85% rent collection.. 7.7% rent deferred- 15% closed storesRioCan Announces Second Quarter Results For 2020
TORONTO, July 29, 2020 (GLOBE NEWSWIRE) -- RioCan Real Estate Investment Trust ("RioCan" or the "Trust")(TSX: REI.UN) announced today its financial results for the three and six months ended June 30, 2020 ("Second Quarter").
"This second quarter was undoubtedly the most challenging quarter ever for many of our tenants as non-essential businesses were mandated to close in mid-March. After several months of shutdown, businesses have started to re-open under various restrictions with some tenants in the GTA just getting to reopen. Against this unprecedented reality, RioCan showed its resiliency and remained committed to supporting our tenants with a view to the long-term. We exercised patience, approved deferrals where appropriate, participated in CECRA for all eligible tenants, and where necessary, managed a stern recovery process," said Edward Sonshine, CEO of RioCan. "This has enabled us to collect 86.8% of our quarterly rents including expected government funding and short term deferrals with credit worthy tenants. The collections will continue to improve as evidenced in July. Meanwhile, we have maintained good relationships with our tenants, with special focus on those with continuing expansion programs. With our major market presence, strong liquidity and our remarkable experienced people, we are well positioned to take advantage of any opportunities that arise from the economic setbacks caused by this pandemic."
Three months ended Six months ended
June 30 June 30
(in millions except
percentages, square
feet and per unit
values) 2020 2019 2020 2019
Financial Highlights
Net income (loss) $ (350.8) $ 253.0 $ (247.9) $ 447.5
Weighted average
Units outstanding -
diluted (in
thousands) 317,721 304,636 317,717 304,829
FFO (i) $ 109.9 $ 144.7 $ 254.5 $ 286.9
FFO per unit --
diluted (i) $ 0.35 $ 0.48 $ 0.80 $ 0.94
Operation Highlights
Same property NOI
(decline) growth -
overall portfolio
(i) (10.8)% 2.2 % (4.3)% 1.9 %
Six major markets - %
of total annualized
revenue (ii) 90.1% 87.8 % 90.1% 87.8 %
Greater Toronto Area
- % of total
annualized revenue
(ii) 52.1% 48.6 % 52.1% 48.6 %
Occupancy - committed
six major markets
(ii) 96.8% 97.8 % 96.8% 97.8 %
Occupancy - committed
(ii) 96.4% 97.1 % 96.4% 97.1 %
Blended leasing
spread 5.8% 11.3 % 5.7% 11.0 %
Renewal leasing
spread 4.6% 10.9 % 5.0% 9.4 %
Development Highlights
Development
completions - sq ft
in thousands 4.0 269.0 137.0 361.0
Development
expenditures (iii) $ 114.6 $ 102.5 $ 217.5 $ 195.0
Properties under
development and
residential
inventory as a
percentage of
consolidated gross
book value of assets
(maximum permitted:
15%) (ii) (iii) 10.7% 8.0 % 10.7% 8.0 %
Balance Sheet Strength
Highlights
Debt to Adjusted
EBITDA (i) (iv) 8.80x 7.92x 8.80x 7.92x
Ratio of total debt
to total assets (i)
(ii) (iv) 44.4% 42.9 % 44.4% 42.9 %
Unencumbered assets
(i) (ii) (iv) $ 8,697 $ 8,104 $ 8,697 $ 8,104
Unencumbered assets
to unsecured debt
(i) (ii) (iv) 221% 225 % 221% 225 %
(i.) A Non-GAAP measurement. For definitions and the basis
of presentation of RioCan's Non-GAAP measures, refer
to the Non-GAAP Measures section in RioCan's Management's
Discussion and Analysis (MD&A) for the three and six
months ended June 30, 2020.
(ii.) (Information presented as at June 30 for the years
then ended.)
(iii.) (Includes costs incurred for various properties under
development and for residential inventory in respective
reporting periods.)
(iv.) (At RioCan's proportionate share.)
COVID-19 Pandemic and Its Impacts on RioCan Property Operations
-- Throughout the COVID-19 pandemic, RioCan has prioritized the health and
safety of its tenants, their customers and its employees. The Trust has
supported communities and small businesses through various initiatives
while many businesses had to shut down or reduce hours of operations
during the Second Quarter. One such initiative is the Trust's
participation in the Canada Emergency Commercial Rent Assistance
("CECRA") program, providing eligible tenants a 75% gross rent reduction
whereby the government funds 50% and landlords effectively incur a 25%
rent abatement.
-- For the quarter, approximately 19.4% of the Trust's portfolio, as
measured based on billed gross rents for the quarter, was estimated to be
potentially eligible for the CECRA program. According to tenant
attestations for their revenues, the Trust determined approximately
14.4% of its portfolio qualified for the CECRA program. This resulted in
total CECRA rent abatements of $9.9 million for the quarter. In addition,
the Trust accrued an additional $9.2 million provision for rent
abatements for other tenants and bad debts. In total, a $19.1 million
provision for rent abatements and bad debts was accrued in the Second
Quarter, representing approximately 6.8% of the billed gross rents for
the quarter.
-- As of July 28, 2020, the Trust's collections of billed gross rents for
the Second Quarter are as follows:
Cash collection (i) 73.3%
CECRA government funding (ii) 5.8%
Deferred rents with definitive payment schedule 7.7%
Provision for rent abatements and bad debts 6.8%
Remaining to be collected 6.4%
Total 100.0%
(i. April, May and June cash collections were 73%,
71% and 76%, respectively.)
(ii. Net of $4.2 million CECRA tenant over-payments
for the quarter.)
-- RioCan is confident in the collectability of the 7.7% deferred rents and
the 6.4% of remaining rents to be collected. Furthermore, RioCan holds
$29.0 million in security deposits and $5.3 million in letters of credit
from tenants which can serve to offset rents owed on a tenant-by-tenant
basis in the unfortunate event of unresolved tenant defaults.
-- As of July 28, 2020, the Trust has collected to date 85.0% of the billed
July gross rents in cash. Rent collections are expected to further
improve as more businesses resume operations and the economy gradually
recovers. Approximately 85% of the Trust's tenants are currently open,
based on occupied net leaseable area.
-- For the quarter, in addition to various expense management and operations
efficiency improvements identified and implemented, the Trust deferred
$43.0 million in municipal realty taxes payments based on available
government programs. The Trust achieved $17.3 million recoverable
operating costs savings from the previous quarter. Such payment deferrals
and costs savings, together with lower maintenance capital expenditures,
offset a significant portion of the Q2 2020 gross rents outstanding in
the quarter from a cash flow perspective.
FFO and Net Income
-- FFO per unit for the Second Quarter was $0.35, a decrease of $0.11 or
24.0% from Q1 2020. This was mainly due to the aforementioned $19.1
million pandemic related provision, no gains on sale of marketable
securities (Q1 2020 - $11.1 million), and no material negative mark to
market adjustment for trustee costs (Q1 2020 - $4.3 million).
-- The Trust reported fair value losses of $451.7 million for the Second
Quarter, representing a 3.1% write-down to the total IFRS value of
investment properties as of the beginning of the quarter, including
assets held for sale.
-- The fair value write-down this quarter reflected the estimated effect of
the pandemic on property cash flows and capitalization rates, as well as
the estimated effect of the depressed oil and gas market in Alberta.
Specifically, the Trust wrote down the IFRS value of its enclosed centers
by 10.6% and those of its Alberta assets by 4.8% during the quarter.
-- As a result of the fair value write-downs and the FFO variances noted
above, the Trust reported a net loss of $350.8 million and $247.9 million
for the three and six months ended June 30, 2020, respectively.
-- The economic recovery from the pandemic is going to take time and it is
difficult to predict the length and severity of such impact in the short
and long term. The Trust expects 2020 to be impacted negatively by the
pandemic and estimates FFO per unit to be in the $1.60 range for the
year. Based on the current situation and recent trends in Canada, the
Trust is hopeful to achieve significant growth in 2021 from this FFO base
of 2020.
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