TORONTO, Nov. 09, 2021 (GLOBE NEWSWIRE) -- Canadian Apartment Properties Real Estate Investment Trust ("CAPREIT") (TSX: CAR.UN) announced today continuing strong operating and financial results for the three and nine months ended September 30, 2021.
HIGHLIGHTS:
| Three Months Ended | Nine Months Ended | ||||||||||||||
| September 30, | September 30, | ||||||||||||||
| 2021 | 2020 | 2021 | 2020 (5) | ||||||||||||
| Portfolio Performance | |||||||||||||||
| Overall portfolio occupancy (1) | 97.9 | % | 97.7 | % | |||||||||||
| Overall portfolio net Average Monthly Rents (1), (2) | $ | 1,143 | $ | 1,113 | |||||||||||
| Operating revenues (000s) | $ | 236,097 | $ | 221,420 | $ | 692,459 | $ | 657,405 | |||||||
| Net rental income ("NOI") (000s) | $ | 158,126 | $ | 148,234 | $ | 456,564 | $ | 429,525 | |||||||
| NOI margin | 67.0 | % | 66.9 | % | 65.9 | % | 65.3 | % | |||||||
| Financial Performance | |||||||||||||||
| Normalized Funds from Operations ("NFFO") (000s) (3) | $ | 105,819 | $ | 101,114 | $ | 301,841 | $ | 288,973 | |||||||
| NFFO per Unit – basic (3) | $ | 0.610 | $ | 0.589 | $ | 1.745 | $ | 1.692 | |||||||
| Cash distributions per Unit | $ | 0.357 | $ | 0.345 | $ | 1.047 | $ | 1.035 | |||||||
| FFO payout ratio (3) | 60.4 | % | 59.3 | % | 61.6 | % | 61.9 | % | |||||||
| NFFO payout ratio (3) | 58.8 | % | 58.8 | % | 60.2 | % | 61.4 | % | |||||||
| Liquidity and Leverage | |||||||||||||||
| Total debt to gross book value (1) | 37.20 | % | 35.70 | % | |||||||||||
| Total debt to gross historical cost (1) | 52.50 | % | 49.31 | % | |||||||||||
| Weighted average mortgage interest rate (1) | 2.55 | % | 2.74 | % | |||||||||||
| Weighted average mortgage term (years) (1) | 5.74 | 4.92 | |||||||||||||
| Debt service coverage (times) (4) | 1.98 | 2.03 | |||||||||||||
| Interest coverage (times) (4) | 3.96 | 4.04 | |||||||||||||
| Available liquidity – Acquisition and Operating Facility (000s) (1) | $ | 243,282 | $ | 137,756 | |||||||||||
| Cash and cash equivalents (000s) (1) | $ | 138,438 | $ | 234,444 | |||||||||||
(1) As at September 30.
(2) Net Average Monthly Rent ("Net AMR") is defined as actual residential rents, excluding vacant units, divided by the total number of suites and sites in the property and does not include revenues from parking, laundry or other sources.
(3) These measures are not defined by IFRS, do not have standard meanings and may not be comparable with other industries or companies. Please refer to the cautionary statements under the heading "Non-IFRS Financial Measures" and the reconciliations provided in this press release.
(4) Based on the trailing four quarters.
(5) Certain 2020 comparative figures have been adjusted to conform with current period presentation.
| Three Months Ended | Nine Months Ended | |||||||||
| September 30, | September 30, | |||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||
| Other Measures | ||||||||||
| Weighted average number of Units - basic (000s) | 173,495 | 171,628 | 172,975 | 170,810 | ||||||
| Number of residential suites and sites acquired | 1,463 | 509 | 3,122 | 2,233 | ||||||
| Number of suites disposed | 87 | 188 | 87 | 194 | ||||||
| Closing price of Trust Units on the TSX (1) | $ | 59.11 | $ | 46.45 | ||||||
| Market capitalization (millions) (1) | $ | 10,366 | $ | 8,008 | ||||||
(1) As at September 30.
SUMMARY OF Q3 - 2021 RESULTS OF OPERATIONS
Key Transactions and Events
- CAPREIT continues to invest in accretive opportunities with total acquisitions for the three months ended September 30, 2021 amounting to $374 million comprised of interests in 1,463 suites and sites located in strong markets within Ontario and British Columbia.
- Total dispositions for the three months ended September 30, 2021 of $52 million, which included 86 suites
located in Ontario and 1 single family home located in the Netherlands.
Strong Operating Results
- CAPREIT has maintained a very high level of rent collection, with over 99% of rents collected year to date.
- On turnovers, monthly residential rents for the three and nine months ended September 30, 2021 increased by 6.0% on 7.5% of the Canadian portfolio and 5.0% on 16.6% of the Canadian portfolio, compared to an increase of 7.0% on 6.1% of the Canadian portfolio and 8.8% on 13.2% of the Canadian portfolio for the three and nine months ended September 30, 2020.
- Net AMR for the stabilized portfolio as at September 30, 2021 increased by 2.3% compared to September 30, 2020.
- Net operating income ("NOI") increased by 1.1% and 2.1% for the stabilized portfolio for the three and nine months ended September 30, 2021, compared to an NOI increase of 4.0% and 4.1% for the stabilized portfolio for the three and nine months ended September 30, 2020.
- NOI margin for the total portfolio increased to 67.0% and 65.9% for the three and nine months ended September 30, 2021 compared to 66.9% and 65.3% for the same periods last year.
- NFFO per unit was up 3.6% and 3.1% for the three and nine months ended September 30, 2021 compared to the same periods last year.
Strong and Flexible Balance Sheet
- CAPREIT's financial position remains strong, with $138.4 million of cash and cash equivalents and $243.3 million of available liquidity on CAPREIT's Acquisition and Operating Facility.
- Management expects to raise between $900 million and $960 million in total mortgage renewals and refinancings for 2021, excluding financings on acquisitions.
- CAPREIT closed mortgage refinancing of $465.2 million and $848.3 million for the three and nine months ended September 30, 2021, with top-ups net of discharges of $415.3 million, a weighted average term to maturity of 7.8 years and a weighted average interest rate of 2.15%.
- For the three and nine months ended September 30, 2021 the fair value of investment properties increased by $546.7 million and $1,359.2 million respectively. Excluding the impact of net acquisitions, operating lease buyout and foreign exchange, the fair value of investment properties increased by $721.7 million for the nine months ended September 30, 2021.
"Once again we produced strong and accretive growth through the third quarter indicating we will see another record year for CAPREIT in 2021,” commented Mark Kenney, President and CEO. “Our proven asset allocation strategy and efficient property management initiatives, combined with our conservative and flexible financial and liquidity position, continue to generate value for our Unitholders. Looking ahead, we are confident that, as the pandemic eases in the coming months, we will see even higher growth and enhanced operating performance as we capitalize on the strong market fundamentals in the Canadian residential rental sector.”
OPERATIONAL AND FINANCIAL RESULTS
Portfolio Net Average Monthly Rents
| Total Portfolio | Properties Owned Prior to September 30, 2020 | |||||||||||||||||||
| As at September 30, | 2021 | 2020 | 2021 | 2020 | ||||||||||||||||
| AMR | Occ. % | AMR | Occ. % | AMR | Occ. % | AMR | Occ. % | |||||||||||||
| Average residential suites | $ | 1,315 | 98.3 | $ | 1,284 | 98.2 | $ | 1,314 | 98.4 | $ | 1,284 | 98.2 | ||||||||
| Average MHC sites | $ | 397 | 95.9 | $ | 387 | 95.7 | $ | 397 | 95.8 | $ | 387 | 95.7 | ||||||||
| Overall portfolio average | $ | 1,143 | 97.9 | $ | 1,113 | 97.7 | $ | 1,139 | 97.9 | $ | 1,113 | 97.7 | ||||||||
The rate of growth in stabilized Net AMR has been primarily due to (i) rental increases on turnover in the rental markets of Nova Scotia and Ontario, (ii) rental increases on renewals, and (iii) an improving Alberta market with a higher occupancy rate. Weighted average gross rent per square foot for Canadian residential suites was approximately $1.60 as at September 30, 2021.
Canadian Portfolio
| For the Three Months Ended September 30, | 2021 | 2020 | ||||
| Change in monthly rent | Turnovers and Renewals (1) | Change in monthly rent | Turnovers and Renewals (1) | |||
| $ | % | % | $ | % | % | |
| Suite turnovers | 81.2 | 6.0 | 7.5 | 92.0 | 7.0 | 6.1 |
| Lease renewals | 16.6 | 1.5 | 14.5 | 12.5 | 1.1 | 20.6 |
| Weighted average of turnovers and renewals | 38.6 | 3.0 | 30.7 | 2.4 | ||
| For the Nine Months Ended September 30, | 2021 | 2020 | ||||
| Change in monthly rent | Turnovers and Renewals (1) | Change in monthly rent | Turnovers and Renewals (1) | |||
| $ | % | % | $ | % | % | |
| Suite turnovers | 68.8 | 5.0 | 16.6 | 116.5 | 8.8 | 13.2 |
| Lease renewals | 15.4 | 1.4 | 31.7 | 13.2 | 1.1 | 59.5 |
| Weighted average of turnovers and renewals | 33.8 | 2.6 | 32.0 | 2.5 | ||
(1) Percentage of suites turned over or renewed during the period based on the total weighted number of residential suites (excluding co-ownerships) held during period.
The Netherlands Portfolio
| For the Three Months Ended September 30, | 2021 | 2020 | ||||
| Change in monthly rent | Turnovers and Renewals (1) | Change in monthly rent | Turnovers and Renewals (1) | |||
| € | % | % | € | % | % | |
| Suite turnovers | 138.0 | 15.7 | 3.5 | 68.1 | 7.3 | 3.3 |
| Lease renewals | 22.8 | 2.3 | 54.7 | 18.9 | 2.4 | 93.5 |
| Weighted average of turnovers and renewals | 29.7 | 3.1 | 20.6 | 2.6 | ||
| For the Nine Months Ended September 30, | 2021 | 2020 | ||||
| Change in monthly rent | Turnovers and Renewals (1) | Change in monthly rent | Turnovers and Renewals (1) | |||
| € | % | % | € | % | % | |
| Suite turnovers | 133.0 | 15.4 | 10.9 | 74.8 | 8.4 | 10.8 |
| Lease renewals | 22.8 | 2.3 | 54.7 | 18.9 | 2.4 | 93.5 |
| Weighted average of turnovers and renewals | 41.1 | 4.5 | 24.7 | 3.0 | ||
(1) Percentage of suites turned over or renewed during the period based on the total weighted number of Dutch residential suites held during the period.
Estimated Net Rental Revenue Run-Rate
CAPREIT’s annualized net rental revenue run-rate as at September 30, 2021 grew to $917.9 million, up 7.7% from $851.9 million. Net rental revenue net of dispositions for the 12 months ended September 30, 2021 was $861.0 million (September 30, 2020 – $816.4 million). For further discussion regarding forecasts and guidance as a result of the COVID-19 pandemic, please see Section II of the 2021 Q3 MD&A under The COVID-19 Pandemic for further details.
NOI
Stabilized properties for the three and nine months ended September 30, 2021 are defined as all properties owned by CAPREIT continuously since December 31, 2019, and therefore do not take into account the impact on performance of acquisitions or dispositions completed during 2021 and 2020.
| ($ Thousands) | Total NOI | Stabilized NOI | ||||||||||||||||||
| For the Three Months Ended September 30, | 2021 | 2020 | % (1) | 2021 | 2020 | % (1) | ||||||||||||||
| Total operating revenues | $ | 236,097 | $ | 221,420 | 6.6 | $ | 215,872 | $ | 213,339 | 1.2 | ||||||||||
| Operating expenses | ||||||||||||||||||||
| Realty taxes | (21,768 | ) | (20,591 | ) | 5.7 | (19,587 | ) | (19,701 | ) | (0.6 | ) | |||||||||
| Utilities | (14,261 | ) | (13,422 | ) | 6.3 | (12,826 | ) | (12,546 | ) | 2.2 | ||||||||||
| Other (2) | (41,942 | ) | (39,173 | ) | 7.1 | (38,145 | ) | (37,330 | ) | 2.2 | ||||||||||
| Total operating expenses | $ | (77,971 | ) | $ | (73,186 | ) | 6.5 | $ | (70,558 | ) | $ | (69,577 | ) | 1.4 | ||||||
| NOI | $ | 158,126 | $ | 148,234 | 6.7 | $ | 145,314 | $ | 143,762 | 1.1 | ||||||||||
| NOI margin | 67.0 | % | 66.9 | % | 67.3 | % | 67.4 | % | ||||||||||||
| ($ Thousands) | Total NOI | Stabilized NOI | ||||||||||||||||||
| For the Nine Months Ended September 30, | 2021 | 2020 | % (1) | 2021 | 2020 | % (1) | ||||||||||||||
| Total operating revenues | $ | 692,459 | $ | 657,405 | 5.3 | $ | 645,096 | $ | 636,933 | 1.3 | ||||||||||
| Operating expenses | ||||||||||||||||||||
| Realty taxes | (65,418 | ) | (61,183 | ) | 6.9 | (60,313 | ) | (58,970 | ) | 2.3 | ||||||||||
| Utilities | (49,573 | ) | (47,547 | ) | 4.3 | (45,820 | ) | (45,393 | ) | 0.9 | ||||||||||
| Other (2) | (120,904 | ) | (119,150 | ) | 1.5 | (112,359 | ) | (114,845 | ) | (2.2 | ) | |||||||||
| Total operating expenses | $ | (235,895 | ) | $ | (227,880 | ) | 3.5 | $ | (218,492 | ) | $ | (219,208 | ) | (0.3 | ) | |||||
| NOI | $ | 456,564 | $ | 429,525 | 6.3 | $ | 426,604 | $ | 417,725 | 2.1 | ||||||||||
| NOI margin | 65.9 | % | 65.3 | % | 66.1 | % | 65.6 | % | ||||||||||||
(1) Represents the year-over-year percentage change.
(2) Comprises R&M, wages, insurance, advertising, legal costs and bad debt.
Operating Revenues
For the three and nine months ended September 30, 2021, total operating revenues for the total and stabilized portfolios increased compared to the same period last year, due to increases in monthly rents and continuing high occupancies, partially offset by increased tenant allowances. Contributions from acquisitions further contributed to higher operating revenues for the total portfolio.
Operating Expenses
The stabilized operating expenses for the three months ended September 30, 2021 increased compared to the same period last year, primarily due to increased in R&M costs, insurance costs, bad debts and utilities costs, and partially offset by the lower on-site costs and realty taxes. The increased R&M costs were primarily due to the reduced ability to complete work during COVID-19 pandemic lockdown in the third quarter of last year compared to this year. The higher insurance costs are driven by overall increases in insurance rates.
The stabilized operating expenses for the nine months ended September 30, 2021 decreased primarily due to lower R&M costs, on-site costs and bad debt, partially offset by higher insurance costs and higher realty taxes. The decreased R&M costs were partially due to the reduced ability to complete work given restrictions and limitations imposed in connection with the COVID-19 pandemic happening in the earlier part of the year, combined with cost controlling measures throughout the year. The higher insurance costs are driven by overall increases in insurance rates. The increased advertising costs were also due to the COVID-19 pandemic in an effort to increase occupancies in some weakened markets.
NOI Margin
For the three months ended September 30, 2021, NOI margin for the total portfolio increased to 67.0% compared to 66.9% for the same period last year. For the nine months ended September 30, 2021, NOI margin for the total portfolio increased to 65.9% compared to 65.3% for the same period last year.
NON-IFRS FINANCIAL PERFORMANCE
For the three months ended September 30, 2021, basic NFFO per Unit increased by 3.6% compared to the same period last year, despite an approximate 1.1% increase in the weighted average number of units outstanding. For the nine months ended September 30, 2021, basic NFFO per Unit increased by 3.1% compared to the same period last year, despite an approximate 1.3% increase in the weighted average number of units outstanding. Management expects per unit FFO and NFFO and related payout ratios to strengthen further in the medium term as a result of NOI contributions from recent acquisitions.
PROPERTY CAPITAL INVESTMENTS
During the nine months ended September 30, 2021, CAPREIT made property capital investments (excluding head office assets) of $204.4 million compared to $141.7 million for the same period last year.
Property capital investments include suite improvements, common areas and equipment, which generally tend to increase NOI more quickly. CAPREIT also continues to invest in environment-friendly and energy-saving initiatives, including energy-efficient boilers and lighting systems.
SUBSEQUENT EVENTS
On October 1, 2021, CAPREIT completed the acquisition of a portfolio of three apartment buildings located in Québec City aggregating 260 residential suites. CAPREIT paid $72.8 million for the portfolio, funded by CAPREIT’s Acquisition and Operating Facility.
On October 1, 2021, CAPREIT sold its one-third managing interest in Kings Club located in downtown Toronto for $90.9 million. CAPREIT provided a vendor takeback mortgage ("VTB") to the purchaser to finance 75% of the purchase price at an annual interest rate of 3.0% due in 36 months from closing.
On October 29, 2021, ERES amended and renewed its existing ERES Credit Facility with the same two Canadian chartered banks, providing up to €100 million for a three-year period ending on October 29, 2024, which resulted in (i) combining the ERES Credit Facility and ERES Bridge Facility into one facility; (ii) lower interest rates and fees, (iii) certain modifications to CAPREIT's financial covenants; and (iv) a negative pledge of an unencumbered property pool provided by CAPREIT, such that it represents 1.50x the facility amount of €100 million.
ADDITIONAL INFORMATION
More detailed information and analysis is included in CAPREIT's unaudited condensed consolidated interim financial statements and MD&A for the three and nine months ended September 30, 2021, which have been filed on SEDAR and can be viewed at www.sedar.com under CAPREIT’s profile or on CAPREIT’s website on the investor relations page at www.caprent.com or www.capreit.net.
Conference Call
A conference call hosted by Mark Kenney, President and Chief Executive Officer and Scott Cryer, Chief Financial Officer will be held Wednesday, November 10, 2021 at 9:00 am EST. The telephone numbers for the conference call are: Local/International: (929) 526-1599, North American Toll Free: (844) 200-6205. The conference access code is 238395#.
A slide presentation to accompany Management's comments during the conference call will be available prior to the conference call. To view the slides, access the CAPREIT website at www.caprent.com or www.capreit.net, click on "Investor Relations" and follow the link at the top of the page. Please log on at least 15 minutes before the call commences.
The call and accompanying slides will also be archived on the CAPREIT website at www.caprent.com or www.capreit.net. For more information about CAPREIT, its business and its investment highlights, please refer to our website at www.caprent.com or www.capreit.net.
About CAPREIT
CAPREIT is Canada’s largest publicly-traded provider of quality rental housing. CAPREIT currently owns or has interests in, and manages, approximately 70,000 residential apartment suites, townhomes and manufactured housing community sites well-located across Canada, in the Netherlands and Ireland. CAPREIT has approximately $18 billion of assets under management globally. For more information about CAPREIT, its business and its investment highlights, please visit our website at www.caprent.com or www.capreit.net, and our public disclosure which can be found under our profile at www.sedar.com.
Non-IFRS Financial Measures
CAPREIT prepares and releases unaudited consolidated interim financial statements and audited consolidated annual financial statements prepared in accordance with IFRS. In this and other earnings releases and investor conference calls, as a complement to results provided in accordance with IFRS, CAPREIT discloses financial measures not recognized under IFRS which do not have standard meanings prescribed by IFRS. These include stabilized net rental income (“Stabilized NOI”), Funds From Operations (“FFO”), Normalized Funds From Operations (“NFFO”), Adjusted Cash Flow from Operations (“ACFO”), FFO and NFFO per Unit amounts and FFO, NFFO and ACFO payout ratios, and Adjusted Cash Generated from Operating Activities (collectively, the “Non-IFRS Measures”). These Non-IFRS Measures are further defined and discussed in the MD&A released on November 9, 2021, which should be read in conjunction with this press release. Since these measures are not recognized under IFRS, they may not be comparable to similar measures reported by other issuers. CAPREIT presents the Non-IFRS measures because Management believes these Non-IFRS measures are relevant measures of the ability of CAPREIT to earn revenue and to evaluate its performance and cash flows. A reconciliation of these Non-IFRS measures is included in this press release below. The Non-IFRS measures should not be construed as alternatives to net income (loss) or cash flows from operating activities determined in accordance with IFRS as indicators of CAPREIT’s performance or the sustainability of our distributions.
Cautionary Statements Regarding Forward-Looking Statements
Certain statements contained, or contained in documents incorporated by reference, in this press release constitute forward-looking information within the meaning of securities laws. Forward-looking information may relate to CAPREIT’s future outlook and anticipated events or results and may include statements regarding the future financial position, business strategy, budgets, litigation, occupancy rates, rental rates, productivity, projected costs, capital investments, development and development opportunities, financial results, taxes, plans and objectives of or involving CAPREIT. Particularly, statements regarding CAPREIT’s future results, performance, achievements, prospects, costs, opportunities and financial outlook, including those relating to acquisition and capital investment strategies and the real estate industry generally, are forward-looking statements. In some cases, forward-looking information can be identified by terms such as “may”, “will”, “should”, “expect”, “plan”, “anticipate”, “believe”, “intend”, “estimate”, “predict”, “potential”, “continue” or the negative thereof, or other similar expressions concerning matters that are not historical facts. Forward-looking statements are based on certain factors and assumptions regarding expected growth, results of operations, performance and business prospects and opportunities. In addition, certain specific assumptions were made in preparing forward-looking information, including: that the Canadian, Irish, Dutch, German and Belgian economies will generally experience growth, which, however, may be adversely impacted by the global economy and the ongoing health crisis related to the novel coronavirus ("COVID-19") pandemic and its direct or indirect impacts on the business of CAPREIT. These impacts may include the ability to enforce leases, perform capital expenditure work, increase rents and apply for above guideline increases, and obtain mortgage financings; that inflation will remain low; that interest rates will remain low in the medium term; that Canada Mortgage and Housing Corporation (“CMHC”) mortgage insurance will continue to be available and that a sufficient number of lenders will participate in the CMHC-insured mortgage program to ensure competitive rates; that the Canadian capital markets will continue to provide CAPREIT with access to equity and/or debt at reasonable rates; that vacancy rates for CAPREIT properties will be consistent with historical norms; that rental rates on renewals will grow at levels similar to the rate of inflation; that rental rates on turnovers will grow; that the difference between in-place and market-based rents will be reduced upon such turnovers and renewals; that CAPREIT will effectively manage price pressures relating to its energy usage; and, with respect to CAPREIT’s financial outlook regarding capital investments, assumptions respecting projected costs of construction and materials, availability of trades, the cost and availability of financing, CAPREIT’s investment priorities, the properties in which investments will be made, the composition of the property portfolio and the projected return on investment in respect of specific capital investments. Although the forward-looking statements contained in this press release are based on assumptions, management believes they are reasonable as of the date hereof; however, there can be no assurance actual results will be consistent with these forward-looking statements, and they may prove to be incorrect. Forward-looking statements necessarily involve known and unknown risks and uncertainties, many of which are beyond CAPREIT’s control, that may cause CAPREIT’s or the industry’s actual results, performance, achievements, prospects and opportunities in future periods to differ materially from those expressed or implied by such forward-looking statements. These risks and uncertainties include, among other things, risks related to: public health crises, disease outbreaks, reporting investment properties at fair value, real property ownership, investment restrictions, operating risk, energy costs, environmental matters, catastrophic events, insurance, capital investments, indebtedness, taxation-related risks, government regulations, controls over financial reporting, other legal and regulatory risks, the nature of units of CAPREIT (“Trust Units”), unitholder liability, liquidity and price fluctuation of Trust Units, dilution, distributions, participation in CAPREIT’s distribution reinvestment plan, potential conflicts of interest, dependence on key personnel, general economic conditions, competition for residents, competition for real property investments, risks related to acquisitions, cyber security risk and foreign operation and currency risks. There can be no assurance that the expectations of CAPREIT’s Management will prove to be correct. These risks and uncertainties are more fully described in regulatory filings, including CAPREIT’s Annual Information Form, which can be obtained on SEDAR at www.sedar.com, under CAPREIT’s profile, as well as under Risks and Uncertainties section of the MD&A released on November 9, 2021. The information in this press release is based on information available to management as of November 9, 2021. Subject to applicable law, CAPREIT does not undertake any obligation to publicly update or revise any forward-looking information.
SOURCE: Canadian Apartment Properties Real Estate Investment Trust
| CAPREIT Mr. Michael Stein Chairman (416) 861-5788 | CAPREIT Mr. Mark Kenney President & CEO (416) 861-9404 | CAPREIT Mr. Scott Cryer Chief Financial Officer (416) 861-5771 |
SELECTED FINANCIAL INFORMATION
Condensed Balance Sheets
| As at | ||||||
| ($ Thousands) | September 30, 2021 | December 31, 2020 | ||||
| Investment properties | $ | 16,359,812 | $ | 15,000,591 | ||
| Total assets | 17,017,620 | 15,499,131 | ||||
| Mortgages payable | 5,899,947 | 5,401,202 | ||||
| Bank indebtedness | 443,559 | 118,553 | ||||
| Total liabilities | 7,179,586 | 6,225,429 | ||||
| Unitholders' equity | 9,838,034 | 9,273,702 | ||||
Condensed Income Statements
| Three Months Ended | Nine Months Ended | ||||||||||||||
| September 30, | September 30, | ||||||||||||||
| ($ Thousands, except per Unit amounts) | |||||||||||||||
| 2021 | 2020 | 2021 | 2020 | ||||||||||||
| Operating revenues | |||||||||||||||
| Revenue from investment properties | $ | 236,097 | $ | 221,420 | $ | 692,459 | $ | 657,405 | |||||||
| Operating expenses | |||||||||||||||
| Realty taxes | (21,768 | ) | (20,591 | ) | (65,418 | ) | (61,183 | ) | |||||||
| Property operating costs | (56,203 | ) | (52,595 | ) | (170,477 | ) | (166,697 | ) | |||||||
| Total operating expenses | (77,971 | ) | (73,186 | ) | (235,895 | ) | (227,880 | ) | |||||||
| Net rental income | 158,126 | 148,234 | 456,564 | 429,525 | |||||||||||
| Trust expenses | (12,284 | ) | (9,984 | ) | (38,980 | ) | (31,639 | ) | |||||||
| Unit-based compensation expense | (3,500 | ) | (694 | ) | (12,419 | ) | (1,487 | ) | |||||||
| Fair value adjustments of investment properties | 122,974 | 233,437 | 480,462 | 197,465 | |||||||||||
| Fair value adjustments of Exchangeable LP Units | 3,467 | 1,354 | 761 | 1,354 | |||||||||||
| Fair value adjustments of investments | 2,130 | (348 | ) | 9,001 | (3,435 | ) | |||||||||
| Realized loss on disposition of investment properties | (20 | ) | (634 | ) | (20 | ) | (1,387 | ) | |||||||
| Amortization of property, plant and equipment | (2,063 | ) | (1,939 | ) | (6,144 | ) | (5,663 | ) | |||||||
| (Loss) gain on non-controlling interest | (7,940 | ) | (15,913 | ) | (27,766 | ) | 19,116 | ||||||||
| Gain (loss) on derivative financial instruments | 129 | (25,800 | ) | 34,854 | (26,758 | ) | |||||||||
| Interest and other financing costs | (41,129 | ) | (36,314 | ) | (117,176 | ) | (108,021 | ) | |||||||
| (Loss) gain on foreign currency translation | (5,132 | ) | 11,730 | (5,901 | ) | (19,962 | ) | ||||||||
| Other income | 5,490 | 5,515 | 18,739 | 9,254 | |||||||||||
| Net income before income taxes | 220,248 | 308,644 | 791,975 | 458,362 | |||||||||||
| Current and deferred income tax expense | (30,035 | ) | (8,569 | ) | (44,139 | ) | (17,392 | ) | |||||||
| Net income | $ | 190,213 | $ | 300,075 | $ | 747,836 | $ | 440,970 | |||||||
| Other comprehensive (loss) income | $ | 9,348 | $ | 29,233 | $ | (71,857 | ) | $ | 91,286 | ||||||
| Comprehensive income | $ | 199,561 | $ | 329,308 | $ | 675,979 | $ | 532,256 | |||||||
SELECTED NON-IFRS FINANCIAL MEASURES
A reconciliation of net income to NFFO is as follows:
| ($ Thousands, except per Unit amounts) | |||||||||||||||
| Three Months Ended | Nine Months Ended | ||||||||||||||
| September 30, | September 30, | ||||||||||||||
| 2021 | 2020 | 2021 | 2020 | ||||||||||||
| Net income | $ | 190,213 | $ | 300,075 | $ | 747,836 | $ | 440,970 | |||||||
| Adjustments: | |||||||||||||||
| Fair value adjustments of investment properties | (122,974 | ) | (233,437 | ) | (480,462 | ) | (197,465 | ) | |||||||
| Realized loss on disposition of investment properties | 20 | 634 | 20 | 1,387 | |||||||||||
| Remeasurement of Exchangeable LP Units | (3,467 | ) | (1,354 | ) | (761 | ) | (1,354 | ) | |||||||
| Remeasurement of investments | (2,130 | ) | 348 | (9,001 | ) | 3,435 | |||||||||
| Remeasurement of unit-based compensation liabilities | 1,862 | (1,236 | ) | 7,033 | (3,998 | ) | |||||||||
| Interest on Exchangeable LP Units | 282 | 218 | 511 | 218 | |||||||||||
| Deferred income tax expense (1) | 28,961 | 7,698 | 41,310 | 15,735 | |||||||||||
| Loss (gain) on foreign currency translation | 5,132 | (11,730 | ) | 5,901 | 19,962 | ||||||||||
| FFO adjustment for income from investment in associate | — | (56 | ) | (2,211 | ) | 7,634 | |||||||||
| Gain (loss) on derivative financial instruments | (129 | ) | 25,800 | (34,854 | ) | 26,758 | |||||||||
| Fair value mark-to-market adjustment on ERES units held by non-controlling unitholders | 4,721 | 12,722 | 18,143 | (28,459 | ) | ||||||||||
| Distributions on ERES units held by non-controlling unitholders | 3,219 | 3,191 | 9,623 | 9,343 | |||||||||||
| Net FFO impact attributable to ERES units held by non-controlling unitholders (2) | (4,504 | ) | (4,178 | ) | (13,183 | ) | (12,051 | ) | |||||||
| Amortization of property, plant and equipment | 2,063 | 1,939 | 6,144 | 5,663 | |||||||||||
| Lease principal repayment | (307 | ) | (292 | ) | (900 | ) | (867 | ) | |||||||
| FFO | $ | 102,962 | $ | 100,342 | $ | 295,149 | $ | 286,911 | |||||||
| Adjustments: | |||||||||||||||
| Amortization of losses from (AOCL) AOCI to interest and other financing costs | 618 | 629 | 1,857 | 1,896 | |||||||||||
| Mortgage prepayment cost | 1,024 | 143 | 1,189 | 166 | |||||||||||
| Reorganization, senior management termination, and retirement costs (3) | 1,215 | — | 2,747 | — | |||||||||||
| Acquisition research costs (4) | — | — | 899 | — | |||||||||||
| NFFO | $ | 105,819 | $ | 101,114 | $ | 301,841 | $ | 288,973 | |||||||
| NFFO per unit – basic | $ | 0.610 | $ | 0.589 | $ | 1.745 | $ | 1.692 | |||||||
| NFFO per unit – diluted | $ | 0.608 | $ | 0.588 | $ | 1.739 | $ | 1.686 | |||||||
| Total distributions declared (5) | $ | 62,193 | $ | 59,484 | $ | 181,811 | $ | 177,503 | |||||||
| NFFO payout ratio (6) | 58.8 | % | 58.8 | % | 60.2 | % | 61.4 | % | |||||||
| Net distributions paid (5) | $ | 42,860 | $ | 42,013 | $ | 125,902 | $ | 127,188 | |||||||
| Excess NFFO over net distributions paid | $ | 62,959 | $ | 59,101 | $ | 175,939 | $ | 161,785 | |||||||
| Effective NFFO payout ratio (7) | 40.5 | % | 41.6 | % | 41.7 | % | 44.0 | % | |||||||
(1) The figures for the three and nine months ended September 30, 2020 consists of $7.7 million and $14.6 million, respectively, of deferred income tax expenses, as well as $nil and $1.2 million, respectively, of current income taxes on the disposition of a German investment property.
(2) This calculation is based on the weighted average ownership held by ERES non-controlling unitholders.
(3) Includes severance and other employee costs relating to reorganization, senior management termination, and retirement.
(4) Expenses included in trust expenses and related to transactions that were not completed.
(5) For a description of distributions declared and net distributions paid, see the Non-IFRS Financial Measures section in the MD&A for the three and nine months ended September 30, 2021.
(6) The payout ratio compares distributions declared to NFFO.
(7) The effective payout ratio compares net distributions paid to NFFO.
Reconciliation of cash generated from operating activities to Adjusted Cash Flows from Operations:
| ($ Thousands, except per unit amounts) | |||||||||||||||||||
| Three Months Ended | Nine Months Ended | Actual | |||||||||||||||||
| September 30, | September 30, | Annual | |||||||||||||||||
| 2021 | 2020 (8) | 2021 | 2020 (8) | 2020 (8) | |||||||||||||||
| Cash generated from operating activities | $ | 156,221 | $ | 126,355 | $ | 401,496 | $ | 379,846 | $ | 480,729 | |||||||||
| Adjustments: | |||||||||||||||||||
| Working capital adjustment (1) | — | 18,116 | — | 18,116 | 18,116 | ||||||||||||||
| Interest expense included in cash flow from financing activities (2) | (33,885 | ) | (32,544 | ) | (99,163 | ) | (96,787 | ) | (130,398 | ) | |||||||||
| Forecasted non-discretionary property capital investments (3) | (20,437 | ) | (16,995 | ) | (59,663 | ) | (50,693 | ) | (70,545 | ) | |||||||||
| Capitalized leasing costs (4) | (2,247 | ) | (1,034 | ) | (6,500 | ) | (1,674 | ) | (3,909 | ) | |||||||||
| Amortization of other financing costs (5) | (3,496 | ) | (2,063 | ) | (10,270 | ) | (6,703 | ) | (23,725 | ) | |||||||||
| Investment income | 3,668 | 4,498 | 8,040 | 10,902 | 11,670 | ||||||||||||||
| Net ACFO impact attributed to ERES units held by non-controlling unitholders (6) | (5,737 | ) | (5,206 | ) | (13,700 | ) | (10,190 | ) | (13,346 | ) | |||||||||
| Lease principal and interest repayments | (1,568 | ) | (1,418 | ) | (4,537 | ) | (4,247 | ) | (5,664 | ) | |||||||||
| Tax on disposition (7) | — | — | — | 1,155 | 1,155 | ||||||||||||||
| ACFO | $ | 92,519 | $ | 89,709 | $ | 215,703 | $ | 239,725 | $ | 264,083 | |||||||||
| Total distributions declared | $ | 62,193 | $ | 59,484 | $ | 181,811 | $ | 177,503 | $ | 237,103 | |||||||||
| Excess ACFO over distributions declared | $ | 30,326 | $ | 30,225 | $ | 33,892 | $ | 62,222 | $ | 26,980 | |||||||||
| ACFO payout ratio | 67.2 | % | 66.3 | % | 84.3 | % | 74.0 | % | 89.8 | % | |||||||||
(1) On a quarterly basis, a review of working capital is performed to determine whether changes in prepaids, receivables, deposits, accounts payable and other liabilities, security deposits and other non-cash operating assets and liabilities were attributed to items which were not indicative of sustainable cash flows available for distribution in line with the ACFO guidance provided by REALpac. As a result, the one-time current income tax payment of $18.1 million relating to current income tax expense triggered on the acquisition of ECREIT on March 29, 2019 was added back for three and nine months ended September 30, 2020 and the year ended December 31, 2020.
(2) Excludes interest with respect to leases, distributions to ERES non-controlling unitholders, and holders of Exchangeable LP Units.
(3) Non-discretionary property capital investments for the three and nine months ended September 30, 2021 and 2020 has been calculated as follows: Non-Discretionary Property Capital Investments per suite and site are based on the annual 2021 and 2020 forecasts respectively, divided by four for the quarter, and multiplied by the weighted average number of residential suites and sites during the period. The forecasted Non-Discretionary Property Capital Investments per suite and site for 2021 and 2020 on an annual basis is $1,259 and $1,113 respectively. The estimated full year weighted average number of residential suites and sites for the nine months ended September 30, 2021 and 2020 is 63,626 and 60,705, respectively. For a reconciliation of actual non-discretionary property capital investments incurred during the period to forecast, see the Adjusted Cash Flows From Operations and Distributions Declared section of the MD&A.
(4) Comprises tenant inducements and direct leasing costs.
(5) Includes amortization of deferred financing costs, CMHC premiums, deferred loan costs and fair value adjustments.
(6) This calculation is based on the weighted average ownership held by ERES non-controlling unitholders.
(7) Represents $1.2 million of income tax expenses on the disposition of a German investment property for the nine months ended September 30, 2020 and year ended December 31, 2020.
(8) Certain 2020 comparative figures have been adjusted to conform with current period presentation.
