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REI.UN - RioCan Real Estate Investment Trust News Story

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Last Trade - 08/12/21

Large Cap
Market Cap £4.16bn
Enterprise Value £8.15bn
Revenue £666.5m
Position in Universe 99th / 2708

RioCan Real Estate Investment Trust Announces Changes To Executive Compensation Program

Thu 28th October, 2021 1:00pm
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TORONTO, Oct. 28, 2021 (GLOBE NEWSWIRE) -- The Board of Trustees of RioCan
Real Estate Investment Trust (“RioCan” or the “Trust”) (TSX: REI.UN)
today announced that it has made significant changes to its executive
compensation program. The changes were made following the Trust’s 2021
annual meeting of unitholders (the “Meeting”) in May 2021, at which RioCan
received a say on pay vote outcome below 50%. Following the Meeting, the Board
of Trustees (the “Board”) and its People, Culture and Compensation
Committee (the “Committee”) conducted a thorough review of the Trust’s
executive compensation program with the goal of ensuring it is designed to
create long-term unitholder value by attracting, and retaining talented
executives, linking pay with performance, and driving long-term performance.

“Immediately following the 2021 Annual Meeting, the Committee and Management
assembled a team to address unitholder concerns regarding RioCan’s 2021
executive compensation program. The Committee then had a series of meetings
with RioCan’s investors. The purpose of the discussions was to better
understand unitholder concerns with the Trust’s 2021 executive compensation
structure. We received and reviewed meaningful feedback and, have taken
important steps to address the concerns that were identified through our
investor outreach,” said Richard Dansereau, Chair of the Committee. “We
would like to extend our gratitude to the unitholders who took the time to
meet with us. We will continue to review and adjust our executive compensation
program to align with the interests of our unitholders and reflect evolving
market and industry dynamics.”

Following the Meeting, the Board took the following actions:
* Unitholder Engagement: The Committee engaged in an extensive investor
outreach initiative immediately following the Meeting. Between June and
September, the Committee met with and solicited feedback from RioCan’s
largest unitholders. The purpose of these meetings was to ensure that the
Board had a comprehensive understanding of unitholder concerns with the
Trust’s compensation program. The Committee reached out to the Trust’s 30
largest unitholders, representing approximately 25.5% of RioCan’s
outstanding units. To date, the Committee has held 16 meetings with
unitholders, representing approximately 18.0% of RioCan’s outstanding units.
The Board intends to continue this outreach.
* Independent Compensation Advisory: The Committee engaged Meridian as an
independent compensation consultant in August 2021 to review and provide a
fresh perspective on the Trust’s compensation program.
* Committee Engagement: Since the Meeting, the Committee has held five
meetings to consider investor feedback and determine durable solutions for the
relevant issues raised.
* Proposed Significant Changes: As a result of the above actions, the Board
and management have committed to significant amendments to the Trust’s
compensation program that RioCan believes will create lasting enhancements to
its approach to executive compensation.
The table below summarizes key themes arising from the valuable investor
discussions and independent consultant reviews of the compensation program, as
well as the changes being made to address the concerns:

 Feedback                                                                                                                                                                  Response/ Commitment                                                                                                                                                                                                                                                                                                                                                                    
 Unit options may no longer be an ideal long-term incentive (“ LTI ”) vehicle for RioCan and, in particular, should not be awarded outside the regular LTI program         * Unit options will no longer be awarded either as part of the LTI program or as special awards                                                                                                                                                                                                                                                                                         
                                                                                                                                                                           * RioCan has redesigned its LTI program to provide awards that are well aligned with unitholder experience, support a strong distribution yield and align long term compensation with long term performance                                                                                                                                                                             
 Special awards are an indicator that the LTI program is not operating effectively                                                                                         * RioCan will not make any special awards to any Named Executive Officers (“ NEOs ”)                                                                                                                                                                                                                                                                                                    
 CEO compensation positioning relative to market median has not been transparently disclosed                                                                               * In conjunction with the CEO transition earlier in the year, the approach to CEO compensation was reset to align more closely to the median of RioCan’s peers                                                                                                                                                                                                                          
                                                                                                                                                                           * Enhanced disclosure of CEO compensation relative to market median will be included as part of RioCan’s 2022 proxy disclosure                                                                                                                                                                                                                                                          
 The Executive Management Bonus Plan (“ EMBP ”) metrics overlap with certain of the LTI metrics and the use of G&A as a percentage of rental revenue as a short-term       * RioCan is responding to the concerns by significantly reducing the overlap of metrics in the annual and LTI program, establishing a standalone ESG metric to increase transparency of this measure, and eliminating G&A as a metric                                                                                                                                                   
 incentive metric should be reduced. The executive ESG metrics and weighting are not transparent                                                                           * RioCan’s EMBP design for 2022 is expected to be: * 60% Funds From Operations, to maintain a significant focus on business fundamentals                                                                                                                                                                                                                                                
                                                                                                                                                                           * 20% ESG related goals, which has been identified as a separate metric, to reflect the importance of ESG to RioCan and its unitholders; and to facilitate more transparent disclosure                                                                                                                                                                                                  
                                                                                                                                                                           * 20% Individual Executive Objectives                                                                                                                                                                                                                                                                                                                                                   
 LTI metrics overlap with certain of the EMBP metrics, and performance should be measured over a multi-year period                                                         * RioCan is retaining the current structure of 50% Performance Equity Units (“ PEUs ”) and 50% Restricted Equity Units for its LTI program                                                                                                                                                                                                                                              
                                                                                                                                                                           * Overlap between the LTI and EMBP metrics has been reduced through the reduction of the FFO per Unit weighting, and the introduction of two new performance metrics into the LTI program                                                                                                                                                                                               
                                                                                                                                                                           * RioCan will measure FFO on a cumulative basis over three years, rather than using three one year periods, further reducing the overlap between the EMBP and LTI program. RioCan’s PEUs will vest based on: * 40% three-year cumulative FFO per Unit                                                                                                                                   
                                                                                                                                                                           * 40% three-year relative total unitholder return against RioCan’s peer group                                                                                                                                                                                                                                                                                                           
                                                                                                                                                                           * 10% three-year NAV growth                                                                                                                                                                                                                                                                                                                                                             
                                                                                                                                                                           * 10% ESG related goals                                                                                                                                                                                                                                                                                                                                                                 
 Increase unit ownership requirements                                                                                                                                      * The CEO’s unit ownership requirement has been increased to 5X base salary                                                                                                                                                                                                                                                                                                             
                                                                                                                                                                           * Until each NEO has met the unit ownership requirement, 50% of the net after tax portion of proceeds from any unit option exercise and 50% of the net after tax value of the any unit redemption must be retained in units or applied to the purchase of units                                                                                                                         
 Compensation peer group                                                                                                                                                                                                                                                                                      * The Committee worked with its independent compensation consultant to redevelop its compensation peer group to provide a more robust sample of peers and to replace some peers in adjacent industries with more business-relevant peers             
                                                                                                                                                                                                                                                                                                              * RioCan will provide enhanced proxy disclosure of the rationale for the selection of the companies in the compensation peer group and information about RioCan’s size relative to peers on key metrics                                              
 Performance peer group                                                                                                                                                                                                                                                                                       * RioCan will use the same group of peers for measuring both compensation and relative total unitholder return performance for the PEUs                                                                                                              
                                                                                                                                                                                                                                                                                                              * This simplifies the analysis of pay and performance and will allow for enhanced disclosure of the close links between compensation outcomes and performance relative to RioCan’s peers                                                             
 Proxy disclosure could be enhanced to more clearly describe compensation and incentive programs                                                                                                                                                                                                              * In addition to the specific references to enhanced disclosure in this press release, RioCan commits to making the management information circular easier to read and to providing enhanced disclosure of compensation decisions and the business   
                                                                                                                                                                                                                                                                                                              rationale for these decisions                                                                                                                                                                                                                        

Additional details will be provided in RioCan’s Management Information
Circular prior to the 2022 annual meeting of unitholders.

RioCan remains committed to year-round and meaningful engagement with
unitholders. The Committee will continue to assess the Trust’s executive
compensation program to align with business goals and unitholder interests and
work towards restoring unitholder confidence in the program.

About RioCan

RioCan is one of Canada’s largest real estate investment trusts. RioCan
owns, manages and develops retail-focused, increasingly mixed-use properties
located in prime, high-density transit-oriented areas where Canadians want to
shop, live and work. As at June 30, 2021, our portfolio is comprised of 214
properties with an aggregate net leasable area of approximately 37.2 million
square feet (at RioCan's interest) including office, residential rental and 15
development properties. To learn more about us, please visit 

Contact Information

RioCan Real Estate Investment Trust
Kim Lee
Vice President, Investor Relations
(416) 866-3033


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