TORONTO, Aug. 12, 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 six months ended June 30, 2021.
HIGHLIGHTS:
| � | Three Months Ended | Six Months Ended | ||||||||||
| June 30, | June 30, | |||||||||||
| 2021 | 2020 | 2021 | 2020 (5) | |||||||||
| Portfolio Performance | ||||||||||||
| Overall portfolio occupancy (1) | 97.2 | % | 98.0 | % | ||||||||
| Overall portfolio net Average Monthly Rents (1) (2) | $ | 1,118 | $ | 1,104 | ||||||||
| Operating revenues (000s) | $ | 228,856 | $ | 219,925 | $ | 456,362 | $ | 435,985 | ||||
| Net rental income (“NOI”) (000s) | $ | 151,786 | $ | 143,233 | $ | 298,438 | $ | 281,291 | ||||
| NOI Margin | 66.3 | % | 65.1 | % | 65.4 | % | 64.5 | % | ||||
| Financial Performance | ||||||||||||
| Normalized Funds from Operations (“NFFO”) (000s) (3) | $ | 100,080 | $ | 94,712 | $ | 196,022 | $ | 187,859 | ||||
| NFFO per Unit basic (3) | $ | 0.579 | $ | 0.555 | $ | 1.135 | $ | 1.102 | ||||
| Cash distributions per Unit | $ | 0.345 | $ | 0.345 | $ | 0.690 | $ | 0.690 | ||||
| FFO payout ratio (3) | 61.4 | % | 62.8 | % | 62.2 | % | 63.3 | % | ||||
| NFFO payout ratio (3) | 59.8 | % | 62.4 | % | 61.0 | % | 62.8 | % | ||||
| Liquidity and Leverage | ||||||||||||
| Total debt to gross book value (1) | 36.37 | % | 36.02 | % | ||||||||
| Total debt to gross historical cost (1) | 51.77 | % | 48.99 | % | ||||||||
| Weighted average mortgage interest rate (1) | 2.53 | % | 2.76 | % | ||||||||
| Weighted average mortgage term (years) (1) | 5.77 | 4.99 | ||||||||||
| Debt service coverage (times) (4) | 2.00 | 1.99 | ||||||||||
| Interest coverage (times) (4) | 3.99 | 3.91 | ||||||||||
| Available liquidity Acquisition and Operating Facility (000s) (1) | $ | 250,676 | $ | 124,772 | ||||||||
| Cash and cash equivalents (000s) (1) | $ | 122,542 | $ | 213,455 | ||||||||
(1) As at June 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 | Six Months Ended | |||||||||
| June 30, | June 30, | |||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||
| Other Measures | ||||||||||
| Weighted average number of Units – basic (000s) | 172,950 | 170,588 | 172,712 | 170,397 | ||||||
| Number of residential suites and sites acquired | 1,659 | | 1,659 | 1,724 | ||||||
| Number of suites disposed | | | | | ||||||
| Closing price of Trust Units on the TSX (1) | $ | 58.12 | $ | 48.59 | ||||||
| Market capitalization (millions) (1) | $ | 10,095 | $ | 8,357 | ||||||
(1) As at June 30.
SUMMARY OF Q2 – 2021 RESULTS OF OPERATIONS
Key Transactions and Events
Strong Operating Results
Strong and Flexible Balance Sheet
“We continued to perform well through the second quarter and first six months of 2021 with solid revenue growth and strong operating performance, commented Mark Kenney, President and CEO. Looking ahead, as the COVID-19 pandemic eases in our markets, we believe we will see another record year as we benefit from increased immigration, businesses re-opening and a return to in-person learning, and the contribution from the significant increase in the size and scale of our property portfolio over the last few months.”
OPERATIONAL AND FINANCIAL RESULTS
Portfolio Net Average Monthly Rents
| Total Portfolio | Properties Owned Prior to June 30, 2020 | |||||||||||||||||||
| As at June 30, | 2021 | 2020 | 2021 | 2020 | ||||||||||||||||
| AMR | Occ. % | AMR | Occ. % | AMR | Occ. % | AMR | Occ. % | |||||||||||||
| Average residential suites | $ | 1,283 | 97.4 | $ | 1,274 | 98.6 | $ | 1,291 | 97.5 | $ | 1,275 | 98.6 | ||||||||
| Average MHC sites | $ | 395 | 96.0 | $ | 386 | 95.8 | $ | 396 | 95.9 | $ | 386 | 95.8 | ||||||||
| Overall portfolio average | $ | 1,118 | 97.2 | $ | 1,104 | 98.0 | $ | 1,119 | 97.2 | $ | 1,104 | 98.1 | ||||||||
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, British Columbia, and Ontario, slightly offset by an increase in vacancy seen in various provinces, and a currently weakening Alberta market, both due to economic impacts related to the COVID-19 pandemic and (ii) rental increases on renewals. Weighted average gross rent per square foot for Canadian residential suites was approximately $1.65 as at June 30, 2021.
Canadian Portfolio
| For the Three Months Ended June 30, | 2021 | 2020 | ||||
| Change in monthly rent | Turnovers and Renewals (1) | Change in monthly rent | Turnovers and Renewals (1) | |||
| $ | % | % | $ | % | % | |
| Suite turnovers | 68.2 | 4.9 | 5.1 | 104.9 | 7.9 | 4.0 |
| Lease renewals | 16.1 | 1.4 | 9.8 | 0.0 | 0.0 | 21.6 |
| Weighted average of turnovers and renewals | 33.9 | 2.6 | 16.4 | 1.2 | ||
| For the Six Months Ended June 30, | 2021 | 2020 | ||||
| Change in monthly rent | Turnovers and Renewals (1) | Change in monthly rent | Turnovers and Renewals (1) | |||
| $ | % | % | $ | % | % | |
| Suite turnovers | 58.9 | 4.2 | 9.4 | 137.2 | 10.4 | 7.2 |
| Lease renewals | 14.4 | 1.2 | 17.8 | 12.5 | 1.0 | 39.0 |
| Weighted average of turnovers and renewals | 29.8 | 2.2 | 31.9 | 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 June 30, | 2021 | 2020 | ||||
| Change in monthly rent | Turnovers and Renewals (1) | Change in monthly rent | Turnovers and Renewals (1) | |||
| | % | % | | % | % | |
| Suite turnovers | 143.0 | 16.9 | 3.6 | 92.6 | 11.5 | 3.4 |
| Lease renewals | | | | | | |
| Weighted average of turnovers and renewals | 143.0 | 16.9 | 92.6 | 11.5 | ||
| For the Six Months Ended June 30, | 2021 | 2020 | ||||
| Change in monthly rent | Turnovers and Renewals (1) | Change in monthly rent | Turnovers and Renewals (1) | |||
| | % | % | | % | % | |
| Suite turnovers | 130.0 | 15.2 | 7.4 | 77.7 | 9.5 | 7.5 |
| Lease renewals | | | | | | |
| Weighted average of turnovers and renewals | 130.0 | 15.2 | 77.7 | 9.5 | ||
(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
CAPREITs annualized net rental revenue run-rate as at June 30, 2021 grew to $886.8 million, up 5.5% from $840.8 million. Net rental revenue net of dispositions for the 12 months ended June 30, 2021 was $849.4 million (June 30, 2020 $798.0 million). For further discussion regarding forecasts and guidance as a result of the COVID-19 pandemic, please see Section II of the 2021 Q2 MD&A under The COVID-19 Pandemic for further details.
NOI
Stabilized properties for the three and six months ended June 30, 2021 are defined as all properties owned by CAPREIT continuously since December 31, 2019, and therefore do not take into account the impact on performance of acquisitions or dispositions completed during 2021 and 2020.
| ($ Thousands) | Total NOI | Stabilized NOI | |||||||||||||||||||||
| For the Three Months Ended June 30, | 2021 | 2020 | % (1) | 2021 | 2020 | % (1) | |||||||||||||||||
| Total operating revenues | $ | 228,856 | $ | 219,925 | 4.1 | $ | 214,511 | $ | 212,795 | 0.8 | |||||||||||||
| Operating expenses | |||||||||||||||||||||||
| Realty taxes | (21,840 | ) | (20,724 | ) | 5.4 | (20,162 | ) | (20,067 | ) | 0.5 | |||||||||||||
| Utilities | (15,138 | ) | (15,382 | ) | (1.6 | ) | (13,915 | ) | (14,644 | ) | (5.0 | ) | |||||||||||
| Other (2) | (40,092 | ) | (40,586 | ) | (1.2 | ) | (37,427 | ) | (39,124 | ) | (4.3 | ) | |||||||||||
| Total operating expenses | $ | (77,070 | ) | $ | (76,692 | ) | 0.5 | $ | (71,504 | ) | $ | (73,835 | ) | (3.2 | ) | ||||||||
| NOI | $ | 151,786 | $ | 143,233 | 6.0 | $ | 143,007 | $ | 138,960 | 2.9 | |||||||||||||
| NOI margin | 66.3 | % | 65.1 | % | 66.7 | % | 65.3 | % | |||||||||||||||
| ($ Thousands) | Total NOI | Stabilized NOI | ||||||||||||||||||||
| For the Six Months Ended June 30, | 2021 | 2020 | % (1) | 2021 | 2020 | % (1) | ||||||||||||||||
| Total operating revenues | $ | 456,362 | $ | 435,985 | 4.7 | $ | 429,950 | $ | 424,331 | 1.3 | ||||||||||||
| Operating expenses | ||||||||||||||||||||||
| Realty taxes | (43,650 | ) | (40,592 | ) | 7.5 | (40,825 | ) | (39,391 | ) | 3.6 | ||||||||||||
| Utilities | (35,312 | ) | (34,125 | ) | 3.5 | (33,047 | ) | (32,890 | ) | 0.5 | ||||||||||||
| Other (2) | (78,962 | ) | (79,977 | ) | (1.3 | ) | (74,318 | ) | (77,656 | ) | (4.3 | ) | ||||||||||
| Total operating expenses | $ | (157,924 | ) | $ | (154,694 | ) | 2.1 | $ | (148,190 | ) | $ | (149,937 | ) | (1.2 | ) | |||||||
| NOI | $ | 298,438 | $ | 281,291 | 6.1 | $ | 281,760 | $ | 274,394 | 2.7 | ||||||||||||
| NOI margin | 65.4 | % | 64.5 | % | 65.5 | % | 64.7 | % | ||||||||||||||
(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 six months ended June 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 other operating expenses for the three months ended June 30, 2021 decreased primarily due to lower utilities, bad debt, and R&M costs, and partially offset by the higher advertising costs and insurance costs. The stabilized other operating expenses for the six months ended June 30, 2021 decreased primarily due to lower R&M costs and lower bad debt, partially offset by higher realty taxes and higher insurance costs driven by overall increases in insurance rates. 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 increased advertising costs were also due to the COVID-19 pandemic in an effort to increase occupancies in some weakened markets. The increased realty taxes were primarily due to increased property assessment values in Québec, British Columbia and Alberta.
NOI Margin
For the three months ended June 30, 2021, NOI margin for the total portfolio increased to 66.3% compared to 65.1% for the same period last year. For the six months ended June 30, 2021, NOI margin for the total portfolio increased to 65.4% compared to 64.5% for the same period last year.
NON-IFRS FINANCIAL PERFORMANCE
For the three months ended June 30, 2021, basic NFFO per Unit increased by 4.3% compared to the same period last year, despite an approximate 1.4% increase in the weighted average number of units outstanding. For the six months ended June 30, 2021, basic NFFO per Unit increased by 3.0% compared to the same period last year, despite an approximate 1.4% 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 six months ended June 30, 2021, CAPREIT made property capital investments (excluding head office assets) of $123.0 million compared to $77.2 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 July 5, 2021, CAPREIT completed the acquisition of two MHC properties containing 342 sites in the town of Lakeshore close to Windsor, Ontario. CAPREIT paid approximately $20.6 million for the two properties, funded by cash and the assumption of a $8.6 million mortgage maturing in October 2025.
Subsequent to period-end, ERES extended the maturity of both the ERES Credit Facility and the ERES Bridge Facility, each originally maturing on July 8, 2021, for an additional period ending on September 10, 2021, under the same terms and conditions.
On August 6, 2021, IRES served a notice of termination of the investment management agreement (“IMA”) and exercised its obligation to acquire IRES Fund Management Limited for 1, effective January 31, 2022 and subject to approval from the Central Bank of Ireland. In the interim, CAPREIT will continue to provide all the services pursuant to the current IMA and services agreement on their existing terms.
On August 12, 2021, the Board of Trustees approved an increase in monthly distributions to $0.1208 per Unit, or $1.45 per Unit on an annualized basis. The increase is effective with the August 2021 distribution payable on September 15, 2021 to Unitholders of record as at August 31, 2021.
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 six months ended June 30, 2021, which have been filed on SEDAR and can be viewed at www.sedar.com under CAPREITs profile or on CAPREITs 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 Friday, August 13, 2021 at 9:00 am EST. The telephone numbers for the conference call are: Local/International: (778) 560-2627, North American Toll Free: (833) 714-0874. The conference access code is 8869205#.
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 Canadas largest publicly-traded provider of quality rental housing. CAPREIT currently owns or has interests in, and manages, approximately 69,300 residential apartment suites, townhomes and manufactured housing community sites well-located across Canada, in the Netherlands and Ireland. 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 August 12, 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 CAPREITs 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 CAPREITs 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 CAPREITs 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 CAPREITs financial outlook regarding capital investments, assumptions respecting projected costs of construction and materials, availability of trades, the cost and availability of financing, CAPREITs 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 CAPREITs control, that may cause CAPREITs or the industrys 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 CAPREITs 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 CAPREITs Management will prove to be correct. These risks and uncertainties are more fully described in regulatory filings, including CAPREITs Annual Information Form, which can be obtained on SEDAR at www.sedar.com, under CAPREITs profile, as well as under Risks and Uncertainties section of the MD&A released on August 12, 2021. The information in this press release is based on information available to management as of August 12, 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) | June 30, 2021 | December 31, 2020 | ||||
| Investment properties | $ | 15,813,126 | $ | 15,000,591 | ||
| Total assets | 16,341,570 | 15,499,131 | ||||
| Mortgages payable | 5,521,198 | 5,401,202 | ||||
| Bank indebtedness | 433,808 | 118,553 | ||||
| Total liabilities | 6,664,572 | 6,225,429 | ||||
| Unitholders’ equity | 9,676,998 | 9,273,702 | ||||
Condensed Income Statements
| Three Months Ended | Six Months Ended | |||||||||||||||
| June 30, | June 30, | |||||||||||||||
| ($ Thousands, except per Unit amounts) | ||||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
| Operating revenues | ||||||||||||||||
| Revenue from investment properties | $ | 228,856 | $ | 219,925 | $ | 456,362 | $ | 435,985 | ||||||||
| Operating expenses | ||||||||||||||||
| Realty taxes | (21,840 | ) | (20,724 | ) | (43,650 | ) | (40,592 | ) | ||||||||
| Property operating costs | (55,230 | ) | (55,968 | ) | (114,274 | ) | (114,102 | ) | ||||||||
| Total operating expenses | (77,070 | ) | (76,692 | ) | (157,924 | ) | (154,694 | ) | ||||||||
| Net rental income | 151,786 | 143,233 | 298,438 | 281,291 | ||||||||||||
| Trust expenses | (13,120 | ) | (10,291 | ) | (26,696 | ) | (21,655 | ) | ||||||||
| Unit-based compensation expense | (4,433 | ) | (6,045 | ) | (8,919 | ) | (793 | ) | ||||||||
| Fair value adjustments of investment properties | 364,567 | (4,053 | ) | 357,488 | (35,972 | ) | ||||||||||
| Realized loss on disposition of investment properties | | | | (753 | ) | |||||||||||
| Amortization of property, plant and equipment | (2,069 | ) | (1,953 | ) | (4,081 | ) | (3,724 | ) | ||||||||
| Fair value adjustments of Exchangeable LP Units | (1,419 | ) | | (2,706 | ) | | ||||||||||
| (Loss) gain on non-controlling interest | (4,038 | ) | (34,650 | ) | (19,826 | ) | 35,029 | |||||||||
| Fair value adjustments of investments | 3,827 | 3,783 | 6,871 | (3,087 | ) | |||||||||||
| Gain (loss) on derivative financial instruments | 4,203 | (7,447 | ) | 34,725 | (958 | ) | ||||||||||
| Interest and other financing costs | (39,417 | ) | (36,911 | ) | (76,047 | ) | (71,707 | ) | ||||||||
| (Loss) gain on foreign currency translation | 165 | 22,116 | (769 | ) | (31,692 | ) | ||||||||||
| Other income (loss) | 8,046 | (3,204 | ) | 13,249 | 3,739 | |||||||||||
| Net income before income taxes | 468,098 | 64,578 | 571,727 | 149,718 | ||||||||||||
| Current and deferred income tax expense | (14,537 | ) | (3,316 | ) | (14,104 | ) | (8,823 | ) | ||||||||
| Net income | $ | 453,561 | $ | 61,262 | $ | 557,623 | $ | 140,895 | ||||||||
| Other comprehensive (loss) income | $ | (4,731 | ) | $ | (23,983 | ) | $ | (81,205 | ) | $ | 62,053 | |||||
| Comprehensive income | $ | 448,830 | $ | 37,279 | $ | 476,418 | $ | 202,948 | ||||||||
SELECTED NON-IFRS FINANCIAL MEASURES
A reconciliation of net income to NFFO is as follows:
| ($ Thousands, except per Unit amounts) | ||||||||||||||||
| Three Months Ended | Six Months Ended | |||||||||||||||
| June 30, | June 30, | |||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
| Net income | $ | 453,561 | $ | 61,262 | $ | 557,623 | $ | 140,895 | ||||||||
| Adjustments: | ||||||||||||||||
| Fair value adjustments of investment properties | (364,567 | ) | 4,053 | (357,488 | ) | 35,972 | ||||||||||
| Realized loss on disposition of investment properties | | | | 753 | ||||||||||||
| Remeasurement of Exchangeable LP Units | 1,419 | | 2,706 | | ||||||||||||
| Remeasurement of investments | (3,827 | ) | (3,783 | ) | (6,871 | ) | 3,087 | |||||||||
| Remeasurement of unit-based compensation liabilities | 2,490 | 4,177 | 5,171 | (2,762 | ) | |||||||||||
| Interest on Exchangeable LP Units | 114 | | 229 | | ||||||||||||
| Deferred income tax expense (1) | 13,486 | 2,956 | 12,349 | 8,037 | ||||||||||||
| Loss (gain) on foreign currency translation | (165 | ) | (22,116 | ) | 769 | 31,692 | ||||||||||
| FFO adjustment for income from investment in associate | (2,211 | ) | 7,690 | (2,211 | ) | 7,690 | ||||||||||
| Gain (loss) on derivative financial instruments | (4,203 | ) | 7,447 | (34,725 | ) | 958 | ||||||||||
| Fair value mark-to-market adjustment on ERES units held by non-controlling unitholders | 843 | 31,512 | 13,422 | (41,181 | ) | |||||||||||
| Distributions on ERES units held by non-controlling unitholders | 3,195 | 3,138 | 6,404 | 6,152 | ||||||||||||
| Net FFO impact attributable to ERES units held by non-controlling unitholders (2) | (4,396 | ) | (3,774 | ) | (8,679 | ) | (7,873 | ) | ||||||||
| Amortization of property, plant and equipment | 2,069 | 1,953 | 4,081 | 3,724 | ||||||||||||
| Lease principal repayment | (305 | ) | (459 | ) | (593 | ) | (575 | ) | ||||||||
| FFO | $ | 97,503 | $ | 94,056 | $ | 192,187 | $ | 186,569 | ||||||||
| Adjustments: | ||||||||||||||||
| Amortization of losses from (AOCL) AOCI to interest and other financing costs | 619 | 633 | 1,239 | 1,267 | ||||||||||||
| Net mortgage prepayment cost | 165 | 23 | 165 | 23 | ||||||||||||
| Other employee costs (6) | 1,532 | | 1,532 | | ||||||||||||
| Acquisition research costs (3) | 261 | | 899 | | ||||||||||||
| NFFO | $ | 100,080 | $ | 94,712 | $ | 196,022 | $ | 187,859 | ||||||||
| NFFO per unit basic | $ | 0.579 | $ | 0.555 | $ | 1.135 | $ | 1.102 | ||||||||
| NFFO per unit diluted | $ | 0.577 | $ | 0.554 | $ | 1.131 | $ | 1.099 | ||||||||
| Total distributions declared (4) | $ | 59,880 | $ | 59,077 | $ | 119,618 | $ | 118,019 | ||||||||
| NFFO payout ratio (5) | 59.8 | % | 62.4 | % | 61.0 | % | 62.8 | % | ||||||||
| Net distributions paid (4) | $ | 42,118 | $ | 45,276 | $ | 83,042 | $ | 85,175 | ||||||||
| Excess NFFO over net distributions paid | $ | 57,962 | $ | 49,436 | $ | 112,980 | $ | 102,684 | ||||||||
| Effective NFFO payout ratio (6) | 42.1 | % | 47.8 | % | 42.4 | % | 45.3 | % | ||||||||
(1) The figures for the three and six months ended June 30, 2020 consists of $3.0 million and $6.9 million, respectively, of deferred income tax expenses, as well as $nil and $1.2 million, respectively, of current income taxes on the disposition of a German investment property.
(2) This calculation is based on the weighted average ownership held by ERES non-controlling unitholders.
(3) Expenses included in trust expenses and related to transactions that were not completed.
(4) For a description of distributions declared and net distributions paid, see the Non-IFRS Financial Measures section in the MD&A for the three and six months ended June 30, 2021.
(5) The payout ratio compares distributions declared to NFFO.
(6) The effective payout ratio compares net distributions paid to NFFO.
Reconciliation of cash generated from operating activities to Adjusted Cash Flows from Operations:
| ($ Thousands, except per unit amounts) | Annual | |||||||||||||||||||
| 2021 | 2020 (9) | 2021 | 2020 (9) | 2020 (9) | ||||||||||||||||
| Cash generated from operating activities | $ | 122,298 | $ | 150,144 | $ | 245,275 | 253,491 | $ | 480,729 | |||||||||||
| Adjustments: | ||||||||||||||||||||
| Working capital adjustment (1) | | | | | 18,116 | |||||||||||||||
| Interest expense included in cash flow from financing activities (2) | (32,955 | ) | (31,030 | ) | (65,278 | ) | (64,243 | ) | (130,398 | ) | ||||||||||
| Forecasted non-discretionary property capital investments (3) | (21,395 | ) | (17,640 | ) | (42,632 | ) | (35,280 | ) | (70,545 | ) | ||||||||||
| Capitalized leasing costs (4) | (1,781 | ) | (431 | ) | (4,253 | ) | (640 | ) | (3,909 | ) | ||||||||||
| Amortization of other financing costs (5) | (4,509 | ) | (2,422 | ) | (6,774 | ) | (4,640 | ) | (23,725 | ) | ||||||||||
| Investment income (6) | 3,978 | 184 | 4,372 | 6,404 | 11,670 | |||||||||||||||
| Net ACFO impact attributed to ERES units held by non-controlling unitholders (7) | (3,655 | ) | (1,465 | ) | (7,963 | ) | (5,353 | ) | (13,346 | ) | ||||||||||
| Lease principal and interest repayments | (1,565 | ) | (2,023 | ) | (2,969 | ) | (2,829 | ) | (5,664 | ) | ||||||||||
| Tax on disposition (8) | | | | 1,155 | 1,155 | |||||||||||||||
| ACFO | $ | 60,416 | $ | 95,317 | $ | 119,778 | $ | 148,065 | $ | 264,083 | ||||||||||
| Total distributions declared | $ | 59,880 | $ | 59,077 | $ | 119,618 | $ | 118,019 | $ | 237,103 | ||||||||||
| Excess ACFO over distributions declared | $ | 536 | $ | 36,240 | $ | 160 | $ | 30,046 | $ | 26,980 | ||||||||||
| ACFO payout ratio | 99.1 | % | 62.0 | % | 99.9 | % | 79.7 | % | 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 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 six months ended June 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 $1,364 and $1,220 respectively. The estimated full year weighted average number of residential suites and sites for the six months ended June 30, 2021 and 2020 is 63,249 and 60,528, 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) The investment income for the six months ended June 30, 2021 includes $3.6 million dividend paid by IRES.
(7) This calculation is based on the weighted average ownership held by ERES non-controlling unitholders.
(8) Represents $1.2 million of income tax expenses on the disposition of a German investment property for the six months ended June 30, 2020.
(9) Certain 2020 comparative figures have been adjusted to conform with current period presentation.
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