SmartCentres Real Estate Investment Trust (“SmartCentres”, the
“Trust” or the “REIT”) (TSX: SRU.UN) is pleased to report its
financial and operating results for the quarter and year ended
December 31, 2021.
“While there continues to be work to do, we
ended the 4th quarter with solid performances from every aspect of
the business. Operational resilience was demonstrated by solid
leasing momentum, increased occupancy to 97.6%, and further
improved cash collections exceeding 98%. This is a reflection of
the strength of our tenants. Our mixed-use intensification program
continues to be a source of additional accretive growth,
demonstrated this quarter by the commencement of presales at both
our exciting new 627-unit ArtWalk condominium/residential rental
project at SmartVMC and our in-demand 174-unit townhome project in
Vaughan. Initial presale activity in both of these residential
projects has exceeded our expectations and we plan to commence
construction on both imminently. In addition, during the quarter,
we experienced property value increments exceeding $580.7 million,
representing progress in the zoning and entitlements’ process on
several strategic projects together with improved market
conditions. Also, FFO per unit increased by $0.06 or 12% to $0.56
as compared to the same quarter in the prior year,” said Mitchell
Goldhar, Executive Chairman and CEO of SmartCentres REIT.
“At SmartVMC, currently our highest profile
development initiative, but just one of many master-planned
projects, we have thus far closed on 1,741 units in the first three
Transit City condominium phases, resulting in $0.37 in FFO per
unit. In addition, construction is progressing well on the 1,026
units in our sold-out Transit City 4 and 5 towers and the 454-unit
Millway rental complex. In addition, our residential banner,
‘SmartLiving’ recently had its inaugural launch of the 627-unit
ArtWalk condominium/residential rental project, and is expected to
soon launch Park Place, a new 1,100-unit two-tower project on the
SmartVMC West lands which we purchased just a month ago. The REIT
purchased a 66.67% interest in these lands which represents the
western 53-acre portion of our SmartVMC City Centre. We intend to
develop approximately 10.0 million square feet of mixed-use space
on these newly acquired lands and they will also accommodate part
of the 9-acre park which, over time, will become the focal point of
SmartVMC.”
“Given the progress that was made in 2021, as we
move toward a ‘post-covid era’ in 2022, we expect an improving
leasing environment, further growth in our self-storage business,
increased construction activity in new residential rental buildings
in both Ontario and Quebec and the commencement of construction of
our first of many retirement home projects with Revera,” added Mr.
Goldhar.
Key Business Development, Financial and
Operational Highlights for the Year Ended December 31,
2021
Mixed-Use Development and
Intensification at SmartVMC
- Completed a strategic acquisition
valued at $513.0 million of a two-thirds interest in 53.0 acres
making up the westerly half in SmartVMC West, more than doubling
the Trust’s holdings in the 105-acre city centre development.
- Construction continues on the 100%
pre-sold Transit City 4 (45 storeys) and 5 (50 storeys) condo
towers, representing 1,026 residential units. Good progress is
being made above grade with concrete and formwork complete up to
level 39 for Transit City 4 and level 30 for Transit City 5.
- Construction of the purpose-built
rental project, The Millway (36 storeys), continues at SmartVMC,
with concrete and formwork up to level 15.
- As part of Transit City 1 and 2
projects, construction of the 22 townhomes, all of which are
pre-sold, is well underway and delivery is expected in early
2022.
- Successful launch of ArtWalk condominium development with over
300 units pre-sold, representing over 90% of released units.
Other Business Development
- Leasing continues on the completed
first phase of the two-phase, purpose-built residential rental
project in Laval, Quebec, which had initial occupancy by tenants
commencing in March 2020 and, to date, approximately 90% of the
171-unit building has been leased. Construction of the next phase
commenced in October 2021.
- The Trust completed the
construction of its fifth self-storage facility with the opening of
its Scarborough East facility in November 2021. All of the five
developed and operating self-storage facilities have been very
well-received by their local communities, with current occupancy
levels ahead of expectations.
- Two self-storage facilities in
Brampton (Kingspoint) and Aurora are currently under construction.
Both facilities are expected to be completed in 2022. Additional
self-storage facilities have been approved by the Board of Trustees
and the Trust is in the process of obtaining municipal approvals in
Whitby, Markham, Stoney Creek and two locations in Toronto (Gilbert
Ave. and Jane St.).
- Construction is on schedule for two purpose-built residential
rental towers (238 units) in Mascouche, Quebec with joint venture
partner Cogir.
- Construction commenced for a new
retirement residence and a seniors’ apartment project, totalling
402 units, in 2021 with joint venture partner Selection Group on
the Trust's Laurentian Place in Ottawa, with completion expected in
2023.
- The Trust has commenced the
redevelopment of a portion of its 73-acre Cambridge retail property
(which is subject to a leasehold interest with Penguin) which now
allows various forms of residential, retail, office, institutional,
and commercial uses providing for the creation of a vibrant urban
community with the potential for over 12.0 million square feet of
development.
Financial
- Net income and comprehensive
income(1) was $987.7 million as compared to $89.9 million in 2020,
representing an increase of $897.7 million. This increase was
primarily attributed to: i) $944.9 million increase in fair value
adjustments on revaluation of investment properties, of which
$766.6 million relates to the Trust's investment properties and
$178.3 million relates to the Trust's proportionate share of equity
accounted investments, ii) $14.7 million decrease in interest
expenses, and partially offset by i) $51.9 million decrease in fair
value adjustments on financial instruments, ii) $3.9 million
increase in general and administrative expenses (net), iii) $3.6
million decrease in interest income, iv) $1.0 million decrease in
NOI, v) $1.1 million increase in supplemental costs and
acquisition-related costs, and vi) $0.4 million decrease in gain on
sale of investment properties.
- Key debt metrics include Debt to
Aggregate Assets(2)(3) of 42.9%, Interest Coverage Ratio
multiple(2) of 3.4X(2), and Adjusted Debt to Adjusted EBITDA
multiple(2)(3) of 9.2X.
- The Trust improved its
unsecured/secured debt ratio(2) to 71%/29% (December 31, 2020 –
68%/32%).
- The Trust continues to add to its
unencumbered pool of high-quality assets. As at December 31, 2021,
this unencumbered portfolio consisted of income properties valued
at $6.6 billion (December 31, 2020 – $5.8 billion).
- FFO(2) increased by $12.1 million
or 3.3% to $380.1 million as compared to 2020, primarily due to
$14.7 million net decrease in interest expense ($12.0 million yield
maintenance costs included in 2020) and $5.6 million increase in
gain on TRS, partially offset by $3.9 million increase in G&A
expenses (net), $3.6 million decrease in interest income, and $1.0
million decrease in NOI.
- Net income and comprehensive income
per Unit(1) increased by $5.16 to $5.68 as compared to 2020,
primarily due to the reasons noted above.
- FFO per Unit(2) increased by $0.06
or 2.8% to $2.19 as compared to 2020, primarily due to the reasons
noted above for the increase in FFO.
- FFO with adjustments(2) increased
by $3.4 million or 0.9% to $383.3 million as compared to 2020. FFO
per Unit with adjustments(2) increased by $0.01 or 0.5% to $2.21 as
compared to 2020.
- Cash flows provided by operating
activities(1) increased by $75.6 million or 25.6% to $371.6 million
as compared to 2020 primarily due to lower working capital
requirements, in addition to an increase in tenant prepaid rent,
deposits, and other payables.
- The Payout Ratio relating to cash
flows provided by operating activities for the 12 months ended
December 31, 2021 was 85.8%, as compared to 107.7% in 2020.
- ACFO(2) decreased by $0.4 million
or 0.1% to $353.1 million as compared to 2020 primarily due to the
contribution of the Transit City 1 and 2 condo closings in
2020.
- ACFO(2) exceeded distributions
declared by $34.3 million (2020 – surplus of ACFO over
distributions declared of $34.7 million).
- The Payout Ratio relating to
ACFO(2) for the 12 months ended December 31, 2021 was 90.3%, as
compared to 90.2% in 2020.
Operational
- Rentals from investment properties
and other(1) was $780.8 million, as compared to $781.3 million in
2020, representing a decrease of $0.5 million or 0.1%. This
decrease was primarily due to lower net base rents, and was
partially offset by short-term rental revenue and percentage rent
revenue.
- In-place and committed occupancy
rates were 97.4% and 97.6%, respectively, as at December 31, 2021
(December 31, 2020 – 97.0% and 97.3%, respectively).
- Same Properties NOI inclusive of
ECL provisions increased by $16.9 million or 3.5% as compared to
2020. Same Properties NOI excluding ECL(2) decreased by $10.2
million or 2.0% as compared to the prior year.
Subsequent Events
- In January 2022, the Trust
acquired, from its unrelated partner, a 50% interest in each of
three co-owned properties located in Ottawa (Laurentian), Ontario,
Edmonton Capilano, Alberta, and Lachenaie, Quebec. The acquisition
was funded with the Trust’s existing operating facilities. Upon
completion of the acquisition, the Trust became the 100% owner of
these properties.
- In January 2022, the Trust entered
into a $300.0 million unsecured credit facility agreement with a
syndicate of Canadian financial institutions, from which $285.0
million was drawn. This facility matures in January 2027 and bears
an interest rate of Canadian Banker's Acceptance rate plus 120
basis points.
(1) |
|
Represents a GAAP measure. |
(2) |
|
Represents a non-GAAP measure. The Trust’s method of calculating
non-GAAP measures may differ from other reporting issuers’ methods
and, accordingly, may not be comparable. For definitions and basis
of presentation of the Trust’s non-GAAP measures, refer to
“Presentation of Certain Terms Including Non-GAAP Measures” and
“Non-GAAP Measures” in the Trust’s MD&A. |
(3) |
|
Net of cash-on-hand of $80.0 million as at December 31, 2021
for the purposes of calculating the ratios. |
|
|
|
Selected Consolidated Operational,
Mixed-Use Development and Financial Information
Key consolidated operational, mixed-use
development and financial information shown in the table below
includes the Trust’s proportionate share of equity accounted
investments:
(in thousands of dollars, except per Unit and other non-financial
data) |
December 31, 2021 |
December 31, 2020 |
December 31, 2019 |
Portfolio Information |
|
|
|
Total number of properties
with an ownership interest |
174 |
167 |
165 |
|
|
|
|
Leasing and
Operational Information |
|
|
|
Gross leasable area including
retail and office space (in thousands of sq. ft.) |
34,119 |
34,056 |
34,337 |
Occupied area including retail
and office space (in thousands of sq. ft.) |
33,219 |
33,039 |
33,678 |
Vacant area including retail
and office space (in thousands of sq. ft.) |
900 |
1,017 |
659 |
In-place occupancy rate
(%) |
97.4 |
97.0 |
98.1 |
Committed occupancy rate
(%) |
97.6 |
97.3 |
98.2 |
Average lease term to maturity
(in years) |
4.4 |
4.6 |
4.9 |
Net retail rental rate (per
occupied sq. ft.) ($) |
15.44 |
15.37 |
15.49 |
Net retail rental rate
excluding Anchors (per occupied sq. ft.) ($) |
22.07 |
21.89 |
22.13 |
|
|
|
|
Mixed-Use Development
Information |
|
|
|
Trust’s share of future
development area (in thousands of sq. ft.) |
40,600 |
32,500 |
27,900 |
Trust’s share of estimated
costs of future projects currently under construction, or for which
construction is expected to commence within the next five years (in
millions of dollars) |
9,800 |
7,900 |
5,500 |
Total number of residential
rental projects |
104 |
96 |
88 |
Total number of seniors’
housing projects |
27 |
40 |
45 |
Total number of self-storage
projects |
36 |
50 |
48 |
Total number of office
building projects |
8 |
7 |
10 |
Total number of hotel
projects |
3 |
4 |
5 |
Total number of condominium
developments |
95 |
72 |
46 |
Total
number of townhome developments |
10 |
15 |
14 |
Total number of future projects currently in development planning
stage |
283 |
284 |
256 |
|
Financial
Information |
|
|
|
Total assets(1) |
11,293,248 |
10,724,492 |
9,928,467 |
Investment properties –
GAAP |
9,847,078 |
8,850,390 |
9,050,066 |
Investment properties –
non-GAAP(3) |
10,684,529 |
9,400,584 |
9,466,501 |
Total unencumbered
assets(2) |
6,640,600 |
5,835,600 |
5,696,100 |
Debt – GAAP |
4,854,527 |
5,210,123 |
4,225,933 |
Debt – non-GAAP(3) |
4,983,078 |
5,261,360 |
4,290,826 |
Debt to Aggregate Assets
(%)(2)(3)(4) |
42.9 |
44.6 |
42.3 |
Debt to Gross Book Value
(%)(2)(3)(4) |
50.8 |
50.1 |
49.0 |
Unsecured to Secured Debt
Ratio(2)(3)(4) |
71%/29% |
68%/32% |
63%/37% |
Unencumbered assets to
unsecured debt(2)(3)(4) |
1.9X |
1.9X |
2.1X |
Weighted average interest rate
(%)(2)(3) |
3.11 |
3.28 |
3.55 |
Weighted average term of debt
(in years) |
4.8 |
5.0 |
5.0 |
Interest coverage
ratio(2)(3)(4) |
3.4X |
3.2X |
3.5X |
Adjusted Debt to Adjusted
EBITDA (net of cash)(2)(3)(4) |
9.2X |
8.5X |
8.0X |
Equity (book value)(1) |
5,841,315 |
5,166,975 |
5,367,752 |
Weighted average number of units outstanding – diluted |
173,748,819 |
172,971,603 |
170,581,531 |
(1) |
|
Represents a GAAP measure. |
(2) |
|
Represents a non-GAAP measure. The Trust’s method of calculating
non-GAAP measures may differ from other reporting issuers’ methods
and, accordingly, may not be comparable. For definitions and basis
of presentation of the Trust’s non-GAAP measures, refer to
“Presentation of Certain Terms Including Non-GAAP Measures” and
“Non-GAAP Measures” in the Trust’s MD&A. |
(3) |
|
Includes the Trust’s proportionate share of equity accounted
investments. |
(4) |
|
As at December 31, 2021, cash-on-hand of $80.0 million was
excluded for the purposes of calculating the applicable ratios
(December 31, 2020 – $754.4 million, December 31, 2019 – $37.0
million). |
|
|
|
Year-to-Date Comparison to Prior
YearThe following table presents key financial, per Unit,
and payout ratio information for the years ended December 31,
2021 and December 31, 2020:
(in
thousands of dollars, except per Unit information) |
|
2021 |
|
|
2020 |
|
Variance |
|
|
|
(A) |
|
|
(B) |
|
|
(A–B) |
|
Financial
Information |
|
|
|
|
|
|
|
|
|
Rentals from investment
properties and other(1) |
|
780,758 |
|
|
781,253 |
|
|
(495 |
) |
Net base rent(1) |
|
494,992 |
|
|
496,135 |
|
|
(1,143 |
) |
Total recoveries(1) |
|
253,032 |
|
|
263,802 |
|
|
(10,770 |
) |
Miscellaneous revenue(1) |
|
17,891 |
|
|
11,182 |
|
|
6,709 |
|
Service and other revenues(1) |
|
14,843 |
|
|
10,134 |
|
|
4,709 |
|
Net income and comprehensive
income(1) |
|
987,676 |
|
|
89,940 |
|
|
897,736 |
|
Net income and comprehensive
income excluding fair value adjustments(2)(3) |
|
342,609 |
|
|
337,863 |
|
|
4,746 |
|
Cash flows provided by operating
activities(1) |
|
371,624 |
|
|
295,982 |
|
|
75,642 |
|
Net rental income and
other(1) |
|
485,802 |
|
|
460,711 |
|
|
25,091 |
|
NOI(2) |
|
518,084 |
|
|
519,105 |
|
|
(1,021 |
) |
NOI excluding condominium
sales(2) |
|
497,613 |
|
|
471,548 |
|
|
26,065 |
|
Change in net rental income and
other(2) |
|
5.4 |
% |
|
(8.8 |
)% |
|
14.2 |
% |
Change in SPNOI(2) |
|
3.5 |
% |
|
(6.9 |
)% |
|
10.4 |
% |
Change in SPNOI excluding
ECL(2) |
|
(2.0 |
)% |
|
(1.1 |
)% |
|
(0.9 |
)% |
FFO(2)(3)(4)(5) |
|
380,070 |
|
|
367,967 |
|
|
12,103 |
|
FFO with
adjustments(2)(3)(4) |
|
383,296 |
|
|
379,921 |
|
|
3,375 |
|
FFO with adjustments and
Transactional FFO(2)(3)(4) |
|
385,219 |
|
|
380,665 |
|
|
4,554 |
|
FFO excluding condominium
sales(2)(3)(4) |
|
361,323 |
|
|
323,188 |
|
|
38,135 |
|
FFO with adjustments excluding
condominium sales(2)(3)(4) |
|
364,549 |
|
|
335,142 |
|
|
29,407 |
|
ACFO(2)(3)(4)(5) |
|
353,055 |
|
|
353,409 |
|
|
(354 |
) |
ACFO with
adjustments(2)(3)(4) |
|
356,281 |
|
|
365,363 |
|
|
(9,082 |
) |
ACFO excluding condominium
sales(2)(3)(4) |
|
332,585 |
|
|
305,852 |
|
|
26,733 |
|
Distributions declared |
|
318,753 |
|
|
318,758 |
|
|
(5 |
) |
Surplus (shortfall) of cash
provided by operating activities over distributions
declared(2) |
|
52,871 |
|
|
(22,776 |
) |
|
75,647 |
|
Surplus of ACFO over
distributions declared(2) |
|
34,302 |
|
|
34,651 |
|
|
(349 |
) |
Units outstanding(6) |
|
178,091,581 |
|
|
172,221,212 |
|
|
5,870,369 |
|
Weighted average – basic |
|
172,447,334 |
|
|
171,973,301 |
|
|
474,033 |
|
Weighted average –
diluted(7) |
|
173,748,819 |
|
|
172,971,603 |
|
|
777,216 |
|
|
|
|
|
|
|
|
|
|
|
Per Unit Information
(Basic/Diluted) |
|
|
|
|
|
|
|
|
|
Net income and comprehensive
income(1) |
|
$5.73/$5.68 |
|
|
$0.52/$0.52 |
|
|
$5.21/$5.16 |
|
Net income and comprehensive
income excluding fair value adjustments(2)(3) |
|
$1.99/$1.97 |
|
|
$1.96/$1.95 |
|
|
$0.03/$0.02 |
|
FFO(2)(3)(4)(5) |
|
$2.20/$2.19 |
|
|
$2.14/$2.13 |
|
|
$0.06/$0.06 |
|
FFO with
adjustments(2)(3)(4) |
|
$2.22/$2.21 |
|
|
$2.21/$2.20 |
|
|
$0.01/$0.01 |
|
FFO with adjustments and
Transactional FFO(2)(3)(4) |
|
$2.23/$2.22 |
|
|
$2.21/$2.20 |
|
|
$0.02/$0.02 |
|
Distributions declared |
$1.850 |
|
$1.850 |
|
$— |
|
|
|
|
|
Payout Ratio
Information |
|
|
|
Payout Ratio to
ACFO(2)(3)(4)(5) |
|
90.3 |
% |
|
90.2 |
% |
|
0.1 |
% |
Payout Ratio to ACFO with adjustments(2)(3)(4) |
|
89.5 |
% |
|
87.2 |
% |
|
2.3 |
% |
(1) |
|
Represents a GAAP measure. |
(2) |
|
Represents a non-GAAP measure. The Trust’s method of calculating
non-GAAP measures may differ from other reporting issuers’ methods
and, accordingly, may not be comparable. For definitions and basis
of presentation of the Trust’s non-GAAP measures, refer to
“Presentation of Certain Terms Including Non-GAAP Measures” and
“Non-GAAP Measures” in the Trust’s MD&A. |
(3) |
|
Includes the Trust’s proportionate share of equity accounted
investments. |
(4) |
|
See “Other Measures of Performance” in the Trust’s MD&A for a
reconciliation of these measures to the nearest consolidated
financial statement measure. |
(5) |
|
The calculation of the Trust’s FFO and ACFO and related payout
ratios, including comparative amounts, are financial metrics that
were determined based on the February 2019 REALpac White Paper on
FFO and ACFO, respectively. Comparison with other reporting issuers
may not be appropriate. The payout ratio to FFO and the payout
ratio to ACFO are calculated as declared distributions divided by
FFO and ACFO, respectively. |
(6) |
|
Total Units outstanding include Trust Units and LP Units, including
Units classified as liabilities. LP Units classified as equity in
the consolidated financial statements are presented as
non-controlling interests. |
(7) |
|
The diluted weighted average
includes the vested portion of the deferred units issued pursuant
to the deferred unit plan. |
|
|
|
Operational Highlights
For the three months ended December 31,
2021, net income and comprehensive income (as noted in the table
above) increased by $603.7 million as compared to the same period
last year. This increase was primarily attributed to the
following:
- $594.2 million increase in fair
value adjustments on revaluation of investment properties, of
which: i) $496.8 million relates to the fair value adjustment
associated with certain properties under development, and ii) $97.4
million relates to the revaluation of investment properties,
principally driven by compression in discount rates as well as
higher revaluation loss in the prior year comparable period (see
details in the “Investment Property” section in the Trust’s
MD&A);
- $7.1 million increase in fair value
adjustment on financial instruments, principally due to: i) $9.5
million increase in fair value adjustment relating to interest rate
swap agreements; ii) $4.2 million increase in fair value adjustment
relating to total return swap (“TRS”); and partially offset by iii)
$4.2 million decrease in fair value adjustment relating to Units
classified as liabilities; iv) $2.4 million decrease in fair value
adjustment relating to LTIP, Deferred Unit Plan (“DUP”) and Equity
Incentive Plan (“EIP”) as a result of fluctuations in the Trust’s
Unit price; and
- $15.8 million decrease in interest
expenses primarily due to the yield maintenance costs incurred in
the prior year;
Partially offset by the following:
- $7.3 million decrease in NOI (see
further details in the “Net Operating Income” subsection in the
Trust’s MD&A);
- $2.6 million increase in
acquisition-related costs (principally resulting from the
acquisition of SmartVMC West property);
- $1.5 million increase in general
and administrative expenses (net) (see further details in the
“General and Administrative Expense” section in the Trust’s
MD&A);
- $1.4 million decrease in interest
income; and
- $0.6 million increase in supplemental costs.
For the year ended December 31, 2021, net
income and comprehensive income (as noted in the table above)
increased by $897.7 million as compared to the same period last
year. This increase was primarily attributed to the following:
- $944.9 million increase in fair
value adjustments on revaluation of investment properties,
principally due to: i) $496.8 million fair value adjustment
associated with certain properties under development, and ii)
$448.1 million relates to the compression of discount rates, and
unfavourable fair value adjustment recorded in 2020, which
reflected the adverse changes in leasing and cash flow assumptions
at the inception of the COVID-19 pandemic; and
- $14.7 million decrease in interest
expense primarily due to the yield maintenance costs incurred in
the prior year;
Partially offset by the following:
- $51.9 million decrease in fair
value adjustment on financial instruments primarily due to: i)
$41.5 million decrease in fair value adjustment relating to Units
classified as liabilities and $23.0 million decrease in fair value
adjustment relating to DUP, as a result of fluctuations in the
Trust’s Unit price; ii) $3.3 million decrease in fair value
adjustment relating to equity incentive plan; iii) $0.2 million
decrease in fair value adjustment relating to loans receivable and
Earnout options recorded in the same period in 2020, and partially
offset by iv) $9.6 million increase in fair value adjustment
relating to interest rate swap agreements; v) $5.7 million increase
on TRS fair value; and vi) $0.8 million increase in fair value
adjustment relating to LTIP;
- $3.9 million increase in general
and administrative expenses (net) (see further details in the
“General and Administrative Expense” section in the Trust’s
MD&A);
- $3.6 million decrease in interest
income;
- $1.0 million decrease in NOI (see
further details in the “Net Operating Income” subsection in the
Trust’s MD&A);
- $0.9 million increase in
supplemental costs and acquisition-related costs; and
- $0.4 million decrease in gain on
sale of investment properties.
FFO Highlights
For the three months ended December 31, 2021, FFO increased
by $10.8 million or 12.4% to $97.5 million. This increase was
primarily attributed to:
- $15.8 million net decrease in
interest expense, which was primarily due to the yield maintenance
costs incurred in the same period prior year;
- $4.2 million increase in gain on
TRS;
- $0.5 million net increase in
adjustment for supplemental costs;
- $0.3 million increase in add back
for indirect interest incurred in respect of equity accounted
development projects; and
- $0.2 million decrease in adjustment
of indirect interest relating to closed Transit City condominium
units in comparative period in 2020;
Partially offset by:
- $7.3 million decrease in NOI (see
details in the “Net Operating Income” subsection in the Trust’s
MD&A);
- $1.5 million increase in net
general and administrative expense;
- $1.4 million decrease in interest
income.
For the three months ended December 31, 2021, FFO with
adjustments decreased by $0.5 million or 0.5% to $98.1 million.
For the year ended December 31, 2021, FFO
increased by $12.1 million or 3.3% to $380.1 million. This increase
was primarily attributed to:
- $14.7 million net decrease in
interest expense, which was primarily due to the yield maintenance
costs incurred in the prior year;
- $5.6 million increase in gain of
TRS;
- $0.6 million increase in adjustment
for supplemental costs;
- $0.2 million increase in adjustment
to indirect interest relating to closed Transit City condominium
units in prior year; and
- $0.2 million increase in add back
for indirect interest incurred in respect of equity accounted
development projects;
Partially offset by:
- $3.9 million increase in net
general and administrative expense;
- $3.6 million decrease in interest
income;
- $1.0 million decrease in NOI (see
details in the “Net Operating Income” subsection in the Trust’s
MD&A); and
- $0.7 million decrease in FFO add
back for salaries and related costs attributed to leasing
activities.
For the year ended December 31, 2021, FFO
with adjustments increased by $3.4 million or 0.9% to $383.3
million.
ACFO Highlights
For the three months ended December 31,
2021, ACFO decreased by $0.6 million or 0.8% to $83.3 million
compared to the same period in 2020, which was primarily due to the
items previously identified (see “Results of Operations” in the
Trust’s MD&A).
For the year ended December 31, 2021, ACFO
decreased by $0.4 million or 0.1% to $353.1 million compared to the
same period in 2020, which was primarily due to the items
previously identified (see “Results of Operations” in the Trust’s
MD&A).
Development and Intensification
Summary
The following table summarizes the 283
identified mixed-use, recurring rental income and development
income initiatives, which are included in the Trust’s large
development pipeline:
|
Underway |
|
Active |
|
Future |
|
Description |
(Construction underway or expected to commence within next
2 years) |
|
(Construction expected to commence within next 3–5
years) |
|
(Construction expected to commence after 5
years) |
Total |
Number of projects in which the Trust has an ownership
interest |
|
|
|
|
|
|
Residential Rental |
20 |
|
24 |
|
60 |
104 |
Seniors’ Housing |
4 |
|
9 |
|
14 |
27 |
Self-storage |
9 |
|
10 |
|
17 |
36 |
Office Buildings |
— |
|
1 |
|
7 |
8 |
Hotels |
— |
|
— |
|
3 |
3 |
Subtotal – Recurring rental income
initiatives |
33 |
|
44 |
|
101 |
178 |
Condominium developments |
24 |
|
24 |
|
47 |
95 |
Townhome developments |
2 |
|
3 |
|
5 |
10 |
Subtotal – Development income
initiatives |
26 |
|
27 |
|
52 |
105 |
Total |
59 |
|
71 |
|
153 |
283 |
Trust’s share of project area (in thousands of sq.
ft.) |
|
|
|
|
|
|
Recurring rental income initiatives |
3,600 |
|
4,900 |
|
12,000 |
20,500 |
Development income initiatives |
5,800 |
|
4,300 |
|
10,000 |
20,100 |
Total Trust’s share of project area (in thousands of sq.
ft.) |
9,400 |
|
9,200 |
|
22,000 |
40,600 |
Trust’s share of such estimated costs (in millions of
dollars) |
5,000 |
|
4,800 |
|
– (1) |
9,800 |
(1) |
|
The Trust does not fully determine the costs attributable to future
projects expected to commence after five years and as such they are
not included in this table. |
As noted in the table above, the Trust is
currently working on initiatives for the development of many
properties, for which final municipal approvals have been obtained
or are being actively pursued including:
- the development of up to 5.3
million square feet of predominately residential space, in various
forms, at Highway 400 & Highway 7, in Vaughan, Ontario, with a
rezoning application submitted in December 2019 and a site plan
application for the first four residential buildings totalling
1,742 units submitted in October 2020;
- the development of up to 5.0
million square feet of predominately residential space, in various
forms over the long term, in Pickering, Ontario, with the site plan
application for a two-tower mixed-use phase, approximating 650,000
square feet, submitted in April 2020;
- the development of up to 5.5
million square feet of predominately residential space, in various
forms, at Oakville North in Oakville, Ontario, with the rezoning
application for an initial two-tower 585-unit residential phase
submitted in April 2021;
- the development of up to 2.55
million square feet of predominately residential space, in various
forms, at the Westside Mall in Toronto, Ontario, with an
application for the first 35-storey mixed-use tower submitted in Q1
2021;
- the development of up to 1.5
million square feet of residential space in various forms on the
Trust’s undeveloped lands at the Vaughan NW property in Vaughan,
Ontario. The first release of 82 townhomes out of 174 Draft Plan
Approved townhomes has been pre-sold. Applications have also been
submitted for a seniors’ apartment building and separate retirement
residence to be developed in partnership with Revera, along with
three residential buildings;
- the development of up to 1.5
million square feet of residential space, in various forms, in
Pointe-Claire, Quebec, with the first phase, a two-tower rental
project, being actively pursued;
- the development of up to 200,000
square feet of residential townhomes at Oakville South in Oakville,
Ontario, with a third-party homebuilder;
- the intensification of the Toronto
StudioCentre (“StudioCentre”) in Toronto, Ontario (zoning allows
for up to 1.2 million square feet);
- the development of four high-rise
purpose-built residential rental buildings comprising approximately
1,700 units with Greenwin, in Barrie, Ontario, for which a zoning
application was approved by Barrie City Council in January 2021
with the site plan approved for Phase 1 by Barrie City Council in
Q1 2022. An application for a building permit was submitted in July
2021. Environmental Risk Assessment for the entire site was
received in September 2021;
- the development of a 35-storey
high-rise purpose-built residential rental tower containing 439
units, on Balliol Street in midtown Toronto, Ontario, with zoning
and site plan applications submitted in September 2020. A second
submission of these applications was made in July 2021;
- the development of up to 1,600
residential units, in various forms, in Mascouche, Quebec and as
noted in the table above, with the first phase consisting of 238
units in two 10-storey rental towers approved by municipal council
in August 2020. Construction began in April 2021, and opening is
anticipated in July 2022. The work on a second phase is expected to
commence in 2022;
- the development of residential
density at the Trust’s shopping centre at 1900 Eglinton Avenue East
in Scarborough with rezoning applications for the first two
residential towers (38 and 40 storeys) submitted in January 2021.
Site plan application for both buildings was submitted in December
2021;
- the development of up to 270,000
square feet of residential space in 138 townhomes at London Fox
Hollow in London, Ontario, with site plan approval applications
submitted in December 2020 and approval is expected to be obtained
in Q1 2022. All zoning approval for the project was completed in Q4
2021;
- the development of the first phase,
46-unit rental building, which is part of a multi-phase masterplan
in Alliston, Ontario, with a rezoning application approved by
Council in December 2020 and a site plan application submitted in
May 2020. The site plan application was resubmitted in March 2021
and again in July 2021 with approvals expected in Q1 2022. The
building permit application was submitted in October 2021;
- the development of five additional
self-storage facilities in Ontario with the Trust’s partner,
SmartStop, in Markham, Stoney Creek, Toronto (2) and Whitby, with
zoning and/or site plan approval obtained or applications well
underway. Project agreements for another five locations are being
finalized;
- the Q4 2020 acquisition of an
additional 33.33% interest (new ownership structure of 66.66% held
by the Trust and 33.33% held by Penguin) in 50 acres of adjacent
land to the Trust’s Premium Outlets Montreal in Mirabel, Quebec,
for the ultimate development of residential density of up to 4,500
units. Site plan applications for the first phase rental building
with 168 units expected to be submitted in Q1 2022. Master Plan of
development is subject to approval;
- the development of a new
residential block consisting of a 155-unit condo building in Phase
1 and approximately 345 rental units in Phases 2 and 3 at Laval
Centre in Quebec. Application for architecture approval was
submitted for the Phase 1 condo and another 155 units in the Phase
2 rental building in Q4 2021;
- the Trust has commenced the
redevelopment of a portion of its 73-acre Cambridge retail property
(which is subject to a leasehold interest with Penguin) which now
allows various forms of residential, retail, office, institutional
and commercial uses providing for the creation of a vibrant urban
community with the potential for over 12.0 million square feet of
development;
- the development of a retirement
living residence at the Trust’s shopping centre at Bayview and
Major Mackenzie in Richmond Hill, Ontario, with a rezoning
application for a 9-storey retirement residences building submitted
in Q1 2021 and a site plan application submitted in Q4 2021, to be
developed in partnership with the existing partner and Revera;
- the development of 1.5 million
square feet of residential density adjacent to the new South Keys
light rail train station at the Trust’s Ottawa South Keys centre,
consistent with current zoning permissions. Site plan application
for the first phase rental complex with 446 units was submitted and
deemed complete in Q4 2021;
- the development of up to 720,000
square feet of predominately residential space on Yonge St. in
Aurora, Ontario, with rezoning applications for the entire site and
site plan submitted for Phase 1 for 498,000 square feet in July
2021;
- the Q4 2020 acquisition of a 50%
interest in a property in downtown Markham for the development of a
243,000 square foot retirement residence with Revera. The rezoning
application was submitted in December 2020; and
- the development of approximately
1.0 million square feet of residential density on the Trust’s
Parkway Plaza centre in Stoney Creek, Ontario, with an application
for a Phase 1 development for a two-tower (15 and 14 storeys),
429,000 square foot, 520-unit condo project submitted in Q4
2021.
Non-GAAP Measures
The non-GAAP measures used in this Press
Release, including but not limited FFO, Transactional FFO, ACFO,
NOI, Same Property NOI, average yield rates, and payout ratio do
not have any standardized meaning prescribed by International
Financial Reporting Standards (“IFRS”) and are therefore unlikely
to be comparable to similar measures presented by other issuers.
These non-GAAP measures are more fully defined and discussed in
'Management’s Discussion and Analysis' ("MD&A") of the Trust
for the year ended December 31, 2021, available on SEDAR at
www.sedar.com.
Full reports of the financial results of the
Trust for the year ended December 31, 2021 are outlined in the
consolidated financial statements and the related MD&A of the
Trust for the year ended December 31, 2021, which are
available on SEDAR at www.sedar.com.
Conference Call
SmartCentres will hold a conference call on
Wednesday, February 16, 2022 at 11:00 a.m. (ET). Participating
on the call will be members of SmartCentres’ senior management.
Investors are invited to access the call by
dialing 1-855-353-9183 and then keying in the participant access
code 20510#. You will be required to identify yourself and the
organization on whose behalf you are participating.
A recording of this call will be made available
Wednesday, February 16, 2022 beginning at 8:30 p.m. (ET)
through to 8:30 p.m. (ET) on Wednesday, February 23, 2022. To
access the recording, please call 1-855-201-2300, enter the
conference access code 20510# and then key in the participant
access code 0111875#.
About SmartCentres
SmartCentres Real Estate Investment Trust is one
of Canada’s largest fully integrated REITs, with a best-in-class
portfolio featuring 174 strategically located properties in
communities across the country. SmartCentres has approximately
$11.3 billion in assets and owns 34.1 million square feet of income
producing value-oriented retail and first-class office space with
97.6% occupancy, on 3,500 acres of owned land across Canada.
SmartCentres continues to focus on enhancing the
lives of Canadians by planning and developing complete, connected,
mixed-use communities on its existing retail properties. Project
512, a publicly announced $15.2 billion intensification program
($9.8 billion at SmartCentres' share) represents the REIT’s current
major development focus on which construction is expected to
commence within the next five years. This intensification program
consists of rental apartments, condos, seniors’ residences and
hotels, to be developed under the SmartLiving banner, and retail,
office, and storage facilities, to be developed under the
SmartCentres banner.
SmartCentres' intensification program is
expected to produce an additional 58.6 million square feet (40.6
million square feet at SmartCentres’ share) of space, 28.6 million
square feet (18.6 million square feet at SmartCentres’ share) of
which has or will commence construction within the next five years.
From shopping centres to city centres, SmartCentres is uniquely
positioned to reshape the Canadian urban and urban-suburban
landscape.
Included in this intensification program is the
Trust’s share of SmartVMC which, when completed, is expected to
include approximately 20.0 million square feet of mixed-use space
in Vaughan, Ontario. Construction of the first five sold-out phases
of Transit City Condominiums that represent 2,789 residential units
continues to progress. Final closings of the first three phases of
Transit City Condominiums began ahead of budget and ahead of
schedule in August 2020 and all 1,741 units in these phases have
now closed. In addition, the 22 sold-out townhomes that complete
this phase of the project, are expected to close in 2022. The
fourth and fifth sold-out phases representing 1,026 units are
currently under construction and are expected to close in 2023.
Certain statements in this Press Release are
"forward-looking statements" that reflect management's expectations
regarding the Trust's future growth, results of operations,
performance and business prospects and opportunities. More
specifically, certain statements including, but not limited to,
statements related to SmartCentres’ expected or planned development
plans and joint venture projects, including the described type,
scope, costs and other financial metrics and the expected timing of
construction and condominium closings and statements that contain
words such as "could", "should", "can", "anticipate", "expect",
"believe", "will", "may" and similar expressions and statements
relating to matters that are not historical facts, constitute
"forward-looking statements". These forward-looking statements are
presented for the purpose of assisting the Trust's Unitholders and
financial analysts in understanding the Trust's operating
environment, and may not be appropriate for other purposes. Such
forward-looking statements reflect management's current beliefs and
are based on information currently available to management.
However, such forward-looking statements involve
significant risks and uncertainties. A number of factors could
cause actual results to differ materially from the results
discussed in the forward-looking statements, including risks
associated with potential acquisitions not being completed or not
being completed on the contemplated terms, public health crises
such as the COVID-19 pandemic, real property ownership and
development, debt and equity financing for development, interest
and financing costs, construction and development risks, ability to
obtain commercial and municipal consents for development. These
risks and others are more fully discussed under the heading “Risks
and Uncertainties” and elsewhere in SmartCentres’ most recent
Management’s Discussion and Analysis, as well as under the heading
“Risk Factors” in SmartCentres’ most recent annual information
form. Although the forward-looking statements contained in this
press release are based on what management believes to be
reasonable assumptions, SmartCentres cannot assure investors that
actual results will be consistent with these forward-looking
statements. The forward-looking statements contained herein are
expressly qualified in their entirety by this cautionary statement.
These forward-looking statements are made as at the date of this
Press Release and SmartCentres assumes no obligation to update or
revise them to reflect new events or circumstances unless otherwise
required by applicable securities legislation.
Material factors or assumptions that were
applied in drawing a conclusion or making an estimate set out in
the forward-looking information may include, but are not limited
to: a stable retail environment; relatively low and stable interest
costs; a continuing trend toward land use intensification,
including residential development in urban markets and continued
growth along transportation nodes; access to equity and debt
capital markets to fund, at acceptable costs, future capital
requirements and to enable our refinancing of debts as they mature;
that requisite consents for development will be obtained in the
ordinary course, construction and permitting costs consistent with
the past year and recent inflation trends.
For more information, please visit
www.smartcentres.com or contact:
Mitchell
Goldhar |
|
Peter
Sweeney |
Executive Chairman and CEO |
|
Chief Financial Officer |
SmartCentres |
|
SmartCentres |
(905) 326-6400 ext. 7674 |
|
(905) 326-6400 ext. 7865 |
mgoldhar@smartcentres.com |
|
psweeney@smartcentres.com |
The Toronto Stock Exchange neither approves nor
disapproves of the contents of this Press Release.
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