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 ended
March 31, 2022.
“We ended the 1st quarter with solid performances from all
aspects of the business. Operational resilience was demonstrated by
solid leasing momentum for both existing and new retail tenants.
This is expected to result in occupancy levels further improving
over the balance of the year. Our in-place occupancy level was
marginally lower than year-end specifically as a result of the
previously announced closure of one tenant, Home Outfitters. Of the
four locations in our portfolio, three of these locations are close
to being leased, while we have active interest in the fourth
location. It is reassuring to see a noticeable improvement in
leasing activity across Canada. As a further reflection of the
improving retail environment, cash collections continue to improve,
exceeding 98% for the quarter; we expect these levels to return to
pre-Covid levels over the remainder of the year. Our retail
portfolio of primarily Walmart-anchored shopping centres is one of
the pillars of our company and even during the most difficult days
of Covid, has continued to provide us with the strength and
stability to help support our pipeline of development projects.
In that regard, (through our residential banner, SmartLiving),
our mixed-use intensification program continues to be a source of
additional accretive growth, demonstrated by the presale activity
at Artwalk and Park Place. Artwalk, 627 residential units in two 38
and 18 storey towers, will be built on a portion of lands
previously occupied by Walmart at SmartVMC. Park Place, which
includes approximately 1100 units in two stunning 56 and 48 storey
towers, will be built on approximately two acres of the 53 acres of
western lands at SmartVMC. The Trust recently purchased a 66.67%
interest in these lands which represent the western portion of our
SmartVMC City Centre. Initial presale interest in these projects
has exceeded our expectations and we plan to commence construction
of both projects later this year.
In addition, during the quarter, we experienced property value
increments exceeding $270.0 million, mainly as a result of progress
in the zoning and entitlements’ process on several strategic
projects together with improved infrastructure and market
conditions around them. These additional valuation increases have
resulted in the Trust’s book value per Unit increasing by $1.71 to
$36.03 as compared to last quarter. In addition, Adjusted FFO per
Unit(1) increased by $0.03 or 6.1% to $0.52, and net income and
comprehensive income per Unit increased by $1.71 to $2.06, 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(1) and $0.38
in net income and comprehensive income per Unit. In addition,
construction is progressing well, and we expect to be completed
early next year on the 1,026 units in our sold-out Transit City 4
and 5 towers and the 454-unit Millway rental complex. Excitement
around SmartVMC continues as the 120,000 square foot YMCA recently
opened to the public and the 22 townhomes that represent the final
part of Phases 1&2 are expected to close in the second quarter.
We intend to develop approximately 20.0 million square feet of
mixed-use space at SmartVMC alone, on which we are also planning a
9-acre park which, over time, will become the focal point of this
landmark city centre development.”
(1) |
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 additional
information, please see “Non-GAAP Measures” in this Press
Release. |
|
|
Key Business Development, Financial and
Operational Highlights for the Three Months Ended March 31,
2022
Mixed-Use Development and Intensification at
SmartVMC
- The construction of the world-class
YMCA at SmartVMC is complete and the facility opened in April
2022.
- Park Place condo pre-development is
underway on the 53.0-acre SmartVMC West lands strategically
acquired in December 2021. This development is expected to be
launched in mid-2022 and council approval is expected to be
finalized in June 2022. The Trust’s two-thirds interest in the
SmartVMC West lands more than doubles the Trust’s holdings in the
105-acre SmartVMC 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
the mechanical penthouse for Transit City 4 and level 44 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 33.
- As part of Transit City 1 and 2
projects, construction of the 22 townhomes, all of which are
pre-sold, is almost complete and delivery is expected in Q2
2022.
- ArtWalk condominium sales of 320
units in Phase 1 substantially sold out with construction expected
to begin in 2022.
Other Business Development
- Leasing continues on the completed
first phase of the two-phase, purpose-built residential rental
project in Laval, Quebec, with more than 92% of the 171 units
leased. Construction of the next phase commenced in October 2021,
with a target completion date of Q1 2023.
- Occupancy will start in July 2022
for the two purpose-built residential rental towers (238 units) in
Mascouche, Quebec, which are under construction with joint venture
partner Cogir. More than 100 units have been pre-leased and
lease-up pace is in line with expectations.
- The Trust completed the
construction of its fifth self-storage facility with the opening of
its Scarborough East facility in Q4 2021. All of the five developed
and operating self-storage facilities (Toronto (Leaside), Vaughan
NW, Brampton, Oshawa South and Scarborough East) 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 commenced for a new
retirement residence and a seniors’ apartment project, totalling
402 units, in 2021 with joint venture partner Groupe Sélection at
the Trust's Laurentian Place in Ottawa, with completion expected in
2023.
- The Trust will be commencing 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 $370.1 million as compared to $60.6 million for the
same period in 2021, representing an increase of $309.5 million.
This increase was primarily attributed to: i) $276.7 million
increase in fair value adjustments on revaluation of investment
properties, ii) $29.1 million increase in fair value adjustment on
financial instruments, iii) $4.9 million increase in Net Operating
Income (“NOI”)(2), and iv) $2.4 million decrease in interest
expense, and was partially offset by i) $2.7 million increase in
supplemental costs, and ii) $0.7 million decrease in interest
income.
- Key debt metrics include Debt to
Aggregate Assets(2)(3) of 42.5%, Interest Coverage Ratio
multiple(2) of 3.5X(2), and Adjusted Debt to Adjusted EBITDA
multiple(2)(3) of 9.4X. (December 31, 2021 – 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 75%/25% (December 31, 2021 –
71%/29%).
- The Trust continues to add to its
unencumbered pool of high-quality assets. As at March 31, 2022,
this unencumbered portfolio consisted of investment properties
valued at $8.4 billion (March 31, 2021 – $5.9 billion).
- FFO(2) increased by $8.0 million or
9.4% to $92.2 million as compared to the same period in 2021,
primarily due to $4.9 million increase in NOI, $1.9 million net
decrease in interest expense, $1.1 million increase in gain on
Total Return Swap (“TRS”), $0.5 million decrease in G&A
expenses (net), and $0.3 million increase in FFO add back for
salaries and related costs attributed to leasing activities,
partially offset by $0.7 million decrease in interest income.
- Net income and comprehensive income
per Unit(1) increased by $1.71 to $2.06 as compared to the same
period in 2021, primarily due to the reasons noted above that
pertain to net income and comprehensive income.
- FFO per Unit(2) increased by $0.02
or 4.1% to $0.51 as compared to the same period in 2021 primarily
due to the reasons noted above.
- For the three months ended March 31, 2022, FFO with
adjustments(2) increased by $8.6 million or 10.2% to $93.2 million
as compared to the same period in 2021. FFO per Unit with
adjustments(2) increased by $0.03 or 6.1% to $0.52 as compared to
the same period in 2021. Excluding SmartVMC West LP Class D Units,
FFO per Unit with adjustments increased by $0.05 or 10.2% to $0.54
as compared to the same period in 2021.
- Cash flows provided by operating
activities(1) increased by $23.3 million or 29.4% to $102.8 million
as compared to the same period in 2021. Cash flows provided by
operating activities(1) exceeded distributions declared by $20.5
million (three months ended March 31, 2021 – shortfall of $0.2
million).
- The Payout Ratio relating to cash
flows provided by operating activities for the rolling 12 months
ended March 31, 2022 was 81.4%, as compared to 107.5% for the same
period in 2021.
- For the three months ended
March 31, 2022, ACFO(2) of $85.2 million remained unchanged as
compared to the same period in 2021.
- The Payout Ratio to ACFO(2) for the
three months ended March 31, 2022 increased by 3.2% to 96.7%
as compared to the same period in 2021, which was primarily due to
the items previously identified. Excluding SmartVMC West LP Class D
distributions, the Payout Ratio to ACFO(2) for the three months
ended March 31, 2022 increased by 0.4% to 93.9% as compared to
the same period in 2021.
- For the three months ended
March 31, 2022, ACFO(2) exceeded distributions declared by
$2.8 million (three months ended March 31, 2021 – $5.5
million).
- The Payout Ratio to ACFO(2) for the
rolling 12 months ended March 31, 2022 was 91.0%, as compared
to 92.1% for the same period in 2021. Excluding SmartVMC West LP
Class D distributions, the Payout Ratio to ACFO(2) for the rolling
12 months ended March 31, 2022 was 90.4%, as compared to 92.1%
for the same period in 2021.
Operational
- Rentals from investment properties
and other(1) was $202.5 million, as compared to $198.8 million for
the same period in 2021, representing an increase of $3.7 million
or 1.9%.
- In-place and committed occupancy
rates were 97.0% and 97.2%, respectively, as at March 31, 2022
(December 31, 2021 – 97.4% and 97.6%, respectively).
- Same Properties NOI inclusive of
ECL(2) increased by $2.8 million or 2.3% as compared to the same
period in 2021. Same Properties NOI excluding ECL(2) decreased by
$0.6 million or 0.5% as compared to the same period in 2021.
(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 additional
information, please see “Non-GAAP Measures” in this Press
Release. |
(3) |
Net of cash-on-hand of $60.0 million as at March 31, 2022 for
the purposes of calculating the applicable ratios. |
|
|
Selected Consolidated Operational,
Mixed-Use Development and Financial InformationKey
consolidated operational, mixed-use development and financial
information shown in the table below includes the Trust’s
proportionate share of equity accounted investments:
(in thousands of dollars, except per Unit and other non-financial
data) |
March 31, 2022 |
|
December 31, 2021 |
|
March 31, 2021 |
|
Portfolio Information |
|
|
|
|
|
|
Total number of properties with an ownership interest |
174 |
|
174 |
|
168 |
|
|
|
|
|
|
|
|
Leasing and
Operational Information |
|
|
|
|
|
|
Gross leasable area including retail and office space (in thousands
of sq. ft.) |
34,664 |
|
34,119 |
|
34,037 |
|
Occupied area including retail and office space (in thousands of
sq. ft.) |
33,616 |
|
33,219 |
|
32,999 |
|
Vacant area including retail and office space (in thousands of sq.
ft.) |
1,047 |
|
900 |
|
1,038 |
|
In-place occupancy rate (%) |
97.0 |
|
97.4 |
|
97.0 |
|
Committed occupancy rate (%) |
97.2 |
|
97.6 |
|
97.3 |
|
Average lease term to maturity (in years) |
4.4 |
|
4.4 |
|
4.6 |
|
Net retail rental rate (per occupied sq. ft.) ($) |
15.49 |
|
15.44 |
|
15.40 |
|
Net retail rental rate excluding Anchors (per occupied sq. ft.)
($) |
22.17 |
|
22.07 |
|
22.00 |
|
|
|
|
|
|
|
|
Mixed-Use Development Information |
|
|
|
|
|
|
Trust’s share of future development area (in thousands of sq.
ft.) |
40,600 |
|
40,600 |
|
32,500 |
|
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 |
|
9,800 |
|
7,900 |
|
Total number of residential rental projects |
104 |
|
104 |
|
96 |
|
Total number of seniors’ housing projects |
27 |
|
27 |
|
40 |
|
Total number of self-storage projects |
36 |
|
36 |
|
50 |
|
Total number of office building projects |
8 |
|
8 |
|
7 |
|
Total number of hotel projects |
3 |
|
3 |
|
4 |
|
Total number of condominium developments |
95 |
|
95 |
|
72 |
|
Total number of townhome developments |
10 |
|
10 |
|
15 |
|
Total number of future projects currently in development planning
stage |
283 |
|
283 |
|
284 |
|
|
Financial Information |
|
|
|
|
|
|
Total assets – GAAP(1) |
11,721,953 |
|
11,293,248 |
|
10,321,117 |
|
Total assets – non-GAAP(2)(3) |
11,985,236 |
|
11,494,377 |
|
10,525,295 |
|
Investment properties – GAAP(1) |
10,244,143 |
|
9,847,078 |
|
8,856,167 |
|
Investment properties – non-GAAP(2)(3) |
11,113,685 |
|
10,684,529 |
|
9,434,999 |
|
Total unencumbered assets(2) |
8,364,500 |
|
6,640,600 |
|
5,910,900 |
|
Debt – GAAP(1) |
4,951,171 |
|
4,854,527 |
|
4,810,106 |
|
Debt – non-GAAP(2)(3) |
5,124,045 |
|
4,983,078 |
|
4,924,116 |
|
Debt to Aggregate Assets (%)(2)(3)(4) |
42.5 |
|
42.9 |
|
44.7 |
|
Debt to Gross Book Value (%)(2)(3)(4) |
51.3 |
|
50.8 |
|
50.2 |
|
Unsecured to Secured Debt Ratio(2)(3)(4) |
75%/25% |
|
71%/29% |
|
69%/31% |
|
Unencumbered assets to unsecured debt(2)(3)(4) |
2.2X |
|
1.9X |
|
1.9X |
|
Weighted average interest rate (%)(2)(3) |
3.09 |
|
3.11 |
|
3.26 |
|
Weighted average term of debt (in years) |
4.7 |
|
4.8 |
|
5.1 |
|
Interest coverage ratio(2)(3)(4) |
3.5X |
|
3.4X |
|
3.2X |
|
Adjusted Debt to Adjusted EBITDA (net of cash)(2)(3)(4) |
9.4X |
|
9.2X |
|
8.6X |
|
Equity (book value)(1) |
6,133,130 |
|
5,841,315 |
|
5,149,986 |
|
Weighted average number of units outstanding – diluted |
179,590,588 |
|
173,748,819 |
|
173,417,020 |
|
(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 additional
information, please see “Non-GAAP Measures” in this Press
Release. |
(3) |
Includes the Trust’s proportionate share of equity accounted
investments. |
(4) |
As at March 31, 2022, cash-on-hand of $60.0 million was
excluded for the purposes of calculating the applicable ratios
(December 31, 2021 – $80.0 million, March 31, 2021 – $397.7
million). |
|
|
Quarterly Comparison to Prior
YearThe following table presents key financial, per Unit,
and payout ratio information for the three months ended
March 31, 2022 and March 31, 2021:
(in thousands of dollars, except per Unit information) |
March 31, 2022 |
|
|
|
March 31, 2021 |
|
|
|
Variance |
|
|
|
(A) |
|
|
|
(B) |
|
|
|
(A–B) |
|
|
Financial Information |
|
|
|
|
|
|
|
|
|
|
|
Rentals from investment properties and other(1) |
202,523 |
|
|
|
198,838 |
|
|
|
3,685 |
|
|
Net base rent(1) |
125,274 |
|
|
|
121,330 |
|
|
|
3,944 |
|
|
Total recoveries(1) |
72,386 |
|
|
|
71,782 |
|
|
|
604 |
|
|
Miscellaneous revenue(1) |
2,315 |
|
|
|
2,841 |
|
|
|
(526 |
) |
|
Service and other revenues(1) |
2,548 |
|
|
|
2,885 |
|
|
|
(337 |
) |
|
Net income and comprehensive income(1) |
370,110 |
|
|
|
60,559 |
|
|
|
309,551 |
|
|
Net income and comprehensive
income excluding fair value adjustments(2)(3) |
80,337 |
|
|
|
76,553 |
|
|
|
3,784 |
|
|
Cash flows provided by operating activities(1) |
102,819 |
|
|
|
79,485 |
|
|
|
23,334 |
|
|
Net rental income and other(1) |
120,414 |
|
|
|
116,137 |
|
|
|
4,277 |
|
|
NOI(2) |
123,868 |
|
|
|
118,981 |
|
|
|
4,887 |
|
|
Change in net rental income and other(2) |
3.7 |
|
% |
|
(6.2 |
) |
% |
|
9.9 |
|
% |
Change in SPNOI(2) |
2.3 |
|
% |
|
(4.8 |
) |
% |
|
7.1 |
|
% |
Change in SPNOI excluding ECL(2) |
(0.5 |
) |
% |
|
(3.7 |
) |
% |
|
3.2 |
|
% |
FFO(2)(3)(4)(5) |
92,235 |
|
|
|
84,275 |
|
|
|
7,960 |
|
|
FFO with adjustments(2)(3)(4) |
93,150 |
|
|
|
84,511 |
|
|
|
8,639 |
|
|
FFO with adjustments and Transactional FFO(2)(3)(4) |
93,150 |
|
|
|
86,098 |
|
|
|
7,052 |
|
|
ACFO(2)(3)(4)(5) |
85,154 |
|
|
|
85,153 |
|
|
|
1 |
|
|
ACFO with adjustments(2)(3)(4) |
86,069 |
|
|
|
85,389 |
|
|
|
680 |
|
|
Distributions declared |
82,339 |
|
|
|
79,660 |
|
|
|
2,679 |
|
|
Surplus (shortfall) of cash provided by operating activities over
distributions declared(2) |
20,480 |
|
|
|
(175 |
) |
|
|
20,655 |
|
|
Surplus of ACFO over distributions declared(2) |
2,815 |
|
|
|
5,493 |
|
|
|
(2,678 |
) |
|
Units outstanding(6) |
178,122,655 |
|
|
|
172,267,483 |
|
|
|
5,855,172 |
|
|
Weighted average – basic |
178,108,771 |
|
|
|
172,237,982 |
|
|
|
5,870,789 |
|
|
Weighted average – diluted(7) |
179,590,588 |
|
|
|
173,417,020 |
|
|
|
6,173,568 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Per Unit Information (Basic/Diluted) |
|
|
|
|
|
|
|
|
|
|
|
Net income and comprehensive income(1) |
$2.08/$2.06 |
|
|
|
$0.35/$0.35 |
|
|
|
$1.73/$1.71 |
|
|
Net income and comprehensive
income excluding fair value adjustments(2)(3) |
$0.45/$0.45 |
|
|
|
$0.44/$0.44 |
|
|
|
$0.01/$0.01 |
|
|
FFO(2)(3)(4)(5) |
$0.52/$0.51 |
|
|
|
$0.49/$0.49 |
|
|
|
$0.03/$0.02 |
|
|
FFO with adjustments(2)(3)(4) |
$0.52/$0.52 |
|
|
|
$0.49/$0.49 |
|
|
|
$0.03/$0.03 |
|
|
FFO with adjustments and Transactional FFO(2)(3)(4) |
$0.52/$0.52 |
|
|
|
$0.50/$0.50 |
|
|
|
$0.02/$0.02 |
|
|
FFO with adjustments excluding impact of SmartVMC West LP Class D
units(2)(3)(4) |
$0.54/$0.54 |
|
|
|
$0.49/$0.49 |
|
|
|
$0.05/$0.05 |
|
|
Distributions declared |
$0.463 |
|
|
|
$0.463 |
|
|
|
$— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payout Ratio Information |
|
|
|
|
|
|
|
|
|
|
|
Payout Ratio to cash flows provided by operating activities |
80.1 |
|
% |
|
100.2 |
|
% |
|
(20.1 |
) |
% |
Payout Ratio to ACFO(2)(3)(4)(5) |
96.7 |
|
% |
|
93.5 |
|
% |
|
3.2 |
|
% |
Payout Ratio to ACFO with adjustments(2)(3)(4) |
95.7 |
|
% |
|
93.3 |
|
% |
|
2.4 |
|
% |
Payout Ratio to ACFO with adjustments excluding SmartVMC West LP
Class D distribution(2)(3)(4) |
92.9 |
|
% |
|
93.3 |
|
% |
|
(0.4 |
) |
% |
(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 additional
information, please see “Non-GAAP Measures” in this Press
Release. |
(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 REALpac White Paper on FFO issued in
January 2022 and REALpac White Paper on ACFO issued in February
2019, 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 March 31, 2022,
net income and comprehensive income (as noted in the table above)
increased by $309.5 million as compared to the same period in
2021. This increase was primarily attributed to the following:
- $276.7 million increase in fair
value adjustments on revaluation of investment properties, of
which: i) $237.7 million relates to the fair value adjustment
associated with certain properties under development, and ii) $39.0
million relates to the revaluation of investment properties,
principally driven by leasing assumption updates (see details in
the “Investment Property” section in the Trust’s MD&A);
- $29.1 million increase in fair
value adjustment on financial instruments primarily due to i) $22.2
million increase in fair value of interest rate swap agreements,
ii) $2.9 million lower fair value loss on Units classified as
liabilities, iii) $2.9 million lower fair value loss relating to
unit based incentive programs, and iv) $1.1 million higher fair
value gain of TRS;
- $4.9 million increase in NOI (see
further details in the “Net Operating Income” subsection, including
impact of ECL, in the Trust’s MD&A);
- $1.9 million decrease in interest
expense (see further details in the “Interest Income and Interest
Expense” subsection in the Trust’s MD&A); and
- $0.5 million decrease in general
and administrative expenses (net) (see further details in the
“General and Administrative Expense” section in the Trust’s
MD&A);
Partially offset by the following:
- $2.7 million increase in
supplemental costs; and
- $0.7 million decrease in interest
income.
FFO Highlights
For the three months ended March 31, 2022,
FFO increased by $8.0 million or 9.4% to $92.2 million. This
increase was primarily attributed to:
- $4.9 million increase in NOI (see
details in the “Net Operating Income” subsection, including impact
of ECL, in the Trust’s MD&A);
- $1.9 million net decrease in
interest expense (see details in the “Interest Income and Interest
Expense” subsection in the Trust’s MD&A);
- $1.1 million increase in gain on
TRS;
- $0.5 million decrease in net
general and administrative expense (see details in the “General and
Administrative Expense” section in the Trust’s MD&A); and
- $0.3 million increase in FFO add
back for salaries and related costs attributed to leasing
activities;
Partially offset by:
- $0.7 million decrease in interest
income.
For the three months ended March 31, 2022,
FFO with adjustments increased by $8.6 million or 10.2% to $93.2
million as compared to the same period in 2021.
ACFO Highlights
For the three months ended March 31, 2022,
ACFO was $85.2 million as further described in “Results of
Operations” section 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 |
21 |
|
23 |
|
60 |
|
104 |
|
Seniors’ Housing |
4 |
|
9 |
|
14 |
|
27 |
|
Self-storage |
11 |
|
8 |
|
17 |
|
36 |
|
Office Buildings |
— |
|
1 |
|
7 |
|
8 |
|
Hotels |
— |
|
— |
|
3 |
|
3 |
|
Subtotal – Recurring rental income
initiatives |
36 |
|
41 |
|
101 |
|
178 |
|
Condominium developments |
26 |
|
22 |
|
47 |
|
95 |
|
Townhome developments |
3 |
|
2 |
|
5 |
|
10 |
|
Subtotal – Development income
initiatives |
29 |
|
24 |
|
52 |
|
105 |
|
Total |
65 |
|
65 |
|
153 |
|
283 |
|
Trust’s share of project area (in thousands of sq.
ft.) |
|
|
|
|
|
|
|
|
Recurring rental income initiatives |
4,000 |
|
4,500 |
|
12,000 |
|
20,500 |
|
Development income initiatives |
6,500 |
|
3,600 |
|
10,000 |
|
20,100 |
|
Total Trust’s share of
project area (in thousands of sq. ft.) |
10,500 |
|
8,100 |
|
22,000 |
|
40,600 |
|
Trust’s share of such estimated costs (in millions of
dollars) |
5,500 |
|
4,300 |
|
– (1) |
|
9,800 |
|
(1) |
The Trust has not fully determined 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. Currently working with the
City of Vaughan on advancement of Weston & 7 Secondary
Plan;
- 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. Council Report for approval
of Phase 1 expected Q2 2022;
- 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. Ninety-nine townhomes out of 174 Draft Plan Approved
townhomes have been 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 received for the entire site in
September 2021 and the application of Certificate of Property Use
was submitted in February 2022;
- 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. A third
submission of these applications was made in March 2022;
- the development of up to 1,600
residential units, in various forms, in Mascouche, Quebec, 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
construction of a second phase is expected to commence in Q1
2023;
- 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 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 master plan
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 Q3 2022. The
building permit application was submitted in October 2021;
- besides the seven self-storage
projects completed or under construction, there are 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 Q2 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 and approval is expected in Q2
2022;
- 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 deemed
complete in Q4 2021 and work is ongoing on a second submission to
respond to agency comments on the application;
- 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
850,000 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 (20 and 15 storeys), 433,000
square foot, 520-unit condo project submitted in Q4 2021.
Proportionately Consolidated Balance
Sheets (including the Trust’s interests in equity accounted
investments)The following table presents the
proportionately consolidated balance sheets, which includes a
reconciliation of the Trust’s proportionate share of equity
accounted investments:
(in thousands of dollars) |
March 31, 2022 |
December 31, 2021 |
|
GAAP Basis |
|
Proportionate Share Reconciliation |
|
Total Proportionate Share(1) |
|
GAAP Basis |
|
Proportionate Share Reconciliation |
|
Total Proportionate Share(1) |
|
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
Non-current assets |
|
|
|
|
|
|
|
|
|
|
|
|
Investment properties |
10,244,143 |
|
869,542 |
|
11,113,685 |
|
9,847,078 |
|
837,451 |
|
10,684,529 |
|
Equity accounted investments |
643,633 |
|
(643,633 |
) |
— |
|
654,442 |
|
(654,442 |
) |
— |
|
Mortgages, loans and notes receivable |
348,337 |
|
(82,951 |
) |
265,386 |
|
345,089 |
|
(69,576 |
) |
275,513 |
|
Other financial assets |
114,530 |
|
— |
|
114,530 |
|
97,148 |
|
— |
|
97,148 |
|
Other assets |
82,411 |
|
7,178 |
|
89,589 |
|
80,940 |
|
7,465 |
|
88,405 |
|
Intangible assets |
44,806 |
|
— |
|
44,806 |
|
45,139 |
|
— |
|
45,139 |
|
|
11,477,860 |
|
150,136 |
|
11,627,996 |
|
11,069,836 |
|
120,898 |
|
11,190,734 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets |
|
|
|
|
|
|
|
|
|
|
|
|
Residential development inventory |
28,325 |
|
76,138 |
|
104,463 |
|
27,399 |
|
67,828 |
|
95,227 |
|
Current portion of mortgages, loans and notes receivable |
87,250 |
|
— |
|
87,250 |
|
71,947 |
|
— |
|
71,947 |
|
Amounts receivable and other |
49,872 |
|
625 |
|
50,497 |
|
49,542 |
|
(8,637 |
) |
40,905 |
|
Prepaid expenses, deposits and deferred financing costs |
25,038 |
|
13,504 |
|
38,542 |
|
12,289 |
|
13,118 |
|
25,407 |
|
Cash and cash equivalents |
53,608 |
|
22,880 |
|
76,488 |
|
62,235 |
|
7,922 |
|
70,157 |
|
|
244,093 |
|
113,147 |
|
357,240 |
|
223,412 |
|
80,231 |
|
303,643 |
|
Total assets |
11,721,953 |
|
263,283 |
|
11,985,236 |
|
11,293,248 |
|
201,129 |
|
11,494,377 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
Non-current liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
Debt |
4,777,675 |
|
160,545 |
|
4,938,220 |
|
4,176,121 |
|
93,465 |
|
4,269,586 |
|
Other financial liabilities |
331,316 |
|
— |
|
331,316 |
|
326,085 |
|
— |
|
326,085 |
|
Other payables |
17,907 |
|
— |
|
17,907 |
|
18,243 |
|
— |
|
18,243 |
|
|
5,126,898 |
|
160,545 |
|
5,287,443 |
|
4,520,449 |
|
93,465 |
|
4,613,914 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
Current portion of debt |
173,496 |
|
12,329 |
|
185,825 |
|
678,406 |
|
35,086 |
|
713,492 |
|
Accounts payable and current portion of other payables |
288,429 |
|
90,409 |
|
378,838 |
|
253,078 |
|
72,578 |
|
325,656 |
|
|
461,925 |
|
102,738 |
|
564,663 |
|
931,484 |
|
107,664 |
|
1,039,148 |
|
Total liabilities |
5,588,823 |
|
263,283 |
|
5,852,106 |
|
5,451,933 |
|
201,129 |
|
5,653,062 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity |
|
|
|
|
|
|
|
|
|
|
|
|
Trust Unit equity |
5,111,274 |
|
— |
|
5,111,274 |
|
4,877,961 |
|
— |
|
4,877,961 |
|
Non-controlling interests |
1,021,856 |
|
— |
|
1,021,856 |
|
963,354 |
|
— |
|
963,354 |
|
|
6,133,130 |
|
— |
|
6,133,130 |
|
5,841,315 |
|
— |
|
5,841,315 |
|
Total liabilities and equity |
11,721,953 |
|
263,283 |
|
11,985,236 |
|
11,293,248 |
|
201,129 |
|
11,494,377 |
|
(1) |
This column contains non-GAAP measures because it includes figures
that are recorded in equity accounted investments. The Trust’s
method of calculating non-GAAP measures may differ from other
reporting issuers’ methods and, accordingly, may not be comparable.
For additional information, please see “Non-GAAP Measures” in this
Press Release. |
|
|
Proportionately Consolidated Statements
of Income and Comprehensive Income (including the Trust’s Interests
in Equity Accounted Investments)The following table
presents the proportionately consolidated statements of income and
comprehensive income, which include a reconciliation of the Trust’s
proportionate share of equity accounted investments:
(in thousands of dollars) |
Three Months Ended March 31, 2022 |
|
Three Months Ended March 31, 2021 |
|
|
|
|
GAAP Basis |
|
Proportionate Share Reconciliation |
|
Total Proportionate Share(1) |
|
GAAP Basis |
|
Proportionate Share Reconciliation |
|
Total Proportionate Share(1) |
|
Variance |
|
Net rental income and other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rentals from investment properties and other |
202,523 |
|
6,492 |
|
209,015 |
|
198,838 |
|
5,031 |
|
203,869 |
|
5,146 |
|
Property operating costs and other |
(82,109 |
) |
(3,013 |
) |
(85,122 |
) |
(82,701 |
) |
(2,253 |
) |
(84,954 |
) |
(168 |
) |
|
120,414 |
|
3,479 |
|
123,893 |
|
116,137 |
|
2,778 |
|
118,915 |
|
4,978 |
|
Condominium sales revenue and other(2) |
— |
|
6 |
|
6 |
|
— |
|
165 |
|
165 |
|
(159 |
) |
Condominium cost of sales and other |
— |
|
(31 |
) |
(31 |
) |
— |
|
(99 |
) |
(99 |
) |
68 |
|
|
— |
|
(25 |
) |
(25 |
) |
— |
|
66 |
|
66 |
|
(91 |
) |
Net rental income and other |
120,414 |
|
3,454 |
|
123,868 |
|
116,137 |
|
2,844 |
|
118,981 |
|
4,887 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income and expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General and administrative expense, net |
(6,867 |
) |
(122 |
) |
(6,989 |
) |
(7,480 |
) |
— |
|
(7,480 |
) |
491 |
|
Earnings from equity accounted investments |
(574 |
) |
574 |
|
— |
|
15,318 |
|
(15,318 |
) |
— |
|
— |
|
Earnings from other(3) |
305 |
|
(305 |
) |
— |
|
— |
|
— |
|
— |
|
— |
|
Fair value adjustment on revaluation of investment properties |
271,345 |
|
446 |
|
271,791 |
|
(18,759 |
) |
13,833 |
|
(4,926 |
) |
276,717 |
|
Gain on sale of investment properties |
(122 |
) |
— |
|
(122 |
) |
10 |
|
— |
|
10 |
|
(132 |
) |
Interest expense |
(35,333 |
) |
(1,391 |
) |
(36,724 |
) |
(37,201 |
) |
(1,380 |
) |
(38,581 |
) |
1,857 |
|
Interest income |
2,960 |
|
8 |
|
2,968 |
|
3,602 |
|
22 |
|
3,624 |
|
(656 |
) |
Supplemental costs |
— |
|
(2,664 |
) |
(2,664 |
) |
— |
|
(1 |
) |
(1 |
) |
(2,663 |
) |
Fair value adjustment on financial instruments |
17,982 |
|
— |
|
17,982 |
|
(11,068 |
) |
— |
|
(11,068 |
) |
29,050 |
|
Net income and comprehensive income |
370,110 |
|
— |
|
370,110 |
|
60,559 |
|
— |
|
60,559 |
|
309,551 |
|
(1) |
This column contains non-GAAP measures because it includes figures
that are recorded in equity accounted investments. The Trust’s
method of calculating non-GAAP measures may differ from other
reporting issuers’ methods and, accordingly, may not be comparable.
For additional information, please see “Non-GAAP Measures” in this
Press Release. |
(2) |
Includes additional partnership profit and other revenues. |
(3) |
Represents SmartVMC West’s operating results. |
|
|
FFO, FFO with adjustments, and FFO with
adjustments and Transactional FFOThe following table
reconciles net income and comprehensive income to FFO, FFO with
adjustments, and FFO with adjustments and Transactional FFO:
(in thousands of dollars, except per Unit amounts) |
Three Months Ended March 31, 2022 |
|
Three Months Ended March 31, 2021 |
|
Variance ($) |
|
Variance (%) |
|
Net income and comprehensive income |
370,110 |
|
60,559 |
|
309,551 |
|
N/R(7) |
|
Add (deduct): |
|
|
|
|
|
|
|
|
Fair value adjustment on revaluation of investment
properties(1) |
(271,345 |
) |
18,759 |
|
(290,104 |
) |
N/R(7) |
|
Fair value adjustment on financial instruments(2) |
(17,982 |
) |
11,068 |
|
(29,050 |
) |
N/R(7) |
|
Gain on derivative – TRS |
1,605 |
|
513 |
|
1,092 |
|
N/R(7) |
|
Gain on sale of investment properties |
122 |
|
(254 |
) |
376 |
|
N/R(7) |
|
Amortization of intangible assets |
333 |
|
333 |
|
— |
|
— |
|
Amortization of tenant improvement allowance and other |
1,659 |
|
2,321 |
|
(662 |
) |
(28.5 |
) |
Distributions on Units classified as liabilities and vested
deferred units recorded as interest expense |
1,721 |
|
1,500 |
|
221 |
|
14.7 |
|
Salaries and related costs attributed to leasing activities(3) |
1,826 |
|
1,503 |
|
323 |
|
21.5 |
|
Adjustments relating to equity accounted investments: |
|
|
|
|
|
|
|
|
Rental revenue adjustment – tenant improvement amortization |
95 |
|
99 |
|
(4 |
) |
(4.0 |
) |
Indirect interest with respect to the development portion(4) |
1,873 |
|
1,706 |
|
167 |
|
9.8 |
|
Fair value adjustment on revaluation of investment properties |
(446 |
) |
(13,833 |
) |
13,387 |
|
(96.8 |
) |
Adjustment for supplemental costs |
2,664 |
|
1 |
|
2,663 |
|
N/R(7) |
|
FFO(5) |
92,235 |
|
84,275 |
|
7,960 |
|
9.4 |
|
Adjustments: |
|
|
|
|
|
|
|
|
Other adjustments(6) |
915 |
|
236 |
|
679 |
|
N/R(7) |
|
FFO with
adjustments(5) |
93,150 |
|
84,511 |
|
8,639 |
|
10.2 |
|
Transactional FFO – gain on sale of land to co-owners |
— |
|
1,587 |
|
(1,587 |
) |
N/R(7) |
|
FFO with adjustments and Transactional
FFO(5) |
93,150 |
|
86,098 |
|
7,052 |
|
8.2 |
|
(1) |
Fair value adjustment on revaluation of investment properties is
described in “Investment Properties” in the Trust’s MD&A. |
(2) |
Fair value adjustment on financial instruments comprises the
following financial instruments: units classified as liabilities,
Earnout options, DUP, EIP, LTIP, TRS, interest rate swap
agreement(s), and loans receivable and Earnout options recorded in
the same period in 2021. The significant assumptions made in
determining the fair value and fair value adjustments for these
financial instruments are more thoroughly described in the Trust’s
unaudited interim condensed consolidated financial statements for
the three months ended March 31, 2022. For details please see
discussion in “Results of Operations” in the Trust’s MD&A. |
(3) |
Salaries and related costs attributed to leasing activities of $1.8
million were incurred in the three months ended March 31, 2022
(three months ended March 31, 2021 – $1.5 million) and were
eligible to be added back to FFO based on the definition of FFO, in
the REALpac White Paper published in January 2022, which provided
for an adjustment to incremental leasing expenses for the cost of
salaried staff. This adjustment to FFO results in more
comparability between Canadian publicly traded real estate entities
that expensed their internal leasing departments and those that
capitalized external leasing expenses. |
(4) |
Indirect interest is not capitalized to properties under
development and residential development inventory of equity
accounted investments under IFRS but is a permitted adjustment
under REALpac’s definition of FFO. The amount is based on the total
cost incurred with respect to the development portion of equity
accounted investments multiplied by the Trust’s weighted average
cost of debt. |
(5) |
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 additional
information, please see “Non-GAAP Measures” in this Press
Release. |
(6) |
Represents adjustments relating to $0.9 million of costs associated
with COVID-19 vaccination centres (three months ended
March 31, 2021 – $0.2 million). |
(7) |
N/R – Not representative. |
|
|
Net Operating Income The
following tables summarize NOI, related ratios and recovery ratios,
provide additional information, and reflect the Trust’s
proportionate share of equity accounted investments, the sum of
which represent a non-GAAP measure:
(in thousands of dollars) |
Three Months Ended March 31, 2022 |
|
Three Months Ended March 31, 2021 |
|
|
|
|
Trust portion excluding EAI |
|
Equity Accounted Investments |
|
Total Proportionate Share(1) |
|
Trust portion excluding EAI |
|
Equity Accounted Investments |
|
Total Proportionate Share(1) |
|
Variance(1) |
|
|
|
|
|
|
(A) |
|
|
|
|
|
(B) |
|
(A–B) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net base rent |
125,274 |
|
4,080 |
|
129,354 |
|
121,330 |
|
3,044 |
|
124,374 |
|
4,980 |
|
Property tax and insurance
recoveries |
45,062 |
|
770 |
|
45,832 |
|
47,374 |
|
656 |
|
48,030 |
|
(2,198 |
) |
Property operating cost
recoveries |
27,324 |
|
921 |
|
28,245 |
|
24,408 |
|
868 |
|
25,276 |
|
2,969 |
|
Miscellaneous revenue |
2,315 |
|
721 |
|
3,036 |
|
2,841 |
|
463 |
|
3,304 |
|
(268 |
) |
Rentals from investment
properties |
199,975 |
|
6,492 |
|
206,467 |
|
195,953 |
|
5,031 |
|
200,984 |
|
5,483 |
|
Service
and other revenues |
2,548 |
|
— |
|
2,548 |
|
2,885 |
|
— |
|
2,885 |
|
(337 |
) |
Rentals
from investment properties and other(2) |
202,523 |
|
6,492 |
|
209,015 |
|
198,838 |
|
5,031 |
|
203,869 |
|
5,146 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recoverable tax and insurance
costs |
(47,093 |
) |
(783 |
) |
(47,876 |
) |
(49,356 |
) |
(653 |
) |
(50,009 |
) |
2,133 |
|
Recoverable CAM costs |
(29,993 |
) |
(950 |
) |
(30,943 |
) |
(26,388 |
) |
(807 |
) |
(27,195 |
) |
(3,748 |
) |
Property management fees and
costs |
(1,058 |
) |
(210 |
) |
(1,268 |
) |
(289 |
) |
(143 |
) |
(432 |
) |
(836 |
) |
Non-recoverable operating costs |
(2,504 |
) |
(1,019 |
) |
(3,523 |
) |
(1,474 |
) |
(652 |
) |
(2,126 |
) |
(1,397 |
) |
ECL |
1,113 |
|
(51 |
) |
1,062 |
|
(2,309 |
) |
2 |
|
(2,307 |
) |
3,369 |
|
Property operating costs |
(79,535 |
) |
(3,013 |
) |
(82,548 |
) |
(79,816 |
) |
(2,253 |
) |
(82,069 |
) |
(479 |
) |
Other expenses |
(2,574 |
) |
— |
|
(2,574 |
) |
(2,885 |
) |
— |
|
(2,885 |
) |
311 |
|
Property operating costs and other(2) |
(82,109 |
) |
(3,013 |
) |
(85,122 |
) |
(82,701 |
) |
(2,253 |
) |
(84,954 |
) |
(168 |
) |
Net rental income and other |
120,414 |
|
3,479 |
|
123,893 |
|
116,137 |
|
2,778 |
|
118,915 |
|
4,978 |
|
Condominium sales revenue |
— |
|
6 |
|
6 |
|
— |
|
165 |
|
165 |
|
(159 |
) |
Condominium cost of sales |
— |
|
(31 |
) |
(31 |
) |
— |
|
(99 |
) |
(99 |
) |
68 |
|
Net profit on condominium sales |
— |
|
(25 |
) |
(25 |
) |
— |
|
66 |
|
66 |
|
(91 |
) |
NOI(3) |
120,414 |
|
3,454 |
|
123,868 |
|
116,137 |
|
2,844 |
|
118,981 |
|
4,887 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net rental income and other as
a percentage of net base rent (%) |
96.1 |
|
85.3 |
|
95.8 |
|
95.7 |
|
91.3 |
|
95.6 |
|
0.2 |
|
Net rental income and other as
a percentage of rentals from investment properties (%) |
60.2 |
|
53.6 |
|
60.0 |
|
59.3 |
|
55.2 |
|
59.2 |
|
0.8 |
|
Net rental income and other as
a percentage of rentals from investment properties and other
(%) |
59.5 |
|
53.6 |
|
59.3 |
|
58.4 |
|
55.2 |
|
58.3 |
|
1.0 |
|
Recovery Ratio (including
prior year adjustments) (%) |
93.9 |
|
97.6 |
|
94.0 |
|
94.8 |
|
104.4 |
|
95.0 |
|
(1.0 |
) |
Recovery Ratio (excluding prior year adjustments) (%) |
93.8 |
|
95.4 |
|
93.9 |
|
95.1 |
|
104.8 |
|
95.3 |
|
(1.4 |
) |
(1) |
This column contains non-GAAP measures because it includes figures
that are recorded in equity accounted investments – that are not
explicitly disclosed and/or presented in the unaudited interim
condensed consolidated financial statements for the three months
ended March 31, 2022 and March 31, 2021. The Trust’s
method of calculating non-GAAP measures may differ from other
reporting issuers’ methods and, accordingly, may not be comparable.
For additional information, please see “Non-GAAP Measures” in this
Press Release. |
(2) |
As reflected under the column 'Trust portion excluding EAI' in the
table above, this amount represents a GAAP measure. |
(3) |
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 additional
information, please see “Non-GAAP Measures” in this Press
Release. |
|
|
Same Properties NOINOI (a
non-GAAP financial measure) from continuing operations represents:
i) rentals from investment properties and other revenues less
property operating costs and other expenses, and ii) net profit
from condominium sales. Disclosing the NOI contribution from each
of same properties, acquisitions, dispositions, Earnouts and
Development activities highlights the impact each component has on
aggregate NOI. Straight-line rent, lease terminations and other
adjustments, and amortization of tenant incentives have been
excluded from Same Properties NOI, as have NOI from acquisitions,
dispositions, Earnouts and Development activities, and ECL. This
has been done in order to more directly highlight the impact of
changes in occupancy, rent uplift and productivity.
|
Three Months Ended |
|
Three Months Ended |
|
|
|
|
|
(in thousands of dollars) |
March 31, 2022 |
|
March 31, 2021 |
|
Variance ($) |
|
Variance (%) |
|
Net rental income |
120,440 |
|
116,137 |
|
4,303 |
|
3.7 |
|
Service and other revenues |
2,548 |
|
2,885 |
|
(337 |
) |
(11.7 |
) |
Other expenses |
(2,574 |
) |
(2,885 |
) |
311 |
|
10.8 |
|
NOI(1) |
120,414 |
|
116,137 |
|
4,277 |
|
3.7 |
|
NOI from equity accounted investments(1) |
3,454 |
|
2,844 |
|
610 |
|
21.4 |
|
Total portfolio NOI before adjustments(1) |
123,868 |
|
118,981 |
|
4,887 |
|
4.1 |
|
|
|
|
|
|
|
|
|
|
Adjustments: |
|
|
|
|
|
|
|
|
Royalties |
235 |
|
201 |
|
34 |
|
16.9 |
|
Straight-line rent |
(77 |
) |
464 |
|
(541 |
) |
N/R(2) |
|
Lease termination and other adjustments |
(242 |
) |
(445 |
) |
203 |
|
(45.6 |
) |
Net profit on condominium sales |
25 |
|
(66 |
) |
91 |
|
N/R(2) |
|
Amortization of tenant incentives |
1,835 |
|
2,474 |
|
(639 |
) |
(25.8 |
) |
Total portfolio NOI after adjustments(1) |
125,644 |
|
121,609 |
|
4,035 |
|
3.3 |
|
|
|
|
|
|
|
|
|
|
NOI sourced from: |
|
|
|
|
|
|
|
|
Acquisitions |
(1,078 |
) |
60 |
|
(1,138 |
) |
N/R(2) |
|
Dispositions |
5 |
|
(570 |
) |
575 |
|
(100.9 |
) |
Earnouts and Developments |
(782 |
) |
(68 |
) |
(714 |
) |
N/R(2) |
|
Same Properties NOI(1) |
123,789 |
|
121,031 |
|
2,758 |
|
2.3 |
|
Add
back: Bad debt expense/ECL |
(1,045 |
) |
2,336 |
|
(3,381 |
) |
N/R(2) |
|
Same
Properties NOI excluding ECL(1) |
122,744 |
|
123,367 |
|
(623 |
) |
(0.5 |
) |
(1) |
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 additional
information, please see “Non-GAAP Measures” in this Press
Release. |
(2) |
N/R – Not representative. |
|
|
Adjusted EBITDAThe following
table presents a reconciliation of net income and comprehensive
income to Adjusted EBITDA:
|
Rolling 12 Months Ended |
|
|
|
(in thousands of dollars) |
March 31, 2022 |
|
March 31, 2021 |
|
Variance ($) |
|
Net income and comprehensive income |
1,297,224 |
|
86,302 |
|
1,210,922 |
|
|
|
|
|
|
|
|
Add (deduct) the following items: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense |
148,124 |
|
155,761 |
|
(7,637 |
) |
Interest income |
(11,699 |
) |
(15,565 |
) |
3,866 |
|
Yield maintenance costs |
— |
|
11,954 |
|
(11,954 |
) |
Amortization of equipment and intangible assets |
3,769 |
|
4,125 |
|
(356 |
) |
Amortization of tenant improvements |
7,223 |
|
8,033 |
|
(810 |
) |
Fair value adjustments |
(950,796 |
) |
241,449 |
|
(1,192,245 |
) |
Fair value adjustment on TRS |
6,734 |
|
513 |
|
6,221 |
|
Adjustment for supplemental costs |
5,281 |
|
1,634 |
|
3,647 |
|
Gain on sale of investment properties |
106 |
|
(451 |
) |
557 |
|
Gain on sale of land to co-owners (Transactional FFO) |
336 |
|
2,332 |
|
(1,996 |
) |
Acquisition-related costs |
2,791 |
|
166 |
|
2,625 |
|
Adjusted EBITDA(1) |
509,093 |
|
496,253 |
|
12,840 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA(1) |
509,093 |
|
496,253 |
|
12,840 |
|
Less: Condominium closing profits |
(20,315 |
) |
(47,865 |
) |
27,550 |
|
Add: Expected credit loss |
421 |
|
32,956 |
|
(32,535 |
) |
Adjusted EBITDA excluding condominium closing profits and
ECL(1) |
489,199 |
|
481,344 |
|
7,855 |
|
(1) |
Represents a non-GAAP measure. The Trust’s method of calculating
non-GAAP measures may differ from other reporting issuers’ methods
and, accordingly, may not be comparable. For additional
information, please see “Non-GAAP Measures” in this Press
Release. |
|
|
ACFO and ACFO with
adjustmentsThe following table reconciles cash flows
provided by operating activities to ACFO and ACFO with
adjustments:
(in thousands of dollars) |
Three Months Ended March 31, 2022 |
|
Three Months Ended March 31, 2021 |
|
Variance ($) |
|
Variance (%) |
|
Cash flows provided by operating activities |
102,819 |
|
79,485 |
|
23,334 |
|
29.4 |
|
Adjustments to working capital
items that are not indicative of sustainable cash available for
distribution(1) |
(4,389 |
) |
1,999 |
|
(6,388 |
) |
N/R(2) |
|
Distributions on Units
classified as liabilities and vested deferred units recorded as
interest expense |
1,721 |
|
1,500 |
|
221 |
|
14.7 |
|
Expenditures on direct leasing costs and tenant incentives |
2,439 |
|
1,061 |
|
1,378 |
|
N/R(2) |
|
Expenditures on tenant
incentives for properties under development |
1,680 |
|
272 |
|
1,408 |
|
N/R(2) |
|
Actual sustaining capital expenditures |
(2,175 |
) |
(1,361 |
) |
(814 |
) |
59.8 |
|
Actual sustaining leasing commissions |
(510 |
) |
(604 |
) |
94 |
|
(15.6 |
) |
Actual sustaining tenant improvements |
(1,948 |
) |
(457 |
) |
(1,491 |
) |
N/R(2) |
|
Non-cash interest expense, net of other financing costs |
(16,205 |
) |
(1,593 |
) |
(14,612 |
) |
N/R(2) |
|
Non-cash interest income |
(839 |
) |
722 |
|
(1,561 |
) |
N/R(2) |
|
Gain on sale of land to co-owners |
— |
|
1,587 |
|
(1,587 |
) |
N/R(2) |
|
Distributions from equity accounted investments |
(426 |
) |
(608 |
) |
182 |
|
(29.9 |
) |
Adjustments relating to equity accounted investments: |
|
|
|
|
|
|
Cash flows from operating activities including working capital
adjustments |
1,122 |
|
1,551 |
|
(429 |
) |
(27.7 |
) |
Notional interest capitalization(3) |
1,873 |
|
1,706 |
|
167 |
|
9.8 |
|
Actual sustaining capital and leasing expenditures |
(93 |
) |
(74 |
) |
(19 |
) |
25.7 |
|
Non-cash interest expense |
85 |
|
(33 |
) |
118 |
|
N/R(2) |
|
ACFO(4) |
85,154 |
|
85,153 |
|
1 |
|
0.0 |
|
Other adjustments(5) |
915 |
|
236 |
|
679 |
|
N/R(2) |
|
ACFO with adjustments(4) |
86,069 |
|
85,389 |
|
680 |
|
0.8 |
|
|
|
|
|
|
|
|
ACFO(4) |
85,154 |
|
85,153 |
|
1 |
|
0.0 |
|
Distributions declared |
82,339 |
|
79,660 |
|
2,679 |
|
3.4 |
|
Surplus of ACFO over distributions declared |
2,815 |
|
5,493 |
|
(2,678 |
) |
(48.8 |
) |
|
|
|
|
|
|
|
Payout Ratio Information: |
|
|
|
|
|
|
Payout Ratio to ACFO(4) |
96.7 |
% |
93.5 |
% |
N/A |
|
3.2 |
% |
Payout Ratio to ACFO with adjustments(4) |
95.7 |
% |
93.3 |
% |
N/A |
|
2.4 |
% |
Payout Ratio to ACFO excluding
SmartVMC West LP Class D distribution(4)(6) |
93.9 |
% |
93.5 |
% |
N/A |
|
0.4 |
% |
Payout
Ratio to ACFO with adjustments excluding SmartVMC West LP Class D
distribution(4)(6) |
92.9 |
% |
93.3 |
% |
N/A |
|
(0.4 |
)% |
(1) |
Adjustments to working capital items include, but are not limited
to, changes in prepaid expenses and deposits, accounts receivables,
accounts payables and other working capital items that are not
indicative of sustainable cash available for distribution. |
(2) |
N/R – Not representative. |
(3) |
See the “Indirect interest with respect to the development portion”
as presented in the “FFO, FFO with adjustments, and FFO with
adjustments and Transactional FFO” subsection above for more
information. |
(4) |
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 additional
information, please see “Non-GAAP Measures” in this Press
Release. |
(5) |
Represents adjustments relating to $0.9 million of costs associated
with COVID-19 vaccination centres (three months ended
March 31, 2021 – $0.2 million). |
(6) |
For the three months ended March 31, 2022, excludes $2.7 million of
distributions declared in connection with SmartVMC West LP Class D
units (March 31, 2021 – $nil). |
|
|
Non-GAAP Measures
The non-GAAP measures used in this Press
Release, including but not limited FFO per Unit, Unencumbered
Assets, NOI, Debt to Aggregate Assets, Interest Coverage Ratio,
Adjusted Debt to Adjusted EBITDA, Unsecured/Secured Debt Ratio,
FFO, FFO with adjustments, FFO per Unit with adjustments,
Transactional FFO, ACFO, Payout Ratio to ACFO, Same Properties NOI,
Investment properties – non-GAAP, Debt – non-GAAP, Debt to Gross
Book Value, Unencumbered Assets to Unsecured Debt, Weighted Average
Interest Rate, Total Proportionate Share, 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.
Additional information regarding these non-GAAP measures is
available in the Management’s Discussion and Analysis of the Trust
for the three months ended March 31, 2022, dated May 11,
2022 (the “MD&A), and is incorporated by reference. The
information is found in the “Presentation of Certain Terms
Including Non-GAAP Measures” and “Non-GAAP Measures” sections of
the MD&A, which is available on SEDAR at www.sedar.com.
Reconciliations of non-GAAP financial measures to the most directly
comparable IFRS measures are found in the following sections of
this Press Release: “Proportionately Consolidated Balance Sheets
(including the Trust’s interests in equity accounted investments)”,
“Proportionately Consolidated Statements of Income and
Comprehensive Income (including the Trust’s Interests in Equity
Accounted Investments)”, “FFO, FFO with adjustments, and FFO with
adjustments and Transactional FFO”, “Net Operating Income”, “Same
Properties NOI”, “Adjusted EBITDA” and, “ACFO and ACFO with
adjustments”.
Full reports of the financial results of the
Trust for the three months ended March 31, 2022 are outlined
in the unaudited interim condensed consolidated financial
statements and the related MD&A of the Trust for the three
months ended March 31, 2022, which are available on SEDAR at
www.sedar.com.
Conference Call
SmartCentres will hold a conference call on
Thursday, May 12, 2022 at 3:30 p.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 20103#. 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
Thursday, May 12, 2022 beginning at 8:30 p.m. (ET) through to
8:30 p.m. (ET) on Thursday, May 19, 2022. To access the
recording, please call 1-855-201-2300, enter the conference access
code 20103# and then key in the playback access code 0112189#.
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
$11.7 billion in assets and owns 34.7 million square feet of income
producing value-oriented retail and first-class office space with
97.2% 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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