SmartCentres Real Estate Investment Trust Releases Fourth Quarter and Full Year Results for 2022
*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 $33.4 million as at December 31, 2022 for the purposes of calculating the applicable ratios.
*Selected Consolidated Operational, Mixed-Use Development and Financial Information*
Key consolidated operational, mixed-use development and financial information shown in the table below includes the Trust’s proportionate share of equity accounted investments:
(in thousands of dollars, except per Unit and other non-financial data) *December 31, 2022* December 31, 2021 December 31, 2020
*Portfolio Information*
Number of retail properties *155* 155 156
Number of office properties *4* 4 4
Number of self-storage properties *6* 6 4
Number of residential properties *1* 1 1
Number of properties under development *19* 17 14
Total number of properties with an ownership interest *185* 183 179
*Leasing and Operational Information*^*(1)*
Gross leasable retail and office area (in thousands of sq. ft.) *34,750* 34,119 34,056
Occupied retail and office area (in thousands of sq. ft.) *33,925* 33,219 33,039
Vacant retail and office area (in thousands of sq. ft.) *826* 900 1,017
In-place occupancy rate (%) *97.6* 97.4 97.0
In-place and committed occupancy rate (%) *98.0* 97.6 97.3
Average lease term to maturity (in years) *4.2* 4.4 4.6
Net annualized retail rental rate (per occupied sq. ft.) ($) *15.53* 15.44 15.37
Net annualized retail rental rate excluding Anchors (per occupied sq. ft.) ($) *22.20* 22.07 21.89
*Mixed-Use Development Information*
Trust’s share of future development area (in thousands of sq. ft.) *41,200* 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) *10,000* 9,800 7,900
Total number of residential rental projects *110* 104 96
Total number of seniors’ housing projects *25* 27 40
Total number of self-storage projects *33* 36 50
Total number of office buildings / industrial projects *8* 8 7
Total number of hotel projects *3* 3 4
Total number of condominium developments *88* 95 72
Total number of townhome developments *7* 10 15
Total number of estimated future projects currently in development planning stage *274* 283 284
*Financial Information*
Total assets – GAAP^(2) *11,702,153* 11,293,248 10,724,492
Total assets – non-GAAP^(3)(4) *12,083,941* 11,494,377 10,874,900
Investment properties – GAAP^(2) *10,250,392* 9,847,078 8,850,390
Investment properties – non-GAAP^(3)(4) *11,223,796* 10,684,529 9,400,584
Total unencumbered assets^(3) *8,415,900* 6,640,600 5,835,600
Debt – GAAP^(2) *4,983,265* 4,854,527 5,210,123
Debt – non-GAAP^(3)(4) *5,260,053* 4,983,078 5,261,360
Debt to Aggregate Assets (%)^(3)(4)(5) *43.6* 42.9 44.6
Debt to Gross Book Value (%)^(3)(4)(5) *52.0* 50.8 50.1
Unsecured to Secured Debt Ratio^(3)(4)(5) *74%/26%* 71%/29% 68%/32%
Unencumbered assets to unsecured debt^(3)(4)(5) *2.2X* 1.9X 1.9X
Weighted average interest rate (%)^(3)(4) *3.86* 3.11 3.28
Weighted average term of debt (in years) *4.0* 4.8 5.0
Interest coverage ratio^(3)(4)(5) *3.1X* 3.4X 3.2X
Equity (book value)^(2) *6,163,101* 5,841,315 5,166,975
Weighted average number of units outstanding – diluted *179,657,455* 173,748,819 172,971,603
(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* 2021 Variance (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:
*Description* *Under Construction* *Construction
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 Rental 3 22 24 61 110
Seniors’ Housing 1 3 7 14 25
Self-storage 3 7 8 15 33
Office Buildings / Industrial 1 — 1 6 8
Hotels — — — 3 3
*Subtotal – Recurring rental income initiatives* 8 32 40 99 179
Condominium developments 2 15 25 46 88
Townhome developments 1 1 2 3 7
*Subtotal –* *Development income initiatives* 3 16 27 49 95
*Total* *11* *48* *67* *148* *274*
Trust’s share of project area (in thousands of sq. ft.)
Recurring rental income initiatives 1,000 4,450 4,300 12,500 22,250
Development income initiatives 400 3,650 4,700 10,200 18,950
*Total Trust’s share of project area (in thousands of sq. ft.)* *1,400* *8,100* *9,000* *22,700* *41,200*
Trust’s share of such estimated costs (in millions of dollars) *550* *4,450* *5,000* *– *^*(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)* *Type* *Trust’s
Share (%)* *Estimated
initial
occupancy /
closing date* *% of
completion* *GFA*^*(2)*
*(sq. ft.)* *No. *
*of units*
Vaughan / Transit City 4 Condo
25
Q1 2023
87%
—
1,026Vaughan / Transit City 5
Vaughan / The Millway Apartment 50 Q1 2023 73% — 458
Brampton / Kingspoint Plaza Self Storage 50 Q1 2023 91% 133,000 969
Pickering (Seaton Lands) Industrial 100 Q1 2023 79% 241,000 —
Laval Centre Apartment 50 Q2 2023 58% — 211
Markham East / Boxgrove Self Storage 50 Q1 2024 38% 133,332 910
Whitby Self Storage 50 Q1 2024 16% 126,135 811
Ottawa SW ^ (1) Retirement Residence 50
Q1 2024
26%
—
402Ottawa SW ^ (1) Senior Apartments
Vaughan NW Townhouse 50 Q3 2024 14% — 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, 2022* Year 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 properties *10,208,071* *957,354* *11,165,425* 9,847,078 837,451 10,684,529
Equity accounted investments *680,999* *(680,999* *)* *—* 654,442 (654,442 ) —
Mortgages, loans and notes receivable *238,099* *(76,994* *)* *161,105* 345,089 (69,576 ) 275,513
Other financial assets *171,807* *—* *171,807* 97,148 — 97,148
Other assets *83,230* *8,977* *92,207* 80,940 7,465 88,405
Intangible assets *43,807* *—* *43,807* 45,139 — 45,139 *11,426,013* *208,338* *11,634,351* 11,069,836 120,898 11,190,734
*Current assets*
Assets held for sale *42,321* *16,050* *58,371* — — —
Residential development inventory *40,373* *113,207* *153,580* 27,399 67,828 95,227
Current portion of mortgages, loans and notes receivable *86,593* *—* *86,593* 71,947 — 71,947
Amounts receivable and other *57,124* *(7,033* *)* *50,091* 49,542 (8,637 ) 40,905
Prepaid expenses, deposits and deferred financing costs *14,474* *15,807* *30,281* 12,289 13,118 25,407
Cash and cash equivalents *35,255* *35,419* *70,674* 62,235 7,922 70,157 *276,140* *173,450* *449,590* 223,412 80,231 303,643
*Total assets* *11,702,153* *381,788* *12,083,941* 11,293,248 201,129 11,494,377
*Liabilities*
*Non-current liabilities*
Debt *4,523,987* *212,928* *4,736,915* 4,176,121 93,465 4,269,586
Other financial liabilities *277,400* *—* *277,400* 326,085 — 326,085
Other payables *17,265* *—* *17,265* 18,243 — 18,243 *4,818,652* *212,928* *5,031,580* 4,520,449 93,465 4,613,914
*Current liabilities*
Current portion of debt *459,278* *63,860* *523,138* 678,406 35,086 713,492
Accounts payable and current portion of other payables *261,122* *105,000* *366,122* 253,078 72,578 325,656 *720,400* *168,860* *889,260* 931,484 107,664 1,039,148
*Total liabilities* *5,539,052* *381,788* *5,920,840* 5,451,933 201,129 5,653,062
*Equity*
Trust Unit equity *5,126,197* *—* *5,126,197* 4,877,961 — 4,877,961
Non-controlling interests *1,036,904* *—* *1,036,904* 963,354 — 963,354 *6,163,101* *—* *6,163,101* 5,841,315 — 5,841,315
* Total liabilities and equity* *11,702,153* *381,788* *12,083,941* 11,293,248 201,129 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 Ended* Three Months Ended
(in thousands of dollars) *December 31, 2022* December 31, 2021 *GAAP Basis* *Proportionate
Share
Reconciliation * *Total
Proportionate
Share*^*(1)* GAAP Basis Proportionate
Share
Reconciliation Total
Proportionate
Share^(1) Variance of
Total
Proportionate
Share^(1)
*Net rental income and other*
Rentals from investment properties and other *206,223* *8,441* *214,664* 192,850 5,974 198,824 15,840
Property operating costs and other *(77,062**)* *(3,779**)* *(80,841**)* (65,896) (3,144) (69,040) (11,801) *129,161* *4,662* *133,823* 126,954 2,830 129,784 4,039
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)
NOI *129,151* *4,481* *133,632* 126,954 2,763 129,717 3,915
*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**)* *113* *—* 160,049 (160,049) — —
Fair value adjustment on revaluation of investment properties *13,377* *(1,418**)* *11,959* 420,418 160,289 580,707 (568,748)
Gain (loss) on sale of investment properties *531* *—* *531* (64) — (64) 595
Interest expense *(40,342**)* *(3,846**)* *(44,188**)* (35,654) (1,355) (37,009) (7,179)
Interest income *5,496* *1,408* *6,904* 2,745 11 2,756 4,148
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 * *100,310* *—* *100,310* 652,081 — 652,081 (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, 2022* Year Ended December 31, 2021 *GAAP Basis* *Proportionate
Share
Reconciliation * *Total
Proportionate
Share*^*(1)* GAAP Basis Proportionate
Share
Reconciliation Total
Proportionate
Share^(1) Variance of
Total
Proportionate
Share^(1)
*Net rental income and other*
Rentals from investment properties and other *804,598* *28,643* *833,241* 780,796 21,530 802,326 30,915
Property operating costs and other *(301,559**)* *(13,467**)* *(315,026**)* (294,956) (9,719) (304,675) (10,351) *503,039* *15,176* *518,215* 485,840 11,811 497,651 20,564
Condo and townhome closings revenue and other^(2) *—* *4,524* *4,524* — 76,837 76,837 (72,313)
Condo and townhome cost of sales and other *(435**)* *(3,784**)* *(4,219**)* — (56,366) (56,366) 52,147 *(435**)* *740* *305* — 20,471 20,471 (20,166)
NOI *502,604* *15,916* *518,520* 485,840 32,282 518,122 398
*Other income and expenses*
General and administrative expense, net *(33,269**)* *(107**)* *(33,376**)* (31,922) (610) (32,532) (844)
Earnings from equity accounted investments *4,199* *(4,199**)* *—* 211,420 (211,420) — —
Fair value adjustment on revaluation of investment properties *201,834* *624* *202,458* 491,528 187,728 679,256 (476,798)
Gain (loss) on sale of investment properties *315* *(241**)* *74* 27 — 27 47
Interest expense *(148,702**)* *(7,798**)* *(156,500**)* (144,540) (5,437) (149,977) (6,523)
Interest income *18,036* *453* *18,489* 12,341 75 12,416 6,073
Supplemental costs *—* *(4,648**)* *(4,648**)* — (2,618) (2,618) (2,030)
Fair value adjustment on financial instruments *91,246* *—* *91,246* (34,227) — (34,227) 125,473
Acquisition-related costs *(298**)* *—* *(298**)* (2,791) — (2,791) 2,493
*Net income and comprehensive income* *635,965* *—* *635,965* 987,676 — 987,676 (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 Ended* Three Months Ended
(in thousands of dollars, except per Unit amounts) *December 31, 2022* December 31, 2021 Variance ($) Variance (%)
Net income and comprehensive income *100,310* 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 – TRS *6,221* 4,180 2,041 48.8
Loss (gain) on sale of investment properties *(531* *)* 64 (595 ) N/R^(7)
Amortization of intangible assets *333* 333 — —
Amortization of tenant improvement allowance and other *2,005* 1,608 397 24.7
Distributions on Units classified as liabilities recorded as interest expense *1,083* 1,008 75 7.4
Distributions on vested deferred units recorded as interest expense *724* 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 amortization *98* 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 properties *1,418* (160,289 ) 161,707 N/R^(7)
Adjustment for supplemental costs *738* 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-owners *7,662* 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 income *635,965* 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 assets *1,332* 1,331 1 0.1
Amortization of tenant improvement allowance and other *7,203* 7,038 165 2.3
Distributions on Units classified as liabilities recorded as interest expense *4,293* 3,919 374 9.5
Distributions on vested deferred units recorded as interest expense *2,847* 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 costs *298* 2,791 (2,493 ) (89.3 )
Adjustments relating to equity accounted investments:
Rental revenue adjustment – tenant improvement amortization *387* 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 properties *241* — 241 N/R^(7)
Adjustment for supplemental costs *4,648* 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-owners *7,662* 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 $2.3 million of costs associated with COVID-19 vaccination centres).
(7) N/R – Not representative.
The following table presents FFO excluding anomalous transactions for the years ended December 31, 2022:
*Three Months Ended December 31* *Year Ended December 31*
(in thousands of dollars) *2022* 2021 Variance ($) *2022* 2021 Variance ($)
FFO with adjustments^(1) *100,561* 98,112 2,449 *372,228* 383,296 (11,068 )
Adjusted for:
ECL *(710* *)* (1,545 ) 835 *(3,257* *)* 3,706 (6,963 )
Loss (gain) on derivative – TRS *(6,221* *)* (4,180 ) (2,041 ) *4,918* (5,642 ) 10,560
FFO sourced from condominium and townhome closings *180* 66 114 *(680* *)* (18,747 ) 18,067
FFO sourced from SmartVMC West acquisition *(371* *)* — (371 ) *(984* *)* — (984 )
FFO with adjustments excluding impact of ECL, TRS, condominium and townhome closings, and SmartVMC West acquisition (“FFO with adjustments excluding the impact of the TRS and other”)^(1) *93,439* 92,453 986 *372,225* 362,613 9,612
(1) Represents a non-GAAP measure. The Trust’s method of calculating non-GAAP measures may differ from other reporting issuers’ methods and, accordingly, may not be comparable. For additional information, please see “Non-GAAP Measures” in this Press Release.*ACFO and ACFO with adjustments*
The following table reconciles cash flows provided by operating activities to ACFO and ACFO with adjustments:
*Quarterly Comparison to Prior Year*
(in thousands of dollars) *Three Months Ended December 31, 2022 * Three Months Ended
December 31, 2021 Variance
($)/(%)
Cash flows provided by operating activities *134,668* 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 expense *1,083* 1,008 75
Distributions on vested deferred units recorded as interest expense *724* 1,045 (321 )
Expenditures on direct leasing costs and tenant incentives *3,108* 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 costs *10,238* 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-owners *7,662* 336 7,326
Distributions from equity accounted investments *12,406* (732 ) 13,138
Adjustments relating to equity accounted investments:
Cash flows from operating activities including working capital adjustments *1,658* (236 ) 1,894
Notional interest capitalization^(2) *1,935* 1,926 9
Actual sustaining capital and leasing expenditures *1* (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 declared *82,386* 79,725 2,661
Surplus of ACFO over distributions declared *10,605* 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 activities *370,762* 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 expense *4,293* 3,919 374
Distributions on vested deferred units recorded as interest expense *2,847* 2,424 423
Expenditures on direct leasing costs and tenant incentives *9,860* 5,927 3,933
Expenditures on tenant incentives for properties under development *1,897* 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, net *298* 2,791 (2,493 )
Gain on sale of land to co-owners *7,662* 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 adjustments *6,662* 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 declared *329,531* 318,753 10,778
Surplus of ACFO over distributions declared *10,544* 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 – $0.04 million).The following table presents ACFO excluding anomalous transactions for the years ended December 31, 2022:
*Three Months Ended December 31* *Year Ended December 31*
(in thousands of dollars) *2022* 2021 Variance ($) *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 closings *191* 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, 2022* Three 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 rent *127,941* *5,260* *133,201* 125,037 3,534 128,571 4,630
Property tax and insurance recoveries *42,833* *807* *43,640* 35,020 507 35,527 8,113
Property operating cost recoveries *25,552* *1,574* *27,126* 21,670 960 22,630 4,496
Miscellaneous revenue *4,979* *1,171* *6,150* 7,479 973 8,452 (2,302)
Rentals from investment properties *201,305* *8,812* *210,117* 189,206 5,974 195,180 14,937
Service and other revenues *4,547* *—* *4,547* 3,606 — 3,606 941
Earnings from other *371* *(371**)* *—* 38 — 38 (38)
Rentals from investment properties and other^(2) *206,223* *8,441* *214,664* 192,850 5,974 198,824 15,840
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 costs *266* *(1,317**)* *(1,051**)* (2,094) (1,273) (3,367) 2,316
ECL *792* *(82**)* *710* 1,603 (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 other *129,161* *4,662* *133,823* 126,954 2,830 129,784 4,039
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)* *129,151* *4,481* *133,632* 126,954 2,763 129,717 3,915
Net rental income and other as a percentage of net base rent (%) *101.0* *88.6* *100.5* 101.5 80.1 100.9 (0.4)
Net rental income and other as a percentage of rentals from investment properties (%) *64.2* *52.9* *63.7* 67.1 47.4 66.5 (2.8)
Net rental income and other as a percentage of rentals from investment properties and other (%) *62.6* *55.2* *62.3* 65.8 47.4 65.3 (3.0)
Recovery Ratio (including prior year adjustments) (%) *94.4* *115.2* *94.9* 92.7 91.8 92.6 2.3
Recovery Ratio (excluding prior year adjustments) (%) *91.5* *132.8* *92.7* 92.6 114.9 93.0 (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, 2022* Year 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 rent *508,023* *18,378* *526,401* 494,992 13,098 508,090 18,311
Property tax and insurance recoveries *171,874* *3,029* *174,903* 169,180 2,354 171,534 3,369
Property operating cost recoveries *93,407* *4,681* *98,088* 83,852 3,389 87,241 10,847
Miscellaneous revenue *15,393* *3,804* *19,197* 17,891 2,689 20,580 (1,383)
Rentals from investment properties *788,697* *29,892* *818,589* 765,915 21,530 787,445 31,144
Service and other revenues *14,652* *—* *14,652* 14,843 — 14,843 (191)
Earnings from other *1,249* *(1,249**)* *—* 38 — 38 (38)
Rentals from investment properties and other^(2) *804,598* *28,643* *833,241* 780,796 21,530 802,326 30,915
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)
ECL *3,448* *(191**)* *3,257* (3,652) (54) (3,706) 6,963
Property operating costs *(286,9