SmartCentres Real Estate Investment Trust Releases Fourth

---

Operational

  • Shopping centre leasing activity remains strong, with industry-leading occupancy levels of 98% in Q4 2022, representing a 40 basis point increase as compared to the same period 2021
  • Same Properties NOI(1) for the quarter increased by $5.1 million or 4.0% as compared to Q4 2021, and for the full year increased by $16.5 million or 3.3% as compared to 2021
  • Net rental income and other for the quarter increased by $2.2 million or 1.7% as compared to Q4 2021, and for the full year increased by $16.8 million or 3.5% as compared to 2021

Mixed-use Development

  • In excess of three million square feet of construction activity is currently underway, principally high rise residential on existing shopping centre sites in Toronto, Montreal, and Ottawa
  • Construction of the Transit City 4 & 5 condominium towers is in the final stages of completion with closings scheduled to commence in March 2023. All 1,026 units have been pre-sold and construction costs are on budget
  • Construction of the Millway, a 458-unit purpose-built rental apartment building, is also in the final stages of completion, with initial tenants taking occupancy and rent commencement later this month

Financial

  • FFO(1) with adjustments excluding the impact of the TRS for the quarter increased by $1.0 million or 1.1% as compared to Q4 2021, and for the full year increased by $9.6 million or 2.7% as compared to 2021
  • Payout Ratio to ACFO(1) with adjustments excluding the impact of the TRS and other for the year ended December 31, 2022 improved by 3.9% to 92.6% as compared to 2021 and for the quarter improved by 5.7% to 94.1% as compared to Q4 2021
  • Payout Ratio to cash flows provided by operating activities for the year ended December 31, 2022 increased by 3.1% to 88.9% as compared to 2021 and for the quarter increased by 1.6% to 61.2% as compared to Q4 2021
  • As a result of fair value adjustments to property valuations and condo and townhouse closings that occurred in 2021, net income and comprehensive income for the quarter decreased by $551.8 million or 84.6% as compared to Q4 2021, and for the year decreased by $351.7 million or 35.6% as compared to 2021

TORONTO, Feb. 08, 2023 (GLOBE NEWSWIRE) -- 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, 2022.

“Walmart is a very strong anchor tenant in good times, and an even stronger one in tough times. Hence, customer traffic to our Walmart-anchored shopping centre portfolio continues to gain momentum which, in turn, is generating steadily increasing levels of leasing activity that began earlier in 2022.” said Mitchell Goldhar, Executive Chairman and CEO of SmartCentres.

“We anticipate this trend will continue into 2023 and that it will have a positive impact on both our occupancy and earnings levels. We are pleased with the noticeable increase in leasing activity in the fourth quarter and the associated improvement in cash collections.”

“We are particularly proud of our progress on the eleven mixed-used development initiatives that are currently under construction. These projects have expected completion dates in 2023 and 2024, upon which they are expected to begin contributing FFO(1). The development initiatives span multiple asset classes, including condos, rental apartments, seniors’ apartments, townhouses, self-storage, industrial, and retirement residences. As at December 31, 2022, the total cumulative amount of capital deployed on these projects was $755.2 million ($304.1 million at the Trust’s share), with approximately $487.8 million remaining until completion ($234.9 million at the Trust’s share),” noted Mr. Goldhar.

“Among these developments are significant projects at our flagship Vaughan Metropolitan Centre. These include two 45-storey and 50-storey condominium towers at Transit City nearing completion after 36 months. These units are sold out and the final stages of construction are rapidly nearing the finish line, on time and on budget. Closings are expected to commence in March 2023. In addition, The Millway, a 458-unit, 36-storey rental apartment tower, is also proceeding on time and on budget with initial occupancy and rent commencement expected to begin later this month. The first phase of our Artwalk condominium project is also sold out and construction is expected to commence in the second half of 2023.”

“We are also pleased to note that, as promised, we published our inaugural ESG report during the fourth quarter of 2022. Our business remains strong and well-positioned for growth in the coming years. Nevertheless, with changing economic conditions, we plan on applying prudent discipline when assessing development and other initiatives. Our focus remains on the long term, including the development of mixed-use projects on our strategically located real estate, which we are confident will extract deeply embedded value for many years to come,” added Mr. Goldhar.

(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 Year Ended December 31, 2022

Mixed-Use Development and New Growth at SmartVMC

  • Park Place condo pre-development is underway on the 53.0 acre SmartVMC West lands strategically acquired in December 2021. Pre-sales for this development have commenced. The Trust’s acquisition in December 2021 of a two-thirds interest in the SmartVMC West lands more than doubled the Trust’s holdings in the 105 acre SmartVMC city centre development.
  • Construction nears completion on the 100% pre-sold Transit City 4 (45 storeys) and 5 (50 storeys) condo towers, representing 1,026 residential units. Concrete, formwork and building envelope have been completed for both towers, with interior finishes ongoing. First closings are expected to commence in March 2023.
  • Construction of the purpose-built rental project, The Millway (36 storeys), nears completion at SmartVMC. Formwork, concrete and building envelope have been completed, with interior finishes underway. Initial occupancy is expected to commence in February 2023.
  • ArtWalk condominium sales of 320 released units in Phase 1 are sold out with construction expected to begin in the second half of 2023.

Other Business Development

  • Occupancy in the completed first phase of the two-phase, purpose-built residential rental project in Laval, Quebec, ended the year with 98% of the 171 units leased. Pre-leasing has commenced on the next phase and construction continues, with a target completion date of Q2 2023.
  • Initial occupancy in the two purpose-built residential rental towers (238 units) in Mascouche, Quebec began in July 2022, with the final floor opened in November. More than 147 units have been leased and current lease-up activity is in line with initial expectations.
  • 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. A sixth facility, Aurora, opened in December 2022.
  • Three self-storage facilities in Whitby, Markham and Brampton (Kingspoint) are currently under construction, with Brampton (Kingspoint) expected to be completed in early 2023. Additional self-storage facilities have been approved by the Board of Trustees and the Trust is in the process of obtaining municipal approvals in Stoney Creek and two locations in Toronto (Gilbert Ave. and Jane St.). In addition, the municipal approval process is underway in New Westminster and Burnaby, British Columbia.
  • Construction continues on a new retirement residence and a seniors’ apartment project, totalling 402 units, at the Trust's Laurentian Place in Ottawa, with completion expected in Q1 2024.
  • By way of a Minister’s Zoning Order, the Trust has permissions that would allow for the redevelopment of the 73-acre Cambridge retail property (which is subject to a leasehold interest with Penguin) including 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 million square feet of development.
  • The Trust, together with its partner, Penguin, has also commenced preliminary siteworks for the 215,000 square foot retail project on Laird Drive in Toronto, that is expected to feature a flagship 190,000 square foot Canadian Tire store together with 25,000 square feet of additional retail space. Canadian Tire is expected to take possession in 2024.

Financial

  • Net income and comprehensive income(1) was $636.0 million in 2022 compared to $987.7 million in 2021, representing a decrease of $351.7 million. This decrease was primarily attributed to: i) $476.8 million decrease in fair value adjustment on revaluation of investment properties; and ii) $20.2 million decrease in net profit on condo and townhome unit closings; and was partially offset by i) $125.5 million increase in fair value adjustments on financial instruments; and ii) $20.6 million increase in net rental income and other mainly due to higher base rent in 2022.
  • Net income and comprehensive income per Unit(1) in 2022 decreased by $2.14 or 37.7% to $3.54 as compared to the same period in 2021, primarily due to the reasons as noted above.
  • As at December 31, 2022, the Trust increased its unsecured/secured debt ratio(2)(3) to 74%/26% (December 31, 2021 – 71%/29%).
  • The Trust continues to add to its unencumbered pool of high-quality assets. As at December 31, 2022, this unencumbered portfolio consisted of investment properties was valued at $8.4 billion (December 31, 2021 – $6.6 billion).
  • The Trust’s fixed rate/variable rate debt ratio(2)(3) was 82%/18% as at December 31, 2022 (December 31, 2021 – 89%/11%).
  • FFO per Unit with adjustments excluding the impact of ECL, TRS, condominium and townhome closings, and SmartVMC West acquisition(2) was $2.14 (year ended December 31, 2021 – $2.09).
  • During the quarter, 693,900 additional notional TRS Units were added at a weighted average price of $26.37 per Unit.
  • For the year ended December 31, 2022, there was a surplus of cash flows provided by operating activities(1) over distributions declared of $41.2 million (year ended December 31, 2021 – surplus of $52.9 million).
  • The Payout Ratio relating to cash flows provided by operating activities for the year ended December 31, 2022 was 88.9%, as compared to 85.8% for the year ended December 31, 2021.
  • For the year ended December 31, 2022, there was a surplus of ACFO(2) over distributions declared of $10.5 million (year ended December 31, 2021 – surplus of $34.3 million).
  • The Payout Ratio to ACFO(2) for the year ended December 31, 2022 was 96.9%, as compared to 90.3% for the year ended December 31, 2021. Excluding the impact of TRS, condominium and townhome closings, and SmartVMC West acquisition, the Payout Ratio to ACFO(2) for the year ended December 31, 2022 was 92.6%, as compared to 96.5% for the year ended December 31, 2021.

Operational

  • Rentals from investment properties and other(1) was $804.6 million, as compared to $780.8 million in 2021, representing an increase of $23.8 million or 3.0%, primarily due to: (i) the acquisition of an additional interest in investment properties in Q1 2022; (ii) higher rental income from Premium Outlets locations in both Toronto and Montreal; and (iii) additional self-storage facility and parking rental revenue.
  • Same Properties NOI inclusive of ECL(2) increased by $16.5 million or 3.3% in 2022 as compared to 2021. Same Properties NOI excluding ECL(2) increased by $9.5 million or 1.9% in 2022 as compared to the prior year.
  • In-place occupancy rate and occupancy rate with committed deals were 97.6% and 98.0%, respectively, as at December 31, 2022 (December 31, 2021 – 97.4% and 97.6%, respectively).

Subsequent Event

  • The Trust together with an entity, PCVP, which is classified as investment in associates, entered into an agreement to dispose approximately 6.4 acres of land located in Vaughan, Ontario (VMC) to an unrelated party, which closed in February 2023, for gross proceeds of $95.6 million that was satisfied with cash. The Trust’s share of such proceeds was $58.4 million, comprised of $42.3 million relating to the Trust’s two-thirds share of the 4.3 acres of land on western part of SmartVMC which were previously consolidated in the Trust’s consolidated financial statements and presented as assets held for sale at December 31, 2022, and $16.1 million relating to the Trust’s 50% share of 2.1 acres of land on eastern part of SmartVMC which were previously recorded in equity accounted investments. Proceeds from the sale were primarily used by the Trust to reduce indebtedness.

(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 $33.4 million as at December 31, 2022   for the purposes of calculating the applicable 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, 2022December 31, 2021December 31, 2020
Portfolio Information   
Number of retail properties155155156
Number of office properties444
Number of self-storage properties664
Number of residential properties111
Number of properties under development191714
Total number of properties with an ownership interest185183179
    
Leasing and Operational Information(1)   
Gross leasable retail and office area (in thousands of sq. ft.)34,75034,11934,056
Occupied retail and office area (in thousands of sq. ft.)33,92533,21933,039
Vacant retail and office area (in thousands of sq. ft.)8269001,017
In-place occupancy rate (%)97.697.497.0
In-place and committed occupancy rate (%)98.097.697.3
Average lease term to maturity (in years)4.24.44.6
Net annualized retail rental rate (per occupied sq. ft.) ($)15.5315.4415.37
Net annualized retail rental rate excluding Anchors (per occupied sq. ft.) ($)22.2022.0721.89
Mixed-Use Development Information   
Trust’s share of future development area (in thousands of sq. ft.)41,20040,60032,500
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)10,0009,8007,900
Total number of residential rental projects11010496
Total number of seniors’ housing projects252740
Total number of self-storage projects333650
Total number of office buildings / industrial projects887
Total number of hotel projects334
Total number of condominium developments889572
Total number of townhome developments71015
Total number of estimated future projects currently in development planning stage274283284
 
Financial Information   
Total assets – GAAP(2)11,702,15311,293,24810,724,492
Total assets – non-GAAP(3)(4)12,083,94111,494,37710,874,900
Investment properties – GAAP(2)10,250,3929,847,0788,850,390
Investment properties – non-GAAP(3)(4)11,223,79610,684,5299,400,584
Total unencumbered assets(3)8,415,9006,640,6005,835,600
Debt – GAAP(2)4,983,2654,854,5275,210,123
Debt – non-GAAP(3)(4)5,260,0534,983,0785,261,360
Debt to Aggregate Assets (%)(3)(4)(5)43.642.944.6
Debt to Gross Book Value (%)(3)(4)(5)52.050.850.1
Unsecured to Secured Debt Ratio(3)(4)(5)74%/26%71%/29%68%/32%
Unencumbered assets to unsecured debt(3)(4)(5)2.2X1.9X1.9X
Weighted average interest rate (%)(3)(4)3.863.113.28
Weighted average term of debt (in years)4.04.85.0
Interest coverage ratio(3)(4)(5)3.1X3.4X3.2X
Equity (book value)(2)6,163,1015,841,3155,166,975
Weighted average number of units outstanding – diluted179,657,455173,748,819172,971,603

(1)   Excluding residential and self-storage area.
(2)   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.
(4)   Includes the Trust’s assets held for sale and the Trust’s proportionate share of equity accounted investments.
(5)   As at December 31, 2022, cash-on-hand of $33.4 million was excluded for the purposes of calculating the applicable ratios (December 31, 2021 – $80.0 million, December 31, 2020 – $754.4 million).

Year-to-Date Comparison to Prior Year

The following table presents key financial, per Unit, and payout ratio information for the year ended December 31, 2022 and December 31, 2021:

(in thousands of dollars, except per Unit information) 2022 2021Variance
 (A)(B)(A–B)
Financial Information   
Rentals from investment properties and other(1) 804,598 780,796 23,802
Net base rent(1) 508,023 494,992 13,031
Total recoveries(1) 265,281 253,032 12,249
Miscellaneous revenue(1) 15,393 17,891 (2,498)
Service and other revenues(1) 14,652 14,843 (191)
Earnings from other(1) 1,249 38 1,211
Net income and comprehensive income(1) 635,965 987,676 (351,711)
Net income and comprehensive income excluding fair value adjustments(2)(3) 342,261 342,609 (348)
Cash flows provided by operating activities(1) 370,762 371,624 (862)
Net rental income and other(1) 502,604 485,840 16,764
NOI from condominium and townhome closings and other adjustments(2) 305 20,471 (20,166)
NOI(2) 518,520 518,122 398
Change in net rental income and other(2) 3.5% 5.4%(1.9)%
Change in SPNOI(2) 3.3% 3.5%(0.2)%
Change in SPNOI excluding ECL(2) 1.9%(2.0)% 3.9%
    
FFO(2)(3)(4)(5) 371,572 380,070 (8,498)
Other adjustments 656 3,226 (2,570)
FFO with adjustments(2)(3)(4) 372,228 383,296 (11,068)
Adjusted for:   
ECL (3,257) 3,706 (6,963)
Loss (gain) on derivative – TRS 4,918 (5,642) 10,560
FFO sourced from condominium and townhome closings (680) (18,747) 18,067
FFO sourced from SmartVMC West acquisition (984)  (984)
FFO with adjustments excluding impact of ECL, TRS, condominium and townhome closings, and SmartVMC West acquisition(2)(3)(4) 372,225 362,613 9,612
    
FFO with adjustments and Transactional FFO(2)(3)(4) 379,890 385,219 (5,329)
    
ACFO(2)(3)(4)(5) 340,075 353,055 (12,980)
Other adjustments 656 3,226 (2,570)
ACFO with adjustments(2)(3)(4) 340,731 356,281 (15,550)
Adjusted for:   
Loss (gain) on derivative – TRS 4,918 (5,642) 10,560
ACFO sourced from condominium and townhome closings (305) (20,471) 20,166
ACFO sourced from SmartVMC West acquisition (984)  (984)
ACFO with adjustments excluding impact of TRS, condominium and townhome closings, and SmartVMC West acquisition(2)(3)(4) 344,360 330,168 14,192
    
Distributions declared 329,531 318,753 10,778
Surplus of cash flows provided by operating activities over distributions declared(2) 41,231 52,871 (11,640)
Surplus of ACFO over distributions declared(2) 10,544 34,302 (23,758)
Surplus of ACFO with adjustments excluding impact of TRS, condominium and townhome closings, and SmartVMC West acquisition over distributions declared(2) 14,829 11,415 3,414
Units outstanding(6) 178,133,853 178,091,581 42,272
Weighted average – basic 178,121,149 172,447,334 5,673,815
Weighted average – diluted(7) 179,657,455 173,748,819 5,908,636
    
Per Unit Information (Basic/Diluted)   
Net income and comprehensive income(1)$3.57/$3.54$5.73/$5.68$-2.16/$-2.14
Net income and comprehensive income excluding fair value adjustments(2)(3)$1.92/$1.91$1.99/$1.97$-0.07/$-0.06
    
FFO(2)(3)(4)(5)$2.09/$2.07$2.20/$2.19$-0.11/$-0.12
Other non-recurring adjustments$0.00/$0.00$0.02/$0.02$-0.02/$-0.02
FFO with adjustments(2)(3)(4)$2.09/$2.07$2.22/$2.21$-0.13/$-0.14
FFO with adjustments excluding impact of ECL, TRS, condominium and townhome closings, and SmartVMC West acquisition(2)(3)(4)$2.16/$2.14$2.10/$2.09$0.06/$0.05
    
FFO with adjustments and Transactional FFO(2)(3)(4)$2.13/$2.11$2.23/$2.22$-0.10/$-0.11
Distributions declared$1.850$1.850$—
    
Payout Ratio Information   
Payout Ratio to cash flows provided by operating activities 88.9% 85.8% 3.1%
Payout Ratio to ACFO(2)(3)(4)(5) 96.9% 90.3% 6.6%
Payout Ratio to ACFO with adjustments(2)(3)(4) 96.7% 89.5% 7.2%
Payout Ratio to ACFO with adjustments excluding impact of TRS, condominium and townhome sales, and SmartVMC West acquisition(2)(3)(4) 92.6% 96.5%(3.9)%

(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” 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 December 31, 2022, net income and comprehensive income (as noted in the table above) decreased by $551.8 million as compared to the same period in 2021. This decrease was primarily attributed to the following:

  • $568.7 million decrease in fair value adjustments on revaluation of investment properties, including adjustments relating to assets held for sale, primarily due to increase in fair value of certain properties under development in Q4 2021 as a result of changes in the market and the progress made on planning entitlements (see details in the “Investment Property” section in the Trust’s MD&A); and
  • $7.2 million increase in interest expense (see further details in the “Interest Income and Interest Expense” subsection in the Trust’s MD&A);

Partially offset by the following:

  • $10.9 million increase in fair value adjustment on financial instruments primarily due to fluctuations in the Trust’s Unit price;
  • $4.1 million increase in interest income mainly due to higher interest rates;
  • $3.9 million increase in NOI (see further details in the “Net Operating Income” subsection in the Trust’s MD&A);
  • $2.8 million decrease in acquisition-related costs related to the SmartVMC West acquisition in 2021; and
  • $1.4 million decrease in general and administrative expenses (net) (see further details in the “General and Administrative Expense” section in the Trust’s MD&A).

For the year ended December 31, 2022, net income and comprehensive income (as noted in the table above) decreased by $351.7 million as compared to the same period in 2021. This decrease was primarily attributed to the following:

  • $476.8 million decrease in fair value adjustments on revaluation of investment properties primarily due to increase in fair value of certain properties under development in Q4 2021 as a result of changes in the market and the progress made on planning entitlements (see details in the “Investment Property” section in the Trust’s MD&A);
  • $6.5 million increase in interest expense (see further details in the “Interest Income and Interest Expense” section in the Trust’s MD&A); and
  • $2.8 million increase in supplemental costs and 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:

  • $125.5 million increase in fair value adjustment on financial instruments primarily due to fluctuations in the Trust’s Unit price and increase in fair value adjustments pertaining to interest rate swap agreements due to fluctuation in the interest rate (see further details in the “Debt” subsection in the Trust’s MD&A);
  • $6.1 million increase in interest income mainly due to higher interest rates; and
  • $2.5 million decrease in acquisition-related costs related to the SmartVMC West acquisition in 2021.

Development and Intensification Summary
The following table summarizes the 274 identified mixed-use, recurring rental income and development income initiatives, which are included in the Trust’s large development pipeline:

DescriptionUnder ConstructionConstruction
expected to
commence within
next 2 years
Active
(Construction
expected to
commence within
next 3–5 years)
Future
(Construction
expected to
commence
after 5 years)
Total
Number of projects in which the Trust has an ownership interest     
Residential Rental3222461110
Seniors’ Housing1371425
Self-storage3781533
Office Buildings / Industrial1168
Hotels33
Subtotal – Recurring rental income initiatives8324099179
Condominium developments215254688
Townhome developments11237
Subtotal – Development income initiatives316274995
Total114867148274
Trust’s share of project area (in thousands of sq. ft.)     
Recurring rental income initiatives1,0004,4504,30012,50022,250
Development income initiatives4003,6504,70010,20018,950
Total Trust’s share of project area (in thousands of sq. ft.)1,4008,1009,00022,70041,200
Trust’s share of such estimated costs (in millions of dollars)5504,4505,000(1)10,000

(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.

The following table provides additional details on the Trust’s 11 development initiatives that are currently under construction (in order of estimated initial occupancy/closing date):

Projects under construction
(Location/Project Name)
TypeTrust’s
Share (%)
Estimated
initial
occupancy /
closing date
% of
completion
GFA(2)
(sq. ft.)
No.
of units
       
Vaughan / Transit City 4Condo

25

Q1 2023

87%
— 

1,026

Vaughan / Transit City 5
Vaughan / The MillwayApartment50Q1 202373%458
Brampton / Kingspoint PlazaSelf Storage50Q1 202391%133,000969
Pickering (Seaton Lands)Industrial100Q1 202379%241,000
Laval CentreApartment50Q2 202358%211
Markham East / BoxgroveSelf Storage50Q1 202438%133,332910
WhitbySelf Storage50Q1 202416%126,135811
Ottawa SW (1)Retirement Residence50

Q1 2024

26%


402

Ottawa SW (1)Senior Apartments
Vaughan NWTownhouse50Q3 202414%174
       
   In millions of dollars  
Total Capital Spend To Date at 100% (3) 755.2  
Estimated Cost to Complete at 100% 487.8  
Total Expected Capital Spend by Completion at 100% (3) 1,243.0  
Total Capital Spend To Date at Trust’s share (3) 304.1  
Estimated Cost to Complete at Trust’s share 234.9  
Total Expected Capital Spend by Completion at Trust’s share (3) 539.0  

(1)   Figure represents capital spend of both retirement residence and senior apartments projects.
(2)   GFA represents Gross Floor Area.
(3)   Total capital spent to date and total expected capital spend by completion include land value.

Reconciliations of Non-GAAP Measures

The following tables reconcile the non-GAAP measures to the most comparable GAAP measures for the three months and year ended December 31, 2022 and the comparable periods in 2021. Such measures do not have a standardized meaning prescribed by IFRS and may not be comparable to similar measures disclosed by other issuers.

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)Year Ended December 31, 2022Year Ended December 31, 2021
 GAAP
Basis
Proportionate
Share
Reconciliation
(1)
Total
Proportionate
Share
(2)
GAAP
Basis
Proportionate
Share
Reconciliation
(1)
Total
Proportionate
Share(2)
Assets      
Non-current assets      
Investment properties10,208,071957,354 11,165,4259,847,078837,451 10,684,529
Equity accounted investments680,999(680,999)654,442(654,442)
Mortgages, loans and notes receivable238,099(76,994)161,105345,089(69,576)275,513
Other financial assets171,807 171,80797,148 97,148
Other assets83,2308,977 92,20780,9407,465 88,405
Intangible assets43,807 43,80745,139 45,139
 11,426,013208,338 11,634,35111,069,836120,898 11,190,734
Current assets      
Assets held for sale42,32116,050 58,371 
Residential development inventory40,373113,207 153,58027,39967,828 95,227
Current portion of mortgages, loans and notes receivable86,593 86,59371,947 71,947
Amounts receivable and other57,124(7,033)50,09149,542(8,637)40,905
Prepaid expenses, deposits and deferred financing costs14,47415,807 30,28112,28913,118 25,407
Cash and cash equivalents35,25535,419 70,67462,2357,922 70,157
 276,140173,450 449,590223,41280,231 303,643
Total assets11,702,153381,788 12,083,94111,293,248201,129 11,494,377
Liabilities      
Non-current liabilities      
Debt4,523,987212,928 4,736,9154,176,12193,465 4,269,586
Other financial liabilities277,400 277,400326,085 326,085
Other payables17,265 17,26518,243 18,243
 4,818,652212,928 5,031,5804,520,44993,465 4,613,914
Current liabilities      
Current portion of debt459,27863,860 523,138678,40635,086 713,492
Accounts payable and current portion of other payables261,122105,000 366,122253,07872,578 325,656
 720,400168,860 889,260931,484107,664 1,039,148
Total liabilities5,539,052381,788 5,920,8405,451,933201,129 5,653,062
Equity      
Trust Unit equity5,126,197 5,126,1974,877,961 4,877,961
Non-controlling interests1,036,904 1,036,904963,354 963,354
 6,163,101 6,163,1015,841,315 5,841,315
Total liabilities and equity11,702,153381,788 12,083,94111,293,248201,129 11,494,377

(1)  Represents the Trust’s proportionate share of assets and liabilities in equity accounted investments.
(2)  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 tables present the proportionately consolidated statements of income and comprehensive income, which include a reconciliation of the Trust’s proportionate share of equity accounted investments:

Quarterly Comparison to Prior Year

 Three Months EndedThree Months Ended 
(in thousands of dollars)December 31, 2022December 31, 2021 
 GAAP BasisProportionate
Share
Reconciliation
Total
Proportionate
Share
(1)
GAAP BasisProportionate
Share
Reconciliation
Total
Proportionate
Share(1)
Variance of
Total
Proportionate
Share(1)
Net rental income and other       
Rentals from investment properties and other206,2238,441214,664192,8505,974198,82415,840
Property operating costs and other(77,062)(3,779)(80,841)(65,896)(3,144)(69,040)(11,801)
 129,1614,662133,823126,9542,830129,7844,039
Condo and townhome closings revenue and other(2)
Condo and townhome cost of sales and other(10)(181)(191)(67)(67)(124)
 (10)(181)(191)(67)(67)(124)
NOI129,1514,481133,632126,9542,763129,7173,915
Other income and expenses       
General and administrative expense, net(7,790)(7,790)(8,703)(534)(9,237)1,447
Earnings from equity accounted investments(113)113160,049(160,049)
Fair value adjustment on revaluation of investment properties13,377(1,418)11,959420,418160,289580,707(568,748)
Gain (loss) on sale of investment properties531531(64)(64)595
Interest expense(40,342)(3,846)(44,188)(35,654)(1,355)(37,009)(7,179)
Interest income5,4961,4086,9042,745112,7564,148
Supplemental costs(738)(738)(1,125)(1,125)387
Fair value adjustment on financial instruments(10,873)(10,873)10,873
Acquisition-related costs(2,791)(2,791)2,791
Net income and comprehensive income 100,310100,310652,081652,081(551,771)

(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.

Year-to-Date Comparison to Prior Year

(in thousands of dollars)Year Ended December 31, 2022Year Ended December 31, 2021 
 GAAP BasisProportionate
Share
Reconciliation
Total
Proportionate
Share
(1)
GAAP BasisProportionate
Share
Reconciliation
Total
Proportionate
Share(1)
Variance of
Total
Proportionate
Share(1)
Net rental income and other       
Rentals from investment properties and other804,59828,643833,241780,79621,530802,32630,915
Property operating costs and other(301,559)(13,467)(315,026)(294,956)(9,719)(304,675)(10,351)
 503,03915,176518,215485,84011,811497,65120,564
Condo and townhome closings revenue and other(2)4,5244,52476,83776,837(72,313)
Condo and townhome cost of sales and other(435)(3,784)(4,219)(56,366)(56,366)52,147
 (435)74030520,47120,471(20,166)
NOI502,60415,916518,520485,84032,282518,122398
Other income and expenses       
General and administrative expense, net(33,269)(107)(33,376)(31,922)(610)(32,532)(844)
Earnings from equity accounted investments4,199(4,199)211,420(211,420)
Fair value adjustment on revaluation of investment properties201,834624202,458491,528187,728679,256(476,798)
Gain (loss) on sale of investment properties315(241)74272747
Interest expense(148,702)(7,798)(156,500)(144,540)(5,437)(149,977)(6,523)
Interest income18,03645318,48912,3417512,4166,073
Supplemental costs(4,648)(4,648)(2,618)(2,618)(2,030)
Fair value adjustment on financial instruments91,24691,246(34,227)(34,227)125,473
Acquisition-related costs(298)(298)(2,791)(2,791)2,493
Net income and comprehensive income635,965635,965987,676987,676(351,711)

(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.

FFO, FFO with adjustments, and FFO with adjustments and Transactional FFO

The following tables reconciles net income and comprehensive income to FFO, FFO with adjustments, and FFO with adjustments and Transactional FFO:

Quarterly Comparison to Prior Year

 Three Months EndedThree Months Ended    
(in thousands of dollars, except per Unit amounts)December 31, 2022December 31, 2021Variance ($)Variance (%)
Net income and comprehensive income100,310 652,081 (551,771)(84.6)
Add (deduct):    
Fair value adjustment on revaluation of investment properties(1)(13,377)(420,418)407,041 (96.8)
Fair value adjustment on financial instruments(2) 10,873 (10,873)N/R(7) 
(Loss) gain on derivative – TRS6,221 4,180 2,041 48.8 
Loss (gain) on sale of investment properties(531)64 (595)N/R(7) 
Amortization of intangible assets333 333   
Amortization of tenant improvement allowance and other2,005 1,608 397 24.7 
Distributions on Units classified as liabilities recorded as interest expense1,083 1,008 75 7.4 
Distributions on vested deferred units recorded as interest expense724 1,045 (321)(30.7)
Salaries and related costs attributed to leasing activities(3)1,514 1,063 451 42.4 
Acquisition-related costs 2,791 (2,791)N/R(7) 
Adjustments relating to equity accounted investments:    
Rental revenue adjustment – tenant improvement amortization98 62 36 58.1 
Indirect interest with respect to the development portion(4)1,935 1,926 9 0.5 
Fair value adjustment on revaluation of investment properties1,418 (160,289)161,707 N/R(7) 
Adjustment for supplemental costs738 1,125 (387)(34.4)
FFO(5)102,471 97,452 5,019 5.2 
Other non-recurring adjustments(6)(1,910)660 (2,570)N/R(7) 
FFO with adjustments(5)100,561 98,112 2,449 2.5 
Transactional FFO – gain on sale of land to co-owners7,662 336 7,326 N/R(7) 
FFO with adjustments and Transactional FFO(5)108,223 98,448 9,775 9.9 

(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, deferred unit plan (“DUP”), equity incentive plan (“EIP”), long term incentive plan (“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 consolidated financial statements for the year ended December 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 $1.5 million were incurred in the three months ended December 31, 2022 (three months ended December 31, 2021 – $1.1 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 $1.9 million of reversal of costs associated with COVID-19 vaccination centres (three months ended December 31, 2021 – $0.7 million of costs associated with COVID-19 vaccination centres).
(7)   N/R – Not representative.

Year-to-Date Comparison to Prior Year

(in thousands of dollars, except per Unit amounts)Year Ended
December 31, 2022
Year Ended
December 31, 2021
Variance ($)Variance (%)
Net income and comprehensive income635,965 987,676 (351,711)(35.6)
Add (deduct):    
Fair value adjustment on revaluation of investment properties(1)(201,834)(491,528)289,694 (58.9)
Fair value adjustment on financial instruments(2)(91,246)34,227 (125,473)N/R(7) 
(Loss) gain on derivative – TRS(4,918)5,642 (10,560)N/R(7) 
Loss (gain) on sale of investment properties(315)(271)(44)16.2 
Amortization of intangible assets1,332 1,331 1 0.1 
Amortization of tenant improvement allowance and other7,203 7,038 165 2.3 
Distributions on Units classified as liabilities recorded as interest expense4,293 3,919 374 9.5 
Distributions on vested deferred units recorded as interest expense2,847 2,424 423 17.5 
Adjustment on debt modification(1,960) (1,960)N/R(7) 
Salaries and related costs attributed to leasing activities(3)7,508 5,196 2,312 44.5 
Acquisition-related costs298 2,791 (2,493)(89.3)
Adjustments relating to equity accounted investments:    
Rental revenue adjustment – tenant improvement amortization387 360 27 7.5 
Indirect interest with respect to the development portion(4)7,747 7,050 697 9.9 
Adjustment to capitalized interest with respect to Transit City condo closings(4) (675)675 N/R(7) 
Fair value adjustment on revaluation of investment properties(624)(187,728)187,104 (99.7)
Loss on sale of investment properties241  241 N/R(7) 
Adjustment for supplemental costs4,648 2,618 2,030 77.5 
FFO(5)371,572 380,070 (8,498)(2.2)
Other non-recurring adjustments(6)656 3,226 (2,570)(79.7)
FFO with adjustments(5)372,228 383,296 (11,068)(2.9)
Transactional FFO – gain on sale of land to co-owners7,662 1,923 5,739 N/R(7) 
FFO with adjustments and Transactional FFO(5)379,890 385,219 (5,329)(1.4)

(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 consolidated financial statements for the year ended December 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 $7.5 million were incurred in the year ended December 31, 2022 (year ended December 31, 2021 – $5.2 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 $0.7 million of costs associated with COVID-19 vaccination centres (year ended December 31, 2021 – $0.9 million of compensation costs relating to previous CEO and $2.3 million of costs associated with COVID-19 vaccination centres).
(7)   N/R – Not representative.

The following table presents FFO excluding anomalous transactions for the years ended December 31, 2022:

 Three Months Ended December 31Year Ended December 31
(in thousands of dollars)2022 2021 Variance ($)2022 2021 Variance ($)
FFO with adjustments(1)100,561 98,112 2,449 372,228 383,296 (11,068)
Adjusted for:      
ECL(710)(1,545)835 (3,257)3,706 (6,963)
Loss (gain) on derivative – TRS(6,221)(4,180)(2,041)4,918 (5,642)10,560 
FFO sourced from condominium and townhome closings180 66 114 (680)(18,747)18,067 
FFO sourced from SmartVMC West acquisition(371) (371)(984) (984)
FFO with adjustments excluding impact of ECL, TRS, condominium and townhome closings, and SmartVMC West acquisition (“FFO with adjustments excluding the impact of the TRS and other”)(1)93,439 92,453 986 372,225 362,613 9,612 

(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 adjustments

The following table reconciles cash flows provided by operating activities to ACFO and ACFO with adjustments:

Quarterly Comparison to Prior Year

(in thousands of dollars)Three Months Ended December 31, 2022 Three Months Ended
December 31, 2021
Variance
($)/(%)
Cash flows provided by operating activities134,668 133,674 994 
Adjustments to working capital items that are not indicative of sustainable cash available for distribution(1)(35,451)(48,678)13,227 
Distributions on Units classified as liabilities recorded as interest expense1,083 1,008 75 
Distributions on vested deferred units recorded as interest expense724 1,045 (321)
Expenditures on direct leasing costs and tenant incentives3,108 2,050 1,058 
Expenditures on tenant incentives for properties under development(646) (646)
Actual sustaining capital expenditures(11,434)(10,323)(1,111)
Actual sustaining leasing commissions(800)(742)(58)
Actual sustaining tenant improvements(2,587)(1,217)(1,370)
Non-cash interest expense, net of other financing costs10,238 9,594 644 
Non-cash interest income(29,571)(7,110)(22,461)
Acquisition-related costs, net 2,791 (2,791)
Gain on sale of land to co-owners7,662 336 7,326 
Distributions from equity accounted investments12,406 (732)13,138 
Adjustments relating to equity accounted investments:   
Cash flows from operating activities including working capital adjustments1,658 (236)1,894 
Notional interest capitalization(2)1,935 1,926 9 
Actual sustaining capital and leasing expenditures1 (103)104 
Non-cash interest expense(3)30 (33)
ACFO(3)92,991 83,313 9,678 
Other non-recurring adjustments(4)(1,910)660 (2,570)
ACFO with adjustments(3)91,081 83,973 7,108 
    
ACFO(3)92,991 83,313 9,678 
Distributions declared82,386 79,725 2,661 
Surplus of ACFO over distributions declared10,605 3,588 7,017 
    
Payout Ratio Information:   
Payout Ratio to ACFO(3)88.6%95.7%(7.1)%
Payout Ratio to ACFO with adjustments(3)90.5%94.9%(4.4)%
Payout Ratio to ACFO with adjustments excluding impact of TRS, condominium and townhome closings, and SmartVMC West acquisition (Payout Ratio to ACFO with adjustments excluding the impact of the TRS and other)(3)(5)94.1%99.8%(5.7)%

(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)   See the “Indirect interest with respect to the development portion” as presented in the “Funds From Operations” subsection in the Trust’s MD&A.
(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.
(4)   Represents adjustments relating to $1.9 million of reversal of costs associated with COVID-19 vaccination centres (three months ended December 31, 2021 – $0.7 million of costs associated with COVID-19 vaccination centres).
(5)   For the three months ended December 31, 2022, excludes $2.7 million of distributions declared in connection with SmartVMC West LP Class D Units (three months ended December 31, 2021 – $0.04 million).

Year-to-Date Comparison to Prior Year

(in thousands of dollars)Year Ended
December 31, 2022
Year Ended
December 31, 2021
Variance
($)/(%)
Cash flows provided by operating activities370,762 371,624 (862)
Adjustments to working capital items that are not indicative of sustainable cash available for distribution(1)(2,293)(40,796)38,503 
Distributions on Units classified as liabilities recorded as interest expense4,293 3,919 374 
Distributions on vested deferred units recorded as interest expense2,847 2,424 423 
Expenditures on direct leasing costs and tenant incentives9,860 5,927 3,933 
Expenditures on tenant incentives for properties under development1,897 730 1,167 
Actual sustaining capital expenditures(19,111)(17,331)(1,780)
Actual sustaining leasing commissions(2,389)(3,071)682 
Actual sustaining tenant improvements(7,796)(2,903)(4,893)
Non-cash interest expense, net of other financing costs(9,156)7,160 (16,316)
Non-cash interest income(26,083)(5,307)(20,776)
Acquisition-related costs, net298 2,791 (2,493)
Gain on sale of land to co-owners7,662 1,923 5,739 
Distributions from equity accounted investments(4,784)(4,072)(712)
Adjustments relating to equity accounted investments:   
Cash flows from operating activities including working capital adjustments6,662 23,819 (17,157)
Notional interest capitalization(2)7,747 7,050 697 
Adjustment to capitalized interest with respect to Transit City condo closings(2) (675)675 
Actual sustaining capital and leasing expenditures(329)(207)(122)
Non-cash interest expense(12)50 (62)
ACFO(3)340,075 353,055 (12,980)
Other non-recurring adjustments(4)656 3,226 (2,570)
ACFO with adjustments(3)340,731 356,281 (15,550)
    
ACFO(3)340,075 353,055 (12,980)
Distributions declared329,531 318,753 10,778 
Surplus of ACFO over distributions declared10,544 34,302 (23,758)
    
Payout Ratio Information:   
Payout Ratio to ACFO(3)96.9%90.3%6.6%
Payout Ratio to ACFO with adjustments(3)96.7%89.5%7.2%
Payout Ratio to ACFO with adjustments excluding impact of TRS, condominium and townhome closings, and SmartVMC West acquisition(3)(5)92.6%96.5%(3.9)%

(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)   See the “Indirect interest with respect to the development portion” as presented in the “Funds From Operations” subsection in the Trust’s MD&A.
(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.
(4)   Represents adjustments relating to $0.7 million of costs associated with COVID-19 vaccination centres (year ended December 31, 2021 – $0.9 million of compensation costs relating to previous CEO, and $2.3 million of costs associated with COVID-19 vaccination centres).
(5)   For the year ended December 31, 2022, excludes $10.7 million of distributions declared in connection with SmartVMC West LP Class D Units (year ended December 31, 2021 – $0.04 million).
The following table presents ACFO excluding anomalous transactions for the years ended December 31, 2022:

 Three Months Ended December 31Year Ended December 31
(in thousands of dollars)2022 2021 Variance ($)2022 2021 Variance ($)
ACFO with adjustments(1)91,081 83,973 7,108 340,731 356,281 (15,550)
Adjusted for:      
Loss (gain) on derivative – TRS(6,221)(4,180)(2,041)4,918 (5,642)10,560 
ACFO sourced from condominium and townhome closings191 67 124 (305)(20,471)20,166 
ACFO sourced from SmartVMC West acquisition(371) (371)(984) (984)
ACFO with adjustments excluding impact of TRS, condominium and townhome closings, and SmartVMC West acquisition(1)84,680 79,860 4,820 344,360 330,168 14,192 

(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.
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:

Quarterly Comparison to Prior Year

(in thousands of dollars)Three Months Ended December 31, 2022Three Months Ended December 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 of
Total
Proportionate
Share(1)
   (A)  (B)(A–B)
Net base rent127,9415,260133,201125,0373,534128,5714,630
Property tax and insurance recoveries42,83380743,64035,02050735,5278,113
Property operating cost recoveries25,5521,57427,12621,67096022,6304,496
Miscellaneous revenue4,9791,1716,1507,4799738,452(2,302)
Rentals from investment properties201,3058,812210,117189,2065,974195,18014,937
Service and other revenues4,5474,5473,6063,606941
Earnings from other371(371)3838(38)
Rentals from investment properties and other(2)206,2238,441214,664192,8505,974198,82415,840
Recoverable tax and insurance costs(43,818)(755)(44,573)(36,015)(547)(36,562)(8,011)
Recoverable CAM costs(28,662)(1,311)(29,973)(25,165)(1,051)(26,216)(3,757)
Property management fees and costs(1,090)(314)(1,404)(586)(215)(801)(603)
Non-recoverable operating costs266(1,317)(1,051)(2,094)(1,273)(3,367)2,316
ECL792(82)7101,603(58)1,545(835)
Property operating costs(72,512)(3,779)(76,291)(62,257)(3,144)(65,401)(10,890)
Other expenses(4,550)(4,550)(3,639)(3,639)(911)
Property operating costs and other(2)(77,062)(3,779)(80,841)(65,896)(3,144)(69,040)(11,801)
Net rental income and other129,1614,662133,823126,9542,830129,7844,039
Condo and townhome closings revenue
Condo and townhome cost of sales(181)(181)(181)
Marketing and selling costs(10)(10)(67)(67)57
Net profit on condo and townhome closings(10)(181)(191)(67)(67)(124)
NOI(3)129,1514,481133,632126,9542,763129,7173,915
Net rental income and other as a percentage of net base rent (%)101.088.6100.5101.580.1100.9(0.4)
Net rental income and other as a percentage of rentals from investment properties (%)64.252.963.767.147.466.5(2.8)
Net rental income and other as a percentage of rentals from investment properties and other (%)62.655.262.365.847.465.3(3.0)
Recovery Ratio (including prior year adjustments) (%)94.4115.294.992.791.892.62.3
Recovery Ratio (excluding prior year adjustments) (%)91.5132.892.792.6114.993.0(0.3)

(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 consolidated financial statements for the years ended December 31, 2022 and December 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.

Year-to-Date Comparison to Prior Year

(in thousands of dollars)Year Ended December 31, 2022Year Ended December 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 of
Total
Proportionate
Share(1)
   (A)  (B)(A–B)
Net base rent508,02318,378526,401494,99213,098508,09018,311
Property tax and insurance recoveries171,8743,029174,903169,1802,354171,5343,369
Property operating cost recoveries93,4074,68198,08883,8523,38987,24110,847
Miscellaneous revenue15,3933,80419,19717,8912,68920,580(1,383)
Rentals from investment properties788,69729,892818,589765,91521,530787,44531,144
Service and other revenues14,65214,65214,84314,843(191)
Earnings from other1,249(1,249)3838(38)
Rentals from investment properties and other(2)804,59828,643833,241780,79621,530802,32630,915
Recoverable tax and insurance costs(176,876)(3,042)(179,918)(176,239)(2,360)(178,599)(1,319)
Recoverable CAM costs(102,721)(4,535)(107,256)(91,468)(3,364)(94,832)(12,424)
Property management fees and costs(4,288)(1,004)(5,292)(1,469)(688)(2,157)(3,135)
Non-recoverable operating costs(6,465)(4,695)(11,160)(7,246)(3,253)(10,499)(661)
ECL3,448(191)3,257(3,652)(54)(3,706)6,963
Property operating costs(286,902)(13,467)(300,369)(280,074)(9,719)(289,793)(10,576)
Other expenses(14,657)(14,657)(14,882)(14,882)225
Property operating costs and other(2)(301,559)(13,467)(315,026)(294,956)(9,719)(304,675)(10,351)
Net rental income and other503,03915,176518,215485,84011,811497,65120,564
Condo and townhome closings revenue4,5244,52476,83776,837(72,313)
Condo and townhome cost of sales(3,295)(3,295)(56,102)(56,102)52,807
Marketing and selling costs(435)(489)(924)(264)(264)(660)
Net profit on condo and townhome closings(435)74030520,47120,471(20,166)
NOI(3)502,60415,916518,520485,84032,282518,122398
Net rental income and other as a percentage of net base rent (%)99.082.698.498.190.297.90.5
Net rental income and other as a percentage of rentals from investment properties (%)63.850.863.363.454.963.20.1
Net rental income and other as a percentage of rentals from investment properties and other (%)62.553.062.262.254.962.00.2
Recovery Ratio (including prior year adjustments) (%)94.9101.895.194.5100.394.60.5
Recovery Ratio (excluding prior year adjustments) (%)94.2100.994.494.6103.394.8(0.4)

(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 consolidated financial statements for the years ended December 31, 2022 and December 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 NOI
NOI (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.

Quarterly Comparison to Prior Year

 Three Months EndedThree Months Ended  
(in thousands of dollars)December 31, 2022December 31, 2021Variance ($)Variance (%)
Net rental income129,154 126,987 2,167 1.7 
Service and other revenues4,547 3,606 941 26.1 
Other expenses(4,550)(3,639)(911)25.0 
NOI(1)129,151 126,954 2,197 1.7 
NOI from equity accounted investments(1)4,481 2,763 1,718 62.2 
Total portfolio NOI before adjustments(1)133,632 129,717 3,915 3.0 
Adjustments:    
Royalties299 285 14 4.9 
Straight-line rent(34)(154)120 (77.9)
Lease termination and other adjustments(82)(3,476)3,394 N/R(2) 
Net profit on condo and townhome closings(3)190 108 82 75.9 
Amortization of tenant incentives2,026 1,725 301 17.4 
Total portfolio NOI after adjustments(1)136,031 128,205 7,826 6.1 
NOI sourced from:    
Acquisitions(2,161)451 (2,612)N/R(2) 
Dispositions3 (280)283 (101.1)
Earnouts and Developments(384) (384)N/R(2) 
Same Properties NOI(1)133,489 128,376 5,113 4.0 
Add back: ECL(710)(1,545)835 (54.0)
Same Properties NOI excluding ECL(1)132,779 126,831 5,948 4.7 

(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.
(3)   Includes marketing costs.

Year-to-Date Comparison to Prior Year

 Year EndedYear Ended  
(in thousands of dollars)December 31, 2022December 31, 2021Variance ($)Variance (%)
Net rental income502,609 485,879 16,730 3.4 
Service and other revenues14,652 14,843 (191)(1.3)
Other expenses(14,657)(14,882)225 1.5 
NOI(1)502,604 485,840 16,764 3.5 
NOI from equity accounted investments(1)15,916 32,282 (16,366)(50.7)
Total portfolio NOI before adjustments(1)518,520 518,122 398 0.1 
Adjustments:    
Royalties1,115 960 155 16.1 
Straight-line rent(437)(883)446 (50.5)
Lease termination and other adjustments(214)(5,240)5,026 (95.9)
Net profit on condo and townhome closings(3)(242)(20,425)20,183 (98.8)
Amortization of tenant incentives7,646 7,614 32 0.4 
Total portfolio NOI after adjustments(1)526,388 500,148 26,240 5.2 
Less NOI sourced from:    
Acquisitions(7,835)524 (8,359)N/R(2) 
Dispositions(9)(1,744)1,735 (99.5)
Earnouts and Developments(4,300)(1,142)(3,158)N/R(2) 
Same Properties NOI(1)514,244 497,786 16,458 3.3 
Add back: ECL(3,257)3,706 (6,963)N/R(2) 
Same Properties NOI excluding ECL(1)510,987 501,492 9,495 1.9 

(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.
(3)   Includes marketing costs.

Adjusted EBITDA

The following table presents a reconciliation of net income and comprehensive income to Adjusted EBITDA:

 12 Months Ended12 Months Ended 
(in thousands of dollars)December 31, 2022December 31, 2021Variance ($)
Net income and comprehensive income635,965 987,676 (351,711)
Add (deduct) the following items:   
Interest expense156,500 149,977 6,523 
Interest income(18,036)(12,341)(5,695)
Amortization of equipment and intangible assets3,604 3,778 (174)
Amortization of tenant improvements7,474 7,872 (398)
Fair value adjustments on revaluation of investment properties(202,458)(679,256)476,798 
Fair value adjustments on revaluation of financial instruments(91,246)34,227 (125,473)
Fair value adjustment on TRS(4,918)5,642 (10,560)
Adjustment for supplemental costs4,648 2,618 2,030 
Gain on sale of investment properties(74)(27)(47)
Gain on sale of land to co-owners (Transactional FFO) 1,923 (1,923)
Acquisition-related costs298 2,791 (2,493)
Adjusted EBITDA(1)491,757 504,880 (13,123)
Less: Condo and townhome closings(305)(20,471)20,166 
Add: ECL(3,257)3,706 (6,963)
Adjusted EBITDA excluding condo and townhome closings and ECL(1)488,195 488,115 80 

(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.

Non-GAAP Measures

The non-GAAP measures used in this Press Release, including but not limited to, 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 with adjustments excluding impact of ECL, TRS, condominium and townhome closings, and SmartVMC West acquisition, FFO per Unit with adjustments, Fixed Rate to Variable Rate Debt Ratio, Transactional FFO, ACFO, ACFO with adjustments excluding impact of TRS, condominium and townhome closings, and SmartVMC West acquisition, Payout Ratio to ACFO, Same Properties NOI, Total assets – non-GAAP, Investment properties – non-GAAP, Debt – non-GAAP, Debt to Gross Book Value, Unencumbered Assets to Unsecured Debt, Weighted Average Interest Rate, and 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 year ended December 31, 2022, dated February 8, 2023 (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”, “ACFO and ACFO with adjustments”, “Net Operating Income”, “Same Properties NOI”, and “Adjusted EBITDA”.

Full reports of the financial results of the Trust for the year ended December 31, 2022 are outlined in the consolidated financial statements and the related MD&A of the Trust for the year ended December 31, 2022, which are available on SEDAR at www.sedar.com.

Conference Call

SmartCentres will hold a conference call on Thursday, February 9, 2023 at 3:00 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 14567#. 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, February 9, 2023 beginning at 8:30 p.m. (ET) through to 8:30 p.m. (ET) on Thursday, February 16, 2023. To access the recording, please call 1-855-201-2300, enter the conference access code 14567# and then key in the playback access code 0113004#.

About SmartCentres

SmartCentres Real Estate Investment Trust is one of Canada’s largest fully integrated REITs, with a best-in-class portfolio featuring 185 strategically located properties in communities across the country. SmartCentres has approximately $11.7 billion in assets and owns 34.8 million square feet of income producing value-oriented retail and first-class office space with 98.0% 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. The publicly announced $14.9 billion intensification program ($10.0 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 56.1 million square feet (41.2 million square feet at SmartCentres’ share) of space, 27.2 million square feet (18.5 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. 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 addition to the 22 townhomes that complete these phases, have now closed. The fourth and fifth sold-out phases representing 1,026 units are currently under construction and are expected to close in the first half of 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’ expectations relating to cash collections, 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, and the 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; 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 GoldharPeter Slan
Executive Chairman and CEOChief Financial Officer
SmartCentresSmartCentres
(905) 326-6400 ext. 7674(905) 326-6400 ext. 7571
mgoldhar@smartcentres.compslan@smartcentres.com

 


SmartCentres Real Estate Investment Trust Releases Fourth

Related News

menu
menu