiatives
Property
Portfolio
Overview
Introduction
Trust Units
Results of
Operations
Asset Profile
Development
Program
Capital
Resources
and Liquidity
Other
Disclosures
Non-GAAP
Measures
Risks and
Uncertainties
As at December 31, 2023, there are 300.5 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, 2023 and 2022, we issued and repurchased Units as follows:
(in thousands)
Units outstanding, beginning of period (i)
Units issued:
Three months ended
December 31
Years ended
December 31
2023
300,405
2022
303,912
2023
300,359
2022
309,797
Unit-based compensation exercises, net of Units repurchased for
settlement of Unit exercises
Direct purchase plan
Units repurchased and cancelled
Units outstanding, end of period (i)
47
3
—
—
4
(3,557)
85
11
—
88
14
(9,540)
300,455
300,359
300,455
300,359
(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, 2023 – 499,754 LP
units, December 31, 2022 – 499,754 LP units).
As of February 13, 2024, there are 300.5 million Units issued and outstanding. In addition, 4.7 million Unit options were issued
under the Trust’s incentive Unit option plan and 0.6 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 4.4 million Unit
options were exercisable at December 31, 2023, at a weighted average exercise price of $25.03.
As at December 31, 2023, the Trust also had 0.5 million Senior Executive Restricted Equity Units (REU), 0.5 million Employee
REUs, and 0.5 million Performance Equity Units (PEU) that are 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 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.
On November 7, 2023, RioCan received TSX approval of its notice of intention to renew its NCIB (the 2023/2024 NCIB), to
acquire up to a maximum of 29,895,017 Units, or approximately 10% of the public float as of October 31, 2023, for cancellation or
to satisfy RioCan's obligation to deliver Units under the REU and PEU Plans, over the next 12 months, effective November 9,
2023.
The number of Units that can be purchased pursuant to the 2023/2024 NCIB is subject to a current daily maximum of 117,050
Units (which is equal to 25% of 468,202, being the average daily trading volume of Units on TSX 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.
RioCan has an automatic securities purchase plan (ASPP) in connection with the 2023/2024 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.
During the year ended December 31, 2023, the Trust did not acquire and cancel any Units.
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.
63 RioCan Annual Report 2023
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 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 2023, was $0.09 per unit, which increased from $0.085 in 2022. Distributions
declared to Unitholders were as follows:
(thousands of dollars)
Distributions declared to Unitholders
Three months ended
December 31
Years ended
December 31
2023
2022
2023
2022
$
81,114 $
76,890 $
322,924 $
310,163
Total distributions declared increased for the three months and year ended December 31, 2023 when compared to the same
period in the prior year due to the distribution increase effective February 2023, 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
Less: Distributions declared to Unitholders
Excess cash flows provided by operating activities excluding non-
cash working capital, net of distributions declared (i)
Three months ended
December 31
Years ended
December 31
2023
2022
2023
2022
$
122,416 $
170,362 $
385,516 $
506,124
(11,185)
(49,055)
109,098
26,470
111,231
121,307
494,614
532,594
(81,114)
(76,890)
(322,924)
(310,163)
$
30,117 $
44,417 $
171,690 $
222,431
(i)
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, 2023, cash flows provided by operating activities, excluding non-cash working capital
items, were higher than distributions declared to Unitholders during the period by $30.1 million. For the year ended December 31,
2023, cash flows provided by operating activities, excluding non-cash working capital items, were higher than distributions
declared to Unitholders during the period by $171.7 million.
Included in the change of the non-cash working capital items for the three months and year ended December 31, 2023, are $4.0
million and $63.1 million decreases in non-cash working capital from residential inventory related changes, respectively ($44.8
million increase and $7.2 million decrease for the three months and year ended December 31, 2022, respectively).
Distribution increase effective February 2023 and February 2024
RioCan's Board of Trustees approved a 6% increase to its monthly distributions to Unitholders from $0.085 to $0.09 per unit
which commenced with the February 2023 distribution, payable in March 2023, bringing RioCan's annualized distribution to $1.08
per unit. Subsequent to year end, RioCan's Board of Trustees has approved a 2.8% increase to the monthly distribution to
Unitholders from $0.09 to $0.0925 per unit commencing with the February 2024 distribution, payable on March 7, 2024 to
Unitholders of record as at February 29, 2024. This brings RioCan's annualized distribution to $1.11 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. The retained cash flow will be used
to support future growth and to pay down debt. 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.
The Board continuously reevaluates the distribution 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, the interest rate environment and cost of capital,
estimated development completions and development spending, the impact of future acquisitions and dispositions, maintenance
capital expenditures and leasing expenditures related to our income producing portfolio, taxable income and debt covenants.
RioCan Annual Report 2023 64
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.
Activity and transactions with associates and joint ventures are disclosed in Note 4 of the 2023 Annual Consolidated Financial
Statements and Asset Profile - Joint Arrangements section of this MD&A.
As at December 31, 2023 and 2022, the Trust’s key management personnel include each of the Trustees and the following
officers: President and Chief Executive Officer, Chief Financial Officer, Chief Investment Officer, and Chief Operating Officer.
Effective February 1, 2024, Mr. Guy Metcalfe was appointed to RioCan’s Board as a Trustee.
Remuneration of the Trust’s Trustees and Key Executives during the three months and years ended December 31, 2023 and
2022 is as follows:
Three months ended December 31
Years ended December 31
Trustees
Key Executives
Trustees
Key Executives
(thousands of dollars)
Compensation and benefits
Unit-based compensation
Post-employment benefit costs
2023
2022
2023
2022
2023
2022
2023
$
107 $
107 $
1,260 $
1,123 $
429 $
420 $
5,119 $
328
—
289
—
1,022
41
826
46
2,239
2,058
3,927
—
—
156
2022
4,597
3,500
176
$
435 $
396 $
2,323 $
1,995 $
2,668 $
2,478 $
9,202 $
8,273
65 RioCan Annual Report 2023
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
$
297 $
2023
2022
Q3
Q2
Q1
Q4
Q3
Q2
271 $
276 $
280 $
306 $
305 $
308 $
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)
$
$
$
$
$
$
$
(118) $
(74) $
112 $
118 $
(5) $
3 $
78 $
176 $
175 $
175 $
170 $
166 $
171 $
171 $
133 $
135 $
132 $
131 $
128 $
135 $
132 $
133 $
136 $
132 $
132 $
128 $
135 $
135 $
114 $
117 $
114 $
114 $
111 $
120 $
116 $
114 $
118 $
114 $
115 $
112 $
120 $
119 $
81 $
81 $
81 $
80 $
77 $
77 $
78 $
300,417
300,471
300,500
300,547
302,423
304,005
308,537
310,114
Q1
294
160
167
131
131
114
115
77
Net income (loss) attributable to Unitholders
$ (0.39) $ (0.24) $
0.37 $
0.39 $ (0.02) $
0.01 $
0.25 $
0.52
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
Adjusted Debt to Adjusted EBITDA (RioCan's
Proportionate Share) (ii)
Other
Total portfolio NLA (in thousands)
Number of properties
Number of employees (iii)
Residency of Unitholders (iv)
– Canadian
– Non-resident
$
$
$
0.44 $
0.45 $
0.44 $
0.44 $
0.42 $
0.44 $
0.43 $
0.42
0.44 $
0.45 $
0.44 $
0.44 $
0.42 $
0.44 $
0.44 $
0.42
0.27 $
0.27 $
0.27 $
0.27 $
0.26 $
0.26 $
0.26 $
0.25
$ 24.76 $ 25.49 $ 26.00 $ 25.83 $ 25.73 $ 25.92 $ 26.15 $ 25.96
$ 18.62 $ 18.07 $ 19.28 $ 20.39 $ 21.13 $ 18.62 $ 20.02 $ 25.23
60.5%
60.3%
70.0%
69.7%
60.4%
60.1%
69.5%
69.2%
59.7%
59.6%
68.3%
68.1%
59.3%
58.8%
67.5%
66.9%
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%
$ 14,842 $ 15,086 $ 15,523 $ 15,179 $ 15,102 $ 15,324 $ 15,474 $ 15,346
$ 6,861 $ 6,889 $ 7,087 $ 6,816 $ 6,742 $ 6,842 $ 6,878 $ 6,710
9.28
9.45
9.49
9.48
9.51
9.28
9.41
9.48
32,586
33,583
33,545
33,498
33,627
34,791
35,930
36,193
188
568
192
565
193
581
191
570
193
563
198
550
202
557
204
581
68.4%
31.6%
67.3%
32.7%
68.3%
31.7%
65.0%
35.0%
66.7%
33.3%
68.4%
31.6%
64.8%
35.2%
66.9%
33.1%
(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) The number of employees reported excludes individuals working exclusively with the third-party residential rental property managers. As at
December 31, 2023, there are 44 individuals who work exclusively with third-party residential rental property managers.
(iv) 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
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 (loss) 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 in Q1 2022, the global pandemic and its effects on the economy and
RioCan operations.
Net income (loss) was further impacted by the changes in the fair values of investment properties.
RioCan Annual Report 2023 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
Fourth Quarter Unaudited Consolidated Statements of Loss
2023
2022
$
276,510 $
268,864
13,789
6,611
33,873
3,450
296,910
306,187
94,445
7,397
8,994
110,836
186,074
95,258
9,060
26,448
130,766
175,421
6,401
(7,190)
6,272
(3,864)
(222,921)
(115,507)
4,459
240
(219,251)
(112,859)
58,940
15,459
3,156
6,945
84,500
(117,677)
(18)
48,320
12,845
3,306
3,236
67,707
(5,145)
(184)
$
(117,659) $
(4,961)
$
$
$
$
(117,659) $
(117,659) $
(4,961)
(4,961)
(0.39) $
(0.39) $
(0.02)
(0.02)
300,417
300,417
302,321
302,423
(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
Loss from equity-accounted investments
Fair value loss on investment properties, net
Investment and other income
Other expenses
Interest costs, net
General and administrative
Internal leasing costs
Transaction and other costs
Loss before income taxes
Current income tax recovery
Net loss
Net loss
Unitholders
Net loss per unit
Basic
Diluted
Weighted average number of units (in thousands):
Basic
Diluted
67 RioCan Annual Report 2023
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 material accounting policies are described in Note 2 of RioCan's 2023 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 2023 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, 2023. 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 2023 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, 2023, the Trust adopted the following amended standards 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 2023 Annual Consolidated Financial
Statements and further described below.
Amendments to IAS 1 and IFRS Practice Statement 2
In February 2021, the IASB issued amendments to IAS 1 and IFRS Practice Statement 2 in which it provided guidance and
examples to help entities apply materiality judgments to accounting policy disclosures. The amendments require the disclosure of
material accounting policy information rather than disclosing significant accounting policies and provided guidance on how entities
apply the concept of materiality in making decisions about accounting policy disclosures.
The amendments are applicable for annual periods beginning on or after January 1, 2023, with early adoption permitted. Since
the amendments to IFRS Practice Statement 2 provide non-mandatory guidance, an effective date for these amendments is not
necessary.
The amendments have resulted in the disclosure of only material accounting policy information in the Trust’s disclosures, but did
not impact the measurement, recognition or presentation of any items in the Trust’s consolidated financial statements.
Amendments to IAS 8, Definition of Accounting Estimates
In February 2021, the IASB issued amendments to IAS 8, in which it introduced 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 for annual periods beginning on or after January 1, 2023, with early adoption permitted. The
amendments had no impact on the Trust's consolidated financial statements.
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
and 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
RioCan Annual Report 2023 68
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
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
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, 2023, RioCan had 26 properties including 2 land parcels (year ended
December 31, 2022 - 29 properties including 3 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 five 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.
Control
When determining whether the Trust should consolidate an investment in entity, the Trust makes judgments in its assessment of
whether it has control over an entity considering the power to direct the relevant activities of the entity, its exposure or rights to the
variable returns of the entity and its ability to use its power to affect its returns.
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 perform 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.
69 RioCan Annual Report 2023
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
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 2023 Annual Consolidated
Financial Statements for the year ended December 31, 2023, 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.
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 that exist at the end of a reporting
period are those that 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, 2023. 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, 2023, 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, 2023 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, 2023, 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, 2023 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 2023 70
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 growing responsibly, reducing climate-related risks and enhancing enterprise value. Since 2020, we have used 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 and opportunities. 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 International
Sustainability Standards Board’s sustainability disclosure standards: IFRS S1 General Requirements for Disclosure of
Sustainability-related Financial Disclosures and IFRS S2 Climate-related Disclosures.
This section provides a summary of our approach to managing our climate risk and opportunities in alignment with TCFD during
2023, unless otherwise noted. In 2023, RioCan conducted an assessment to identify gaps between our existing climate
disclosures and the IFRS S1 and S2 disclosure requirements. For additional details related to our climate program, please refer
to RioCan’s 2023 ESG report, available on our website.
Governance
Board Oversight
The Board of Trustees has ultimate oversight for risk management and receives updates, at least annually, 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 (the NESGC). The
charter of the NESGC sets out that the mandate of the NESGC includes overseeing the Trust’s policies and practices with
respect to corporate social responsibility matters, including environmental and sustainability issues. During 2023, the NESGC
received climate-related and other ESG updates at three of its meetings.
Significant and emerging risks, including those related to climate change, are escalated to the Audit Committee, which also
oversees environmental compliance. The People, Culture and Compensation Committee emphasizes the importance of
incorporating ESG factors including climate objectives and metrics into executive compensation. Additionally, it considers human
capital retention and development, succession planning, talent development, pay equity, benefits and compensation.
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. 20% of RioCan’s Executive Management Bonus Plan
(EBMP) payout is weighted toward ESG-specific goals, which focuses on objectives like organizational environmental goals,
employee engagement, progress towards RioCan’s s Diversity, Equity and Inclusion (DEI) action plan and related initiatives.
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 disclosures, and meet evolving stakeholder expectations.
Our climate objectives are:
•
Strengthen resilience and protect assets: Protect our operations, portfolio and developments against the 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
•
•
71 RioCan Annual Report 2023
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
Understanding the climate-related objectives and targets of our tenants
Exploring opportunities to embed climate considerations in our decision-making
Supporting education and awareness on climate
Further enhancing lease clauses to embed climate-related objectives
To accelerate our efforts towards transitioning to a net-zero economy, we took the following steps in 2023:
•
•
•
•
Climate Assessment
RioCan has conducted a detailed climate assessment to identify our climate-related risks and opportunities. We continuously
manage and monitor our climate-related risks and opportunities to understand their impact on RioCan’s business and strategy.
For further details on our climate-related risks and opportunities, please refer to RioCan’s 2023 ESG report.
Physical risk
In 2023, we expanded our assessment of potential climate change impacts to physical assets to the remaining properties not
assessed in 2022. The results have identified properties susceptible to physical damage resulting from pluvial (rainfall) flooding,
with limited exposure to fluvial (river) flooding.
Transition risk
We used the results of the climate scenario analysis conducted in 2022 to inform our strategic decision-making. To accelerate our
efforts towards transitioning to a net-zero economy, we took the following steps in 2023:
Developed near-term GHG emissions reduction and long-term net-zero targets
•
Submitted targets and associated supporting documentation to SBTi for approval and worked through the validation process.
•
Our targets were validated by the SBTi in December 2023
Developed an environmental data management plan to establish clear practices for calculating, quality checking and
reporting environmental performance data in line with standards and best practices. This will contribute to high-quality and
decision useful data needed to track progress against targets
Continued to engage with our tenants to understand their climate-related objectives and targets
Further enhanced lease clauses to embed climate considerations
Supported education and awareness on climate change
•
•
•
Risk Management
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.
•
•
•
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. For our 2022
performance, please refer to our 2023 ESG Supplement, available on our website. Our 2023 performance will be disclosed in our
2024 ESG Supplement, which will be available in Q3 2024.
In 2023, RioCan established the following GHG emissions reduction targets which were approved by the SBTi:
Near-term targets:
•
•
Absolute Scope 1 and 2 emissions to be reduced 46.2% by 2030 from using 2019 as the baseline year.
Absolute Scope 3 emissions from downstream-leased assets to be reduced 28.0% by 2030 from using 2019 as the baseline
year.
Scope 3 emissions from capital goods to be reduced 55.0% per square foot by 2030 from using 2019 as the baseline year.
RioCan commits to reduce absolute scope 1, 2 and 3 GHG emissions by 90.0% by 2050 from using 2019 as the baseline
year.
•
Long-Term Targets:
•
RioCan Annual Report 2023 72
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. Non-
GAAP financial measures are not standardized financial measures under IFRS and may not be comparable to similar financial
measures presented by other issuers. 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. 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
RioCan's
Proportionate Share
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
results presented on a
investments. Management considers certain
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
The remaining definitions outlined below pertain to measures that are 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
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 meaningful, because it is consistent with how RioCan
operates and manages its development program. The Trust currently accounts
for its investments in joint ventures using the equity method of accounting.
Asset Profile-Joint
Arrangements
and
Development Program
sections
73 RioCan Annual Report 2023
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 being a key input in determining the value of the income
producing properties portfolio.
Same Property NOI
(SPNOI)
Commercial Same
Property NOI,
Residential Same
Property NOI
and
Adjusted Commercial
Same Property NOI
Same Property NOI is comprised of Commercial Same Property NOI and
Residential Same Property NOI.
Commercial 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
Commercial 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 rent-free periods and contractual rent
increases embedded in the underlying lease agreements. Commercial Same
Property NOI also excludes NOI for a limited number of properties undergoing
significant de-leasing in preparation for redevelopment or intensification.
Residential Same Property NOI is a non-GAAP financial measure used by
RioCan to assess the period-over-period performance of the stabilized
residential rental properties owned and operated by RioCan in both periods. A
property is considered to have reached stabilization upon the earlier of (i)
achieving 95% occupancy or (ii) 24 months after first occupancy in both periods.
Commercial Same Property NOI and Residential Same Property NOI are
meaningful measures of operating performance because
they allow
management to assess rent growth and leasing activity of its portfolio on a
same property basis and the impact of capital investments.
Adjusted Commercial Same Property NOI starts with Same Property NOI but
adds back (deducts) same property provision for credit losses (recovery) and
excludes legal and CAM/property tax settlements.
(iii) Same Property
NOI
RioCan Annual Report 2023 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
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
including associated
losses on
transaction costs, and ERP implementation costs (net of amortization) which are
not representative of recurring operating performance.
investment properties,
the disposal of
Funds From
Operations (FFO)
and
FFO Adjusted
RioCan’s method of calculating FFO is in compliance with REALPAC’s definition
of FFO except that RioCan excludes unrealized fair value gains or losses on
marketable securities and ERP implementation costs (net of amortization) in its
calculation of FFO. The Trust believes that including such unrealized fair value
gains or losses on marketable securities and ERP implementation costs (net of
amortization) 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, to normalize FFO. Debt prepayment
costs include yield maintenance, write-off of deferred financing costs and
discounts/premiums, and related swap settlements that are not related to
investment properties dispositions. One-time compensation costs include the
acceleration of certain unit-based compensation amortization expenses.
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.
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.
(iv) FFO
Adjusted Funds From
Operations (AFFO)
and
AFFO Adjusted
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 fair value gains or losses on
marketable securities and ERP implementation costs (net of amortization) from
FFO and by extension AFFO. Management considers AFFO a meaningful
measure of recurring economic earnings and relevant in understanding
RioCan's ability to service its debt, fund capital expenditures and determine 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, to normalize AFFO. 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
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 and 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
75 RioCan Annual Report 2023
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
(vi) Adjusted G&A
Expense
Asset Profile-Capital
Expenditures on
Income Properties
section
Adjusted G&A
Expense
and
Adjusted G&A
Expense as a
percentage of rental
revenue
Adjusted G&A Expense is a non-GAAP financial measure calculated as total
general and administrative expense
implementation costs,
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 ongoing general and administrative expenses as a percentage of rental
revenue.
less ERP
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 is 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 2023, the Trust determined that $55.0 million was a reasonable estimate for
its Normalized Capital Expenditures. The Trust's Normalized Capital
Expenditures for 2024 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 2024, although
quarterly fluctuations between the $13.8 million quarterly Normalized Capital
Expenditures spend and actual spend are expected. Normalized Capital
Expenditures does not include estimated capital expenditures for mixed-use
residential projects given that these are newly constructed buildings.
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 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.
Asset Profile-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 proportionate share of
Development Spending from equity-accounted joint ventures. Development
Spending is disaggregated into mixed-use (typically the complete or partial
redevelopment of a property, that consists of retail, office, residential rental and/
or residential condominiums) and construction of retail projects (typically, add-
on pad/building or repurposing a section of an existing retail property).
Development Spending is a useful measure of development progress and
investment in properties under development and residential inventory.
(vii) Development
Spending
RioCan Annual Report 2023 76
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
Net Cost Transfer
from PUD to IPP
Net Cost Transfer from PUD to IPP is a non-GAAP financial measure defined as
IFRS cost transfer from PUD to IPP, net of adjustments to cash basis. It
excludes vacant land costs and invested costs on retail redevelopment at date
of transfer. It is also net of proceeds from land sales, applicable interim income
or fee income earned, capitalized interest on invested equity, and fair value on
initial amounts transferred into properties under development.
Net Cost Transfer from PUD to IPP is a useful measure of cash investment in
the development projects.
Quantitative
Reconciliation
(viii) Net Cost Transfer
from PUD to IPP
Total Development at
Cost
Total Development at Cost is a non-GAAP financial measure defined as the sum
of the cost of residential inventory and related prepaid selling commissions, and
properties under development, and the cost of RioCan's proportionate share of
residential inventory and related prepaid selling commissions, and properties
under development from equity-accounted joint ventures.
This metric is a useful measure in determining RioCan's development costs
incurred.
(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 proportionate share of investment property and residential inventory
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 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)
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.
These measures are useful in measuring leverage.
(xi) Total Debt and
Total Contractual Debt
Adjusted EBITDA
and
Adjusted EBITDA
(RioCan's
Proportionate Share)
Adjusted EBITDA and Adjusted EBITDA (RioCan's Proportionate Share) are
non-GAAP financial measures that are used by management as an input in a
key debt metric that we use in measuring our debt profile and assessing our
ability to service our debt.
includes RioCan’s
(RioCan's Proportionate Share)
Adjusted EBITDA
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, transaction costs, ERP
implementation 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, one-time cash compensation costs and
restructuring costs.
(xv) Adjusted EBITDA
and Coverage Ratios
77 RioCan Annual Report 2023
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
Average Total
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 (Average Total 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 Average Total Adjusted Debt of RioCan's entire portfolio,
including equity-accounted investments, divided by Adjusted EBITDA (RioCan's
Proportionate Share).
These ratios are useful measures of the Trust's ability to satisfy debt obligations.
Quantitative
Reconciliation
(xv) 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)
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).
These ratios are useful measures of the Trust's relative exposure to fixed and
floating rate debt.
(xii) Floating Rate
Debt and Fixed Rate
Debt
Liquidity
and
Liquidity (RioCan's
Proportionate Share)
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.
(xiv) Liquidity
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 (contractual amount of 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 (contractual amount of 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).
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.
(xiii) Unsecured Debt
and Secured Debt
RioCan Annual Report 2023 78
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
Unencumbered
Assets
and
Ratio of
Unencumbered
Assets to total
investment properties
and
Ratio of
Unencumbered
Assets to total
investment properties
(RioCan's
Proportionate Share)
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 (Unencumbered Assets) divided by total fair
value of investment properties.
Ratio of Unencumbered Assets to total investment properties (RioCan's
Proportionate Share) is a non-GAAP ratio calculated as Unencumbered Assets
divided by
investment properties, both at RioCan's
Proportionate Share (RioCan's proportionate interest of its entire portfolio,
including equity-accounted investments).
fair value of
total
These ratios are useful measures of investment properties that can be
mortgaged to increase Liquidity.
Quantitative
Reconciliation
(xvi) Unencumbered
Assets
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.
(xvi) Unencumbered
Assets
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
operating activities excluding non-cash working capital
the
distributions declared to Unitholders.
items
less
This is a useful measure of the excess cash the Trust has retained after
distributions to fund operations, investments and capital activities.
Distributions to
Unitholders section
79 RioCan Annual Report 2023
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 sheets from IFRS to RioCan's proportionate share basis as at
December 31, 2023 and 2022:
As at
December 31, 2023
December 31, 2022
(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
IFRS basis
Equity-
accounted
investments
RioCan's
proportionate
share
IFRS basis
Equity-
accounted
investments
RioCan's
proportionate
share
$ 13,561,718 $
411,811 $ 13,973,529 $ 13,807,740 $
398,701 $ 14,206,441
383,883
289,533
217,186
19,075
246,652
124,234
$ 14,842,281 $
(383,883)
(6,707)
407,946
—
50,681
14,506
—
282,826
625,132
19,075
297,333
138,740
364,892
269,339
272,005
42,140
259,514
86,229
494,354 $ 15,336,635 $ 15,101,859 $
(364,892)
—
214,536
—
37,779
—
269,339
486,541
42,140
297,293
8,001
94,230
294,125 $ 15,395,984
$ 3,240,943 $
— $ 3,240,943 $ 2,942,051 $
— $ 2,942,051
2,740,924
158,292
2,899,216
2,659,180
172,100
2,831,280
Lines of credit and other bank loans
Accounts payable and other liabilities
879,246
543,398
231,963
1,111,209
1,141,112
89,187
1,230,299
104,099
647,497
630,624
32,838
663,462
Total liabilities
$ 7,404,511 $
494,354 $ 7,898,865 $ 7,372,967 $
294,125 $ 7,667,092
Equity
Unitholders’ equity
7,437,770
—
7,437,770
7,728,892
—
7,728,892
Total liabilities and equity
$ 14,842,281 $
494,354 $ 15,336,635 $ 15,101,859 $
294,125 $ 15,395,984
RioCan Annual Report 2023 80
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 sheets from IFRS to RioCan's proportionate share basis as at
December 31, 2021:
December 31, 2021
IFRS basis
Equity-
accounted
investments
RioCan's
proportionate
share
$ 14,021,338 $
409,794 $ 14,431,132
327,335
237,790
217,043
47,240
248,959
77,758
(327,335)
—
121,291
—
35,367
9,113
—
237,790
338,334
47,240
284,326
86,871
$ 15,177,463 $
248,230 $ 15,425,693
$ 2,990,692 $
— $ 2,990,692
2,334,016
1,285,910
166,368
2,500,384
48,049
1,333,959
655,501
33,813
689,314
$ 7,266,119 $
248,230 $ 7,514,349
7,911,344
—
7,911,344
$ 15,177,463 $
248,230 $ 15,425,693
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
81 RioCan Annual Report 2023
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, 2023 and December 31, 2022 and year ended December 31, 2021:
(thousands of dollars)
Revenue
Rental revenue
Three months ended December 31, 2023 Three months ended December 31, 2022
RioCan's
proportionate
RioCan's
proportionate
IFRS basis
share IFRS basis
share
Equity-
accounted
investments
Equity-
accounted
investments
$
276,510 $
8,124 $
284,634 $
268,864 $
7,516 $
276,380
Residential inventory sales
13,789
11,365
25,154
33,873
Property management and other service fees
6,611
—
6,611
3,450
—
—
33,873
3,450
296,910
19,489
316,399
306,187
7,516
313,703
Operating costs
Rental operating costs
Recoverable under tenant leases
Non-recoverable costs
Residential inventory cost of sales
Operating income
Other income (loss)
Interest income
94,445
7,397
8,994
110,836
186,074
881
605
95,326
95,258
8,002
9,060
9,117
18,111
26,448
10,603
121,439
130,766
8,886
194,960
175,421
836
606
—
1,442
6,074
96,094
9,666
26,448
132,208
181,495
6,401
618
7,019
6,272
599
6,871
Income (loss) from equity-accounted
investments
Fair value loss on investment properties, net
(7,190)
7,190
—
(3,864)
3,864
—
(222,921)
(13,506)
(236,427)
(115,507)
(8,404)
(123,911)
Investment and other income (loss)
4,459
(25)
4,434
240
324
564
(219,251)
(5,723)
(224,974)
(112,859)
(3,617)
(116,476)
Other expenses
Interest costs, net
General and administrative
Internal leasing costs
Transaction and other costs
Loss before income taxes
Current income tax recovery
Net loss
58,940
15,459
3,156
6,945
3,108
23
—
32
62,048
15,482
3,156
6,977
48,320
12,845
3,306
3,236
2,394
23
—
40
84,500
3,163
87,663
67,707
2,457
$
(117,677) $
— $
(117,677) $
(5,145) $
(18)
—
(18)
(184)
$
(117,659) $
— $
(117,659) $
(4,961) $
— $
—
— $
50,714
12,868
3,306
3,276
70,164
(5,145)
(184)
(4,961)
RioCan Annual Report 2023 82
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, 2023
RioCan's
proportionate
Equity-
accounted
investments
IFRS basis
share IFRS basis
Year ended December 31, 2022
RioCan's
proportionate
Equity-
accounted
investments
share
$ 1,091,105 $
33,609 $ 1,124,714 $ 1,074,192 $
29,221 $ 1,103,413
Residential inventory sales
Property management and other service fees
13,789
18,977
63,222
77,011
118,659
—
18,977
20,996
936
—
119,595
20,996
1,123,871
96,831
1,220,702 1,213,847
30,157
1,244,004
Operating costs
Rental operating costs
Recoverable under tenant leases
Non-recoverable costs
Residential inventory cost of sales
Operating income
Other income (loss)
Interest income
374,149
26,320
8,994
409,463
714,408
3,549
2,338
49,476
55,363
41,468
377,698
376,914
28,658
58,470
464,826
755,876
27,955
96,286
501,155
712,692
2,889
2,394
422
5,705
24,452
379,803
30,349
96,708
506,860
737,144
25,131
2,559
27,690
20,902
2,326
23,228
Income from equity-accounted investments
18,383
(18,383)
—
2,349
(2,349)
—
Fair value loss on investment properties, net
(450,408)
(14,123)
(464,531)
(241,128)
(16,208)
(257,336)
Investment and other (loss) income
8,501
(339)
8,162
(1,842)
277
(1,565)
(398,393)
(30,286)
(428,679)
(219,719)
(15,954)
(235,673)
Other expenses
Interest costs, net
General and administrative
Internal leasing costs
Transaction and other costs
208,948
11,339
220,287
180,365
8,242
188,607
60,367
11,919
9,344
56
—
(213)
60,423
11,919
9,131
54,437
12,204
8,274
290,578
11,182
301,760
255,280
74
—
182
8,498
— $
—
— $
54,511
12,204
8,456
263,778
237,693
921
236,772
Income before income taxes
Current income tax (recovery) expense
Net income
$
$
25,437 $
(13,365)
38,802 $
— $
—
— $
25,437 $
237,693 $
(13,365)
921
38,802 $
236,772 $
83 RioCan Annual Report 2023
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 (loss)
Interest income
Income from equity-accounted investments
Fair value gain (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
Debt prepayment costs, net
Income before income taxes
Current income tax recovery
Net income
Results of
Operations
Asset Profile
Development
Program
Capital
Resources
and Liquidity
Other
Disclosures
Non-GAAP
Measures
Risks and
Uncertainties
Year ended December 31, 2021
Equity-
accounted
investments
RioCan's
proportionate
share
IFRS basis
$ 1,066,562 $
26,836 $ 1,093,398
93,727
14,772
6,474
100,201
—
14,772
1,175,061
33,310
1,208,371
367,297
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
13,666
2,160
15,826
19,189
(19,189)
—
124,052
(1,113)
122,939
2,743
(806)
1,937
159,650
(18,948)
140,702
171,521
7,026
178,547
51,400
11,807
17,343
10,914
60
—
272
—
262,985
7,358
$
598,330 $
(59)
$
598,389 $
— $
—
— $
51,460
11,807
17,615
10,914
270,343
598,330
(59)
598,389
RioCan Annual Report 2023 84
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, 2023 and 2022 and years
ended December 31, 2023, 2022 and 2021:
(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
2023
2022
2023
2022
2021
$
186,074 $
175,421 $
714,408 $
712,692 $
701,665
(6,611)
(4,795)
1,638
(3,450)
(7,425)
1,516
(18,977)
(4,795)
6,717
(20,996)
(22,373)
5,666
(14,772)
(28,381)
4,799
NOI
$
176,306 $
166,062 $
697,353 $
674,989 $
663,311
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, 2023 and 2022 and years ended December 31, 2023, 2022 and 2021:
(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
2023
176,306 $
2022
166,062 $
2023
697,353 $
2022
674,989 $
2021
663,311
8,886 $
6,074 $
41,468 $
24,452 $
26,306
(2,248)
(222)
6,416 $
—
(13,746)
(202)
(858)
(514)
(809)
5,872 $
26,864 $
23,129 $
(4,103)
(777)
21,426
182,722 $
171,934 $
724,217 $
698,118 $
684,737
85 RioCan Annual Report 2023
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, 2023 and 2022:
(thousands of dollars)
Commercial:
Commercial Same Property NOI
NOI from income producing properties:
Acquired (i)
Disposed (i)
NOI from completed commercial developments
NOI from properties under de-leasing (ii)
Lease cancellation fees
Straight-line rent adjustment
NOI from commercial properties
Residential:
Residential Same Property NOI
NOI from income producing properties:
Acquired (i)
Disposed (i)
NOI from completed residential developments
NOI from residential rental
NOI (iii)
Three months ended
December 31
Years ended
December 31
2023
2022
2023
2022
$
150,698 $
142,019 $
596,558 $
569,416
566
2,494
3,060
9,181
4,213
70
8
8,830
8,838
4,878
5,111
391
2,010
15,351
17,361
31,964
18,842
5,253
462
46,709
47,171
16,948
20,829
5,119
2,638
169,860
806
162,043
5,898
675,876
1,884
661,367
4,088
3,507
7,123
6,260
401
—
401
1,957
6,446
—
—
—
512
4,019
2,975
48
3,023
11,331
21,477
1,667
(7)
1,660
5,702
13,622
$
176,306 $
166,062 $
697,353 $
674,989
Includes properties acquired or disposed of during the periods being compared.
(i)
(ii) NOI from limited number of properties undergoing significant de-leasing in preparation for redevelopment or intensification.
(iii) Refer to (ii) NOI of this Non-GAAP Measures section of this MD&A for reconciliation from NOI to operating income.
(thousands of dollars)
Commercial Same Property NOI
Residential Same Property NOI
Same Property NOI
Adjusted Commercial Same Property NOI
(thousands of dollars)
Commercial Same Property NOI
Add (exclude):
Same property (recovery) provisions for credit losses
Legal and CAM/property tax settlements
Three months ended
December 31
Years ended
December 31
2023
2022
2023
2022
$
$
150,698 $
142,019 $
596,558 $
569,416
4,088
3,507
7,123
6,260
154,786 $
145,526 $
603,681 $
575,676
Three months ended
December 31
Years ended
December 31
2023
2022
2023
2022
$
150,698 $
142,019 $
596,558 $
569,416
(801)
(1,606)
1,325
1,022
(5,571)
(6,119)
1,185
(520)
Adjusted Commercial Same Property NOI
$
148,291 $
144,366 $
584,868 $
570,081
RioCan Annual Report 2023 86
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, 2023 and 2022:
Three months ended
December 31
Years ended
December 31
(thousands of dollars, except where otherwise noted)
Net income (loss) attributable to Unitholders
2023
2022
2023
2022
$
(117,659) $
(4,961) $
38,802 $
236,772
Add back/(Deduct):
Fair value losses, net
222,921
115,507
450,408
241,128
Fair value losses included in equity-accounted investments
Internal leasing costs
Transaction losses on investment properties, net (i)
Transaction gains on equity-accounted investments
Transaction costs on sale of investment properties
ERP implementation costs
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 related to equity-accounted investments (ii)
13,506
3,156
1,147
(14)
5,094
3,503
(1,846)
(18)
1,283
(16)
1,833
8,404
3,306
560
—
2,652
—
382
(184)
1,120
(12)
869
14,124
11,919
1,182
(83)
5,601
12,032
865
(13,365)
5,116
(55)
4,735
16,207
12,204
1,027
—
5,734
—
3,782
921
4,086
(46)
2,863
FFO
Add back:
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)
$
132,890 $
127,643 $
531,281 $
524,678
$
$
$
$
24
510
1,368
4,289
132,914 $
128,153 $
532,649 $
528,967
0.44 $
0.44 $
0.44 $
0.42 $
0.42 $
0.42 $
1.77 $
1.77 $
1.77 $
1.71
1.71
1.73
300,417
300,417
302,321
302,423
300,392
300,479
306,069
306,247
(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, 2023 and 2022:
(thousands of dollars)
Income from equity-accounted investments
Three months ended
December 31
Years ended
December 31
2023
2022
2023
$
(7,190) $
(3,864) $
18,383 $
Fair value losses included in equity-accounted investments
13,506
8,404
14,124
Transaction gains on equity-accounted investments
Transaction costs/(gains) on sale of investment properties
Operational lease expenses from ROU assets in equity-accounted
investments
Capitalized interest related to equity-accounted investments (i)
FFO from equity-accounted investments
(14)
—
(16)
1,833
8,119 $
$
—
—
(12)
869
(83)
—
(55)
4,735
5,397 $
37,104 $
2022
2,349
16,207
—
2
(46)
2,863
21,375
(i)
This amount represents the interest capitalized to RioCan's equity-accounted investment in 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, PR Bloor Street LP and RC Yorkville LP. This amount is not capitalized to properties under development under IFRS but is
allowed as an adjustment under REALPAC’s definition of FFO.
87 RioCan Annual Report 2023
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
The following tables reconcile quarterly net income (loss) attributable to Unitholders to FFO for the years ended December 31,
2023, 2022 and 2021:
Q4 2023
Q3 2023
Q2 2023
Q1 2023
Twelve months ended
December 31, 2023
$ (117,659) $
(73,510) $ 111,967 $ 118,004 $
38,802
222,921
199,528
10,594
17,365
450,408
(thousands of dollars, except where otherwise
noted)
Net income (loss) attributable to Unitholders
Add back/(Deduct):
Fair value losses, net
Fair value losses (gains) included in equity-
accounted investments
Internal leasing costs
Transaction losses (gains) on investment
properties, net
Transaction gains on equity-accounted
investments
Transaction costs (recoveries) on sale of
investment properties
ERP implementation costs
Change in unrealized fair value on marketable
securities
Current income tax (recovery) expense
13,506
167
3,156
3,020
1,072
3,018
(621)
2,725
1,147
(77)
176
(64)
(14)
(69)
—
—
5,094
3,503
(4)
344
167
2,121
2,454
3,954
(1,846)
1,898
(173)
986
(18)
20
31
(13,398)
Operational lease revenue from ROU assets
1,283
1,283
1,196
1,354
Operational lease expenses from ROU assets in
equity-accounted investments
Capitalized interest related to equity-accounted
investments
FFO
Add back:
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
(16)
(14)
(13)
(12)
1,833
1,059
966
877
$ 132,890 $ 135,422 $ 131,632 $ 131,337 $
24
720
11
613
$ 132,914 $ 136,142 $ 131,643 $ 131,950 $
$
$
$
$
81,109 $
81,110 $
81,101 $
78,094 $
531,281 $
526,034 $
525,415 $
525,440
532,649 $
527,888 $
526,549 $
529,733
321,414 $
317,500 $
313,887 $
311,603
14,124
11,919
1,182
(83)
5,601
12,032
865
(13,365)
5,116
(55)
4,735
531,281
1,368
532,649
321,414
60.5 %
60.3 %
RioCan Annual Report 2023 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
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 (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 (recovery) expense
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 related to equity-accounted
investments
FFO
Add back:
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 %
89 RioCan Annual Report 2023
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)
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)
(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
Internal leasing costs
Transaction losses (gains) on investment
properties, net
Transaction costs on sale of investment properties
Current income tax (recovery) expense
Operational lease revenue from ROU assets
Operational lease (expenses) from ROU assets in
equity-accounted investments
(1,480)
2,982
1,386
3,206
695
512
2,767
2,852
901
234
6,324
2,751
(68)
887
479
834
(888)
1,678
(307)
824
155
3,638
(163)
763
(11)
(11)
(11)
(9)
Capitalized interest on equity-accounted
investments
FFO
Add back:
Debt prepayment costs, net
One-time compensation costs
FFO Adjusted
Distribution paid
FFO Payout Ratio
FFO Payout Ratio Adjusted
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 $
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 %
RioCan Annual Report 2023 90
MANAGEMENT’S DISCUSSION AND ANALYSIS
Our Business
and Our
Business
Environment
Environmental,
Social and
Governance
(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, 2023 and 2022:
(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
Three months ended
December 31
Years ended
December 31
2023
2022
2023
2022
$
132,890 $
127,643 $
531,281 $
524,678
(2,638)
(258)
(7,075)
(5,875)
(800)
(3,156)
582
(806)
(295)
(5,898)
(1,180)
(1,884)
(1,461)
(5,625)
(5,625)
(1,250)
(3,306)
610
(28,300)
(23,500)
(3,200)
(11,919)
2,199
(22,500)
(22,500)
(5,000)
(12,204)
2,252
461,381
113,670
111,346
459,483
24
510
1,368
4,289
$
113,694 $
111,856 $
460,851 $
465,670
(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, 2023, 2022 and 2021:
(thousands of dollars, except where otherwise noted)
FFO (i)
Q4 2023
Q3 2023
Q2 2023
Q1 2023
Twelve months ended
December 31, 2023
$ 132,890 $ 135,422 $ 131,632 $ 131,337 $
531,281
Add back (deduct):
Straight-line rent
(2,638)
(1,660)
(1,027)
Straight-line rent in equity-accounted investments
(258)
(262)
(353)
(573)
(307)
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
(7,075)
(5,875)
(800)
(7,075)
(5,875)
(800)
(7,075)
(5,875)
(800)
(7,075)
(5,875)
(800)
(3,156)
(3,020)
(3,018)
(2,725)
582
557
557
503
$ 113,670 $ 117,287 $ 114,041 $ 114,485 $
24
720
11
613
$ 113,694 $ 118,007 $ 114,052 $ 115,098 $
$
81,109 $
81,110 $
81,101 $
78,094 $
321,414
AFFO last 4 quarters
$ 459,483 $ 457,159 $ 459,483 $ 461,530
AFFO Adjusted for last 4 quarters
$ 460,851 $ 459,013 $ 460,617 $ 465,823
Distributions last four quarters
$ 321,414 $ 317,500 $ 313,887 $ 311,603
AFFO Payout Ratio
AFFO Payout Ratio Adjusted
70.0 %
69.7 %
(i) Refer to (iv) FFO of this Non-GAAP Measures section of this MD&A for reconciliation from net income to FFO.
91 RioCan Annual Report 2023
(5,898)
(1,180)
(28,300)
(23,500)
(3,200)
(11,919)
2,199
459,483
1,368
460,851
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 AFFO, AFFO Payout Ratio and AFFO Payout Ratio Adjusted (continued)
(thousands of dollars, except where otherwise noted)
FFO (i)
Q4 2022
Q3 2022
Q2 2022
Q1 2022
Twelve months ended
December 31, 2022
$ 127,643 $ 134,803 $ 131,657 $ 130,575 $
524,678
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
AFFO last 4 quarters
AFFO Adjusted for last 4 quarters
Distributions last four quarters
AFFO Payout Ratio
AFFO Payout Ratio Adjusted
(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 $
$
77,195 $
77,497 $
78,817 $
75,907 $
$ 461,381 $ 481,410 $ 471,858 $ 467,635
$ 465,670 $ 489,085 $ 479,533 $ 472,351
$ 309,416 $ 308,221 $ 306,986 $ 304,433
(1,884)
(1,461)
(22,500)
(22,500)
(5,000)
(12,204)
2,252
461,381
4,289
465,670
309,416
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.
(thousands of dollars, except where otherwise noted)
FFO (i)
Q4 2021
Q3 2021
Q2 2021
Q1 2021
Twelve months ended
December 31, 2021
$ 146,521 $ 126,908 $ 127,517 $ 106,036 $
506,982
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 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 $
(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 %
RioCan Annual Report 2023 92
MANAGEMENT’S DISCUSSION AND ANALYSIS
Our Business
and Our
Business
Environment
Environmental,
Social and
Governance
(ESG)
Initiatives
Property
Portfolio
Overview
Introduction
(vi) Adjusted G&A Expense
Results of
Operations
Asset Profile
Development
Program
Capital
Resources
and Liquidity
Other
Disclosures
Non-GAAP
Measures
Risks and
Uncertainties
Adjusted G&A Expense for the three months and years ended December 31, 2023 and 2022 are as follows:
(thousands of dollars, except where otherwise
noted)
Three months ended December 31
Years ended December 31
2023
2022
Change
2023
2022
Change
Total G&A expense
Deduct:
Restructuring costs
ERP implementation costs
Adjusted G&A Expense
Rental revenue
Adjusted G&A Expense as a percentage of
rental revenue
(vii) Development Spending
$
15,459 $
12,845 $
2,614 $
60,367 $
54,437 $
5,930
24
3,503
510
—
(486)
1,368
4,289
(2,921)
3,503
12,032
—
12,032
$
11,932 $
12,335 $
(403) $
46,967 $
50,148 $
(3,181)
276,510
268,864
7,646 1,091,105 1,074,192
16,913
4.3%
4.6%
(0.3)%
4.3%
4.7%
(0.4)%
Total Development Spending for the three months and years ended December 31, 2023 and 2022 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
2023
2022
2023
2022
$
52,267 $
78,282 $
244,260 $
26,875
33,631
127,118
298,409
112,597
RioCan's share of Development Spending from equity-accounted
joint ventures
15,223
2,639
28,568
16,062
Total Development Spending
$
94,365 $
114,552 $
399,946 $
427,068
(thousands of dollars)
Mixed-use projects
Retail projects
Total Development Spending
(viii) Net Cost Transfer from PUD to IPP
(thousands of dollars)
IFRS cost transfer from PUD to IPP
Adjustments to cash basis (i)
Net Cost Transfer from PUD to IPP
Three months ended
December 31
Years ended
December 31
2023
2022
2023
2022
$
$
83,271 $
88,642 $
346,956 $
394,926
11,094
25,910
52,990
32,142
94,365 $
114,552 $
399,946 $
427,068
Years ended
December 31
2023
530,600 $
(63,800)
466,800 $
2022
565,520
(60,553)
504,967
$
$
(i)
Includes vacant land costs, invested costs on retail redevelopment at date of transfer, proceeds from land sales, applicable interim income or fee
income earned, capitalized interest on invested equity, and fair value on initial amounts transferred into properties under development.
93 RioCan Annual Report 2023
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
(ix) Total Development at Cost
Total Development at Cost as at December 31, 2023 is as follows:
Residential inventory cost to date
IFRS basis
Commissions
Adjustments
for EAI JV
Cost
3,823
(thousands of dollars)
Projects under construction $ 125,369 $
Shovel ready development
sites
Zoning approved
Zoning application
submitted
Future developments
Development lands &
others
Total Development at
Cost
$ 217,186 $
56,229
27,498
4,267
—
(i)
(ii)
Total
7,242 $ 176,841 $ 309,452 $ 366,308 $
PUD cost to date
Total
Residential
inventory
and PUD
cost to
Total
date
13,856 $ 380,164 $ 689,616
IFRS
basis
Adjustments
for EAI JV
—
—
3,823 173,151
— 173,151
176,974
—
101,965 158,194 165,789
2,130 167,919
326,113
655
16,435 44,588
67,956
2,031
69,987
114,575
—
—
—
4,267 102,415
— 102,415
106,682
—
—
24,644
—
24,644
24,644
7,897 $ 295,241 $ 520,324 $ 900,263 $
18,017 $ 918,280 $ 1,438,604
Total properties under development at fair value
$ 947,573
(i)
(ii)
Includes selling commissions which are included in prepaid expenses and other assets.
Includes $7.7 million in commissions for EAI JV.
(x) Total Acquisitions
Total Acquisitions for the three months and years ended December 31, 2023 and 2022 are as follows:
(thousands of dollars)
Income producing properties
Properties under development
Residential inventory
Three months ended
December 31
Years ended
December 31
2023
2022
2023
$
— $
5,011 $
75,473 $
—
—
—
—
—
—
34,583
—
—
2022
96,031
11,946
19,440
66,497
RioCan's share of acquisitions from equity-accounted joint ventures
Total Acquisitions
$
— $
5,011 $
110,056 $
193,914
RioCan Annual Report 2023 94
MANAGEMENT’S DISCUSSION AND ANALYSIS
Our Business
and Our
Business
Environment
Environmental,
Social and
Governance
(ESG)
Initiatives
Property
Portfolio
Overview
Introduction
(xi) Total Debt and Total Contractual Debt
Results of
Operations
Asset Profile
Development
Program
Capital
Resources
and Liquidity
Other
Disclosures
Non-GAAP
Measures
Risks and
Uncertainties
RioCan uses both debt and equity in its capital structure, which is summarized as follows as at December 31, 2023 and
December 31, 2022:
As at
December 31, 2023
December 31, 2022
(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
$ 3,240,943 $
2,740,924
879,246
$ 6,861,113 $
— $ 3,240,943 $ 2,942,051 $
158,292
231,963
390,255 $ 7,251,368 $ 6,742,343 $
2,659,180
1,141,112
2,899,216
1,111,209
7,437,770
—
7,437,770
7,728,892
$ 14,298,883 $
390,255 $ 14,689,138 $ 14,471,235 $
— $ 2,942,051
2,831,280
172,100
89,187
1,230,299
261,287 $ 7,003,630
—
7,728,892
261,287 $ 14,732,522
December 31, 2023
December 31, 2022
Equity-
accounted
investments
RioCan's
proportionate
IFRS basis
$ 6,861,113 $
share
390,255 $ 7,251,368 $ 6,742,343 $
IFRS basis
Equity-
accounted
investments
RioCan's
proportionate
share
261,287 $ 7,003,630
(24,019)
(484)
(24,503)
(15,634)
(690)
(16,324)
Total Contractual Debt
$ 6,885,132 $
390,739 $ 7,275,871 $ 6,757,977 $
261,977 $ 7,019,954
(xii) Floating Rate Debt and Fixed Rate Debt
As at
December 31, 2023
December 31, 2022
(thousands of dollars, except where
otherwise noted)
Total fixed rate debt
Total floating rate debt
Total debt
Ratio of floating rate debt to total
debt
IFRS basis
Equity-
accounted
investments
RioCan's
proportionate
share
IFRS basis
Equity-
accounted
investments
RioCan's
proportionate
share
$ 6,543,106 $
212,554 $ 6,755,660 $ 6,301,054 $
141,720 $ 6,442,774
318,007
177,701
495,708
441,289
119,567
560,856
$ 6,861,113 $
390,255 $ 7,251,368 $ 6,742,343 $
261,287 $ 7,003,630
4.6%
6.8%
6.5%
8.0%
(xiii) Unsecured Debt and Secured Debt
The following table reconciles Total Unsecured and Secured Debt to Total Contractual Debt as at December 31, 2023 and
December 31, 2022:
As at
December 31, 2023
December 31, 2022
IFRS basis
Equity-
accounted
investments
RioCan's
proportionate
share
IFRS basis
Equity-
accounted
investments
$
3,950,000 $
— $
3,950,000 $
3,783,649 $
— $
RioCan's
proportionate
share
3,783,649
2,935,132
390,739
3,325,871
2,974,328
261,977
3,236,305
$
6,885,132 $
390,739 $
7,275,871 $
6,757,977 $
261,977 $
7,019,954
57.4 %
42.6 %
54.3 %
45.7 %
56.0 %
44.0 %
53.9 %
46.1 %
(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
95 RioCan Annual Report 2023
MANAGEMENT’S DISCUSSION AND ANALYSIS
Our Business
and Our
Business
Environment
Environmental,
Social and
Governance
(ESG)
Initiatives
Property
Portfolio
Overview
Introduction
(xiv) Liquidity
Results of
Operations
Asset Profile
Development
Program
Capital
Resources
and Liquidity
Other
Disclosures
Non-GAAP
Measures
Risks and
Uncertainties
As at December 31, 2023, RioCan had $2.0 billion of Liquidity as summarized in the following table:
As at
(thousands of dollars)
Undrawn revolving unsecured operating line
of credit
Undrawn construction lines and other bank
loans
Cash and cash equivalents
December 31, 2023
December 31, 2022
Equity-
accounted
investments
IFRS basis
RioCan's
proportionate
share IFRS basis
Equity-
accounted
investments
RioCan's
proportionate
share
$ 1,250,000 $
— $ 1,250,000 $ 1,116,351 $
— $ 1,116,351
385,715
189,563
124,234
14,506
575,278
138,740
267,562
70,094
86,229
8,001
337,656
94,230
Liquidity
$ 1,759,949 $
204,069 $ 1,964,018 $ 1,470,142 $
78,095 $ 1,548,237
(xv) Adjusted EBITDA and Coverage Ratios
The following table reconciles consolidated net income attributable to Unitholders to Adjusted EBITDA:
Year ended
December 31, 2023
December 31, 2022
IFRS basis
Equity-
accounted
investments
RioCan's
proportionate
share IFRS basis
Equity-
accounted
investments
RioCan's
proportionate
share
$
38,802 $
— $
38,802 $ 236,772 $
— $
236,772
(thousands of dollars)
Net income attributable to Unitholders
Add (deduct) the following items:
Income tax (recovery) expense:
Current
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
Restructuring costs
ERP implementation costs
Depreciation and amortization
Transaction losses (gains) on the sale of
investment properties, net (ii)
Transaction costs on investment properties
Operational lease revenue (expenses) from
ROU assets
Adjusted EBITDA
(13,365)
—
(13,365)
921
—
921
450,408
14,123
464,531
241,128
16,208
257,336
865
11,919
10,154
—
—
—
865
3,783
11,919
12,204
10,154
9,056
—
—
—
3,783
12,204
9,056
208,948
11,339
220,287
180,365
8,242
188,607
1,368
12,032
2,632
1,180
5,606
—
—
—
1,368
4,289
12,032
—
2,632
4,774
(83)
1,097
1,024
1
5,607
5,734
—
—
—
—
3
4,289
—
4,774
1,024
5,737
5,116
(55)
5,061
4,086
(46)
4,040
$ 735,665 $
25,325 $
760,990 $ 704,136 $
24,407 $
728,543
(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.
RioCan Annual Report 2023 96
MANAGEMENT’S DISCUSSION AND ANALYSIS
Our Business
and Our
Business
Environment
Environmental,
Social and
Governance
(ESG)
Initiatives
Property
Portfolio
Overview
Introduction
Year ended
(thousands of dollars)
Net income attributable to Unitholders
Add (deduct) the following items:
Income tax recovery:
Current
Fair value (gains) losses on investment
properties, net
Internal leasing costs
Non-cash unit-based compensation expense
Interest costs, net
Debt prepayment costs, net
One-time cash compensation 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
Results of
Operations
Asset Profile
Development
Program
Capital
Resources
and Liquidity
Other
Disclosures
Non-GAAP
Measures
Risks and
Uncertainties
December 31, 2021
IFRS basis
Equity-
accounted
investments
RioCan's
proportionate
share
$ 598,389 $
— $
598,389
(59)
—
(59)
(124,052)
1,113
(122,939)
11,807
12,546
171,521
10,914
1,932
4,022
402
—
—
11,807
12,546
7,026
178,547
—
—
—
—
10,914
1,932
4,022
402
14,363
28
14,391
3,308
(42)
3,266
$ 705,093 $
8,125 $
713,218
(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.
Adjusted EBITDA Ratios
Adjusted Debt to Adjusted EBITDA ratio is calculated as follows:
As at
December 31, 2023
December 31, 2022
12 months ended
(thousands of dollars, except where
otherwise noted)
IFRS basis
Adjusted Debt to Adjusted EBITDA
Equity-
accounted
investments
RioCan's
proportionate
share
IFRS basis
Equity-
accounted
investments
RioCan's
proportionat
e share
Average total debt outstanding
$ 6,879,087 $
317,231 $ 7,196,318 $ 6,756,628 $
251,888 $ 7,008,516
Less: average cash and cash equivalents
(120,952)
(11,408)
(132,360)
(74,871)
(8,791)
(83,662)
Average Total Adjusted Debt
Adjusted EBITDA
$ 6,758,135 $
305,823 $ 7,063,958 $ 6,681,757 $
243,097 $ 6,924,854
$ 735,665 $
25,325 $
760,990 $
704,136 $
24,407 $
728,543
Adjusted Debt to Adjusted EBITDA
9.19
9.28
9.49
9.51
As at 12 months ended
(thousands of dollars, except where
otherwise noted)
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
97 RioCan Annual Report 2023
December 31, 2021
IFRS basis
Equity-
accounted
investments
RioCan's
proportionat
e share
$ 6,773,147 $
192,804 $ 6,965,951
(119,400)
(5,639)
(125,039)
$ 6,653,747 $
187,165 $ 6,840,912
$
705,093 $
9.44
8,125 $
713,218
9.59
MANAGEMENT’S DISCUSSION AND ANALYSIS
Our Business
and Our
Business
Environment
Environmental,
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(ESG)
Initiatives
Property
Portfolio
Overview
Introduction
(xvi) 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 and Percentage of Normalized NOI Generated from
Unencumbered Assets as at December 31, 2023 and December 31, 2022:
As at
December 31, 2023
December 31, 2022
(thousands of dollars, except
where otherwise noted)
Investment Properties
Less: Encumbered Investment
Properties
Unencumbered Assets
Annual Normalized NOI - total
portfolio (i)
Annual Normalized NOI -
Unencumbered Assets (i)
Percentage of Normalized
NOI Generated from
Unencumbered Assets
Targeted
Ratios
Equity-
accounted
investments
RioCan's
proportionate
Equity-
accounted
investments
RioCan's
proportionate
IFRS basis
$ 13,561,718 $
share
411,811 $ 13,973,529 $ 13,807,740 $
IFRS basis
share
398,701 $ 14,206,441
5,531,177
352,425
5,883,602
5,607,460
342,473
5,949,933
$ 8,030,541 $
59,386 $
8,089,927 $ 8,200,280 $
56,228 $
8,256,508
$
$
692,092 $
25,664 $
717,756 $
646,540 $
23,488 $
670,028
396,888 $
3,736 $
400,624 $
370,804 $
3,440 $
374,244
> 50.0%
57.3 %
55.8 %
57.4 %
55.9 %
(i) Annual Normalized NOI is reconciled in the table below.
Three months ended
December 31, 2023
Three months ended
December 31, 2022
IFRS basis
$
176,306 $
Equity-
accounted
investments
6,416 $
RioCan's
proportionate
share
182,722 $
IFRS basis
166,062 $
Equity-
accounted
investments
5,872 $
RioCan's
proportionate
share
171,934
(thousands of dollars)
NOI (i)
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)
$
$
$
$
$
(874)
(2,339)
(70)
—
—
—
(874)
(802)
(2,339)
(3,234)
(70)
(391)
—
—
—
(802)
(3,234)
(391)
173,023 $
6,416 $
179,439 $
161,635 $
5,872 $
167,507
692,092 $
25,664 $
717,756 $
646,540 $
23,488 $
670,028
101,349 $
934 $
102,283 $
94,957 $
860 $
95,817
(796)
(1,331)
—
—
—
—
(796)
(518)
(1,331)
(1,430)
—
(308)
—
—
—
(518)
(1,430)
(308)
99,222 $
934 $
100,156 $
92,701 $
860 $
93,561
396,888 $
3,736 $
400,624 $
370,804 $
3,440 $
374,244
(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 respective Normalized NOI by a factor of 4.
RioCan Annual Report 2023 98
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
2023
2022
Q4
Q3
Q2
Q1
Q4
Q3
Q2
Q1
$ 186,074 $ 176,255 $ 178,836 $ 173,243 $ 175,421 $ 182,492 $ 180,912 $ 173,868
(6,611)
(2,408)
(5,139)
(4,819)
(3,450)
(5,553)
(6,112)
(5,882)
(4,795)
—
—
—
(7,425)
(7,767)
(5,148)
(2,033)
1,638
1,650
1,571
1,858
1,516
1,419
1,386
1,346
$ 176,306 $ 175,497 $ 175,268 $ 170,282 $ 166,062 $ 170,591 $ 171,038 $ 167,299
99 RioCan Annual Report 2023
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
Twelve months ended
(thousands of dollars, except
where otherwise noted)
Net income (loss) attributable to
Unitholders
Add (deduct) the following items:
Income tax (recovery) expense:
2023
2022
Q4
Q3
Q2
Q1
Q4
Q3
Q2
Q1
$
38,802 $ 151,500 $ 228,225 $ 194,718 $ 236,772 $ 450,509 $ 584,904 $ 651,718
Current
(13,365)
(13,531)
(12,717)
(12,296)
921
1,037
682
(77)
Fair value losses (gains) on investment
properties, net
Change in unrealized fair value on
marketable securities
450,408
342,994
262,249
293,925
241,128
53,366
(85,419)
(150,618)
865
3,094
3,195
4,769
3,783
3,400
1,401
—
Internal leasing costs
11,919
12,069
12,137
11,944
12,204
11,880
11,998
11,940
Non-cash unit-based compensation
expense
Interest costs, net
Debt prepayment costs, net
Restructuring costs
ERP implementation costs
Depreciation and amortization
Transaction losses (gains) 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
10,154
10,002
9,766
9,269
9,056
8,729
8,254
7,575
208,948
198,328
192,897
186,582
180,365
174,448
170,184
169,363
—
1,368
12,032
2,632
—
1,854
8,530
2,712
—
1,134
6,408
4,201
—
4,293
3,954
4,461
—
4,289
—
4,774
3,896
3,779
—
5,050
3,896
3,779
—
3,897
3,896
609
—
3,986
1,180
594
400
576
1,024
1,367
1,871
631
5,606
3,162
4,935
5,305
5,734
9,379
10,360
11,323
5,116
4,955
4,706
4,494
4,086
3,851
3,651
3,491
$ 735,665 $ 726,263 $ 717,536 $ 711,994 $ 704,136 $ 730,691 $ 719,458 $ 713,837
Interest costs, net
11,339
10,624
9,812
8,895
8,242
14,123
9,023
12,393
14,797
16,208
6,321
7,667
4,172
7,303
1,391
7,327
Transaction gains on equity-accounted
investments
Transaction costs on investment
properties
Operational lease expenses from ROU
assets
Adjusted EBITDA- RioCan's
proportionate share
IFRS basis:
(83)
(69)
1
(1)
—
—
—
—
—
3
—
29
—
30
—
30
(55)
(51)
(48)
(47)
(46)
(46)
(46)
(44)
$ 760,990 $ 745,789 $ 739,693 $ 735,639 $ 728,543 $ 744,662 $ 730,917 $ 722,541
Average total debt outstanding
$ 6,879,087 $ 6,875,311 $ 6,872,987 $ 6,797,665 $ 6,756,628 $ 6,756,065 $ 6,740,402 $ 6,729,616
Less: average cash and cash
equivalents
Average Total Adjusted Debt
Add: equity-accounted investments
(120,952)
(106,768)
(112,497)
(78,746)
(74,871)
(78,168)
(87,182)
(88,746)
$ 6,758,135 $ 6,768,543 $ 6,760,490 $ 6,718,919 $ 6,681,757 $ 6,677,897 $ 6,653,220 $ 6,640,870
Average total debt outstanding
$ 317,231 $ 292,517 $ 268,708 $ 263,022 $ 251,888 $ 241,176 $ 228,546 $ 216,840
Less: average cash and cash
equivalents
Average Total Adjusted Debt- Equity-
accounted investments
Average Total Adjusted Debt -
RioCan's proportionate share
Adjusted Debt to Adjusted EBITDA -
RioCan's proportionate share
(11,408)
(10,343)
(10,092)
(9,339)
(8,791)
(8,346)
(7,288)
(7,110)
$ 305,823 $ 282,174 $ 258,616 $ 253,683 $ 243,097 $ 232,830 $ 221,258 $ 209,730
$ 7,063,958 $ 7,050,717 $ 7,019,106 $ 6,972,602 $ 6,924,854 $ 6,910,727 $ 6,874,478 $ 6,850,600
9.28
9.45
9.49
9.48
9.51
9.28
9.41
9.48
RioCan Annual Report 2023 100
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.
Financial and Liquidity Risk
Interest Rate and Financing Risk
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 inflation through cooling demand, the Bank of Canada tightened
monetary policy in 2023 by increasing the overnight lending rate by 75 basis points over the course of the year. Although the
Bank of Canada has held rates steady since July 2023, 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, 2023, 6.8% 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, 2023, the carrying value of our floating rate debt,
not subject to a hedging strategy, is $318.0 million. A 50 basis point increase in market interest rates would result in a $1.6 million
decrease in our net income.
Inflation Risk
The rate of inflation impacts the general economic and business environment in which the Trust operates. Canada's inflation rate
increased to 3.4% in December 2023. Continued inflationary pressures experienced domestically and globally, 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
101 RioCan Annual Report 2023
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
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.
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, 2023, RioCan’s total debt on a proportionate share basis had a 2.97 year weighted average term to maturity,
bearing interest at a weighted average contractual interest rate of 3.91% per annum.
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.
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.
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, 2023,
RioCan was in compliance with this restriction.
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.
RioCan Annual Report 2023 102
MANAGEMENT’S DISCUSSION AND ANALYSIS
Our Business
and Our
Business
Environment
Environmental,
Social and
Governance
(ESG)
Initiatives
Property
Portfolio
Overview
Introduction
Tenant Bankruptcies
Results of
Operations
Asset Profile
Development
Program
Capital
Resources
and Liquidity
Other
Disclosures
Non-GAAP
Measures
Risks and
Uncertainties
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 1.0% and 0.02% of the total portfolio in 2023 and
2022, respectively, on a total annualized contractual gross rent basis.
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, 2023, RioCan had a commercial NLA, at its interest, of 30,937,000 square feet of income producing
properties and a portfolio in-place occupancy rate of 97.1%. Based on our current annualized portfolio weighted average
commercial rental revenue of approximately $35.27 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 $10.9 million annually.
RioCan's aggregate net rental revenue from leases expiring over the next five years is $403.7 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, 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, 2024, the guideline on rent increases for 2024 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
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 (“PMTSA”) by the Minister of Municipal Affairs and Housing
(the “Minister”). 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 PMTSAs in the City of Toronto and therefore inclusionary zoning is not in force in the
103 RioCan Annual Report 2023
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
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.
In response to legislative changes to the Planning Act, particularly Bill 109 which put in place specific time related application fee
refund requirements, municipalities, including the City of Toronto, are in the process of revamping their Planning Act application
review process, including their pre-consultation and complete application requirements at the Official Plan level. This has
resulted in changes to the planning application process which front end application review and often results in resubmissions
being required prior to applications being deemed complete to avoid the required refund of application fees. Delays related to the
filing of complete Site Plan applications have the potential to impact the calculation of Development Charges payable in relation
to a development, Inclusionary Zoning transition requirements, and the application of costly green building application related
requirements such as the City of Toronto Green Standards. RioCan has appealed related Official Plan Amendments made in the
City of Toronto and the City of Vaughan in regard to such matters and the appeals are currently in process.
The Province of Ontario has also passed Bill 150, the Planning Statute Law Amendment Act, 2023, which provides that specified
decisions by the Minister to modify certain official plans pursuant to s.17(34) of the Planning Act are deemed to have never been
made. The reversal of these modifications could have a negative impact on proposed development in impacted municipalities. At
this time, Bill 150 does not apply to the City of Toronto but does apply to specific Official Plans in the Greater Toronto Area
including the Regional Official Plans of York, Peel and Halton Regions. As this is a very new development, the impact of the
removal of these Provincial modifications is still being determined.
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 and rising interest rates. 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 mixed-
use 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 density 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%, with the increase phased in through May of 2024. The Province of Ontario 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.
RioCan Annual Report 2023 104
MANAGEMENT’S DISCUSSION AND ANALYSIS
Our Business
and Our
Business
Environment
Environmental,
Social and
Governance
(ESG)
Initiatives
Property
Portfolio
Overview
Introduction
Other Risks
Environmental Matters
Results of
Operations
Asset Profile
Development
Program
Capital
Resources
and Liquidity
Other
Disclosures
Non-GAAP
Measures
Risks and
Uncertainties
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. Work from home arrangements for the Trust's employees 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.
Key Personnel
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
105 RioCan Annual Report 2023
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
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 2023 106
Audited Annual Consolidated Financial Statements
for the Years Ended December 31, 2023 and 2022
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
108
109
112
113
114
115
116
117
107 RioCan Annual Report 2023
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 13, 2024.
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, 2023, 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 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 2023 and 2022 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 13, 2024
RioCan Annual Report 2023 108
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, 2023 and 2022, 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 material accounting policy
information.
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, 2023 and 2022, 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.
109 RioCan Annual Report 2023
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 $13.6B which represents 91% of total assets at
December 31, 2023.
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 2023 110
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.
Toronto, Canada
February 13, 2024
111 RioCan Annual Report 2023
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, 2023
December 31, 2022
3, 8
$
13,561,718 $
13,807,740
4
6
5
3
7, 8
10
11
12
8, 13
$
$
$
$
383,883
289,533
217,186
19,075
246,652
124,234
364,892
269,339
272,005
42,140
259,514
86,229
14,842,281 $
15,101,859
3,240,943 $
2,740,924
879,246
543,398
7,404,511 $
2,942,051
2,659,180
1,141,112
630,624
7,372,967
7,437,770
14,842,281 $
7,728,892
15,101,859
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 the Audit Committee
Trustee
(signed) Jonathan Gitlin
Jonathan Gitlin
President and Chief Executive Officer
Trustee
RioCan Annual Report 2023 112
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 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
Income before income taxes
Current income tax (recovery) expense
Net income
Net income per unit
Basic
Diluted
The accompanying notes are an integral part of the consolidated financial statements.
Note
2023
2022
17
$
1,091,105 $
1,074,192
5, 17
17
13,789
18,977
118,659
20,996
1,123,871
1,213,847
374,149
26,320
8,994
409,463
714,408
25,131
18,383
376,914
27,955
96,286
501,155
712,692
20,902
2,349
(450,408)
(241,128)
8,501
(1,842)
(398,393)
(219,719)
208,948
180,365
60,367
11,919
9,344
290,578
25,437
(13,365)
54,437
12,204
8,274
255,280
237,693
921
38,802 $
236,772
0.13 $
0.13 $
0.77
0.77
5
19
4
3
18
20
21
22
23
23
$
$
$
113 RioCan Annual Report 2023
RIOCAN REAL ESTATE INVESTMENT TRUST
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands of Canadian dollars)
Years ended December 31,
Net income
Other comprehensive income (loss)
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 (loss) gain 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 (loss) gain on pension plan
Other comprehensive (loss) income, net of tax
Comprehensive income, net of tax
The accompanying notes are an integral part of the consolidated financial statements.
Note
2023
2022
$
38,802 $
236,772
14, 25
14, 25
14, 25
14, 25
14, 25
4, 14
14
8,877
(22,921)
(6,338)
16,770
(7,127)
132
(517)
(11,124)
43,024
1,225
6,092
37,136
(2,217)
583
3,071
88,914
$
27,678 $
325,686
RioCan Annual Report 2023 114
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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 on investment properties, net
Fair value loss on marketable securities
Transaction losses, net on disposition of investment properties
Proceeds from bond forward hedge settlement in hedge reserve
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
Contributions to equity-accounted investments
Distributions received from equity-accounted investments
Proceeds from disposition of equity-accounted investments
Advances of mortgages and loans receivable
Repayments of mortgages and loans receivable
Purchases of marketable securities
Purchase of other investments
Proceeds from other investments
Proceeds from sale of marketable securities, net of selling costs
Lease payments received from finance lease receivables
Cash 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.
2023
2022
$
38,802 $
236,772
2,632
(5,898)
(7,127)
5,161
10,154
(18,383)
4,774
(1,884)
(2,217)
5,314
9,056
(2,349)
450,408
241,128
761
1,334
3,783
1,081
16,770
37,136
(109,098)
(26,470)
385,516
506,124
(76,005)
(90,026)
(265,144)
(291,506)
(125,854)
(101,467)
286,541
420,970
(19,828)
(16,817)
14,141
14,601
14,565
—
(84,080)
(87,224)
74,617
86,826
(7,173)
(19,241)
(30,000)
9,921
2,862
5,256
—
—
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4,235
(200,145)
(79,685)
212,739
(172,964)
345,842
(45,642)
320,014
177,438
(471,139)
(323,742)
796,114
248,603
(500,000)
(300,000)
(321,414)
(309,416)
—
(203,874)
(8,844)
(1,872)
(5,232)
(1,945)
(147,366)
(417,968)
38,005
86,229
$
124,234 $
Note 28
8,471
77,758
86,229
RioCan Annual Report 2023 116
Notes to Consolidated Financial Statements
for the Years Ended December 31, 2023 and 2022
Canadian dollars, tabular amounts in thousands, except
per unit amounts or unless otherwise noted
TABLE OF CONTENTS
1. General Information
2. Material Accounting Policy Information
118
118
18.
Investment and Other Income (Loss)
19.
Interest Income
3.
Investment Properties
127
20.
Interest Costs
4.
Equity-accounted Investments
133
21. General and Administrative
5.
Residential Inventory
135
22. Transaction and Other Costs
6. Mortgages and Loans Receivable
135
23. Net Income per Unit
7.
Receivables and Other Assets
136
24. Fair Value Measurement
8.
Leases
137
25. Risk Management
9.
Income Taxes
139
26. Capital Management
10. Debentures Payable
139
27. Subsidiaries
11. Mortgages Payable
140
28. Supplemental Cash Flow Information
12. Lines of Credit and Other Bank Loans
141
29. Changes in Other Working Capital Items
13. Accounts Payable and Other Liabilities
142
30. Related Party Transactions
14. Unitholders' Equity
143
31. Employee Benefits
15. Unit-based Compensation Plans
144
32. Segmented Information
16. Distributions to Unitholders
146
33. Contingencies and Other Commitments
17. Revenue
147
34. Events after the Balance Sheet Date
148
148
148
148
148
149
149
150
154
155
156
157
157
157
158
158
159
117 RioCan Annual Report 2023
RIOCAN REAL ESTATE INVESTMENT TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2023 AND 2022
(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 as at and for the years ended December 31, 2023 and 2022
were authorized for issue by RioCan's Board of Trustees on February 13, 2024.
2. MATERIAL ACCOUNTING POLICY INFORMATION
The material 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 2.25.
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 2.25. Certain comparative amounts have been reclassified to conform to
the current year's presentation.
2.3 Significant judgments
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.
Control
When determining whether the Trust should consolidate an investment in entity, the Trust makes judgments in its assessment of
whether it has control over an entity considering the power to direct the relevant activities of the entity, its exposure or rights to the
variable returns of the entity and its ability to use its power to affect its returns.
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.
Properties under development 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.
RioCan Annual Report 2023 118
RIOCAN REAL ESTATE INVESTMENT TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2023 AND 2022
(In thousands of Canadian dollars, tabular amounts in thousands, except per unit amounts or unless otherwise noted)
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 perform 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). Changes in 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, 2023 (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).
119 RioCan Annual Report 2023
RIOCAN REAL ESTATE INVESTMENT TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2023 AND 2022
(In thousands of Canadian dollars, tabular amounts in thousands, except per unit amounts or unless otherwise noted)
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.
(i) Subsidiaries
Subsidiaries are entities over which the Trust has control. The Trust reassesses whether 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. Investments in associates and joint ventures are accounted for using the equity method.
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
Parties to a joint arrangement have joint control of the arrangement and 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, which include significant processes, are acquired in addition to the property. 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’ on an asset by asset basis 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. Transaction costs associated with business
combinations are expensed 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.
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 incorporates 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 presumes that the transaction to sell the asset or transfer the liability takes place either:
•
•
In the principal market for the asset or liability; or
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.
RioCan Annual Report 2023 120
RIOCAN REAL ESTATE INVESTMENT TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2023 AND 2022
(In thousands of Canadian dollars, tabular amounts in thousands, except per unit amounts or unless otherwise noted)
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. 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 fair value of 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.
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. Residential inventory is recorded at the lower of cost 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.
121 RioCan Annual Report 2023
RIOCAN REAL ESTATE INVESTMENT TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2023 AND 2022
(In thousands of Canadian dollars, tabular amounts in thousands, except per unit amounts or unless otherwise noted)
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. 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 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.
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
included are similar to those noted under lease liabilities above.
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).
RioCan Annual Report 2023 122
RIOCAN REAL ESTATE INVESTMENT TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2023 AND 2022
(In thousands of Canadian dollars, tabular amounts in thousands, except per unit amounts or unless otherwise noted)
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
Revenue recognition under an operating 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. Lease contracts that contain rent escalation and/or rent free periods are recognized on
a straight line basis over the term of the lease. A straight-line rent receivable, which is included in the carrying amount of
investment properties, is recorded for the difference between the rental revenue recorded and the contractual amount of
minimum base rent received or receivable.
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.
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.
(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.
2.13 Investment and other income and transaction and other costs
Transaction gains included in investment and other income (loss), net, and transaction and other costs on the consolidated
statements of income, are recognized on the settlement date or on the settlement of post-transaction adjustments. 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.
123 RioCan Annual Report 2023
RIOCAN REAL ESTATE INVESTMENT TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2023 AND 2022
(In thousands of Canadian dollars, tabular amounts in thousands, except per unit amounts or unless otherwise noted)
2.15 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, 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, bond forward agreement and certain other liabilities.
The Trust determines the classification of its financial assets and financial liabilities at initial recognition by considering 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.
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)
Bond forward agreement (v)
Financial liabilities
Debentures payable
Mortgages payable
Lines of credit and other bank loans
Bond forward agreement (v)
Accounts payable and other liabilities (vi)
IFRS 9 Classification
Amortized cost
FVTPL (vii)
FVTPL
Amortized cost
Amortized cost or FVTPL
FVTPL
FVTPL
Amortized cost
Amortized cost
Amortized cost
FVTPL
Amortized cost
(i) As at December 31, 2023, cash equivalent is $0.4 million (December 31, 2022 - $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 sheets.
(iv)
receivables, amounts due on condominium final closings, funds held in trust, other receivables.
Interest rate swaps are derivative financial instruments that are recorded at fair value on the consolidated balance sheets as interest rate swap
assets or interest rate swap liabilities. The effective portion of the fair value gains (losses) is recorded in other comprehensive (loss) income as
they are designated in an effective cash flow hedging relationship. See Note 2.19 for further discussion regarding hedge accounting policies.
(v) The bond forward agreement is a derivative financial instrument that is recorded at fair value on the consolidated balance sheets as bond forward
asset or bond forward liability. The effective portion of the fair value gains (losses) is recorded in other comprehensive (loss) income as it is
designated in an effective cash flow hedging relationship. See Note 2.19 for further discussion regarding hedge accounting policies.
(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.
(vii) Fair value through profit or loss (FVTPL).
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 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.
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.
(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.
RioCan Annual Report 2023 124
RIOCAN REAL ESTATE INVESTMENT TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2023 AND 2022
(In thousands of Canadian dollars, tabular amounts in thousands, except per unit amounts or unless otherwise noted)
(ii) Financial assets at FVTPL
Financial assets at FVTPL are managed and evaluated on a fair value basis and 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
(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. 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.
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.
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
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.
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. 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
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.
Amounts accumulated in the cash flow hedge reserve are reclassified to the consolidated statements of income in the same
periods as the hedged future cash flow. If the hedging instrument expires or is sold, terminated or exercised without replacement
125 RioCan Annual Report 2023
RIOCAN REAL ESTATE INVESTMENT TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2023 AND 2022
(In thousands of Canadian dollars, tabular amounts in thousands, except per unit amounts or unless otherwise noted)
or rollover (as part of the hedging strategy) or no longer qualifies for hedge accounting, and the forecasted transaction is still
expected to occur, the related cash flow hedge reserve is reclassified into the consolidated statements of income in the period the
forecasted transaction occurs. Otherwise, it 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
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 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.
2.23 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.
2.24 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, 2023 as follows:
Amendments to IAS 1 and IFRS Practice Statement 2
In February 2021, the IASB issued amendments to IAS 1 and IFRS Practice Statement 2 in which it provided guidance and
examples to help entities apply materiality judgments to accounting policy disclosures. The amendments require the disclosure of
material accounting policy information rather than disclosing significant accounting policies and provided guidance on how entities
apply the concept of materiality in making decisions about accounting policy disclosures.
The amendments are applicable for annual periods beginning on or after January 1, 2023, with early adoption permitted. Since
the amendments to IFRS Practice Statement 2 provide non-mandatory guidance, an effective date for these amendments is not
necessary.
The amendments have resulted in the disclosure of only material accounting policy information in the Trust’s disclosures, but did
not impact the measurement, recognition or presentation of any items in the Trust’s consolidated financial statements.
Amendments to IAS 8, Definition of Accounting Estimates
In February 2021, the IASB issued amendments to IAS 8, in which it introduced 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 for annual periods beginning on or after January 1, 2023, with early adoption permitted. The
amendments had no impact on the Trust's consolidated financial statements.
RioCan Annual Report 2023 126
RIOCAN REAL ESTATE INVESTMENT TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2023 AND 2022
(In thousands of Canadian dollars, tabular amounts in thousands, except per unit amounts or unless otherwise noted)
2.25 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.
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 that exist at the end of a reporting
period are those that 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.
3. INVESTMENT PROPERTIES
As at
Income properties
Properties under development
Year ended December 31, 2023,
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, 2023
December 31, 2022
$
$
12,632,473 $
929,245
13,561,718 $
12,635,332
1,172,408
13,807,740
Income
properties
Properties
under
development
Total (v)
$
12,676,651 $
1,173,229 $
13,849,880
75,473
(285,921)
—
83,781
52,472
417,417
—
(372,464)
5,898
(3,774)
—
1,456
248
34,583
(9,485)
244,260
—
—
(417,417)
(6,400)
(77,944)
—
—
(11,270)
—
—
110,056
(295,406)
244,260
83,781
52,472
—
(6,400)
(450,408)
5,898
(3,774)
(11,270)
1,456
248
$
$
$
12,651,237 $
929,556 $
13,580,793
12,632,473 $
929,245 $
13,561,718
18,764
311
19,075
12,651,237 $
929,556 $
13,580,793
(i) During the year ended December 31, 2023, transfers to income properties from properties under development totalled $574.0 million, reflecting
completed developments. Transfers from income properties to properties under development totalled $156.6 million, reflecting the commencement
of active development on certain income properties during the year.
(ii) During the year ended December 31, 2023, East Hills South Block was transferred to residential inventory from investment property as appropriate
(iii)
evidence of a change in use was established.
Included in investment properties is $119.3 million of net rents receivable arising from the recognition of rental revenue on a straight-line basis over
the lease term (December 31, 2022 - $115.8 million).
(iv) On September 28, 2023, RioCan formed a new joint venture and transferred its ownership of the 11YV project to equity-accounted investments.
Refer to Note 4 for further details.
Included in investment properties are 10 properties held as right-of-use assets as at December 31, 2023. Refer to Note 8.
(v)
127 RioCan Annual Report 2023
RIOCAN REAL ESTATE INVESTMENT TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2023 AND 2022
(In thousands of Canadian dollars, tabular amounts in thousands, except per unit amounts or unless otherwise noted)
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
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 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 2023 128
RIOCAN REAL ESTATE INVESTMENT TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2023 AND 2022
(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 2023 - No Acquisitions
Q3 2023
Income properties
Properties under development
2023
2022
2023
2022
$
75,473 $
96,031 $
34,583 $
(40,848)
—
—
—
—
—
11,946
(9,191)
(2,368)
$
34,625 $
96,031 $
34,583 $
387
Date
acquired
Interest
acquired
IPP
purchase
price (i)
PUD
purchase
price (i)
VTB mortgage,
purchase price
payable and/or
debt assumed
2973 Bloor Street West, Toronto, ON
July 31
100.0 % $
5,202 $
Q2 2023
18154-18162 Yonge Street, East Gwillimbury, ON
King & Sherbourne Portfolio, Toronto, ON (ii)
Bellevue Phase One, Two & Four, Montreal, QC (iii)
1303 Bloor Street West, Toronto, ON
$
5,202 $
June 29
June 26
May 29
April 12
100.0 % $
50.0 %
100.0 %
100.0 %
8,214 $
10,613
51,444
—
— $
— $
— $
—
2,061
3,675
—
—
—
2,799
38,049
—
$
70,271 $
5,736 $
40,848
Q1 2023
508 Lansdowne Avenue, Toronto, ON
March 1
100.0 % $
— $
2,209 $
Parking lease at RioCan Hall, Toronto, ON
January 13
100.0 %
—
26,638
Total acquisitions for the year ended December 31, 2023
$
$
— $
28,847 $
75,473 $
34,583 $
40,848
—
—
—
(i) Purchase price includes transaction costs.
(ii) Debt assumed includes $2.1 million in mortgage payable and $0.7 million in VTB mortgage.
(iii) Gross purchase price before transaction costs of $2.4 million was $55.3 million, of which $51.1 million was allocated to investment properties and
$4.2 million was allocated to mortgage payable. The mortgage payable assumed on closing was for Phase One and Two and had an aggregate
contractual balance of $42.2 million.
Purchase obligations
The Trust has agreed to purchase 100% of the retail portion of the 11YV project upon completion, currently estimated to be during
2025, at a 6.0% capitalization rate. The Trust currently owns a 37.5% interest in the project through an equity-accounted
investment. Refer to Note 4 for further details.
The Trust has agreed to purchase its partners' interest in the retail and residential rental components of Queen & Ashbridge upon
stabilization, currently estimated to be during 2026, at the greater of pre-determined capitalization rates of 4.75% and 4.15%,
respectively, or total cost plus 5%.
The Trust has agreed to purchase 100% interest in Bellevue Phase Three provided certain conditions are met, currently
estimated to be during 2026, at a pre-determined capitalization rate.
The Trust has agreed to purchase, provided certain conditions are met, a 50% interest in a mixed-use residential rental property
located in Calgary, Alberta in Q1 2025 for an estimated purchase price of $6.0 million plus 50% of development costs incurred at
the time of closing and a vendor promote that will be paid upon stabilization.
129 RioCan Annual Report 2023
RIOCAN REAL ESTATE INVESTMENT TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2023 AND 2022
(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
Vendor take-back mortgages receivable on dispositions
Total consideration, net of related debt
Investment properties dispositions
Property name and location
Q4 2023
Strawberry Hill Shopping Centre, Surrey, BC
Silver City Hull, Gatineau, QC (i)
Garden City Shopping Centre, Winnipeg, MB
Q3 2023 - No Dispositions
Q2 2023
RioCan West Ridge, Orillia, ON
Q1 2023
Income properties
Properties under development
2023
2022
2023
2022
$
$
285,921 $
425,491 $
9,485 $
34,277
(6,000)
(22,286)
—
—
279,921 $
403,205 $
9,485 $
34,277
Date
disposed
Interest
disposed
IPP
sales proceeds
PUD
sales proceeds
December 14
November 1
October 25
100 % $
100 %
100 %
$
147,913 $
12,250
61,000
221,163 $
May 1
100 % $
$
7,087
—
—
7,087
1,577
1,577
—
821
821
23,464 $
23,464 $
115 $
41,179
41,294 $
285,921 $
9,485
Hamilton Highbury Plaza, London, ON
Southland Crossing Shopping Centre, Calgary, AB
February 2
100 % $
January 16
100 %
Total dispositions for the year ended December 31, 2023
(i) RioCan provided a vendor take-back mortgage of $6.0 million.
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, 2023 December 31, 2022
$
$
18,764 $
311
19,075 $
41,319
821
42,140
Subsequent to year end, the Trust entered into firm deals to dispose full interests in two secondary market assets, one of which
was cinema anchored and the second was an open air centre. As a result, as at December 31, 2023, RioCan has two investment
properties held for sale with a carrying value of $19.1 million. As at December 31, 2022, RioCan had two investment properties
held for sale with a carrying value of $42.1 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.
RioCan Annual Report 2023 130
RIOCAN REAL ESTATE INVESTMENT TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2023 AND 2022
(In thousands of Canadian dollars, tabular amounts in thousands, except per unit amounts or unless otherwise noted)
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 26 external property appraisals (including 2 vacant land parcels), which supported an
IFRS fair value of approximately $1.7 billion, or 12.2% of the Trust's investment property portfolio (at 100% interest), as at
December 31, 2023. In 2024, the Trust intends to select approximately five 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,
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 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.
131 RioCan Annual Report 2023
RIOCAN REAL ESTATE INVESTMENT TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2023 AND 2022
(In thousands of Canadian dollars, tabular amounts in thousands, except per unit amounts or unless otherwise noted)
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, 2023, the weighted average capitalization rate for the Trust's investment properties and properties held for
sale is 5.41% (December 31, 2022 - 5.33%). The carrying value of the Trust's investment properties reflects its best estimate for
the highest and best use as at December 31, 2023.
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 the table below
for a sensitivity analysis of investment properties valuations.
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)
(1.00%)
(0.75%)
(0.50%)
(0.25%)
December 31, 2023
0.25%
0.50%
0.75%
1.00%
Weighted average
capitalization rate Fair value variance
3,315,714
4.41 % $
4.66 %
4.91 %
5.16 %
5.41 %
5.66 %
5.91 %
6.16 %
6.41 %
2,301,974
1,439,869
679,969
—
(614,211)
(1,170,596)
(1,678,531)
(2,144,601)
A 0.25% increase in capitalization rate would result in a lower portfolio fair value of $614.2 million. A 0.25% decrease in
capitalization rate would result in a higher portfolio fair value of $680.0 million. In addition, a 1% increase in SNOI would result in
a higher portfolio fair value of $131.0 million. A 1% decrease in SNOI would result in a lower portfolio fair value of $131.9 million.
A 1% increase in SNOI coupled with a 0.25% decrease in capitalization rates would result in a higher portfolio fair value of
$817.8 million. A 1% decrease in SNOI coupled with a 0.25% increase in capitalization rates would result in a lower portfolio fair
value of $739.3 million. A 1% increase in costs to complete for the development properties would result in a lower portfolio fair
value of $1.5 million, and a 1% decrease in costs to complete for the development properties would result in a higher portfolio fair
value of $1.5 million.
RioCan Annual Report 2023 132
RIOCAN REAL ESTATE INVESTMENT TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2023 AND 2022
(In thousands of Canadian dollars, tabular amounts in thousands, except per unit amounts or unless otherwise noted)
4. EQUITY-ACCOUNTED INVESTMENTS
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:
Equity investee
RC Yorkville LP
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)
WhiteCastle New Urban Fund 3, LP (WNUF 3)
WhiteCastle New Urban Fund 4, LP (WNUF 4)
WhiteCastle New Urban Fund 5, LP (WNUF 5)
Principal activity
Development of mixed-use project and sale of
residential inventory
Development of mixed-use project and sale of
residential inventory
Development of mixed-use project 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
Development of mixed use project and sale of
residential inventory
December 31, 2023 December 31, 2022
— %
37.5 %
50.0 %
50.0 %
40.0 %
22.0 %
20.0 %
25.0 %
— %
19.3 %
20.0 %
18.4 %
14.2 %
50.0 %
50.0 %
40.0 %
20.2 %
20.0 %
25.0 %
14.2 %
19.3 %
20.0 %
18.4 %
14.2 %
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 (i)
Distributions
Disposition of units (ii)
Total cash flow activities
Non-cash contributions:
Contribution accrual
Investment properties
New joint venture from previously consolidated subsidiary (iii)
Share of net income and gains from redemption of units (ii)
Other comprehensive income from equity-accounted investments (ii) (iii) (iv)
Other
Balance, end of year
2023
$
364,892 $
19,828
(14,141)
(14,601)
(8,914)
(145)
—
9,958
18,383
132
(423)
$
383,883 $
2022
327,335
16,817
(14,565)
—
2,252
100
34,462
—
2,349
583
(2,189)
364,892
(i) During the year ended December 31, 2023, the Trust contributed $2.1 million to the RioCan-HBC JV and $17.7 million to the other equity-
accounted investments.
(ii) RioCan sold 25.0% of its interest in RC Yorkville LP for proceeds of $14.6 million, resulting in a gain of $12.1 million, including the recycling of $0.6
million hedge reserve from other comprehensive income (OCI) to net income.
Year ended December 31,
Share of net income from equity-accounted investments
Gains from partial disposition of RC Yorkville LP
Share of net income and gains from redemption of units
$
$
2023
6,271
12,112
18,383
(iii) 11 YV total non-cash contribution was $12.2 million, comprising accumulated other comprehensive income (AOCI) of $2.3 million of interest rate
swap and $9.9 million of other net assets.
(iv) Changes in other comprehensive income from equity-accounted investments consist of:
Year ended December 31,
Interest rate swap hedge reserve in RC Yorkville LP on initial contribution to equity-accounted investment
Hedge reserve recycled from OCI to net income on partial disposition of RC Yorkville LP
Changes to interest rate swap hedge reserve for other equity-accounted investments
Other comprehensive income from equity-accounted investments
$
$
2023
2,265
(566)
(1,567)
132
133 RioCan Annual Report 2023
RIOCAN REAL ESTATE INVESTMENT TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2023 AND 2022
(In thousands of Canadian dollars, tabular amounts in thousands, except per unit amounts or unless otherwise noted)
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, 2023
December 31, 2022
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
$
8,608 $ 1,311,926 $ 1,320,534
$
7,702 $
849,520 $
857,222
1,870,226
61,714
1,931,940
1,924,339
38,521
1,962,860
203,269
346,243
549,512
162,581
242,788
405,369
583,759
566,016
1,149,775
633,003
258,949
891,952
$
$
1,091,806 $
461,381 $ 1,553,187
248,628 $
135,255 $
383,883
$
$
1,136,457 $
386,304 $ 1,522,761
256,588 $
108,304 $
364,892
Years ended December 31
2023
2022
Revenue
Operating expenses
Fair value (losses) gains
Interest expense
Net income (loss)
Income (loss) from equity-accounted
investments
$
$
RioCan-HBC JV
Other
Total
RioCan-HBC
JV
Other
Total
$
143,979 $
21,119 $
165,098
$
142,383 $
21,536 $
163,919
21,022
13,375
34,397
21,608
13,496
35,104
(64,667)
52,467
894
399
5,823 $
8,239 $
(63,773)
52,866
14,062
2,440 $
15,943 $
18,383
$
$
(81,596)
39,921
785
407
(742) $
8,418 $
(80,811)
40,328
7,676
(153) $
2,502 $
2,349
(i) As at December 31, 2023, total current assets include $1.2 billion of residential inventory (December 31, 2022 - $793.2 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 $1.5 billion, or 90.1% of the JV's
investment property portfolio.
(iii) As at December 31, 2023, total current liabilities include $363.8 million of mortgages payable and other loans, of which $190.3 million relates to
the RioCan-HBC JV (December 31, 2022 - $329.9 million, of which $150.7 million relates to the RioCan-HBC JV).
(iv) As at December 31, 2023, total non-current liabilities include $1.0 billion of mortgages payable and lines of credit with maturities beyond twelve
months, of which $535.6 million relates to the RioCan-HBC JV (December 31, 2022 - $810.3 million, of which $584.6 million relates to the RioCan-
HBC JV).
WhiteCastle New Urban Fund, LP (WNUF 1)
On March 29, 2023, WNUF 1, one of the Trust's equity-accounted investments, was dissolved and final proceeds were distributed
to the partners.
RioCan-HBC JV
During the second quarter of 2023, the Trust's ownership interest increased to 22.0% (December 31, 2022 - 20.2%).
On November 30, 2023, RioCan advanced a $30.0 million bridge financing loan to the RioCan-HBC JV, which was subsequently
repaid on January 26, 2024.
RC Yorkville LP
On September 28, 2023, RioCan entered into a series of transactions whereby certain previously consolidated subsidiaries which
held various interests in 11 YV, including RC Yorkville LP, became jointly controlled. RioCan subsequently sold 20.8% of its units
and reduced its ownership in RC Yorkville LP from 100% to 79.2% or from 50.0% to 39.6% in the underlying 11YV project.
As a result, the Trust ceased consolidating these subsidiaries and an equity-accounted joint venture investment was created with
a carrying value of $12.2 million, including an interest rate swap hedge reserve in AOCI of $2.3 million. Upon the sale of its 20.8%
interest to new investors, RioCan received $12.2 million of proceeds, which resulted in a gain of $10.1 million, including the
recycling of $0.5 million hedge reserve from AOCI to net income.
On October 3, 2023, RioCan sold another 4.2% interest in the units of RC Yorkville LP and reduced its interest to 75.0% or 37.5%
in the underlying 11YV project for $2.4 million, which resulted in a gain of $2.0 million, including the recycling of $0.1 million
hedge reserve from AOCI to net income.
RioCan provided loans in the aggregate amount of $10.2 million to the above-noted new investors, to finance their acquisition of
the units from RC Yorkville LP.
On January 1, 2024, RioCan sold an additional 25.0% interest in the units of RC Yorkville LP and reduced its interest to 50.0% or
25.0% in the underlying 11YV project.
RioCan Annual Report 2023 134
RIOCAN REAL ESTATE INVESTMENT TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2023 AND 2022
(In thousands of Canadian dollars, tabular amounts in thousands, except per unit amounts or unless otherwise noted)
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,
2023, the Trust has 44 such joint operations, of which two are considered individually significant: The WellTM and FourFifty The
WellTM, located in Toronto, Canada. RioCan has a 50% ownership interest in the commercial component of The Well and a 50%
interest in the residential project FourFifty The Well.
5. 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
Dispositions
Development expenditures
Transfers from investment properties (i)
Transfers to equity-accounted investments (ii)
Balance, end of year
$
$
2023
272,005 $
—
(8,602)
127,118
6,400
(179,735)
217,186 $
2022
217,043
19,440
(91,322)
112,597
14,247
—
272,005
(i) During the year ended December 31, 2023, East Hills South Block was transferred to residential inventory from investment property as appropriate
evidence of change in use was established.
(ii) On September 28, 2023, RioCan formed a new joint venture and transferred its ownership of the 11YV project to equity-accounted investments.
Refer to Note 4 for further details.
The following table provides details on residential inventory gains for the years ended December 31, 2023 and 2022:
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
6. MORTGAGES AND LOANS RECEIVABLE
For the years ended December 31,
Current
Non-current
Mortgages and loans receivable measured at amortized cost
$
$
$
$
$
2023
13,789 $
8,602
392
8,994 $
4,795 $
2023
49,391 $
240,142
289,533 $
2022
118,659
91,322
4,964
96,286
22,373
2022
100,581
168,758
269,339
As at December 31, 2023, mortgages and loans receivable bear interest at a weighted average effective and contractual rate of
9.06% and 8.57% per annum, respectively (December 31, 2022 - 8.26% and 7.73%, respectively) and mature between 2024 and
2033.
Future repayments of mortgages and loans receivables by year of maturity are as follows:
2024
2025
2026
2027
2028
Thereafter
135 RioCan Annual Report 2023
$
49,391
61,125
49,899
37,450
90,727
941
$
289,533
RIOCAN REAL ESTATE INVESTMENT TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2023 AND 2022
(In thousands of Canadian dollars, tabular amounts in thousands, except per unit amounts or unless otherwise noted)
7. RECEIVABLES AND OTHER ASSETS
The following table details the Trust's receivables and other assets as at December 31, 2023 and December 31, 2022:
As at
December 31, 2023
Current
Non-
current
December 31, 2022
Total
Current
Non-
current
Total
Prepaid expenses and other assets
$
67,593 $
43,277 $
110,870 $
52,855 $
19,570 $
72,425
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
Bond forward agreements
35,345
5,627
6,529
—
34,483
—
35,345
40,110
6,529
15,184
20,972
36,156
8,872
4,202
—
—
4,568
—
8,872
8,770
—
27,639
4,709
3,018
9,527
30,948
3,428
4,341
—
36,883
—
20,445
26,765
19,386
—
27,639
41,592
3,018
29,972
57,713
22,814
4,341
$
143,352 $
103,300 $
246,652 $
136,465 $
123,049 $
259,514
(i) Other receivables primarily include fees and cost reimbursements receivable from partners, and disposition proceeds receivable.
Prepaid expenses and other assets
Prepaid expenses and other assets primarily include other investments, prepaid property taxes, prepaid selling commissions,
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
Transfers to equity-accounted investments (i)
Selling commissions expensed during the year
Balance, end of year
(i) Relates to the 11YV project. Refer to Note 4 for further details.
Net contractual rents and other tenant receivables
$
$
2023
10,603 $
3,597
(6,155)
(392)
7,653 $
2022
10,612
4,955
—
(4,964)
10,603
Net contractual rents and other tenant receivables, include common area maintenance, realty tax and insurance recoveries and
presented net of an allowance for doubtful accounts of $9.6 million as at December 31, 2023 (December 31, 2022 - $13.5
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.
The Trust recognized a $5.6 million net recovery of rent abatements and bad debts for the year ended December 31, 2023 (year
ended December 31, 2022 - provision of $1.2 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
(Recovery of) provision for credit losses
Write-offs, net of recoveries
Allowance for doubtful accounts, end of year
$
$
2023
13,469 $
(5,587)
1,761
9,643 $
2022
16,604
1,218
(4,353)
13,469
RioCan Annual Report 2023 136
RIOCAN REAL ESTATE INVESTMENT TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2023 AND 2022
(In thousands of Canadian dollars, tabular amounts in thousands, except per unit amounts or unless otherwise noted)
Funds held in trust
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 10 properties held as ROU assets arising from land and/or building leases where RioCan is
the lessee as at December 31, 2023 (December 31, 2022 - 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 $215.0 million (December 31, 2022 - $215.4 million). The corresponding lease
liability in accounts payable and other liabilities is $35.1 million (December 31, 2022 - $36.6 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:
$
$
2023
36,572 $
350
(1,872)
35,050 $
Year 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
$
2023
23,480 $
(1,985)
(984)
2022
37,975
542
(1,945)
36,572
2023
8,435
12,780
53,792
75,007
39,957
35,050
2022
22,540
(1,883)
(1,122)
(i) Includes variable lease payments and excludes finance lease interest income, disclosed below as lessor.
During the year ended December 31, 2023, the Trust had total cash outflows for leases of $6.1 million (December 31, 2022 - $6.1
million), including office equipment lease payments and variable lease payments of $2.2 million (December 31, 2022 - $2.3
million).
137 RioCan Annual Report 2023
RIOCAN REAL ESTATE INVESTMENT TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2023 AND 2022
(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
$
$
2023
41,592 $
3,774
(5,256)
40,110 $
2022
42,158
3,669
(4,235)
41,592
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,
2024
2025
2026
2027
2028
Thereafter
Total minimum lease payments
Less: Future interest income
Present value of minimum lease payments
Lease commitments
$
$
$
2023
7,787
7,874
7,979
8,120
8,214
7,533
47,507
7,397
40,110
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,
2024
2025
2026
2027
2028
Thereafter
Total
$
$
2023
670,672
576,348
498,752
422,972
335,247
1,417,888
3,921,879
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.
2023
200,858 $
8,424
2,552
2022
199,437
9,092
2,514
RioCan Annual Report 2023 138
RIOCAN REAL ESTATE INVESTMENT TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2023 AND 2022
(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 the Trust does not qualify for the REIT Exemption for Canadian income tax purposes, certain distributions will not be
deductible by the Trust in computing its income for Canadian tax purposes. As a result, the Trust 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, 2023
$
$
300,000 $
2,940,943
3,240,943 $
December 31, 2022
500,000
2,442,051
2,942,051
As at December 31, 2023, total debentures payable bear interest at weighted average contractual interest rates of 3.68% and a
weighted average effective interest rate of 3.65% inclusive of the benefit of bond forward hedges (December 31, 2022 - 2.99%
and 3.06%, respectively).
Issuance and redemption activity
On March 6, 2023, RioCan issued $200.0 million of Series AG senior unsecured debentures. These debentures were issued at a
coupon rate of 5.611% per annum and will mature on October 6, 2027. Inclusive of the benefit of bond forward hedges, the all-in
rate is 5.184%.
On April 18, 2023, RioCan redeemed, in full, its $200.0 million, 3.725% Series T unsecured debenture upon maturity.
On June 26, 2023, RioCan issued $300.0 million of Series AH senior unsecured debentures. These debentures were issued at a
coupon rate of 5.962% per annum and will mature on October 1, 2029. Inclusive of the benefit of bond forward hedges, the all-in
rate is 5.284%.
On September 29, 2023, RioCan issued $300 million of Series AI senior unsecured debentures. These debentures were issued at
a coupon rate of 6.488% per annum and will mature on September 29, 2026. RioCan will have the option to repay Series AI
debentures at par, in whole or in part, on or after September 29, 2024.
On September 29, 2023, RioCan redeemed, in full, its $300.0 million, 3.210% Series AA unsecured debentures upon maturity.
The Trust has the following series of senior unsecured debentures outstanding as at December 31, 2023 and 2022:
(thousands of dollars)
As at
Series
T
AA
W
AB
I
Maturity date
April 18, 2023
September 29, 2023
February 12, 2024
February 12, 2025
February 6, 2026
AD
AI
AC
AG
AE
AF
AH
June 15, 2026
September 29, 2026
March 10, 2027
October 6, 2027
November 8, 2028
May 1, 2029
October 1, 2029
Coupon rate
3.73 %
3.21 %
3.29 %
2.58 %
5.95 %
1.97 %
6.49 %
2.36 %
5.61 %
2.83 %
4.63 %
5.96 %
Interest payment frequency
December 31,
2023
$
Semi-annual
Semi-annual
Semi-annual
Semi-annual
Semi-annual
Semi-annual
Semi-annual
Semi-annual
Semi-annual
Semi-annual
Semi-annual
Semi-annual
— $
—
300,000
500,000
100,000
500,000
300,000
350,000
200,000
450,000
250,000
300,000
December 31,
2022
200,000
300,000
300,000
500,000
100,000
500,000
—
350,000
—
450,000
250,000
—
Contractual obligations
$
3,250,000 $
2,950,000
139 RioCan Annual Report 2023
RIOCAN REAL ESTATE INVESTMENT TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2023 AND 2022
(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
2024
2025
2026
2027
2028
Thereafter
Weighted average
contractual interest rate
3.29 % $
2.58 %
3.92 %
3.54 %
2.83 %
5.36 %
$
Principal
maturities
300,000
500,000
900,000
550,000
450,000
550,000
3,250,000
(9,057)
3,240,943
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, 2023, the Trust is 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, 2023
December 31, 2022
$
$
398,406 $
2,342,518
2,740,924 $
320,177
2,339,003
2,659,180
Future repayments of mortgages payable by year of maturity are as follows:
Year
2024
2025
2026
2027
2028
Thereafter
Weighted
average
contractual
interest rate (i)
Scheduled
principal
amortization
Principal
maturities
Total
repayments
4.74 % $
47,946 $
350,462 $
3.33 %
3.58 %
2.59 %
3.17 %
3.83 %
44,015
39,950
39,050
30,824
488,871
103,221
162,832
374,735
398,406
532,886
143,171
201,882
405,559
45,281
1,026,658
1,071,941
Unamortized debt financing costs, net of premiums, discounts, market
interest rate differential on debt assumed and debt modification losses
3.66 % $
247,066 $
2,506,779 $
2,753,845
(12,921)
$
2,740,924
(i) Inclusive of interest rate swap hedges.
As at December 31, 2023, total mortgages payable bear interest at a weighted average contractual interest rate of 3.66%, and a
weighted average effective interest rate of 3.59% inclusive of bond forward hedges (December 31, 2022 - 3.39% and 3.29%,
respectively), and mature between 2024 and 2034.
During the year ended December 31, 2023, RioCan completed new term mortgage borrowings of $217.2 million and renewals at
maturity balance of $8.4 million at a combined weighted average interest rate of 4.90% and a weighted average term of nine
years, and assumed contractual debt and a vendor take-back mortgage of $45.0 million at a weighted average interest rate of
2.67% and a remaining weighted average term of eight years. During the year ended December 31, 2023, repayments of
mortgage balances and scheduled amortization amounted to $173.0 million.
RioCan Annual Report 2023 140
RIOCAN REAL ESTATE INVESTMENT TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2023 AND 2022
(In thousands of Canadian dollars, tabular amounts in thousands, except per unit amounts or unless otherwise noted)
Pledged properties
As at December 31, 2023, $5.8 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, 2022 - $5.9
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 (i)
Non-revolving unsecured credit facilities
Construction lines and other bank loans
Current
Non-current
December 31, 2023
December 31, 2022
$
$
$
$
(1,875) $
699,836
181,285
879,246 $
567,015 $
312,231
879,246 $
131,601
699,823
309,688
1,141,112
332,461
808,651
1,141,112
(i) Balance represents deferred financing costs and there are no drawn amounts as at December 31, 2023.
Revolving unsecured operating line of credit
As at December 31, 2023, RioCan has a drawn balance of nil and $1,250.0 million of credit is available to be drawn from this
revolving unsecured operating line of credit (December 31, 2022 - $133.6 million and $1,116.4 million, respectively). The
weighted average contractual interest rate on amounts drawn under this facility is nil as at December 31, 2023 (December 31,
2022 - 6.34%).
Non-revolving unsecured credit facilities
On January 31, 2023, RioCan refinanced its $200 million non-revolving unsecured credit facility with two Schedule I financial
institutions, with a weighted average annual all-in fixed rate of 4.93% through interest rate swaps and a maturity date of February
3, 2025 with an option to extend to January 30, 2026. All other terms were similar to the facility it replaced. The matured
$200 million facility with two financial institutions (consisting of a Schedule I and a Schedule III bank) had a weighted average
annual all-in fixed interest rate of 3.53% 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, 2022 - 3.59%).
In addition, the Trust has a $150.0 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, 2022 - 3.68%) through interest rate swaps.
As at December 31, 2023, all of the Trust's non-revolving unsecured credit facilities are fully drawn.
The underlying spreads for the revolving unsecured operating line of credit and the non-revolving unsecured credit facilities are
based on the Trust's credit ratings. The revolving unsecured operating line of credit and the non-revolving unsecured credit
facilities agreements require the Trust to maintain certain financial covenants. 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 fixed rate and variable rate non-revolving secured construction and acquisition
facilities for the funding of certain development properties. As at December 31, 2023, these facilities have an aggregate maximum
borrowing capacity of $567.0 million (December 31, 2022 - $577.3 million) and mature between January 2024 to March 2033, of
which the Trust has drawn $181.3 million (December 31, 2022 - $309.7 million). The weighted average contractual interest rate
on amounts outstanding is 6.51% (December 31, 2022 - 5.89%).
141 RioCan Annual Report 2023
RIOCAN REAL ESTATE INVESTMENT TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2023 AND 2022
(In thousands of Canadian dollars, tabular amounts in thousands, except per unit amounts or unless otherwise noted)
13. ACCOUNTS PAYABLE AND OTHER LIABILITIES
As at
December 31, 2023
December 31, 2022
Current
Non-
current
Total
Current
Non-
current
Total
Property operating costs (i)
$
68,516 $
41,612 $ 110,128 $
88,616 $
39,312 $ 127,928
Development expenditures
Capital expenditures and leasing commissions on
income properties
Deferred revenue
Unitholder distributions payable
Interest payable
Lease liability (ii)
Income taxes payable
125,007
—
125,007
149,549
—
149,549
52,087
—
52,087
41,688
—
41,688
31,445
74,346
105,791
41,359
118,896
160,255
27,038
42,043
—
—
27,038
25,528
42,043
28,745
—
—
6,793
28,257
35,050
6,777
29,795
992
—
992
14,357
—
Unfunded employee future benefits
—
10,579
10,579
Contingent consideration
Bond forward agreement
Other payables and accruals
476
—
30,174
—
476
1,997
2,036
1,997
32,210
—
35,626
—
—
10,148
228
—
—
25,528
28,745
36,572
14,357
10,148
228
—
35,626
Includes amounts billed in advance for common area maintenance, realty taxes and insurance recoveries.
(i)
(ii) Refer to Note 8 for further details.
$ 384,571 $ 158,827 $ 543,398 $ 432,245 $ 198,379 $ 630,624
Deferred revenue
Deferred revenue consists of the following:
As at
Deposits received on residential inventory sales (contract liabilities)
Other deferred revenue (i)
December 31, 2023
December 31, 2022
$
$
75,601 $
30,190
105,791 $
129,400
30,855
160,255
(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
Deposits transferred to equity-accounted investments (i)
Recognized as revenue during the year
Balance, end of year
December 31, 2023
December 31, 2022
$
$
129,400 $
15,525
(68,322)
(1,002)
75,601 $
118,288
33,235
—
(22,123)
129,400
(i) Relates to the 11YV project. Refer to Note 4 for further details.
During the year ended December 31, 2023, $1.0 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, 2022 -
$22.1 million).
Income taxes payable
Income taxes payable relates primarily to the realized gain on sale of the Trust's U.S income property portfolio during May 2016.
RioCan Annual Report 2023 142
RIOCAN REAL ESTATE INVESTMENT TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2023 AND 2022
(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, 2023 and 2022:
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
Units repurchased and cancelled
Balance, end of year
2023
Units
$
2022
Units
$
300,359 $
4,556,783
309,797 $
4,696,785
85
11
—
300,455 $
3,173
210
—
4,560,166
88
14
(9,540)
300,359 $
4,415
304
(144,721)
4,556,783
Included in Units outstanding as at December 31, 2023 are exchangeable limited partnership Units totalling 0.5 million
(December 31, 2022 - 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 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.
On November 7, 2023, RioCan received TSX approval of its notice of intention to renew its NCIB (the 2023/2024 NCIB), to
acquire up to a maximum of 29,895,017 Units, or approximately 10% of the public float as of October 31, 2023, for cancellation or
to satisfy RioCan's obligation to deliver Units under the REU and PEU Plans, over the next 12 months, effective November 9,
2023.
The number of Units that can be purchased pursuant to the 2023/2024 NCIB is subject to a current daily maximum of 117,050
Units (which is equal to 25% of 468,202, being the average daily trading volume of Units on TSX 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.
RioCan has an automatic securities purchase plan (ASPP) in connection with the 2023/2024 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.
During the year ended December 31, 2023, the Trust did not acquire and cancel any Units (December 31, 2022 - 9,539,675 Units
were acquired and cancelled).
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, 2023, RioCan recorded $13.0 million in unit-based compensation costs (year ended
December 31, 2022 - $11.1 million).
143 RioCan Annual Report 2023
RIOCAN REAL ESTATE INVESTMENT TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2023 AND 2022
(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, 2023 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, 2022
Other comprehensive (loss)
As at December 31, 2023
$
$
(446) $
(517)
(963) $
23,303 $
(14,044)
9,259 $
256 $
132
388 $
39,260 $
3,305
42,565 $
Total
62,373
(11,124)
51,249
15. UNIT-BASED COMPENSATION PLANS
Restricted Equity Unit Plans (REU Plans)
Senior Executive REU Plan
As at December 31, 2023, 478,426 Senior Executive REUs are outstanding (December 31, 2022 - 439,174), of which 189,319
are vested (December 31, 2022 - 148,864). 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.
All REUs granted prior to December 8, 2023 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. Pursuant
to amendments to the Senior Executive REU Plan approved by the Board on December 8, 2023, all REUs granted after
December 8, 2023 shall vest and settle on the third anniversary of the grant date (or such other date as contemplated by the
Senior Executive REU Plan) (this date, together with the vesting date of REUs granted prior to December 8, 2023, being 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. Additional amendments
made to the Senior Executive REU Plan set out the requirement for a ‘double trigger’ before permitting REUs to vest upon a
change of control. This change means that REUs will now require both a termination of the executive’s employment and a change
of control to trigger vesting, which aligns RioCan with equity plan best-practices.
During the year ended December 31, 2023, the Trust granted 131,230 REUs under its Senior Executive REU Plan. The weighted
average grant date price was $21.81 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 $2.9 million.
Employee REU Plan
As at December 31, 2023, 511,086 Employee REUs are unvested and outstanding (December 31, 2022 - 410,447). The
Employee REU Plan provides for the allotment of REUs to certain 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, 2023, the Trust granted 230,496 REUs under its Employee REU Plan. The weighted
average grant date price was $22.01 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 $5.1 million.
Performance Equity Unit Plan (PEU Plan)
As at December 31, 2023, 451,522 PEUs are unvested and outstanding (December 31, 2022 - 419,137). 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.
RioCan Annual Report 2023 144
RIOCAN REAL ESTATE INVESTMENT TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2023 AND 2022
(In thousands of Canadian dollars, tabular amounts in thousands, except per unit amounts or unless otherwise noted)
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.
During the year ended December 31, 2023, the Trust granted 125,503 PEUs under its PEU Plan at a fair value of $2.9 million.
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)
$
$
2023
2,923 $
126
23.29 $
4.0%
34.0%
5.2%
2022
3,363
115
29.32
1.6%
32.0%
11.0%
(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 2023 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, 2023 to February 22, 2023 for the 2023 PEU grants.
Units Purchased for Settlement
During the year ended December 31, 2023, RioCan purchased 153,263 Units at an average price of $21.79, for satisfying
RioCan's existing obligations under the REU and PEU Plans (December 31, 2022 - 149,639 Units at average price of $24.11).
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, 2023, 14.4 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 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 years ended December 31, 2023 and December 31, 2022, there were no Unit options granted to senior management.
145 RioCan Annual Report 2023
RIOCAN REAL ESTATE INVESTMENT TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2023 AND 2022
(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, 2023 and 2022:
Years ended December 31,
2023
2022
Options
Outstanding, beginning of year
Exercised
Expired
Forfeited
Outstanding, end of year
Options exercisable at end of year
Units
(in thousands)
Weighted
average
exercise price
Units
(in thousands)
Weighted
average
exercise price
5,691 $
—
(969)
—
4,722 $
4,372 $
25.03
—
27.51
—
24.52
25.03
7,336 $
(88)
(943)
(614)
5,691 $
4,641 $
25.27
24.00
26.77
25.30
25.03
26.41
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 $
1,516
900
398
708
4,722 $
18.13
25.37
26.54
27.51
29.31
24.52
4.1
2.6
2.4
0.4
1.2
2.6
850 $
1,516
900
398
708
4,372 $
18.13
25.37
26.54
27.51
29.31
25.03
Exercise price range ($/unit)
As at December 31, 2023
$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 the People, Culture and Compensation Committee, 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. Pursuant to amendments to the Deferred Unit Plan that were approved by Unitholders in 2023, the
maximum number of Units reserved for issuance under the Deferred Unit Plan at any time is 1,500,000. 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.
Trustees have up to two years after ceasing to be a Trustee to redeem deferred Units, upon which the Trust will issue and deliver
Units.
As at December 31, 2023, there are 579,234 deferred Units vested and outstanding (December 31, 2022 - 648,207).
During the year ended December 31, 2023, 79,591 deferred Units were granted at weighted average grant price of $20.07 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 183,838 deferred Units were exercised at $19.15 per
Unit (year ended December 31, 2022 - 70,490 deferred Units granted and no deferred Units exercised).
16. DISTRIBUTIONS TO UNITHOLDERS
Total distributions declared to Unitholders are as follows:
Years ended December 31,
Distributions declared to Unitholders
Distributions per unit
$
$
2023
322,924 $
1.0750 $
2022
310,163
1.0150
Commencing with the February 2023 distribution, payable in March 2023, the Trust increased its monthly distribution by $0.005
per unit to $0.09 per unit or $1.08 per unit on an annualized basis.
On January 15, 2024, RioCan declared a distribution payable of $0.09 per unit for the month of January 2024, which was paid on
February 7, 2024 to Unitholders of record as at January 31, 2024.
RioCan Annual Report 2023 146
RIOCAN REAL ESTATE INVESTMENT TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2023 AND 2022
(In thousands of Canadian dollars, tabular amounts in thousands, except per unit amounts or unless otherwise noted)
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
$
2023
689,609 $
200,858
176,080
8,424
5,898
5,253
4,983
2022
687,459
199,437
168,144
9,092
1,884
5,119
3,057
$
1,091,105 $
1,074,192
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)
$
$
$
2023
176,080 $
18,977
4,983
13,789
213,829 $
2023
3,525 $
5,928
381
5,018
4,125
Property management and other service fees
$
18,977 $
2022
168,144
20,996
3,057
118,659
310,856
2022
3,031
12,492
515
3,194
1,764
20,996
(i) Recognized over time.
(ii) Recognized at a point in time.
(iii) During the year ended December 31, 2023, $4.0 million is recognized over time and $0.2 million is recognized at a point in time (year ended
December 31, 2022 - $1.6 million and $0.2 million, respectively).
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, 2023 and 2022:
As at
Within one year
More than one year
Total
December 31, 2023 December 31, 2022
$
$
83,840 $
361,690
445,530 $
27,455
739,876
767,331
147 RioCan Annual Report 2023
RIOCAN REAL ESTATE INVESTMENT TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2023 AND 2022
(In thousands of Canadian dollars, tabular amounts in thousands, except per unit amounts or unless otherwise noted)
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
$
$
2023
932 $
(761)
8,330
8,501 $
2022
491
(3,783)
1,450
(1,842)
The following table breaks down the fair value losses on marketable securities for the years ended December 31, 2023 and 2022:
Years ended December 31,
Realized gains on sale of marketable securities during the year
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
Other interest income (i)
$
$
$
$
2023
104 $
(865)
(761) $
2023
19,511 $
5,620
25,131 $
2022
—
(3,783)
(3,783)
2022
17,356
3,546
20,902
(i)
Includes interest from finance subleases of $2.6 million for the year ended December 31, 2023 (year ended December 31, 2022 - $2.5 million).
20. INTEREST COSTS
Years ended December 31,
Total interest (i)
Less: Interest capitalized
$
$
2023
250,537 $
(41,589)
208,948 $
2022
224,040
(43,675)
180,365
(i)
Includes interest from lease liabilities of $2.0 million for the year ended December 31, 2023 (December 31, 2022 - $1.9 million).
For the year ended December 31, 2023, interest was capitalized to properties under development and residential inventory at a
weighted average effective interest rate of 3.88% (year ended December 31, 2022 - 3.33%).
21. GENERAL AND ADMINISTRATIVE
Years ended December 31,
Non-recoverable salaries and benefits, net
Unit-based compensation expense
Depreciation and amortization
Other general and administrative expenses
G&A expense before Enterprise Resource Planning (ERP) implementation costs
ERP implementation costs
Total G&A expense
$
2023
22,438 $
7,807
2,632
15,458
48,335
12,032
$
60,367 $
2022
26,228
6,998
4,774
16,437
54,437
—
54,437
Other general and administrative costs include information technology costs, public company costs, professional fees, travel
expenses, occupancy costs, donations, advertising, promotion and marketing costs.
ERP implementation costs include salaries and benefits, consultant and licensing costs.
22. TRANSACTION AND OTHER COSTS
For the year ended December 31, 2023, transaction and other costs totalling $9.3 million (December 31, 2022 - $8.3 million)
primarily include property disposition costs and marketing costs.
RioCan Annual Report 2023 148
RIOCAN REAL ESTATE INVESTMENT TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2023 AND 2022
(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)
$
$
$
2023
38,802 $
300,392
87
300,479
0.13 $
0.13 $
2022
236,772
306,069
178
306,247
0.77
0.77
(i) The calculation of diluted weighted average number of Units outstanding excludes 3.8 million Unit options for the year ended December 31, 2023
(year ended December 31, 2022 - 5.0 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 swap assets
Bond forward agreement
December 31, 2023
December 31, 2022
Level 1
Level 2
Level 3
Level 1
Level 2
Level 3
— $
—
30,142
— $
15,887 $
$
20,198 $
—
—
—
—
—
—
— 12,632,473
—
—
929,245
19,075
8,770
—
—
—
— $
—
—
8,932
— 12,635,332
— 1,172,408
—
42,140
22,814
4,341
—
—
—
—
—
—
—
—
Total assets measured at fair value
$
20,198 $
8,770 $ 13,610,935 $
15,887 $
27,155 $ 13,858,812
Liabilities measured at fair value:
Bond forward agreement
Total liabilities measured at fair value
$
—
— $
1,997
1,997 $
—
— $
—
— $
—
— $
—
—
For assets and liabilities measured at fair value as at December 31, 2023, there were no transfers between Level 1, Level 2 and
Level 3 during the year ended December 31, 2023. 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, development expenditures and capital expenditures and leasing commissions, trade
payables and accruals, and deposits received from customers on residential inventory.
149 RioCan Annual Report 2023
RIOCAN REAL ESTATE INVESTMENT TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2023 AND 2022
(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
Bond forward agreement
December 31, 2023
December 31, 2022
Carrying value
Fair value
Carrying value
Fair value
$
20,198 $
20,198 $
15,887 $
30,142
40,110
289,533
8,770
—
30,142
40,110
284,512
8,770
—
8,932
41,592
269,339
22,814
4,341
$
3,240,943 $
3,137,722 $
2,942,051 $
2,740,924
2,631,379
879,246
1,997
879,460
1,997
2,659,180
1,141,112
—
15,887
8,932
41,592
266,121
22,814
4,341
2,719,995
2,485,578
1,141,112
—
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 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, 2023, approximately 4.6%
(December 31, 2022 - 6.5%) 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.
RioCan Annual Report 2023 150
RIOCAN REAL ESTATE INVESTMENT TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2023 AND 2022
(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 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, 2023, the outstanding notional amount of the floating-for-fixed interest rate swaps is $0.8 billion
(December 31, 2022 - $1.0 billion) and the term to maturity of these agreements ranges from February 2024 to November 2028.
The outstanding interest rate swaps by year of maturity are as follows:
Maturity
2024
2025
2026
2027
2028
Thereafter
Notional outstanding principal amount Weighted average effective fixed interest rate
3.62 %
4.93 %
— %
— %
3.94 %
— %
533,404
200,000
—
—
100,000
—
833,404
$
$
As at December 31, 2023, the Trust has bond forward contracts with an aggregate notional of $150.0 million outstanding, with a
settlement date on these agreements in February 12, 2024 (December 31, 2022 - $200.0 million, maturity in April 2023). The
bond forward contracts outstanding as at December 31, 2023, were entered into on December 14, 2023, to sell on February 12,
2024 $150.0 million Government of Canada Bonds due June 1, 2030 with an effective bond yield of 3.168%, to hedge its
exposure to movements in underlying risk-free interest rates on a highly probable anticipated fixed rate debt issuance.
On March 13, 2023, the Trust entered into bond forward contracts to sell on September 15, 2023, $300.0 million of Government
of Canada Bonds due June 1, 2030 with an effective bond yield of 2.629%, to hedge its exposure to movements in underlying
risk-free interest rates on highly probable anticipated fixed rate debt issuances.
During the year ended December 31, 2023, the Trust settled a total of $500.0 million of bond forward contracts which resulted in a
weighted average hedged interest rate of 5.244% for $500.0 million of debentures with a weighted average term of 5.6 years,
including the benefit of the $16.8 million realized bond forward gains, and $2.8 million of hedge ineffectiveness gains, arising from
issuing debentures with less tenor than the underlying bonds. The $500.0 million of settled bond forward contracts were
comprised of $200.0 million of bond forward contracts entered into on November 24, 2022, which were settled on March 6, 2023
in conjunction with the offering of the Series AG Debenture, and $300.0 million of bond forward contracts entered into on March
13, 2023, which were settled on June 26, 2023 in conjunction with the offering of the Series AH debenture.
On January 11, 2024, in conjunction with the offering of the Series AJ debenture, the Trust settled the $150.0 million of bond
forward contracts entered into on December 14, 2023 generating a $0.3 million realized bond forward gain, which will be
amortized over the term of the debenture.
The Trust assessed the effectiveness of its continuing hedging relationships and determined all such designated hedging
relationships are effective as at December 31, 2023. As at December 31, 2023, the fair value of the interest rate swaps and bond
forward agreements are, in aggregate, a net financial asset of approximately $6.8 million (December 31, 2022 - net financial
asset of approximately $27.2 million).
As at December 31, 2023, the carrying value of the Trust's floating rate debt that is not subject to a hedging strategy is $318.0
million and a 50 basis point increase in market interest rates would result in an annualized decrease of $1.6 million in the Trust's
net income.
151 RioCan Annual Report 2023
RIOCAN REAL ESTATE INVESTMENT TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2023 AND 2022
(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:
2023
Carry amount of the hedging
instrument
Assets
Liabilities
Nominal
amount of
hedging
instrument
Interest
rate swaps
$833,404
$8,770
$—
Bond
forward
agreement
$150,000
$—
$1,997
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
$—
Line item in the
consolidated
balance sheets
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 sheets
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 - 2023
Fair value
gain
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
$8,877
$—
$(22,921)
Interest costs/
Debt
prepayment
costs, net
$10,432
$2,792
$(7,127)
Interest costs
During the year - 2022
Fair value
gain
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
$43,024
$—
$1,225
Interest costs
$43,228
$725
$(2,217)
Interest costs/
Other income
The amounts at the reporting date relating to items designated as hedged items were as follows:
2023
2022
Fair value gain
used for
calculating hedge
ineffectiveness
during the year
Cash flow hedge
reserve (loss) for
continuing
hedges
Balance in cash
flow hedge
reserve for
discontinued
hedges
Fair value gain
used for
calculating hedge
ineffectiveness
during the year
Cash flow hedge
reserve for
continuing
hedges
Balance in cash
flow hedge
reserve for
discontinued
hedges
$8,877
$9,259
$—
$43,024
$23,303
$—
Interest rate risk
Variable rate mortgages
and lines of credit and the
bank loans
Bond forward agreement
$10,432
$(1,997)
$44,562
$43,228
$4,341
$34,919
The Trust has evaluated the extent to which its cash flow hedging relationships are subject to uncertainty driven by Interbank
offered rates (IBOR) reform as at December 31, 2023. The Trust's hedged items and hedging instruments for interest rate swaps
continue to be indexed to one-month Canadian Dollar Offered Rate (CDOR). Under IBOR reform, a new risk-free benchmark
interest rate, Canadian Overnight Repo Rate Average (CORRA), 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, 2023, the Trust
has one interest rate swap with a notional amount of $100.0 million that will mature after June 30, 2024 that does not have
fallback language to CORRA. The Trust will update its hedge documentation and adjust effective interest rates as the new
benchmark rate is implemented.
RioCan Annual Report 2023 152
RIOCAN REAL ESTATE INVESTMENT TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2023 AND 2022
(In thousands of Canadian dollars, tabular amounts in thousands, except per unit amounts or unless otherwise noted)
The Trust’s exposure to interest rate benchmark reform as at December 31, 2023 include the following floating rate financial
liabilities that will mature after June 30, 2024 and have not transitioned to or have fallback language to CORRA:
Financial liabilities
Mortgages payable
Revolving unsecured operating line of credit
Construction lines and other bank loans
Liquidity risk
December 31, 2023
108,400
—
102,075
210,475
$
$
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 11 and 12 respectively 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, default on the repayment of their mortgages or loans receivable to the Trust or investment entity in which the Trust
has an investment.
• 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, 2023 and December 31, 2022, the allowance for doubtful accounts totals $9.6 million and $13.5 million,
respectively. RioCan holds approximately $37.8 million of security deposits and approximately $1.4 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.
153 RioCan Annual Report 2023
RIOCAN REAL ESTATE INVESTMENT TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2023 AND 2022
(In thousands of Canadian dollars, tabular amounts in thousands, except per unit amounts or unless otherwise noted)
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.
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, 2023. 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,
2023, 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
2023
3,240,943 $
2,740,924
879,246
6,861,113
7,437,770
2022
2,942,051
2,659,180
1,141,112
6,742,343
7,728,892
$
14,298,883 $
14,471,235
Revolving unsecured operating line of credit and non-revolving unsecured credit facilities
The Trust is subject to certain key financial covenants pursuant to the agreements 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, 2023, the Trust is in compliance with all applicable financial covenants.
RioCan Annual Report 2023 154
RIOCAN REAL ESTATE INVESTMENT TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2023 AND 2022
(In thousands of Canadian dollars, tabular amounts in thousands, except per unit amounts or unless otherwise noted)
The following table summarizes the Trust's performance relative to these key financial covenants:
As at
Total indebtedness (i) (vi) (vii)
Secured indebtedness (ii) (vi) (vii)
Debt service coverage (iii) (vi) (vii)
Minimum unitholders' equity (in millions)
Ratio of unencumbered property assets to
unsecured indebtedness (iv) (v) (vi) (vii)
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, 2023 December 31, 2022
48.4 %
50.9 %
22.0 %
2.2 x
$7,438
1.7 x
7.7 %
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.
(vii) The calculation was performed on a proportionate share basis.
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
Name
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
RioCan Realty Investments Partnership Four LP
RC Condo Management Trust
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
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-Three LP
RC Windfield Farms LP
RioCan Realty Investments Partnership Twenty-Four LP
RioCan Realty Investments Partnership Twenty-Five 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 Yonge Roehampton LP
RC Dufferin LP
RC Bellevue 4 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
RC Parkway Lease LP
RC King and Sherbourne LP
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.
155 RioCan Annual Report 2023
RIOCAN REAL ESTATE INVESTMENT TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2023 AND 2022
(In thousands of Canadian dollars, tabular amounts in thousands, except per unit amounts or unless otherwise noted)
Refer to Note 4 for the financial information of PR Bloor Street LP, RC Yorkville LP, RioCan-Fieldgate LP, RioCan-HBC JV,
Dawson-Yonge LP, RC (Queensway) LP, RC (Leaside) LP - Class B, 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,
2023.
28. SUPPLEMENTAL CASH FLOW INFORMATION
Operating activities
Years ended December 31,
Interest received
Interest paid
Investing activities
$
2023
16,365 $
(235,875)
2022
9,376
(220,723)
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
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
$
$
$
$
2023
(79,235) $
(46,619)
(125,854) $
2022
(52,869)
(48,598)
(101,467)
2023
2022
(322,924) $
(25,528)
27,038
(321,414) $
(310,163)
(24,781)
25,528
(309,416)
The following provides a reconciliation of liabilities arising from financing activities:
Year ended December 31, 2023
Balance, beginning of year
Proceeds/advances, net
Repayments
Non-cash changes:
Deferred financing costs and premiums and discounts
Transfers to equity-accounted investment
VTB mortgage or contractual principal assumed on
acquisition/disposition, net
Balance, end of year
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
Mortgages payable
Lines of credit and
other bank loans
$
2,659,180 $
1,141,112 $
212,739
(172,964)
(3,048)
—
320,014
(471,139)
1,044
(111,785)
Debentures
2,942,051
796,114
(500,000)
2,778
—
$
$
45,017
2,740,924 $
—
879,246 $
—
3,240,943
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
—
Balance, end of year
$
2,659,180 $
1,141,112 $
2,942,051
RioCan Annual Report 2023 156
RIOCAN REAL ESTATE INVESTMENT TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2023 AND 2022
(In thousands of Canadian dollars, tabular amounts in thousands, except per unit amounts or unless otherwise noted)
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
$
$
2023
6,671 $
(5,700)
(116,610)
8,427
(1,886)
(109,098) $
2022
27,074
(10,482)
(25,849)
(20,087)
2,874
(26,470)
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.
As at December 31, 2023 and 2022, the Trust’s key management personnel include each of the Trustees and the following
officers: President and Chief Executive Officer, Chief Financial Officer, Chief Investment Officer, and Chief Operating Officer.
Effective February 1, 2024, Mr. Guy Metcalfe was appointed to RioCan’s Board as a Trustee.
Remuneration of the Trust’s Trustees and Key Executives during the years ended December 31, 2023 and 2022 is as follows:
Trustees
2023
429 $
2,239
—
2,668 $
2022
420 $
2,058
—
2,478 $
Key Executives
2023
5,119 $
3,927
156
9,202 $
2022
4,597
3,500
176
8,273
$
$
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, 2023, RioCan's
contributions to the defined contribution plan were $3.0 million (December 31, 2022 - $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, 2023 is $4.0 million (December 31, 2022 - $3.8 million). The
recognized pension obligation (net of plan assets) as at December 31, 2023 is $10.6 million (December 31, 2022 - $10.1 million).
Pension costs of $0.2 million were recorded in net income for the year ended December 31, 2023 (pension costs for the year
ended December 31, 2022 - $0.2 million). The discount rate used was 4.4% (December 31, 2022 - 4.8%), the compensation
growth rate was 4.0% (December 31, 2022 - 4.0%) and the expected long-term rate of return on plan assets was 4.4%
(December 31, 2022 - 4.8%).
157 RioCan Annual Report 2023
RIOCAN REAL ESTATE INVESTMENT TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2023 AND 2022
(In thousands of Canadian dollars, tabular amounts in thousands, except per unit amounts or unless otherwise noted)
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.
33. CONTINGENCIES AND OTHER COMMITMENTS
Third-party guarantees
As at December 31, 2023, the maximum exposure to credit loss resulting from the Trust's debt guarantees on behalf of certain
co-owners' interests and mortgages assumed by purchasers on property dispositions is $341.2 million (December 31, 2022 -
$284.7 million), which expires between 2024 and 2033. Debt guaranteed by RioCan that relates to the assumption of mortgages
on property dispositions is nil (December 31, 2022 - $29.3 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:
2024
2025
2026
2027
2028
Thereafter
Total
$
$
27,175
163,619
45,696
—
—
104,755
341,245
Letters of credit and surety bonds
The Trust has aggregate letter of credit facilities with certain Schedule I banks totalling $91.3 million (December 31, 2022 -
$111.6 million). As at December 31, 2023, the Trust’s outstanding letters of credit under these facilities are $40.2 million
(December 31, 2022 - $53.0 million).
The Trust is contingently liable for surety bonds that have been provided to support condominium developments and warranties
in the amount of $184.4 million (December 31, 2022 - $147.7 million).
Investment commitments
As at December 31, 2023, the Trust has total unfunded investment commitments of $84.7 million relating to equity-accounted
investments (December 31, 2022 - $96.2 million). In addition, within RioCan's investment in equity-accounted investments there
are $59.8 million in construction commitments at RioCan's ownership interest pertaining to development activities (December 31,
2022 - $35.1 million).
Construction commitments
RioCan has entered into commitments for development activity and building renovations from leasing activity. As at December 31,
2023, the commitments for investment properties and residential inventory are $248.0 million (December 31, 2022 - $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.
RioCan Annual Report 2023 158
RIOCAN REAL ESTATE INVESTMENT TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2023 AND 2022
(In thousands of Canadian dollars, tabular amounts in thousands, except per unit amounts or unless otherwise noted)
34. EVENTS AFTER THE BALANCE SHEET DATE
Debenture issuance
February 12, 2024, RioCan issued $300.0 million Series AJ senior unsecured debentures. These debentures were issued at a
coupon rate 5.470% per annum and will mature on March 1, 2030. Inclusive of the benefit of bond forward hedges, the all-in rate
is 5.452%.
Debenture redemption
On February 12, 2024, RioCan redeemed, in full, its $300.0 million, 3.29% Series W unsecured debenture upon maturity.
Non-revolving unsecured credit facility
On February 7, 2024, RioCan repaid its $350.0 million non-revolving unsecured credit facility upon maturity, in accordance with its
terms.
Acquisitions
On January 11, 2024, RioCan acquired a 50% interest in a property located in Toronto, Ontario, for the purchase price of $100.2
million including transaction costs, of which $40.9 million is variable consideration to be paid as various development milestones
are met. The acquisition included the assumption of $46.1 million of debt at a weighted average contractual interest rate of
3.20%.
On February 2, 2024, RioCan acquired a 50% interest in a property located in Calgary, Alberta, for the purchase price of $52.9
million including transaction costs. RioCan assumed a total of $32.7 million of debt consisting of both CMHC insured and
conventional mortgages, with a blended contractual fixed interest rate of 1.97%.
Unit distributions
On February 13, 2024, RioCan's Board of Trustees approved an increase to its per unit monthly distributions to Unitholders from
$0.09 to $0.0925 beginning with the distribution declared in February 2024 bringing RioCan's annualized distribution to $1.11 per
unit.
159 RioCan Annual Report 2023
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., K.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),(4)
Dale H. Lastman, C.M., O.Ont.
Jane Marshall (1),(4)
Chair of the People, Culture and Compensation Committee
Guy Metcalfe (3),(4)
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
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
The Toronto Stock Exchange
Trading Symbol: Trust Units – REI.UN
1 Member of the Nominating, 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