TORONTO, May 11, 2022 (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 ended March 31, 2022.
“We ended the 1st quarter with solid performances from all aspects of the business. Operational resilience was demonstrated by solid leasing momentum for both existing and new retail tenants. This is expected to result in occupancy levels further improving over the balance of the year. Our in-place occupancy level was marginally lower than year-end specifically as a result of the previously announced closure of one tenant, Home Outfitters. Of the four locations in our portfolio, three of these locations are close to being leased, while we have active interest in the fourth location. It is reassuring to see a noticeable improvement in leasing activity across Canada. As a further reflection of the improving retail environment, cash collections continue to improve, exceeding 98% for the quarter; we expect these levels to return to pre-Covid levels over the remainder of the year. Our retail portfolio of primarily Walmart-anchored shopping centres is one of the pillars of our company and even during the most difficult days of Covid, has continued to provide us with the strength and stability to help support our pipeline of development projects.
In that regard, (through our residential banner, SmartLiving), our mixed-use intensification program continues to be a source of additional accretive growth, demonstrated by the presale activity at Artwalk and Park Place. Artwalk, 627 residential units in two 38 and 18 storey towers, will be built on a portion of lands previously occupied by Walmart at SmartVMC. Park Place, which includes approximately 1100 units in two stunning 56 and 48 storey towers, will be built on approximately two acres of the 53 acres of western lands at SmartVMC. The Trust recently purchased a 66.67% interest in these lands which represent the western portion of our SmartVMC City Centre. Initial presale interest in these projects has exceeded our expectations and we plan to commence construction of both projects later this year.
In addition, during the quarter, we experienced property value increments exceeding $270.0 million, mainly as a result of progress in the zoning and entitlements’ process on several strategic projects together with improved infrastructure and market conditions around them. These additional valuation increases have resulted in the Trust’s book value per Unit increasing by $1.71 to $36.03 as compared to last quarter. In addition, Adjusted FFO per Unit(1) increased by $0.03 or 6.1% to $0.52, and net income and comprehensive income per Unit increased by $1.71 to $2.06, as compared to the same quarter in the prior year,” said Mitchell Goldhar, Executive Chairman and CEO of SmartCentres REIT.
“At SmartVMC, currently our highest profile development initiative, but just one of many master-planned projects, we have thus far closed on 1,741 units in the first three Transit City condominium phases, resulting in $0.37 in FFO per Unit(1) and $0.38 in net income and comprehensive income per Unit. In addition, construction is progressing well, and we expect to be completed early next year on the 1,026 units in our sold-out Transit City 4 and 5 towers and the 454-unit Millway rental complex. Excitement around SmartVMC continues as the 120,000 square foot YMCA recently opened to the public and the 22 townhomes that represent the final part of Phases 1&2 are expected to close in the second quarter. We intend to develop approximately 20.0 million square feet of mixed-use space at SmartVMC alone, on which we are also planning a 9-acre park which, over time, will become the focal point of this landmark city centre development.”
(1) | Represents a non-GAAP measure. The Trust’s method of calculating non-GAAP measures may differ from other reporting issuers’ methods and, accordingly, may not be comparable. For additional information, please see “Non-GAAP Measures” in this Press Release. |
Key Business Development, Financial and Operational Highlights for the Three Months Ended March 31, 2022
Mixed-Use Development and Intensification at SmartVMC
Other Business Development
Financial
Operational
(1) | Represents a GAAP measure. |
(2) | Represents a non-GAAP measure. The Trust’s method of calculating non-GAAP measures may differ from other reporting issuers’ methods and, accordingly, may not be comparable. For additional information, please see “Non-GAAP Measures” in this Press Release. |
(3) | Net of cash-on-hand of $60.0 million as at March 31, 2022 for the purposes of calculating the applicable ratios. |
Selected Consolidated Operational, Mixed-Use Development and Financial Information
Key consolidated operational, mixed-use development and financial information shown in the table below includes the Trust’s proportionate share of equity accounted investments:
(in thousands of dollars, except per Unit and other non-financial data) | March 31, 2022 | December 31, 2021 | March 31, 2021 | |||
Portfolio Information | ||||||
Total number of properties with an ownership interest | 174 | 174 | 168 | |||
Leasing and Operational Information | ||||||
Gross leasable area including retail and office space (in thousands of sq. ft.) | 34,664 | 34,119 | 34,037 | |||
Occupied area including retail and office space (in thousands of sq. ft.) | 33,616 | 33,219 | 32,999 | |||
Vacant area including retail and office space (in thousands of sq. ft.) | 1,047 | 900 | 1,038 | |||
In-place occupancy rate (%) | 97.0 | 97.4 | 97.0 | |||
Committed occupancy rate (%) | 97.2 | 97.6 | 97.3 | |||
Average lease term to maturity (in years) | 4.4 | 4.4 | 4.6 | |||
Net retail rental rate (per occupied sq. ft.) ($) | 15.49 | 15.44 | 15.40 | |||
Net retail rental rate excluding Anchors (per occupied sq. ft.) ($) | 22.17 | 22.07 | 22.00 | |||
Mixed-Use Development Information | ||||||
Trust’s share of future development area (in thousands of sq. ft.) | 40,600 | 40,600 | 32,500 | |||
Trust’s share of estimated costs of future projects currently under construction, or for which construction is expected to commence within the next five years (in millions of dollars) | 9,800 | 9,800 | 7,900 | |||
Total number of residential rental projects | 104 | 104 | 96 | |||
Total number of seniors’ housing projects | 27 | 27 | 40 | |||
Total number of self-storage projects | 36 | 36 | 50 | |||
Total number of office building projects | 8 | 8 | 7 | |||
Total number of hotel projects | 3 | 3 | 4 | |||
Total number of condominium developments | 95 | 95 | 72 | |||
Total number of townhome developments | 10 | 10 | 15 | |||
Total number of future projects currently in development planning stage | 283 | 283 | 284 | |||
Financial Information | ||||||
Total assets – GAAP(1) | 11,721,953 | 11,293,248 | 10,321,117 | |||
Total assets – non-GAAP(2)(3) | 11,985,236 | 11,494,377 | 10,525,295 | |||
Investment properties – GAAP(1) | 10,244,143 | 9,847,078 | 8,856,167 | |||
Investment properties – non-GAAP(2)(3) | 11,113,685 | 10,684,529 | 9,434,999 | |||
Total unencumbered assets(2) | 8,364,500 | 6,640,600 | 5,910,900 | |||
Debt – GAAP(1) | 4,951,171 | 4,854,527 | 4,810,106 | |||
Debt – non-GAAP(2)(3) | 5,124,045 | 4,983,078 | 4,924,116 | |||
Debt to Aggregate Assets (%)(2)(3)(4) | 42.5 | 42.9 | 44.7 | |||
Debt to Gross Book Value (%)(2)(3)(4) | 51.3 | 50.8 | 50.2 | |||
Unsecured to Secured Debt Ratio(2)(3)(4) | 75%/25% | 71%/29% | 69%/31% | |||
Unencumbered assets to unsecured debt(2)(3)(4) | 2.2X | 1.9X | 1.9X | |||
Weighted average interest rate (%)(2)(3) | 3.09 | 3.11 | 3.26 | |||
Weighted average term of debt (in years) | 4.7 | 4.8 | 5.1 | |||
Interest coverage ratio(2)(3)(4) | 3.5X | 3.4X | 3.2X | |||
Adjusted Debt to Adjusted EBITDA (net of cash)(2)(3)(4) | 9.4X | 9.2X | 8.6X | |||
Equity (book value)(1) | 6,133,130 | 5,841,315 | 5,149,986 | |||
Weighted average number of units outstanding – diluted | 179,590,588 | 173,748,819 | 173,417,020 |
(1) | Represents a GAAP measure. |
(2) | Represents a non-GAAP measure. The Trust’s method of calculating non-GAAP measures may differ from other reporting issuers’ methods and, accordingly, may not be comparable. For additional information, please see “Non-GAAP Measures” in this Press Release. |
(3) | Includes the Trust’s proportionate share of equity accounted investments. |
(4) | As at March 31, 2022, cash-on-hand of $60.0 million was excluded for the purposes of calculating the applicable ratios (December 31, 2021 – $80.0 million, March 31, 2021 – $397.7 million). |
Quarterly Comparison to Prior Year
The following table presents key financial, per Unit, and payout ratio information for the three months ended March 31, 2022 and March 31, 2021:
(in thousands of dollars, except per Unit information) | March 31, 2022 | March 31, 2021 | Variance | ||||||||
(A) | (B) | (A–B) | |||||||||
Financial Information | |||||||||||
Rentals from investment properties and other(1) | 202,523 | 198,838 | 3,685 | ||||||||
Net base rent(1) | 125,274 | 121,330 | 3,944 | ||||||||
Total recoveries(1) | 72,386 | 71,782 | 604 | ||||||||
Miscellaneous revenue(1) | 2,315 | 2,841 | (526 | ) | |||||||
Service and other revenues(1) | 2,548 | 2,885 | (337 | ) | |||||||
Net income and comprehensive income(1) | 370,110 | 60,559 | 309,551 | ||||||||
Net income and comprehensive income excluding fair value adjustments(2)(3) | 80,337 | 76,553 | 3,784 | ||||||||
Cash flows provided by operating activities(1) | 102,819 | 79,485 | 23,334 | ||||||||
Net rental income and other(1) | 120,414 | 116,137 | 4,277 | ||||||||
NOI(2) | 123,868 | 118,981 | 4,887 | ||||||||
Change in net rental income and other(2) | 3.7 | % | (6.2 | ) | % | 9.9 | % | ||||
Change in SPNOI(2) | 2.3 | % | (4.8 | ) | % | 7.1 | % | ||||
Change in SPNOI excluding ECL(2) | (0.5 | ) | % | (3.7 | ) | % | 3.2 | % | |||
FFO(2)(3)(4)(5) | 92,235 | 84,275 | 7,960 | ||||||||
FFO with adjustments(2)(3)(4) | 93,150 | 84,511 | 8,639 | ||||||||
FFO with adjustments and Transactional FFO(2)(3)(4) | 93,150 | 86,098 | 7,052 | ||||||||
ACFO(2)(3)(4)(5) | 85,154 | 85,153 | 1 | ||||||||
ACFO with adjustments(2)(3)(4) | 86,069 | 85,389 | 680 | ||||||||
Distributions declared | 82,339 | 79,660 | 2,679 | ||||||||
Surplus (shortfall) of cash provided by operating activities over distributions declared(2) | 20,480 | (175 | ) | 20,655 | |||||||
Surplus of ACFO over distributions declared(2) | 2,815 | 5,493 | (2,678 | ) | |||||||
Units outstanding(6) | 178,122,655 | 172,267,483 | 5,855,172 | ||||||||
Weighted average – basic | 178,108,771 | 172,237,982 | 5,870,789 | ||||||||
Weighted average – diluted(7) | 179,590,588 | 173,417,020 | 6,173,568 | ||||||||
Per Unit Information (Basic/Diluted) | |||||||||||
Net income and comprehensive income(1) | $2.08/$2.06 | $0.35/$0.35 | $1.73/$1.71 | ||||||||
Net income and comprehensive income excluding fair value adjustments(2)(3) | $0.45/$0.45 | $0.44/$0.44 | $0.01/$0.01 | ||||||||
FFO(2)(3)(4)(5) | $0.52/$0.51 | $0.49/$0.49 | $0.03/$0.02 | ||||||||
FFO with adjustments(2)(3)(4) | $0.52/$0.52 | $0.49/$0.49 | $0.03/$0.03 | ||||||||
FFO with adjustments and Transactional FFO(2)(3)(4) | $0.52/$0.52 | $0.50/$0.50 | $0.02/$0.02 | ||||||||
FFO with adjustments excluding impact of SmartVMC West LP Class D units(2)(3)(4) | $0.54/$0.54 | $0.49/$0.49 | $0.05/$0.05 | ||||||||
Distributions declared | $0.463 | $0.463 | $— | ||||||||
Payout Ratio Information | |||||||||||
Payout Ratio to cash flows provided by operating activities | 80.1 | % | 100.2 | % | (20.1 | ) | % | ||||
Payout Ratio to ACFO(2)(3)(4)(5) | 96.7 | % | 93.5 | % | 3.2 | % | |||||
Payout Ratio to ACFO with adjustments(2)(3)(4) | 95.7 | % | 93.3 | % | 2.4 | % | |||||
Payout Ratio to ACFO with adjustments excluding SmartVMC West LP Class D distribution(2)(3)(4) | 92.9 | % | 93.3 | % | (0.4 | ) | % |
(1) | Represents a GAAP measure. |
(2) | Represents a non-GAAP measure. The Trust’s method of calculating non-GAAP measures may differ from other reporting issuers’ methods and, accordingly, may not be comparable. For additional information, please see “Non-GAAP Measures” in this Press Release. |
(3) | Includes the Trust’s proportionate share of equity accounted investments. |
(4) | See “Other Measures of Performance” in the Trust’s MD&A for a reconciliation of these measures to the nearest consolidated financial statement measure. |
(5) | The calculation of the Trust’s FFO and ACFO and related payout ratios, including comparative amounts, are financial metrics that were determined based on the REALpac White Paper on FFO issued in January 2022 and REALpac White Paper on ACFO issued in February 2019, respectively. Comparison with other reporting issuers may not be appropriate. The payout ratio to FFO and the payout ratio to ACFO are calculated as declared distributions divided by FFO and ACFO, respectively. |
(6) | Total Units outstanding include Trust Units and LP Units, including Units classified as liabilities. LP Units classified as equity in the consolidated financial statements are presented as non-controlling interests. |
(7) | The diluted weighted average includes the vested portion of the deferred units issued pursuant to the deferred unit plan. |
Operational Highlights
For the three months ended March 31, 2022, net income and comprehensive income (as noted in the table above) increased by $309.5 million as compared to the same period in 2021. This increase was primarily attributed to the following:
Partially offset by the following:
FFO Highlights
For the three months ended March 31, 2022, FFO increased by $8.0 million or 9.4% to $92.2 million. This increase was primarily attributed to:
Partially offset by:
For the three months ended March 31, 2022, FFO with adjustments increased by $8.6 million or 10.2% to $93.2 million as compared to the same period in 2021.
ACFO Highlights
For the three months ended March 31, 2022, ACFO was $85.2 million as further described in “Results of Operations” section in the Trust’s MD&A.
Development and Intensification Summary
The following table summarizes the 283 identified mixed-use, recurring rental income and development income initiatives, which are included in the Trust’s large development pipeline:
Underway | Active | Future | ||||||
Description | (Construction underway or expected to commence within next 2 years) | (Construction expected to commence within next 3–5 years) | (Construction expected to commence after 5 years) | Total | ||||
Number of projects in which the Trust has an ownership interest | ||||||||
Residential Rental | 21 | 23 | 60 | 104 | ||||
Seniors’ Housing | 4 | 9 | 14 | 27 | ||||
Self-storage | 11 | 8 | 17 | 36 | ||||
Office Buildings | — | 1 | 7 | 8 | ||||
Hotels | — | — | 3 | 3 | ||||
Subtotal – Recurring rental income initiatives | 36 | 41 | 101 | 178 | ||||
Condominium developments | 26 | 22 | 47 | 95 | ||||
Townhome developments | 3 | 2 | 5 | 10 | ||||
Subtotal – Development income initiatives | 29 | 24 | 52 | 105 | ||||
Total | 65 | 65 | 153 | 283 | ||||
Trust’s share of project area (in thousands of sq. ft.) | ||||||||
Recurring rental income initiatives | 4,000 | 4,500 | 12,000 | 20,500 | ||||
Development income initiatives | 6,500 | 3,600 | 10,000 | 20,100 | ||||
Total Trust’s share of project area (in thousands of sq. ft.) | 10,500 | 8,100 | 22,000 | 40,600 | ||||
Trust’s share of such estimated costs (in millions of dollars) | 5,500 | 4,300 | – (1) | 9,800 |
(1) | The Trust has not fully determined the costs attributable to future projects expected to commence after five years and as such they are not included in this table. |
As noted in the table above, the Trust is currently working on initiatives for the development of many properties, for which final municipal approvals have been obtained or are being actively pursued, including:
Proportionately Consolidated Balance Sheets (including the Trust’s interests in equity accounted investments)
The following table presents the proportionately consolidated balance sheets, which includes a reconciliation of the Trust’s proportionate share of equity accounted investments:
(in thousands of dollars) | March 31, 2022 | December 31, 2021 | ||||||||||
GAAP Basis | Proportionate Share Reconciliation | Total Proportionate Share(1) | GAAP Basis | Proportionate Share Reconciliation | Total Proportionate Share(1) | |||||||
Assets | ||||||||||||
Non-current assets | ||||||||||||
Investment properties | 10,244,143 | 869,542 | 11,113,685 | 9,847,078 | 837,451 | 10,684,529 | ||||||
Equity accounted investments | 643,633 | (643,633 | ) | — | 654,442 | (654,442 | ) | — | ||||
Mortgages, loans and notes receivable | 348,337 | (82,951 | ) | 265,386 | 345,089 | (69,576 | ) | 275,513 | ||||
Other financial assets | 114,530 | — | 114,530 | 97,148 | — | 97,148 | ||||||
Other assets | 82,411 | 7,178 | 89,589 | 80,940 | 7,465 | 88,405 | ||||||
Intangible assets | 44,806 | — | 44,806 | 45,139 | — | 45,139 | ||||||
11,477,860 | 150,136 | 11,627,996 | 11,069,836 | 120,898 | 11,190,734 | |||||||
Current assets | ||||||||||||
Residential development inventory | 28,325 | 76,138 | 104,463 | 27,399 | 67,828 | 95,227 | ||||||
Current portion of mortgages, loans and notes receivable | 87,250 | — | 87,250 | 71,947 | — | 71,947 | ||||||
Amounts receivable and other | 49,872 | 625 | 50,497 | 49,542 | (8,637 | ) | 40,905 | |||||
Prepaid expenses, deposits and deferred financing costs | 25,038 | 13,504 | 38,542 | 12,289 | 13,118 | 25,407 | ||||||
Cash and cash equivalents | 53,608 | 22,880 | 76,488 | 62,235 | 7,922 | 70,157 | ||||||
244,093 | 113,147 | 357,240 | 223,412 | 80,231 | 303,643 | |||||||
Total assets | 11,721,953 | 263,283 | 11,985,236 | 11,293,248 | 201,129 | 11,494,377 | ||||||
Liabilities | ||||||||||||
Non-current liabilities | ||||||||||||
Debt | 4,777,675 | 160,545 | 4,938,220 | 4,176,121 | 93,465 | 4,269,586 | ||||||
Other financial liabilities | 331,316 | — | 331,316 | 326,085 | — | 326,085 | ||||||
Other payables | 17,907 | — | 17,907 | 18,243 | — | 18,243 | ||||||
5,126,898 | 160,545 | 5,287,443 | 4,520,449 | 93,465 | 4,613,914 | |||||||
Current liabilities | ||||||||||||
Current portion of debt | 173,496 | 12,329 | 185,825 | 678,406 | 35,086 | 713,492 | ||||||
Accounts payable and current portion of other payables | 288,429 | 90,409 | 378,838 | 253,078 | 72,578 | 325,656 | ||||||
461,925 | 102,738 | 564,663 | 931,484 | 107,664 | 1,039,148 | |||||||
Total liabilities | 5,588,823 | 263,283 | 5,852,106 | 5,451,933 | 201,129 | 5,653,062 | ||||||
Equity | ||||||||||||
Trust Unit equity | 5,111,274 | — | 5,111,274 | 4,877,961 | — | 4,877,961 | ||||||
Non-controlling interests | 1,021,856 | — | 1,021,856 | 963,354 | — | 963,354 | ||||||
6,133,130 | — | 6,133,130 | 5,841,315 | — | 5,841,315 | |||||||
Total liabilities and equity | 11,721,953 | 263,283 | 11,985,236 | 11,293,248 | 201,129 | 11,494,377 |
(1) | This column contains non-GAAP measures because it includes figures that are recorded in equity accounted investments. The Trust’s method of calculating non-GAAP measures may differ from other reporting issuers’ methods and, accordingly, may not be comparable. For additional information, please see “Non-GAAP Measures” in this Press Release. |
Proportionately Consolidated Statements of Income and Comprehensive Income (including the Trust’s Interests in Equity Accounted Investments)
The following table presents the proportionately consolidated statements of income and comprehensive income, which include a reconciliation of the Trust’s proportionate share of equity accounted investments:
(in thousands of dollars) | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | ||||||||||||
GAAP Basis | Proportionate Share Reconciliation | Total Proportionate Share(1) | GAAP Basis | Proportionate Share Reconciliation | Total Proportionate Share(1) | Variance | ||||||||
Net rental income and other | ||||||||||||||
Rentals from investment properties and other | 202,523 | 6,492 | 209,015 | 198,838 | 5,031 | 203,869 | 5,146 | |||||||
Property operating costs and other | (82,109 | ) | (3,013 | ) | (85,122 | ) | (82,701 | ) | (2,253 | ) | (84,954 | ) | (168 | ) |
120,414 | 3,479 | 123,893 | 116,137 | 2,778 | 118,915 | 4,978 | ||||||||
Condominium sales revenue and other(2) | — | 6 | 6 | — | 165 | 165 | (159 | ) | ||||||
Condominium cost of sales and other | — | (31 | ) | (31 | ) | — | (99 | ) | (99 | ) | 68 | |||
— | (25 | ) | (25 | ) | — | 66 | 66 | (91 | ) | |||||
Net rental income and other | 120,414 | 3,454 | 123,868 | 116,137 | 2,844 | 118,981 | 4,887 | |||||||
Other income and expenses | ||||||||||||||
General and administrative expense, net | (6,867 | ) | (122 | ) | (6,989 | ) | (7,480 | ) | — | (7,480 | ) | 491 | ||
Earnings from equity accounted investments | (574 | ) | 574 | — | 15,318 | (15,318 | ) | — | — | |||||
Earnings from other(3) | 305 | (305 | ) | — | — | — | — | — | ||||||
Fair value adjustment on revaluation of investment properties | 271,345 | 446 | 271,791 | (18,759 | ) | 13,833 | (4,926 | ) | 276,717 | |||||
Gain on sale of investment properties | (122 | ) | — | (122 | ) | 10 | — | 10 | (132 | ) | ||||
Interest expense | (35,333 | ) | (1,391 | ) | (36,724 | ) | (37,201 | ) | (1,380 | ) | (38,581 | ) | 1,857 | |
Interest income | 2,960 | 8 | 2,968 | 3,602 | 22 | 3,624 | (656 | ) | ||||||
Supplemental costs | — | (2,664 | ) | (2,664 | ) | — | (1 | ) | (1 | ) | (2,663 | ) | ||
Fair value adjustment on financial instruments | 17,982 | — | 17,982 | (11,068 | ) | — | (11,068 | ) | 29,050 | |||||
Net income and comprehensive income | 370,110 | — | 370,110 | 60,559 | — | 60,559 | 309,551 |
(1) | This column contains non-GAAP measures because it includes figures that are recorded in equity accounted investments. The Trust’s method of calculating non-GAAP measures may differ from other reporting issuers’ methods and, accordingly, may not be comparable. For additional information, please see “Non-GAAP Measures” in this Press Release. |
(2) | Includes additional partnership profit and other revenues. |
(3) | Represents SmartVMC West’s operating results. |
FFO, FFO with adjustments, and FFO with adjustments and Transactional FFO
The following table reconciles net income and comprehensive income to FFO, FFO with adjustments, and FFO with adjustments and Transactional FFO:
(in thousands of dollars, except per Unit amounts) | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | Variance ($) | Variance (%) | ||||
Net income and comprehensive income | 370,110 | 60,559 | 309,551 | N/R(7) | ||||
Add (deduct): | ||||||||
Fair value adjustment on revaluation of investment properties(1) | (271,345 | ) | 18,759 | (290,104 | ) | N/R(7) | ||
Fair value adjustment on financial instruments(2) | (17,982 | ) | 11,068 | (29,050 | ) | N/R(7) | ||
Gain on derivative – TRS | 1,605 | 513 | 1,092 | N/R(7) | ||||
Gain on sale of investment properties | 122 | (254 | ) | 376 | N/R(7) | |||
Amortization of intangible assets | 333 | 333 | — | — | ||||
Amortization of tenant improvement allowance and other | 1,659 | 2,321 | (662 | ) | (28.5 | ) | ||
Distributions on Units classified as liabilities and vested deferred units recorded as interest expense | 1,721 | 1,500 | 221 | 14.7 | ||||
Salaries and related costs attributed to leasing activities(3) | 1,826 | 1,503 | 323 | 21.5 | ||||
Adjustments relating to equity accounted investments: | ||||||||
Rental revenue adjustment – tenant improvement amortization | 95 | 99 | (4 | ) | (4.0 | ) | ||
Indirect interest with respect to the development portion(4) | 1,873 | 1,706 | 167 | 9.8 | ||||
Fair value adjustment on revaluation of investment properties | (446 | ) | (13,833 | ) | 13,387 | (96.8 | ) | |
Adjustment for supplemental costs | 2,664 | 1 | 2,663 | N/R(7) | ||||
FFO(5) | 92,235 | 84,275 | 7,960 | 9.4 | ||||
Adjustments: | ||||||||
Other adjustments(6) | 915 | 236 | 679 | N/R(7) | ||||
FFO with adjustments(5) | 93,150 | 84,511 | 8,639 | 10.2 | ||||
Transactional FFO – gain on sale of land to co-owners | — | 1,587 | (1,587 | ) | N/R(7) | |||
FFO with adjustments and Transactional FFO(5) | 93,150 | 86,098 | 7,052 | 8.2 |
(1) | Fair value adjustment on revaluation of investment properties is described in “Investment Properties” in the Trust’s MD&A. |
(2) | Fair value adjustment on financial instruments comprises the following financial instruments: units classified as liabilities, Earnout options, DUP, EIP, LTIP, TRS, interest rate swap agreement(s), and loans receivable and Earnout options recorded in the same period in 2021. The significant assumptions made in determining the fair value and fair value adjustments for these financial instruments are more thoroughly described in the Trust’s unaudited interim condensed consolidated financial statements for the three months ended March 31, 2022. For details please see discussion in “Results of Operations” in the Trust’s MD&A. |
(3) | Salaries and related costs attributed to leasing activities of $1.8 million were incurred in the three months ended March 31, 2022 (three months ended March 31, 2021 – $1.5 million) and were eligible to be added back to FFO based on the definition of FFO, in the REALpac White Paper published in January 2022, which provided for an adjustment to incremental leasing expenses for the cost of salaried staff. This adjustment to FFO results in more comparability between Canadian publicly traded real estate entities that expensed their internal leasing departments and those that capitalized external leasing expenses. |
(4) | Indirect interest is not capitalized to properties under development and residential development inventory of equity accounted investments under IFRS but is a permitted adjustment under REALpac’s definition of FFO. The amount is based on the total cost incurred with respect to the development portion of equity accounted investments multiplied by the Trust’s weighted average cost of debt. |
(5) | Represents a non-GAAP measure. The Trust’s method of calculating non-GAAP measures may differ from other reporting issuers’ methods and, accordingly, may not be comparable. For additional information, please see “Non-GAAP Measures” in this Press Release. |
(6) | Represents adjustments relating to $0.9 million of costs associated with COVID-19 vaccination centres (three months ended March 31, 2021 – $0.2 million). |
(7) | N/R – Not representative. |
Net Operating Income
The following tables summarize NOI, related ratios and recovery ratios, provide additional information, and reflect the Trust’s proportionate share of equity accounted investments, the sum of which represent a non-GAAP measure:
(in thousands of dollars) | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | ||||||||||||
Trust portion excluding EAI | Equity Accounted Investments | Total Proportionate Share(1) | Trust portion excluding EAI | Equity Accounted Investments | Total Proportionate Share(1) | Variance(1) | ||||||||
(A) | (B) | (A–B) | ||||||||||||
Net base rent | 125,274 | 4,080 | 129,354 | 121,330 | 3,044 | 124,374 | 4,980 | |||||||
Property tax and insurance recoveries | 45,062 | 770 | 45,832 | 47,374 | 656 | 48,030 | (2,198 | ) | ||||||
Property operating cost recoveries | 27,324 | 921 | 28,245 | 24,408 | 868 | 25,276 | 2,969 | |||||||
Miscellaneous revenue | 2,315 | 721 | 3,036 | 2,841 | 463 | 3,304 | (268 | ) | ||||||
Rentals from investment properties | 199,975 | 6,492 | 206,467 | 195,953 | 5,031 | 200,984 | 5,483 | |||||||
Service and other revenues | 2,548 | — | 2,548 | 2,885 | — | 2,885 | (337 | ) | ||||||
Rentals from investment properties and other(2) | 202,523 | 6,492 | 209,015 | 198,838 | 5,031 | 203,869 | 5,146 | |||||||
Recoverable tax and insurance costs | (47,093 | ) | (783 | ) | (47,876 | ) | (49,356 | ) | (653 | ) | (50,009 | ) | 2,133 | |
Recoverable CAM costs | (29,993 | ) | (950 | ) | (30,943 | ) | (26,388 | ) | (807 | ) | (27,195 | ) | (3,748 | ) |
Property management fees and costs | (1,058 | ) | (210 | ) | (1,268 | ) | (289 | ) | (143 | ) | (432 | ) | (836 | ) |
Non-recoverable operating costs | (2,504 | ) | (1,019 | ) | (3,523 | ) | (1,474 | ) | (652 | ) | (2,126 | ) | (1,397 | ) |
ECL | 1,113 | (51 | ) | 1,062 | (2,309 | ) | 2 | (2,307 | ) | 3,369 | ||||
Property operating costs | (79,535 | ) | (3,013 | ) | (82,548 | ) | (79,816 | ) | (2,253 | ) | (82,069 | ) | (479 | ) |
Other expenses | (2,574 | ) | — | (2,574 | ) | (2,885 | ) | — | (2,885 | ) | 311 | |||
Property operating costs and other(2) | (82,109 | ) | (3,013 | ) | (85,122 | ) | (82,701 | ) | (2,253 | ) | (84,954 | ) | (168 | ) |
Net rental income and other | 120,414 | 3,479 | 123,893 | 116,137 | 2,778 | 118,915 | 4,978 | |||||||
Condominium sales revenue | — | 6 | 6 | — | 165 | 165 | (159 | ) | ||||||
Condominium cost of sales | — | (31 | ) | (31 | ) | — | (99 | ) | (99 | ) | 68 | |||
Net profit on condominium sales | — | (25 | ) | (25 | ) | — | 66 | 66 | (91 | ) | ||||
NOI(3) | 120,414 | 3,454 | 123,868 | 116,137 | 2,844 | 118,981 | 4,887 | |||||||
Net rental income and other as a percentage of net base rent (%) | 96.1 | 85.3 | 95.8 | 95.7 | 91.3 | 95.6 | 0.2 | |||||||
Net rental income and other as a percentage of rentals from investment properties (%) | 60.2 | 53.6 | 60.0 | 59.3 | 55.2 | 59.2 | 0.8 | |||||||
Net rental income and other as a percentage of rentals from investment properties and other (%) | 59.5 | 53.6 | 59.3 | 58.4 | 55.2 | 58.3 | 1.0 | |||||||
Recovery Ratio (including prior year adjustments) (%) | 93.9 | 97.6 | 94.0 | 94.8 | 104.4 | 95.0 | (1.0 | ) | ||||||
Recovery Ratio (excluding prior year adjustments) (%) | 93.8 | 95.4 | 93.9 | 95.1 | 104.8 | 95.3 | (1.4 | ) |
(1) | This column contains non-GAAP measures because it includes figures that are recorded in equity accounted investments – that are not explicitly disclosed and/or presented in the unaudited interim condensed consolidated financial statements for the three months ended March 31, 2022 and March 31, 2021. The Trust’s method of calculating non-GAAP measures may differ from other reporting issuers’ methods and, accordingly, may not be comparable. For additional information, please see “Non-GAAP Measures” in this Press Release. |
(2) | As reflected under the column 'Trust portion excluding EAI' in the table above, this amount represents a GAAP measure. |
(3) | Represents a non-GAAP measure. The Trust’s method of calculating non-GAAP measures may differ from other reporting issuers’ methods and, accordingly, may not be comparable. For additional information, please see “Non-GAAP Measures” in this Press Release. |
Same Properties NOI
NOI (a non-GAAP financial measure) from continuing operations represents: i) rentals from investment properties and other revenues less property operating costs and other expenses, and ii) net profit from condominium sales. Disclosing the NOI contribution from each of same properties, acquisitions, dispositions, Earnouts and Development activities highlights the impact each component has on aggregate NOI. Straight-line rent, lease terminations and other adjustments, and amortization of tenant incentives have been excluded from Same Properties NOI, as have NOI from acquisitions, dispositions, Earnouts and Development activities, and ECL. This has been done in order to more directly highlight the impact of changes in occupancy, rent uplift and productivity.
Three Months Ended | Three Months Ended | |||||||
(in thousands of dollars) | March 31, 2022 | March 31, 2021 | Variance ($) | Variance (%) | ||||
Net rental income | 120,440 | 116,137 | 4,303 | 3.7 | ||||
Service and other revenues | 2,548 | 2,885 | (337 | ) | (11.7 | ) | ||
Other expenses | (2,574 | ) | (2,885 | ) | 311 | 10.8 | ||
NOI(1) | 120,414 | 116,137 | 4,277 | 3.7 | ||||
NOI from equity accounted investments(1) | 3,454 | 2,844 | 610 | 21.4 | ||||
Total portfolio NOI before adjustments(1) | 123,868 | 118,981 | 4,887 | 4.1 | ||||
Adjustments: | ||||||||
Royalties | 235 | 201 | 34 | 16.9 | ||||
Straight-line rent | (77 | ) | 464 | (541 | ) | N/R(2) | ||
Lease termination and other adjustments | (242 | ) | (445 | ) | 203 | (45.6 | ) | |
Net profit on condominium sales | 25 | (66 | ) | 91 | N/R(2) | |||
Amortization of tenant incentives | 1,835 | 2,474 | (639 | ) | (25.8 | ) | ||
Total portfolio NOI after adjustments(1) | 125,644 | 121,609 | 4,035 | 3.3 | ||||
NOI sourced from: | ||||||||
Acquisitions | (1,078 | ) | 60 | (1,138 | ) | N/R(2) | ||
Dispositions | 5 | (570 | ) | 575 | (100.9 | ) | ||
Earnouts and Developments | (782 | ) | (68 | ) | (714 | ) | N/R(2) | |
Same Properties NOI(1) | 123,789 | 121,031 | 2,758 | 2.3 | ||||
Add back: Bad debt expense/ECL | (1,045 | ) | 2,336 | (3,381 | ) | N/R(2) | ||
Same Properties NOI excluding ECL(1) | 122,744 | 123,367 | (623 | ) | (0.5 | ) |
(1) | Represents a non-GAAP measure. The Trust’s method of calculating non-GAAP measures may differ from other reporting issuers’ methods and, accordingly, may not be comparable. For additional information, please see “Non-GAAP Measures” in this Press Release. |
(2) | N/R – Not representative. |
Adjusted EBITDA
The following table presents a reconciliation of net income and comprehensive income to Adjusted EBITDA:
Rolling 12 Months Ended | ||||||
(in thousands of dollars) | March 31, 2022 | March 31, 2021 | Variance ($) | |||
Net income and comprehensive income | 1,297,224 | 86,302 | 1,210,922 | |||
Add (deduct) the following items: | ||||||
Interest expense | 148,124 | 155,761 | (7,637 | ) | ||
Interest income | (11,699 | ) | (15,565 | ) | 3,866 | |
Yield maintenance costs | — | 11,954 | (11,954 | ) | ||
Amortization of equipment and intangible assets | 3,769 | 4,125 | (356 | ) | ||
Amortization of tenant improvements | 7,223 | 8,033 | (810 | ) | ||
Fair value adjustments | (950,796 | ) | 241,449 | (1,192,245 | ) | |
Fair value adjustment on TRS | 6,734 | 513 | 6,221 | |||
Adjustment for supplemental costs | 5,281 | 1,634 | 3,647 | |||
Gain on sale of investment properties | 106 | (451 | ) | 557 | ||
Gain on sale of land to co-owners (Transactional FFO) | 336 | 2,332 | (1,996 | ) | ||
Acquisition-related costs | 2,791 | 166 | 2,625 | |||
Adjusted EBITDA(1) | 509,093 | 496,253 | 12,840 | |||
Adjusted EBITDA(1) | 509,093 | 496,253 | 12,840 | |||
Less: Condominium closing profits | (20,315 | ) | (47,865 | ) | 27,550 | |
Add: Expected credit loss | 421 | 32,956 | (32,535 | ) | ||
Adjusted EBITDA excluding condominium closing profits and ECL(1) | 489,199 | 481,344 | 7,855 |
(1) | Represents a non-GAAP measure. The Trust’s method of calculating non-GAAP measures may differ from other reporting issuers’ methods and, accordingly, may not be comparable. For additional information, please see “Non-GAAP Measures” in this Press Release. |
ACFO and ACFO with adjustments
The following table reconciles cash flows provided by operating activities to ACFO and ACFO with adjustments:
(in thousands of dollars) | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | Variance ($) | Variance (%) | ||||
Cash flows provided by operating activities | 102,819 | 79,485 | 23,334 | 29.4 | ||||
Adjustments to working capital items that are not indicative of sustainable cash available for distribution(1) | (4,389 | ) | 1,999 | (6,388 | ) | N/R(2) | ||
Distributions on Units classified as liabilities and vested deferred units recorded as interest expense | 1,721 | 1,500 | 221 | 14.7 | ||||
Expenditures on direct leasing costs and tenant incentives | 2,439 | 1,061 | 1,378 | N/R(2) | ||||
Expenditures on tenant incentives for properties under development | 1,680 | 272 | 1,408 | N/R(2) | ||||
Actual sustaining capital expenditures | (2,175 | ) | (1,361 | ) | (814 | ) | 59.8 | |
Actual sustaining leasing commissions | (510 | ) | (604 | ) | 94 | (15.6 | ) | |
Actual sustaining tenant improvements | (1,948 | ) | (457 | ) | (1,491 | ) | N/R(2) | |
Non-cash interest expense, net of other financing costs | (16,205 | ) | (1,593 | ) | (14,612 | ) | N/R(2) | |
Non-cash interest income | (839 | ) | 722 | (1,561 | ) | N/R(2) | ||
Gain on sale of land to co-owners | — | 1,587 | (1,587 | ) | N/R(2) | |||
Distributions from equity accounted investments | (426 | ) | (608 | ) | 182 | (29.9 | ) | |
Adjustments relating to equity accounted investments: | ||||||||
Cash flows from operating activities including working capital adjustments | 1,122 | 1,551 | (429 | ) | (27.7 | ) | ||
Notional interest capitalization(3) | 1,873 | 1,706 | 167 | 9.8 | ||||
Actual sustaining capital and leasing expenditures | (93 | ) | (74 | ) | (19 | ) | 25.7 | |
Non-cash interest expense | 85 | (33 | ) | 118 | N/R(2) | |||
ACFO(4) | 85,154 | 85,153 | 1 | 0.0 | ||||
Other adjustments(5) | 915 | 236 | 679 | N/R(2) | ||||
ACFO with adjustments(4) | 86,069 | 85,389 | 680 | 0.8 | ||||
ACFO(4) | 85,154 | 85,153 | 1 | 0.0 | ||||
Distributions declared | 82,339 | 79,660 | 2,679 | 3.4 | ||||
Surplus of ACFO over distributions declared | 2,815 | 5,493 | (2,678 | ) | (48.8 | ) | ||
Payout Ratio Information: | ||||||||
Payout Ratio to ACFO(4) | 96.7 | % | 93.5 | % | N/A | 3.2 | % | |
Payout Ratio to ACFO with adjustments(4) | 95.7 | % | 93.3 | % | N/A | 2.4 | % | |
Payout Ratio to ACFO excluding SmartVMC West LP Class D distribution(4)(6) | 93.9 | % | 93.5 | % | N/A | 0.4 | % | |
Payout Ratio to ACFO with adjustments excluding SmartVMC West LP Class D distribution(4)(6) | 92.9 | % | 93.3 | % | N/A | (0.4 | )% |
(1) | Adjustments to working capital items include, but are not limited to, changes in prepaid expenses and deposits, accounts receivables, accounts payables and other working capital items that are not indicative of sustainable cash available for distribution. |
(2) | N/R – Not representative. |
(3) | See the “Indirect interest with respect to the development portion” as presented in the “FFO, FFO with adjustments, and FFO with adjustments and Transactional FFO” subsection above for more information. |
(4) | Represents a non-GAAP measure. The Trust’s method of calculating non-GAAP measures may differ from other reporting issuers’ methods and, accordingly, may not be comparable. For additional information, please see “Non-GAAP Measures” in this Press Release. |
(5) | Represents adjustments relating to $0.9 million of costs associated with COVID-19 vaccination centres (three months ended March 31, 2021 – $0.2 million). |
(6) | For the three months ended March 31, 2022, excludes $2.7 million of distributions declared in connection with SmartVMC West LP Class D units (March 31, 2021 – $nil). |
Non-GAAP Measures
The non-GAAP measures used in this Press Release, including but not limited FFO per Unit, Unencumbered Assets, NOI, Debt to Aggregate Assets, Interest Coverage Ratio, Adjusted Debt to Adjusted EBITDA, Unsecured/Secured Debt Ratio, FFO, FFO with adjustments, FFO per Unit with adjustments, Transactional FFO, ACFO, Payout Ratio to ACFO, Same Properties NOI, Investment properties – non-GAAP, Debt – non-GAAP, Debt to Gross Book Value, Unencumbered Assets to Unsecured Debt, Weighted Average Interest Rate, Total Proportionate Share, do not have any standardized meaning prescribed by International Financial Reporting Standards (“IFRS”) and are therefore unlikely to be comparable to similar measures presented by other issuers. Additional information regarding these non-GAAP measures is available in the Management’s Discussion and Analysis of the Trust for the three months ended March 31, 2022, dated May 11, 2022 (the “MD&A), and is incorporated by reference. The information is found in the “Presentation of Certain Terms Including Non-GAAP Measures” and “Non-GAAP Measures” sections of the MD&A, which is available on SEDAR at www.sedar.com. Reconciliations of non-GAAP financial measures to the most directly comparable IFRS measures are found in the following sections of this Press Release: “Proportionately Consolidated Balance Sheets (including the Trust’s interests in equity accounted investments)”, “Proportionately Consolidated Statements of Income and Comprehensive Income (including the Trust’s Interests in Equity Accounted Investments)”, “FFO, FFO with adjustments, and FFO with adjustments and Transactional FFO”, “Net Operating Income”, “Same Properties NOI”, “Adjusted EBITDA” and, “ACFO and ACFO with adjustments”.
Full reports of the financial results of the Trust for the three months ended March 31, 2022 are outlined in the unaudited interim condensed consolidated financial statements and the related MD&A of the Trust for the three months ended March 31, 2022, which are available on SEDAR at www.sedar.com.
Conference Call
SmartCentres will hold a conference call on Thursday, May 12, 2022 at 3:30 p.m. (ET). Participating on the call will be members of SmartCentres’ senior management.
Investors are invited to access the call by dialing 1-855-353-9183 and then keying in the participant access code 20103#. You will be required to identify yourself and the organization on whose behalf you are participating.
A recording of this call will be made available Thursday, May 12, 2022 beginning at 8:30 p.m. (ET) through to 8:30 p.m. (ET) on Thursday, May 19, 2022. To access the recording, please call 1-855-201-2300, enter the conference access code 20103# and then key in the playback access code 0112189#.
About SmartCentres
SmartCentres Real Estate Investment Trust is one of Canada’s largest fully integrated REITs, with a best-in-class portfolio featuring 174 strategically located properties in communities across the country. SmartCentres has approximately $11.7 billion in assets and owns 34.7 million square feet of income producing value-oriented retail and first-class office space with 97.2% occupancy, on 3,500 acres of owned land across Canada.
SmartCentres continues to focus on enhancing the lives of Canadians by planning and developing complete, connected, mixed-use communities on its existing retail properties. Project 512, a publicly announced $15.2 billion intensification program ($9.8 billion at SmartCentres' share) represents the REIT’s current major development focus on which construction is expected to commence within the next five years. This intensification program consists of rental apartments, condos, seniors’ residences and hotels, to be developed under the SmartLiving banner, and retail, office, and storage facilities, to be developed under the SmartCentres banner.
SmartCentres' intensification program is expected to produce an additional 58.6 million square feet (40.6 million square feet at SmartCentres’ share) of space, 28.6 million square feet (18.6 million square feet at SmartCentres’ share) of which has or will commence construction within the next five years. From shopping centres to city centres, SmartCentres is uniquely positioned to reshape the Canadian urban and urban-suburban landscape.
Included in this intensification program is the Trust’s share of SmartVMC which, when completed, is expected to include approximately 20.0 million square feet of mixed-use space in Vaughan, Ontario. Construction of the first five sold-out phases of Transit City Condominiums that represent 2,789 residential units continues to progress. Final closings of the first three phases of Transit City Condominiums began ahead of budget and ahead of schedule in August 2020 and all 1,741 units in these phases have now closed. In addition, the 22 sold-out townhomes that complete this phase of the project, are expected to close in 2022. The fourth and fifth sold-out phases representing 1,026 units are currently under construction and are expected to close in 2023.
Certain statements in this Press Release are "forward-looking statements" that reflect management's expectations regarding the Trust's future growth, results of operations, performance and business prospects and opportunities. More specifically, certain statements including, but not limited to, statements related to SmartCentres’ expected or planned development plans and joint venture projects, including the described type, scope, costs and other financial metrics and the expected timing of construction and condominium closings and statements that contain words such as "could", "should", "can", "anticipate", "expect", "believe", "will", "may" and similar expressions and statements relating to matters that are not historical facts, constitute "forward-looking statements". These forward-looking statements are presented for the purpose of assisting the Trust's Unitholders and financial analysts in understanding the Trust's operating environment and may not be appropriate for other purposes. Such forward-looking statements reflect management's current beliefs and are based on information currently available to management.
However, such forward-looking statements involve significant risks and uncertainties. A number of factors could cause actual results to differ materially from the results discussed in the forward-looking statements, including risks associated with potential acquisitions not being completed or not being completed on the contemplated terms, public health crises such as the COVID-19 pandemic, real property ownership and development, debt and equity financing for development, interest and financing costs, construction and development risks, ability to obtain commercial and municipal consents for development. These risks and others are more fully discussed under the heading “Risks and Uncertainties” and elsewhere in SmartCentres’ most recent Management’s Discussion and Analysis, as well as under the heading “Risk Factors” in SmartCentres’ most recent annual information form. Although the forward-looking statements contained in this Press Release are based on what management believes to be reasonable assumptions, SmartCentres cannot assure investors that actual results will be consistent with these forward-looking statements. The forward-looking statements contained herein are expressly qualified in their entirety by this cautionary statement. These forward-looking statements are made as at the date of this Press Release and SmartCentres assumes no obligation to update or revise them to reflect new events or circumstances unless otherwise required by applicable securities legislation.
Material factors or assumptions that were applied in drawing a conclusion or making an estimate set out in the forward-looking information may include, but are not limited to: a stable retail environment; relatively low and stable interest costs; a continuing trend toward land use intensification, including residential development in urban markets and continued growth along transportation nodes; access to equity and debt capital markets to fund, at acceptable costs, future capital requirements and to enable our refinancing of debts as they mature; that requisite consents for development will be obtained in the ordinary course, construction and permitting costs consistent with the past year and recent inflation trends.
For more information, please visit www.smartcentres.com or contact:
Mitchell Goldhar | Peter Sweeney |
Executive Chairman and CEO | Chief Financial Officer |
SmartCentres | SmartCentres |
(905) 326-6400 ext. 7674 | (905) 326-6400 ext. 7865 |
[email protected] | [email protected] |
The Toronto Stock Exchange neither approves nor disapproves of the contents of this Press Release.
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