Community Strong
B O A R D W A L K R E A L E S T A T E I N V E S T M E N T T R U S T
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T S X : B E I . U N
2 0 1 6 A N N U A L R E P O R T
1 2016 Highlights
4 Letter to Unitholders
10
Goals and Targets
18 Unitholders
20 Resident Members
22 Associates
25 Health and Safety
26 Community
28
Environment and Sustainability
30 Portfolio Summary
34
Good Corporate Governance
35
Financial Review
36 Management’s Discussion and Analysis
94 Management’s Report
95
Independent Auditors’ Report
96
Financial Statements
100 Notes to Financial Statements
146
Five Year Summary
148 Quarterly Results
150
Market and Unitholder Information
151 Corporate Information
Corporate Profile
Boardwalk REIT strives to be Canada’s friendliest landlord and currently owns and operates more than
200 communities with over 33,000 residential units totalling approximately 28 million net rentable
square feet. Boardwalk’s principal objectives are to provide its Residents with the best quality communities
and superior customer service, while providing Unitholders with sustainable monthly cash distributions,
and increase the value of its trust units through selective acquisitions, dispositions, development, and
effective management of its residential multi-family communities. Boardwalk REIT is vertically integrated
and is Canada’s leading owner/operator of multi-family communities with over 1,700 Associates bringing
Residents home to properties located in Alberta, Saskatchewan, Ontario, and Quebec.
Cover photo: taken at Boardwalk’s Auburn Landing Community in Calgary, Alberta.
Back cover photo: Boardwalk’s Associates and Resident’s make our Community Strong.
2016 Highlights
Positioning for Market Recovery
Countercyclical Acquisitions and Development
▲ Revenue opportunity in the reduction of incentives
▲ Acquired 747 newly constructed apartment units in
and vacancy
2016 near the cost of construction
▲ Suite renovation program to high grade and
re-position portfolio
▲ Completion of the first of five phases of
development at Pines Edge in Regina
▲ Formation of a joint venture with Riocan REIT to
co-develop and co-own a 12 storey, mixed use
residential tower in Calgary
▲ 4,700-unit development pipeline totaling 4.7 million
square feet
▲ Investing in Associates to further enhance
Boardwalk’s brand of service
Financial Strength and Flexibility
▲ $293 million of available liquidity at the end of 2016
▲ 99% of Trust’s mortgages are NHA-Insured
▲ The Trust renewed $247 million of mortgages in
2016
▲ Obtained an additional $197 million in upfinancing
in 2016
FUNDS FROM OPERATIONS
Per Unit (Cdn$)
2.39
2.51
2.47
2.52
2.07
1.64
3.21
2.87
3.37
3.56
2.84
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
A R 2 0 1 6 O P E R A T I O N S R E V I E W
B O A R D W A L K R E I T n n n 1
Grand Prairie
645 units
1.9% of portfolio
Fort McMurray
352 units
1.0% of portfolio
St. Albert
280 units
0.8% of portfolio
Spruce Grove
160 units
0.5% of portfolio
Edmonton
12,466 units
36.9% of portfolio
Red Deer
939 units
2.8% of portfolio
Banff
76 units
0.2% of portfolio
Saskatoon
1,988 units
5.9% of portfolio
Airdrie
163 units
0.5% of portfolio
Calgary
5,418 units
16.0% of portfolio
Regina
2,701 units
8.0% of portfolio
2 n n n B O A R D W A L K R E I T
O P E R A T I O N S R E V I E W A R 2 0 1 6
O U R M I S S I O N :
“ To serve and
provide our
Residents with
quality rental
communities.”
Quebec City
1,319 units
3.9% of portfolio
London
2,256 units
6.7% of portfolio
Kitchener
329 units
1.0% of portfolio
Montreal
4,681 units
13.9% of portfolio
BOARDWALK REIT – TOTAL NUMBER OF RESIDENTIAL UNITS
33,298 34,207
36,487 36,785 36,419
35,277 35,277
35,277
35,386 34,626
32,947 33,773
31,239 32,159
29,326
24,821 25,889
22,441
19,480
8,787
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
A R 2 0 1 6 O P E R A T I O N S R E V I E W
B O A R D W A L K R E I T n n n 3
L E T T E R T O U N I T H O L D E R S
Community Strong
As we take the opportunity to reflect on what was a
challenging 2016, we remain focused on maximizing value
for our stakeholders as we continue to provide the best value
in housing by providing our Resident Members with superior
customer service and the best quality communities, while
also providing our Unitholders with sustainable monthly
distributions coupled with long-term growth.
(From left to right): Roberto Geremia, President;
Van Kolias, Senior Vice President, Quality Control;
Dean Burns, General Counsel and Secretary;
Sam Kolias, Chief Executive Officer and Chairman
of the Board; Lisa Russell, Senior Vice President,
Acquisition and Development; and William Wong,
Chief Financial Officer.
4 n n n B O A R D W A L K R E I T
L E T T E R T O U N I T H O L D E R S A R 2 0 1 6
Community Strong is a term we used throughout 2016, and is a testament to the
TOTAL UNITS
approach we have taken as we strive to provide the best quality communities. The past
couple of years in Alberta have been the first time in a long time that residential renters
have had an increased level of choice in housing as new supply and a slowdown in net
migration also reduced rental rates in the province. Despite this, Boardwalk continued
to provide resident friendly programs, including our internal subsidy program, which
provides rental rate flexibility to Resident Members who can prove financial hardship.
These programs, along with our community initiatives which are detailed later in our
report help to further provide a Community where we believe our loyal Residents are
proud to call home.
33,773
MORE THAN
1,700
The onset of new purpose-built rental supply in the Alberta markets contributed to the
ASSOCIATES
increase in market vacancy levels, and despite Boardwalk’s unique approach of focusing
on providing superior customer service, the best quality rental communities, and high
occupancy, we were not immune to the impact of this additional new supply. Demand
for affordable rental housing decreased during the historically busy summer turnover
season as the shift of focus in Alberta during these months turned to the disaster in
Fort McMurray. We are proud to say that Boardwalk, through its team’s commitment,
stepped up in support by refunding rent to its Fort McMurray Residents, provided addi-
tional financial support to its Residents and Associates affected, and provided nearly 600
apartment units to evacuees of the fire in Boardwalk’s Edmonton, Red Deer and Calgary
communities for no charge for two months or until evacuees were able to return home.
Our approach in providing our Residents with the best value in housing has set us apart
and through further investment in our value added initiatives such as our suite renova-
tion program, we continue to build long-term relationships with our Resident Members
and are well positioned for a more stable economic environment.
HISTORIC ALBERTA VACANCY RATES
6.3%
5.2%
5.3%
3.3%
3.6%
2.9%
6.6%
8.1%
5.2%
2.1%
1.6%
1.8%
1.3%
2.2%
1.4%
2.5%
2009
2010
2011
2012
2013
2014
2015
2016
(cid:31) CMHC Fall Rental Market Report Average (cid:31) Boardwalk Annual Vacancy
*Boardwalk average annual vacancy rate on stabilized properties; CMHC vacancy rate from annual October RM Survey
A R 2 0 1 6 L E T T E R T O U N I T H O L D E R S
B O A R D W A L K R E I T n n n 5
Positioning for Market Recovery
The Trust carried higher vacancy into the latter part of the year, in part as a result of
IFRS NET ASSET VALUE:
its commitment to the Fort McMurray fire disaster, and continues to offer short term
incentives to remain competitive and to optimize Net Operating Income (“NOI”).
Incentives and vacancy as of December 31, 2016 totaled $22.3 million and $21.2 million
respectively and represent an exceptional opportunity for the Trust to re-capture higher
revenues through the reduction of incentives and improving occupancy.
$5.6 BILLION
To position the Trust for a rebalancing of the rental market and decrease the current
vacancy and incentive loss, the Trust is focusing on high-grading and re-positioning its
portfolio through the headwinds in 2016. By investing in its suite renovation program
Boardwalk will have newly renovated homes available for Residents which will further
add to Boardwalk’s mission of providing the best value in housing. In addition, the suite
renovation program offers various levels of renovations in exchange for lower incentives
INTERNAL DEVELOPMENT
OPPORTUNIT Y:
4,700
APARTMENT UNITS
for our existing Residents.
The addition of newly constructed rental communities is also a form of high-grading
Boardwalk’s portfolio. The Trust’s counter-cyclical acquisition of 747 apartment units at
or near construction cost in 2016 are leasing up on schedule and, as they stabilize, will
add to the Trust’s overall performance. The Trust’s development of Pines Edge 1 in Regina
was completed on time and on budget in February of 2016. Lease up of Pines Edge 1
exceeded expectations with full occupancy after four months. The estimated capital-
ization rate of Pines Edge 1 is between 6.50% and 7.00%. The Trust has commenced
construction of Phase 2 of Pines Edge, and has taken further steps to prepare Phase’s 3
and 4. Boardwalk’s development pipeline includes additional projects on excess density
that the Trust holds in its existing portfolio. These developments are in various stages of
planning and approval, however remain well positioned to continue to add new assets
to the Trust’s portfolio.
Boardwalk was pleased to announce in November of 2016 the formation of a joint
venture with RioCan REIT (“RioCan”) to build a mixed use retail and residential tower at
RioCan’s Brentwood Village Shopping Centre. The project will include an 12-storey tower
with approximately 120,000 sq.ft of residential and 10,000 sq.ft. of retail space that will
provide premium rental housing at a desirable location that is along the Calgary Light
Rail Transit Line, and with close proximity to the University of Calgary, Foothills Hospital,
and McMahon Stadium.
The Trust is continuing to explore other potential developments to complement the
organic growth opportunities that have arisen from the volatility in 2016.
6 n n n B O A R D W A L K R E I T
L E T T E R T O U N I T H O L D E R S A R 2 0 1 6
Financial Strength and Flexibility
By taking measures since the previous downturn to further strengthen the Trust’s
balance sheet and financial sustainability, the Trust’s financial strength, conservative
balance sheet and historically low interest rates have positioned Boardwalk to actively
explore options to deploy capital in support of unitholder value creation, including
value added capital expenditures such as the new suite-renovation program, acquisi-
tions, development of new assets, joint ventures, and a continued investment in the
Trust’s own portfolio through value-added capital expenditures.
FINANCIAL AND
OPERATING HIGHLIGHTS
▲
FFO per unit of $2.84
▲
AFFO per unit of $2.50
▲
Operating margin of 58%
At the end of 2016, the Trust had approximately $293 million in available liquidity
(comprised of $99 million in cash, access to an undrawn $194 million credit facility). In
addition, the Trust estimates that it could obtain an additional $451 million in liquidity
within the next two years, providing aggregate potential liquidity of $744 million.
As interest rates continued to remain low throughout much of 2016, the Trust was able
to renew approximately $247 million in mortgage maturities, as well as obtain $197 mil-
lion of additional mortgage funds with an average term of 7 years at a weighted average
interest rate of 2.14%, a decrease from the 3.92% maturing rate on these mortgages,
and a significant decrease in the Trust’s interest expense. As of February 2017, estimated
CMHC-insured five and ten-year mortgage rates continued to decrease and were esti-
mated to be 2.00% and 2.70% respectively. The Trust’s mortgage program undertakes a
balanced approach with a priority to firstly stagger its maturities to limit future interest
rate risk, and secondly capitalize on the current low rate environment by renewing
maturities at lower interest rates, and upfinancing where appropriate, as this will help
ensure sufficient liquidity for the Trust’s strategic initiatives.
Boardwalk debt (net of cash) to its reported Fair Value at the end of 2016 was a conser-
vative 43%. The Trust’s Fair Value as of December 31, 2016 was $5.6 billion, a decrease
from $5.7 billion a year ago, as a result of Boardwalk’s proactive decrease in market
rents and higher vacancy assumptions, though moderated by the addition of newly
acquired assets. Our interest coverage ratio, measured as Earnings before Interest, Taxes,
Depreciation, and Amortization (“EBITDA”) to interest expense (excluding gains) for
the current year decreased slightly to 3.14 times versus 3.64 times for the same period
last year.
Through the various cycles in our 32 year history, the Trust has conservatively positioned
its balance sheet over the past decade to weather economic volatility. The balanced and
conservative approach of reducing its debt to fair value and ensuring that over 99% of
its debt is CMHC Insured to eliminate renewal risk has positioned the Trust to capitalize
on counter-cyclical opportunities.
A R 2 0 1 6 L E T T E R T O U N I T H O L D E R S
B O A R D W A L K R E I T n n n 7
2017 Outlook and Summary
Signs of macro economic stability are beginning to show in
ability to reduce incentives in the historically busier spring and
Alberta as economic indicators are levelling off as oil prices have
summer months.
shown signs of stability. The recent approvals of pipelines add to
the optimism in Alberta and as a result, the labour market has
seen a similar stabilization as job layoffs in the province have
slowed with many companies planning to add staff in 2017. The
Alberta Government, through its Treasury Board, is now forecast-
ing GDP growth of 2.3% in 2017 as compared to negative GDP in
each of the last two years.
The construction of additional purpose rental housing in Alberta
has also slowed with limited new construction expected in 2017.
As the rental market continues its rebalancing, the investment
in suite renovations the Trust has undertaken, and continues to
undertake, has positioned Boardwalk to begin reducing both
incentives and vacancy. These newly renovated suites, combined
with Boardwalk’s commitment to quality and service will allow
the Trust to gain market share regardless of market conditions,
while reducing its incentives and vacancy.
As is customary, at the end of the third quarter of 2016, the Trust
provided a financial outlook for the upcoming year to enhance
transparency in our financial reporting by sharing our own
perspectives on the Trust’s current position and objectives. This
guidance is updated on a quarterly basis and is reported during
our quarterly conference calls and press releases, with the most
recent update shown below.
As noted, the Trust is estimating a slowing of NOI and FFO decline
as the rental market begins to rebalance. In the first half of 2017,
it is anticipated we’ll see negative NOI and FFO growth as the
Trust carries the additional vacancy from 2016, and begins 2017
with a lower revenue base than it had at the beginning of 2016.
The additional investment made throughout 2016 and into 2017
in our Associates to improve our service levels in our existing
communities and to improve our product quality; by investing in
our newest communities and developments, we have positioned
In the first part of 2017, Boardwalk has begun to see this pos-
ourselves to improve our portfolio which we believe will allow
itive trend emerge, as rentals reached record levels for the
Boardwalk to excel in the summer turnover season in 2017. We
months of January and February when compared to the same
are therefore anticipating an improvement in the second half of
months in prior years. The Trust’s NOI Optimization Strategy
the year.
includes a reduction of vacancy in the winter months, to align its
Description
2017 Revised Objectives
2017 Original Objectives
Acquisition of Investment Properties:
Disposition of Investment Properties:
Development:
Stabilized Building NOI Growth:
FFO Per Trust Unit:
AFFO per Trust Unit:
(based on $525/year/apt)
No new apartment
acquisitions
No dispositions
Phase 2 of Pines Edge,
Regina, Saskatchewan
- 79 Units
Continue with Phase 3 of
Pines Edge,
Regina, Saskatchewan
- 71 Units
No new apartment
acquisitions
No dispositions
Phase 2 of Pines Edge,
Regina, Saskatchewan
- 79 Units
Continue with Phase 3 of
Pines Edge,
Regina, Saskatchewan
- 71 Units
Commencement of
Brentwood Village joint
venture with RioCan,
Calgary, Alberta
~ 164 units
Commencement of
Brentwood Village joint
venture with RioCan,
Calgary, Alberta
~ 164 units
-15% to -9%
$2.30 to $2.65
$1.96 to $2.31
-8% to -3%
$2.70 to $2.90
$2.36 to $2.56
2016 Actual
Acquired 747
Apartment Units
No dispositions
Phase 1 of Pines Edge,
Regina, Saskatchewan
- 79 Units
Commencement of Phase 2
and the review of
Phase 3 of Pines Edge,
Regina, Saskatchewan
- 150 Units
-12.50%
$ 2.84
$ 2.50
8 n n n B O A R D W A L K R E I T
L E T T E R T O U N I T H O L D E R S A R 2 0 1 6
Unit Breakdown by Province
As at Dec 31, 2016
NOI Breakdown by Province
As at Dec 31, 2016
AB 60.6%
SK 13.9%
ON 7.7%
QC 17.8%
AB 65.2%
SK 13.5%
ON 5.7%
QC 15.6%
The Trust will continue to undertake a balanced approach, with
We would like to take this opportunity to thank our 1,700
a continued focus on organic growth, as the Trust’s conservative
Associates across Canada for their discipline and commitment to
balance sheet and access to low cost debt financing has provided
our vision and values in providing our Residents with the best
a source of capital to assist in funding new growth opportunities.
quality communities.
The Trust’s liquidity position is strong and it is planning to con-
Thank you to our stakeholders as well as financial and operating
tinue an investment in its suite renovation program. Additionally,
partners for their continued support. We would especially like to
the Trust plans to continue the construction of phase 2 of its Pines
thank CMHC, our largest financial partner, as they continue to pro-
Edge development, as well as its Brentwood Village joint venture
vide mortgage insurance products which maintain low interest
with RioCan, while also acting opportunistically at acquisitions
rates and mitigates renewal risks, all of which allows Boardwalk
and further new developments. By focusing on acquiring and
to provide the best value in rental housing for Canadians.
developing new assets, and capitalizing on Boardwalk’s brand,
the Trust believes it can create and enhance Unitholder value by
decreasing the average age of our portfolio, while also creating
long term revenue and net asset value growth.
The Trust believes it has positioned itself well to weather eco-
nomic volatility and is well positioned to deliver growth as the
rental market rebalances. The Trust is committed to utilizing its
conservative balance sheet to provide growth through opportu-
nistic value added capital allocation opportunities.
We would also like to thank our Board of Trustees for their disci-
pline, guidance and continued focus on governance.
As always, thank you to our Resident Members for their con-
tinued loyalty and engagement in our Boardwalk Community.
Thank you for calling Boardwalk your home.
Respectfully,
We continue to provide our Resident Members with the best
value in housing with our customer friendly approach that
includes superior customer service, resident support programs
and the best quality communities.
Sam Kolias
Chairman and CEO
A R 2 0 1 6 L E T T E R T O U N I T H O L D E R S
B O A R D W A L K R E I T n n n 9
T A B L E O F Q U A L I T A T I V E A N D Q U A N T I T A T I V E
Goals and Targets
Boardwalk is built upon its Golden Foundation:
GOLDEN RULE: Treat others as you want to be treated
GOLDEN GOAL: Be good
GOLDEN VISION: Love community
GOLDEN MISSION: Have fun
With the guiding mission, “To serve and provide our Resident
▲
Fostering opportunity to create positive change and influ-
Members with quality rental communities”, Boardwalk persists
ence in Boardwalk’s local, national and global communities;
in exploring the resiliency of community and the benefits it
and,
creates for its Associates, Resident Members, Communities and
Unitholders.
▲
Embracing the ongoing journey to become Canada’s friend-
liest and preeminent residential landlord through strategic
Boardwalk is committed to abiding by its Golden Foundation,
acquisitions, dispositions and development and utilizing
which is the foundation for our relationships with our Resident
creative and innovative strategies.
Members and Stakeholders and has led to resilience in our
Communities. Despite the challenging economic environment
in 2016, the positive impact of resilient communities included:
Each year, Boardwalk sets goals and targets that allow measure-
ment of its strategies; such goals and targets are broken into
categories and outlined in the table below. Boardwalk strives
▲
Stable property values. Private market transactions for
to exceed these goals and targets, however, acknowledges that
multi-family real estate continues to be strong with stable
it operates in an industry where market conditions are often
property values;
▲
Ongoing fostering of safe, healthy, happy and consistent
work environments for Associates across Canada;
beyond its control. As a result, Boardwalk accepts that exceed-
ing targets in each category and region is not always possible;
however, it continues to strive to overcome and mitigate varying
obstacles to ensure it continually improves wherever and when-
ever possible.
10 n n n B O A R D W A L K R E I T
G O A L S & T A R G E T S A R 2 0 1 6
Though individual stakeholders place varying levels of importance on each of the goals
KEY:
and targets outlined below, Boardwalk recognizes that all of its goals and targets are all
intertwined and vital to its business. Boardwalk believes in transparency and accountability
to its goals and targets, desiring that its continued performance will encourage discussion
between stakeholders. Boardwalk also believes the resiliency of the communities it has
worked so hard to build continues to drive performance and provide exceptional benefits
and opportunities for all its stakeholders.
✓
✓
Achieved, and aim to
improve still further
✓
✓
✗
Achieved
Partly achieved
Did not achieve
RESIDENT MEMBERS: To work proactively to ensure Boardwalk remains Canada’s multi-family residential landlord of choice.
2017 Targets
Continually improve
the Customer Service
provided.
2016 Targets
2016 Results
Continually improve
the Customer Service
provided.
✓
✓
A component of Boardwalk’s competitive advantage is providing excellent
Customer Service to Resident Members, which is maintained and enhanced by:
·
·
·
·
Providing Resident’s with 24-hour, on-call maintenance as part of its 72-hour
maintenance guarantee, (which states that all standard maintenance requests
from will be completed within three (3) days);
Operation of the Boardwalk Call Centre, which is open 24 hours a day, 7
days a week, 365 days a year for existing and prospective Residents. Via the
Customer Call Centre, Resident Members are able to reach Boardwalk by
telephone, email or live chat. In 2016, 156,522 phone calls, 70,056 emails and
17,363 live chats were received;
Operating and updating Boardwalk’s secure Resident Member website,
including an improved Lease and Balance page, ability to add multiple images
to feedback and contact forms, and a reorganization of pages to make it more
user-friendly. The number of Residents registered on the site increased by
seven (7%) percent year-over-year; and
Improving Resident Member website features such as “Community Corner”,
allowing Residents living in the same community to communicate with one
another. Boardwalk is pleased to observe that Residents continue to make
use of this page to build new and long-lasting relationships. New features
are planned for the Resident Member website in 2017 that will enhance the
usability of the website as well as advance the level of service provided.
Ongoing monitoring of the reasons Resident Members move-out, providing
insight as to how the Customer Service model meets the needs of Resident
Members and where the model can be enhanced or improved.
In 2016, move-outs increased slightly from 12,736 in 2015 to 12,998. Transfers
of Resident Members to other Boardwalk buildings also decreased by 10.5%
year-over-year.
Up to and including September, automated telephone surveys were conducted
with Resident Members who either had recent maintenance work completed,
or had recently moved into a Boardwalk Community. Beginning October 2016,
Boardwalk implemented an online survey model. Boardwalk conducted surveys
for new Resident Members shortly after they joined a Boardwalk Community.
Boardwalk has received over 85% positive feedback in 2016.
A R 2 0 1 6 G O A L S & T A R G E T S
B O A R D W A L K R E I T n n n 11
2017 Targets
Develop innovative ways
to further improve long-
term relationships with
Resident Members.
RESIDENT MEMBERS: (continued)
2016 Targets
2016 Results
Develop innovative ways
to further improve long-
term relationships with
Resident Members.
✓
✓
Annual funding of Boardwalk’s Internal Subsidy Program to help Residents
experiencing financial hardship. In 2016, the Trust provided approximately
$150,000 in its internal subsidy program.
As a responsible landlord, Boardwalk also continued its mandate of internal
rent control, limiting the number and amount of its rental increases, in any
given year.
Investment in communities and community partnerships through sponsoring
more than 100 community-based events across Canada, provided Boardwalk, its
Associates and its Resident Members many opportunities to get involved and
give back.
Tri-annual distribution of Boardwalk’s Resident Magazine “Across the Board”,
which was created in an effort to help connect Boardwalk Residents across its
nation-wide portfolio by including articles on community building initiatives
and events, City profiles, photos, and opportunities for Residents to write their
own articles. Boardwalk will extend its production of Across the Board in 2017,
making updates and improvements to ensure it remains interesting and relevant
to Residents.
Boardwalk continues to believe the most successful way to build lasting
relationships with Resident Members is to give back to the communities in
which they live. Through sponsoring numerous events across Canada in 2016,
Boardwalk encouraged others to volunteer time and resources by providing
paid volunteer hours and donation match opportunities for Associates, as well
as inviting Resident Members to participate and work alongside Associates in
their efforts to improve the communities in which they live and work, enhancing
its objective of “building better communities”.
Respond to the
changing priorities of
Resident Members.
✓
✓
Regular evaluation of our website, www.bwalk.com, and constantly looking for
ways to improve the site and its ease of use for current and potential Resident
Members. In 2016, new features such as improved map functionality were added
on the search page, while Senior Residences and increased accessibility features
were also highlighted site.
Respond to the
changing priorities of
Resident Members.
Boardwalk added a new ‘Book a Showing’ feature to its website to allow
perspective Resident Members an additional option to book showings on a
timely basis.
Active and continual pursuit of ways to further improve Boardwalk’s internal,
customer-based website, ensuring it is always relevant, current and user friendly.
12 n n n B O A R D W A L K R E I T
G O A L S & T A R G E T S A R 2 0 1 6
ASSOCIATES: Invest in our people to provide them with supportive, engaging, long-term employment.
2016 Targets
2016 Results
Strive to cultivate a
corporate culture
of on-going, open,
two-way dialogue
between all levels of
Associates.
✓
✓
Updated Boardwalk’s internal website, the “Bistro”, to provide Associates with
improved, easier access to important information (i.e.: Health and Safety documents,
Associate Handbook, Human Resources information and upcoming community
events.
Team focus groups held throughout 2016 to identify areas of potential improvement
in operations. Included all levels of Associates from site staff to senior management.
Continue to
implement internal
communications
strategic plan.
✓
✓
Quarterly distribution of the “Community Chest”, Boardwalk’s internal magazine
containing invaluable information for it Associates regarding Human Resources,
Health and Safety, as well as stories from Boardwalk community events across
Canada, to its Associates. The magazine also allows Associates to contribute their
own content, creating a unique way for Associates to connect across Boardwalk’s
portfolio.
2017 Targets
Continue to strive to
cultivate a corporate
culture of on-going,
open, two-way
dialogue between all
levels of Associates.
Communications plan.
Hosting of annual events, branded as The Executive Associate Meeting (or “TEAM”),
across Canada for Associates. TEAM events allow Associates across Canada to spend
time and connect with members of the Senior Management team and contribute
greatly to Associate engagement in the workplace. As a result of positive feedback
received in 2016, Boardwalk will continue to host TEAM events in 2017.
✓
✓
Boardwalk routinely conducts market research to ensure it provides Associates
with competitive compensation and benefits. The current compensation
package includes a Profit Share Program, an RRSP match program, and Charitable
Contribution match program and a High-Potential Program that recognizes
outstanding Associates.
✓
✓
To further support Associates, Boardwalk has a long-standing internal committee in
each region called “The Rainbow of Hope”, which raises funds to provide assistance
for Associates during a time of need. Boardwalk matches 100% of the fundraising
efforts for each Committee.
Encourage a positive
workplace that
effectively engages
Associates.
Encourage work-life
balance.
Constantly adjust
internal policy to
focus on changing
priorities of Associates,
while innovatively
maintaining a
balance between our
Associates, Resident
Members, Unitholders
and Communities.
Encourage a positive
workplace that
effectively engages
Associates.
Encourage work-life
balance.
Constantly adjust
internal policy to
focus on changing
priorities of
Associates, while
innovatively
maintaining a
balance between
Associates,
Resident Members,
Unitholders and
Communities.
Create a safe work
environment by
educating Associates
and enforcing
Health and Safety
Procedures.
✓
✓
Continuation of a Zero Injury Campaign, striving to eliminate all workplace injuries.
In 2016, 180 sites remained injury free for the entire year. Zero Injury sites are
recognized through Boardwalk’s intranet, internal newsletter and annual TEAM
lunches. Under the Campaign, a mandatory Health and Safety objective is part of
Boardwalk Associates’ performance reviews, helping to reinforce the expectation
that Health and Safety is everyone’s responsibility.
Continue to create a
safe work environment
by educating
Associates and
enforcing Health and
Safety Procedures.
Internal Health and Safety Audit conducted, during which Boardwalk achieved an
overall score of 99%. The audit allowed an accurate overview of the Health and
Safety Program and a metric to assess Associates’ understanding of it, providing
an opportunity to assess where success had been achieved with the Program, and
where there is still room for improvement.
Routine monitoring and review of the Health and Safety Program to ensure it
complies with the most recent legislation and supports the objective to provide
Associates a safe place to work. Comprehensive Power Tool Safety Training was
added to the Program in 2016 for all Maintenance Associates, and policies were
updated to ensure compliance with changing legislation in Ontario.
A R 2 0 1 6 G O A L S & T A R G E T S
B O A R D W A L K R E I T n n n 13
ASSOCIATES: (continued)
2016 Targets
2016 Results
Foster safe, respectful
work practices
and environments;
further develop
training, orientation
and support offered
to new Associates.
✓
✓
Boardwalk invested further in Associates by contributing over $121,000 to training
and development. These funds covered the cost of items such as books, tuition and
membership fees to provide Associates the opportunity to further their education
and grow their skills.
Assisting Associates in acclimatizing to the Boardwalk environment through
orientation sessions regularly conducted for new personnel. During Orientation,
new Associates spend time with members of Human Resources to learn about
Boardwalk’s history, mission, vision, values, corporate culture and its Health and
Safety Program, which is followed up through the mentor program that includes
regular on-going training.
Strive to constantly
enhance ability to
attract, support,
encourage and
recognize high-
performing,
innovative team
members.
Retain long term
Associates, and
further develop
succession
planning policy and
procedures.
✓
✓
Twelve Associates were awarded with Foundation of Excellence Awards in 2016. Such
awards are given to Associates who have been nominated by their peers for their
ongoing dedication to exhibiting Boardwalk’s Mission, Vision and Values each day.
Under the Chairman’s Scholarship Program, 32 scholarships were awarded for a sum
of more than $249,000. These scholarships are awarded to children of Boardwalk
Associates to assist in their post-secondary education.
Boardwalk makes great efforts to recognize Associates who go above and beyond
for its Resident Members every day. Through its Bravo Program, 459 Bravos were
awarded to 310 Associates as a result receiving compliments from Resident Members
in 2016.
Boardwalk expanded its recognition programs in 2016 through the addition of a new
benefit. This new benefit recognizes Associates who have been with Boardwalk for
20 or more years by offering them varying rewards, including additional vacation
days, and travel vouchers.
The Boardwalk “Associate Referral Bonus” was continued, providing Associates with
a monetary reward when they referred friends and/or family to work at Boardwalk
and their referral successfully completed a probationary period.
In addition to competitive salaries, Boardwalk offers Associates a comprehensive
benefits package and an RRSP Match Program. In 2016, Boardwalk dedicated over
$2.7 million to its RRSP Match Program, and $2.2 million in comprehensive group
benefits.
✓
✓
Boardwalk continued to provide Associates with a Mentorship Program. This
program ensures that Associates feel supported in their positions as, during their
training, each Site Associate is provided with a Mentor who helps to have a better
understanding of the Boardwalk culture.
To supplement the Mentorship Program, Boardwalk introduced the CSR Best
Practices Program; a module developed based on actual Resident Member
situations and feedback from actual Site Associates. The Program utilizes a variety of
teaching tools including informational handouts, videos and role-playing activities,
required to be completed monthly.
Boardwalk’s Succession Planning Program provides Associates with opportunities
to develop and excel in their roles. Under this Program, each Leader must identify a
successor for their role and include a timeline in which the individual would be ready
to take over the role. As a result of this succession planning, internal promotions
occur. With the retirement of William Chidley, Lisa Russell was promoted to Senior
Vice President, Acquisition and Development.
Boardwalk has over 1,700 Associates across Canada, many of whom are choosing to
to stay longer. Year over year, Associate turnover was 16.66%, substantially down
from 21.86% in 2015.
As of 2016, 27% of Associates have been with Boardwalk for between 5 and 10 years,
while 21% have been part of the Boardwalk team for more than 10 years.
2017 Targets
Foster safe, respectful
work practices and
environments; further
develop the training,
orientation and
support offered to new
Associates.
Strive to constantly
enhance ability to
attract, support,
encourage and
recognize high-
performing, innovative
team members.
Retain long term
Associates, and further
develop succession
planning policy and
procedures.
Boardwalk will continue
adding new training
tools to the CSR Best
Practices Program
to aide in Associate
development.
14 n n n B O A R D W A L K R E I T
G O A L S & T A R G E T S A R 2 0 1 6
COMMUNITY: To positively impact the communities in which we operate and the larger global community.
2016 Targets
2016 Results
Expand and continue
to focus on Community
Development to further
foster collaboration with
Government and Social
Services.
✓
✓
Continued partnerships with more than 20 organizations across Canada to
provide affordable housing to individuals in need. Through these partnerships,
Boardwalk subsidizes approximately 1,100 units. In addition, Boardwalk donates
office space for the Calgary Pregnancy Care Centre and the Calgary Homeless
Foundation.
2017 Targets
Expand and continue to
focus on the Community
Development to further
foster collaboration with
Government and Social
Services.
Continue to assist
Resident Members who
are in financial need.
✓
✓
Support of Resident Members through Boardwalk’s Internal Subsidy Program.
Across its entire portfolio, Resident Members experiencing financial hardship
are subsidized under the Program, maximizing the Program’s annual budget of
$150,000.
Continue to provide
assistance to Resident
Members who are in
financial need.
Focus on encouraging
both corporate
and individual
contribution to, as
well as involvement in,
Boardwalk communities
to give where we live!
As part of Boardwalk’s internal subsidy program, the Trust will reduce or
eliminate any rental increases to those Resident Members who can prove
financial hardship.
In 1999, Boardwalk established an internally-mandated, self regulation program,
which limits the amount of its rental increases after any given lease period.
Boardwalk re-evaluates the Program annually to ensure it remains sustainable.
✓
✓
Ongoing support of Boardwalk’s “Week of Caring” initiative, hosted annually
in December, encouraging Associates to volunteer at an organization of
their choice for up to four (4) paid work hours. In 2016, Associates collectively
volunteered over 480 hours of time to charities in their communities.
Sponsoring of numerous charity events throughout 2016, in addition to
Boardwalk’s Week of Caring, including WE Day Alberta, Boardwalk Walk for
Wellspring, The Coldest night of the Year, Hockey Helps the Homeless, Five Days
for the Homeless and many more.
Continuation of the Company Matched, Payroll Charitable Deduction Program,
allowing Associates to donate a portion of their salary to a specific charity with
Boardwalk matching that donation, up to $1,000 per Associate, per year. In 2016,
Boardwalk matched over $26,000.
Maintenance of the internal “Angels” Program, to further community
involvement. The Angels Program recognizes Boardwalk Communities which
participate in Boardwalk sponsored charitable events, supporting both local and
global communities. Including new buildings, Boardwalk has recognized more
than 100 of its communities under the Angels Program initiative.
Focus on encouraging
both corporate
and individual
contribution to, as
well as involvement in
Boardwalk communities
to give where we live!
To expand personal and
corporate boundaries by
taking an active role in
the global community.
✓
✓
Each year, Boardwalk partners with Youth With a Mission and Homes of Hope to
build homes for families in need in Tijuana, Mexico. In 2016, Boardwalk hosted
two (2) trips and built six (6) homes for families in need. Altogether, 97 Resident
Members, Associates and family members had the opportunity to travel to
Tijuana to take part in these homebuilding trips.
To expand personal and
corporate boundaries by
taking an active role in
the global community.
Ongoing support of Samaritan’s Purse – Operation Christmas Child. Through this
program, Samaritan’s purse sends shoeboxes filled with gifts to children around
the world in need. In addition to volunteering at the warehouse to prepare
shoeboxes for travel, Associates and Residents packed 2,123 shoe boxes.
A R 2 0 1 6 G O A L S & T A R G E T S
B O A R D W A L K R E I T n n n 15
THE ENVIRONMENT: To positively impact the environment through sustainable practices.
2016 Targets
2016 Results
Increase corporate
sustainability by creating
opportunities for
positive environmental
change.
✓
✓
Installation of variable frequency drives is being done on large motors across the
portfolio, allowing for better monitoring and regulation of energy consumption,
reduced operating costs, and reducing carbon emissions of Boardwalk Buildings
to one-third of what was previously being produced.
In an effort to further reduce operating costs and CO2 emissions, Boardwalk
continues to install and monitor high-efficiency, hi-consumption and domestic
hot water systems. Monitoring of water and gas meters on both high-efficient
and standard-efficiency systems demonstrates provable effectiveness of this
strategy.
Continued use of LED lighting, timers and photocells in outdoor lights to reduce
energy usage. Installation of energy star appliances, low-flow showerheads and
toilets is ongoing and use of low VOC paint has been implemented.
To reduce the impact of paper usage and/or waste, all investor materials
are readily available online at www.BoardwalkREIT.com and all information
for Resident Members and Associates is distributed electronically via either
Boardwalk’s intranet or secure Resident Member website.
2017 Targets
Increase corporate
sustainability by creating
opportunities for
positive environmental
change.
CORPORATE GOVERNANCE: To provide fully transparent, on-going corporate information to all stakeholders, meeting or
exceeding the guidelines set out by the TSX regarding effective corporate governance.
2016 Targets
2016 Results
✓
✓
✓
✓
Maintain independence
of the Board.
Strive to continually
improve transparency
and open, honest
dialogue with all
Unitholders.
Currently the Trust has seven (7) Trustees, five (5) of whom are independent.
Boardwalk provides the public with opportunities to call in to listen to all its
quarterly conference calls. Audio recordings of all webcasts are also made
available following the teleconference.
The senior management team and the Investor Relations team are jointly
committed to making themselves available to answer and address specific
Unitholder questions.
Webcasts of all of quarterly conference calls are available to the public. In
addition, all of Boardwalk’s documents/webcasts are easily accessible on
www.boardwalkreit.com utilizing links to all current and historical documents
containing corporate information.
For the second consecutive year, in 2016 Boardwalk was recognized as the
winner of the CPA of Canada Award of Excellence in Corporate Reporting for the
Real Estate Sector.
2017 Targets
Maintain independence
of the Board.
Strive to continually
improve transparency
and open, honest
dialogue with all
Unitholders.
Further enhance
procedures and systems
for the consistent,
timely dissemination of
corporate and industry
information.
✓
✓
Continued demonstration of success and improvement with its quarterly
reporting format. Utilizing feedback from Stakeholders and the Investment
Community at large, Boardwalk strives to provide transparent and useful
financial documents, including financial outlooks and market guidance.
Further enhance
procedures and systems
for the consistent,
timely dissemination of
corporate and industry
information.
16 n n n B O A R D W A L K R E I T
G O A L S & T A R G E T S A R 2 0 1 6
UNITHOLDERS: To provide a consistent, sustainable and attractive investment option focused on providing stable monthly
cash flow and increasing overall returns for Unitholders.
2016 Targets
2016 Results
Realize FFO target $3.40
to $3.60 per Trust Unit.
✗ Boardwalk achieved FFO of $2.84 in 2016. Though the Trust did not achieve
its original 2016 target, the Trust provided quarterly guidance updates and
revisions.
Stabilized Buildings NOI
growth of -2% to 2%.
Realize a total return
on the REIT units that
outperforms the S&P/
TSX Composite and the
S&P/TSX Capped REIT
Indices.
Complete performance
enhancing transactions
to maximize Unitholder
value.
✗ Stabilized buildings NOI decreased 12.50%. The Trust revised its NOI target each
quarter.
✗ Boardwalk Unitholders realized a total return of 9.2% on their REIT units,
compared to the posted return of 17.6% for the S&P/TSX Capped REIT Indices.
The return for Boardwalk and other publicly traded entities for 2016 were
moderated by a decline in REIT Unit Prices in December, a result of declining
Crude Oil Prices.
The S&P/TSX Composite index returned a gain of 21.1% and also outperformed
Boardwalk Units.
✓✓
The Trust acquired 747 newly constructed apartment units in Calgary and
Edmonton in 2016 at a price near construction cost.
Boardwalk also completed the development of the first phase of Pines Edge in
Regina, a 79 unit community with underground parking.
In 2016, Boardwalk was pleased to announce the formation of a joint venture
co-ownership arrangement between RioCan REIT to develop a 12-storey
residential tower with a retail podium at RioCan’s Brentwood Village Shopping
Centre in Calgary, AB. Boardwalk views RioCan as a like-minded partner,
sharing similar values and goals as its own; namely in maximizing the potential
of well-located, transit-oriented, mixed-use developments while creating new
communities that Residents are proud to call home.
2017 Targets
Realize FFO target of
$2.30 to $2.65.
Stabilized Buildings NOI
growth of -15% to -9%.
Realize a total return
on the REIT units that
outperforms the S&P/
TSX Composite and the
S&P/TSX Capped REIT
Indices.
Complete performance
enhancing transactions
to maximize Unitholder
value.
A R 2 0 1 6 G O A L S & T A R G E T S
B O A R D W A L K R E I T n n n 17
C O M M U N I T Y S T R O N G
Unitholders
Boardwalk continues to maintain a diverse portfolio of assets spanning across
four provinces, and consisting of more than 200 communities which vary between
high-rises, low-rises and townhomes and appeal to a wide demographic of Resident
Members. This range in product allows Boardwalk to provide value and flexibility in
homes to a broad range of Residents across Canada.
Boardwalk is not immune to market instability and volatility,
comprised of Auburn Landing (238 units) in Calgary, Alberta for
however conservative fiscal management has allowed the Trust
$51.2 million, and Vita Estates (162 units); Axxess (165 units); and
to maintain a strong financial position, with ample liquidity. This
The Edge (182 units) in Edmonton, Alberta for $93.0 million.
strong financial position allows Boardwalk to pursue and capital-
ize on opportunities as they arise across its portfolio.
The Trust announced, in Q3 2016, the formation of a joint
venture arrangement between RioCan REIT and Boardwalk
With over 200 resilient communities currently in Boardwalk’s
REIT to develop a mixed use tower consisting of an at-grade
portfolio, the Trust continues to take a disciplined approach to
retail podium totaling approximately 10,000 square feet and an
acquisitions, dispositions, and development with the goal of high-
12-storey residential tower with approximately 120,000 square
grading its portfolio through the acquisition and development
feet of residential space, totaling approximately 165 apartment
of new communities, as well as continued investment in
units at RioCan’s Brentwood Village Shopping Centre in Calgary,
value added capital expenditures such as Boardwalk’s suite
AB. The development will include two levels of underground
renovation program. In 2016, the Trust utilized the counter-
parking and will provide premium rental housing minutes from
cyclical opportunity to acquire newly constructed purpose built
downtown Calgary along the Northwest Light Rail Transit Line,
rental buildings from local developers at or near the cost of
while providing close proximity to the University of Calgary,
construction. Acquisitions in 2016 totaled 747 apartment units
McMahon Stadium and Foothills Hospital.
18 n n n B O A R D W A L K R E I T
O P E R A T I O N S R E V I E W A R 2 0 1 6
Boardwalk views Riocan as a like-minded partner who shares sim-
As interest rates remained low for much of 2016, Boardwalk is
ilar values and goals to its own, namely to maximize the potential
pleased to have renewed approximately $247 million of matur-
of well-located, transit oriented mixed use developments that
ing CMHC mortgage principal. The weighted average new
can be constructed to create new communities that residents
interest rate on these funds was 2.14% versus the maturing rate
are proud to call home. The joint venture involves an equal 50%
of 3.92%, a significant decrease to Boardwalk’s interest expense.
interest in which both Riocan and Boardwalk will provide its best-
The average term of these renewals was over 7 years.
in-class retail and residential expertise, respec-
tively, to co-develop the asset. To maximize
the value of the development, RioCan will
manage the retail component and Boardwalk
will manage the residential component, each
on a cost basis.
In 2016, the Trust introduced
a new suite renovation
program to enhance
Boardwalk’s product quality.
The
largest opportunity for the Trust to
enhance value to Unitholders continues
to be organic growth within the Trust’s
portfolio. Throughout the softer economic
environment in Boardwalk’s Alberta markets
in 2016, the Trust continued to invest in its
RioCan and Boardwalk are currently working together to final-
own portfolio and introduced a suite renovation program to
ize the submission of plans for a development permit. Subject
enhance Boardwalk’s product quality. By focusing on providing
to certain conditions, including the receipt of both the devel-
the Boardwalk brand of customer service and a further enhanced
opment permit and the subdivision of the lands on terms and
product, the Trust believes it has positioned itself well for 2017
conditions satisfactory to both RioCan and Boardwalk, closing is
and beyond.
expected to occur in mid-2017, with construction beginning as
early as Q3, 2017. Based on the determination of total buildable
area, Boardwalk will pay RioCan approximately $2.9 million for
a 50% interest in the sub-divided land at closing. Subject to the
finalization of building plans and specifications, it is estimated
that the total construction for the project will be between $60
million to $70 million ($30 million to $35 million per partner).
Through the continued guidance and leadership of the Trust’s
Board and experienced management, Boardwalk continues to
be an industry leader in transparency and financial disclosure.
Boardwalk’s quarterly financial reports are an excellent source of
information for all of its stakeholders and can be found online
on Boardwalk’s investor website: www.BoardwalkREIT.com. As
highlighted in these reports, Boardwalk continues to be one of
Also in 2016, Boardwalk completed the first phase of its develop-
the only REITs to provide stakeholders with financial guidance on
ment at Boardwalk’s Pines of Normanview Community in Regina,
a quarterly basis. Boardwalk finds this full transparency provides
Saskatchewan. The first phase, known as Pines Edge I, was built
opportunities for prospective and current Unitholders to ade-
on excess land the Trust owns and was completed on time and on
quately evaluate the Trust’s long-term value propositions.
budget in January of 2016. Lease up exceeded expectations with
full occupancy four months after completion. Construction of the
second phase, Pines Edge II has since begun, and is scheduled
to be complete in July 2017. Going forward, the Trust continues
to explore the viability of other development projects on excess
land it currently owns.
These acquisition and development initiatives allow the Trust
to high-grade its portfolio by adding newly constructed, high
quality rental product in desirable locations. These high quality
assets also allow the Trust to broaden the demographic group
Boardwalk serves.
A R 2 0 1 6 O P E R A T I O N S R E V I E W
B O A R D W A L K R E I T n n n 19
C O M M U N I T Y S T R O N G
Resident
Members
Boardwalk looks for new and
innovative ways to further build our
relationships with our Residents. The
combination of superior service and
building long lasting relationships
continues to enhance the loyalty
of our Resident Members who call
Boardwalk home.
As a part of Boardwalk’s continued effort to provide the best
As part of the annual surveys, the reasons Resident Members
customer service, Boardwalk provides Residents with a Customer
decide to leave Boardwalk is also tracked. In 2016, the results
Call Centre that is available to them 24 hours a day, 7 days a week,
showed move-outs increased slightly year-over-year to 12,998
and 365 days a year. In addition, Boardwalk provides Residents
compared to 12,736 in 2015. The surveys also showed that
with 24-hour on-call maintenance for their buildings, which
transfers of Residents to other Boardwalk buildings decreased by
includes a 72-hour Maintenance Guarantee that ensures all stan-
10.5% year-over-year.
dard maintenance requests will be completed within 72 hours.
Under its “Internal Subsidy Program”, Boardwalk continued offer-
Residents are able to connect with our Customer Call Centre
ing Resident Members various methods of rental forgiveness,
by phone, email, or live chat. In 2016, Boardwalk’s website
including withholding rental increases for those who are experi-
(www.bwalk.com) reached an all-time high of over 1.1 million
encing financial hardship. Over the course of the year, Boardwalk
visitors and 3.6 million page views; additionally, there were 156
subsidized suites across its portfolio, maximizing its dedicated
phone calls, 80 thousand emails, and 17 thousand live chats were
budget of $150 thousand annually, though this number fluctu-
received by the Centre.
ates according to need.
To ensure service is consistent and Residents are satisfied, both
Boardwalk actively searches for new ways to connect with
automated-telephone and online surveys were conducted with
Resident Members and has found great success through its
Resident Members who either had recent maintenance work
secure Resident Member website. In 2016, new features were
completed, or had recently moved into a Boardwalk Community.
added to the Resident Member website, and include the follow-
‘A highlight from these surveys was that 85% of new Residents
ing: a redesigned Lease and Balance page to display expected
responded with a positive score. These annual surveys help to
transactions for the coming month; the ability to add multiple
quantify Boardwalk’s level of customer service and where it can
images to feedback and contact forms; and, reorganizing pages
be improved.
to make the website as user-friendly as possible. In 2016, Resident
Members increased their use of the “Community Corner”; a place
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O P E R A T I O N S R E V I E W A R 2 0 1 6
where Resident Members living in the same community have an
opportunity to connect online, whether through the “Buy and
Sell” section, or as a way to make new friends. Registration on the
website increased by seven (7%) percent year-over-year. Plans
are in place to further develop the Resident Member website in
2017 to make it a convenient way for Residents to connect with
Boardwalk and with each other.
Believing that a connected community is the basis for a resil-
ient community, each year, Boardwalk invites and encourages
Residents to participate in numerous sponsored “Resident
Appreciation Events” across Canada, including movie nights,
zoo days, barbeques and more in and effort to engage Resident
Members in its Golden Foundation. Boardwalk continues to find
that these events help build relationships with Residents as well
as also fosters the opportunity for Residents to form relationships
amongst themselves.
Boardwalk strives to provide
superior service to our Resident
Members and be Canada’s friendliest
and preeminent landlord.
“Bringing You
Home”
media websites and seeing substantial success with its Facebook
page. Boardwalk uses social media to connect with and engage
Boardwalk continued to publish and distribute its member mag-
current and potential Resident members. With the help of social
azine “Across the Board”, online and in print, to Resident Members
media, Boardwalk ran its 2016 branding campaign “Feel at Home”,
across Canada three times yearly. The magazine features a variety
which saw great success in creating positive brand awareness
of information including household tips, community stories, city
amongst the Community and Boardwalk’s Resident Members.
profiles, etc., and offers Resident Members an opportunity to
get involved by writing a story of their own. In 2017, Boardwalk
will continue to distribute the magazine as it provides an
excellent way to connect communities and Resident Members
across Canada.
In 2017, new and creative ways will be identified and pursued to
interact with Resident Members to create lasting relationships.
Based on past successes, it has been proven that one of the best
ways to create and build these relationships is to get Resident
Members involved in their communities by encouraging partic-
As Boardwalk is always looking for new ways to connect with
ipation in community events. There is no greater demonstration
current and potential Resident Members, it increased its focus in
of the resiliency in community than Associates and Resident
social media in 2016, with a presence now on a variety of social
Members working side by side to build better communities.
A R 2 0 1 6 O P E R A T I O N S R E V I E W
B O A R D W A L K R E I T n n n 21
C O M M U N I T Y S T R O N G
Associates
Boardwalk’s mission is to provide the best quality communities for
its Resident Members, and this can only be accomplished with the
collaborative efforts of our team of over 1,700 dedicated Associates.
While Associates foster
lasting, resilient communities and
to all its Associates across Canada. The Community Chest is
relationships with Resident Members, Boardwalk continues to
bilingual, and also includes information about Health and Safety,
provide an exceptional place for its Associates to work.
benefits, messages from Senior Management, financial updates,
A component of creating the best team is ensuring that access to
and much more.
information is provided to its Associates in a timely matter. With
Annual team events for Boardwalk Associates, branded as The
its team spanning across four Provinces in Canada, Boardwalk
Executive Associate Meeting (“TEAM”) continue to be hosted.
has taken the necessary steps to developing a strategic internal
TEAM events are very popular across Canada, as they provide
communications program. Such program includes the use of
opportunities for each Associate to connect with members of
numerous communication vehicles to ensure that each Associate
the Senior Management Team, as well as to receive updates on
has quick and easy access to important information, including an
Boardwalk’s strategy and operations. In addition to communica-
intranet (the “Bistro”), which is a secure website Associates can
tion, TEAM has continued to shift its focus over the last few years
access either from work or from home. The Bistro hosts informa-
towards also recognizing and celebrating Boardwalk’s family
tion regarding Health and Safety, benefits, Human Resources,
of outstanding Associates, providing Senior Management with
important announcements, as well as information concerning
the opportunity to acknowledge outstanding and long-term
community events. Additionally, Boardwalk publishes a quarterly
Associates, as well as to thank them for their hard work and
internal magazine (the “Community Chest”) that is distributed
continued commitment to its mission. Finally, Site Associates
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O P E R A T I O N S R E V I E W A R 2 0 1 6
participate in monthly group meetings, during which they meet
scenarios for training videos and new role-playing exercises to
with the Leaders to discuss any concerns and review Boardwalk
ensure content remains current and relevant.
updates.
Boardwalk also offers Associates a comprehensive benefits
Boardwalk strives to provide its Associates with a rewarding place
package, which includes an RRSP Match Program (“RRSP Match”).
to work and encourage Associates to maintain a healthy work-
Through the RRSP Match, Associates can opt to have a portion
life balance. As a result, it frequently conducts market research
of their salary deposited directly into an RRSP, where Boardwalk
to ensure that Associates are offered com-
petitive compensation packages. Further,
Boardwalk offers a Profit Share Program
that rewards Associates for helping to meet
and surpass its corporate strategy and goals
each year. Aside from compensation and
financial
incentives, Boardwalk ensures
Boardwalk offers a Profit
Share Program that rewards
Associates for helping to meet
and surpass its corporate
strategy and goals each year.
will then match a percentage of their con-
tributions, which varies depending on the
Associate’s length of service. Under the RRSP
Match, Boardwalk matched over $2.7 million
in Associate contributions in 2016. In addi-
tion to the RRSP Match Program, Boardwalk
also offers Associates a three-tiered, com-
that each Associate is given the opportunity to excel and reach
prehensive benefits program. In 2016, Boardwalk contributed
their full potential. Through its Succession Planning Program,
over $2.2 million to Associate benefits.
Boardwalk continues to invest in Associate training and develop-
ment to assist Associates in achieving their goals, investing over
$121,000 in tuition fees, books and professional memberships for
Associates in 2016.
Boardwalk strives to make a difference for charitable organiza-
tions, and encourages Associates to give back to the communi-
ties that surround them. To foster the spirit of giving, Boardwalk
continued its Charitable Match Donation Program, providing
To help Associates in continuing to develop their skills and
Associates with the opportunity to donate a portion of their sal-
improve the level of customer service provided to Resident
ary to a charity of their choice, which Boardwalk will then match,
Members, Boardwalk created and implemented its Customer
up to an annual maximum of $1,000 per Associate. Under the
Service Representative Best Practices Program (“CSRBPP”). The
Program, Boardwalk matched over $26 thousand in Associate
CSRBPP currently consists of three types of training: informa-
donations in 2016.
tional brochures, videos, and role-playing exercises. The material
was developed using both actual life examples received from
Resident Members, as well as feedback from Site Associates.
In 2016, Boardwalk found the CSRBPP to be very successful at
encouraging Associates to work together to solve problems and
to learn from each other’s experience and expertise. Boardwalk
plans to further expand the CSRBPP in 2017 to include new
Boardwalk expanded its recognition program in 2016 through
the addition of a new benefit which recognizes Associates who
have been with Boardwalk for 20 or more years by offering
varying rewards including additional vacation days in milestone
anniversary years and travel vouchers.
A R 2 0 1 6 O P E R A T I O N S R E V I E W
B O A R D W A L K R E I T n n n 23
To recognize Boardwalk Associates who go above and beyond, Boardwalk continued
its “Bravo Program” in 2016. The Bravo Program recognizes Associates after they receive
a compliment from a Resident Member. When a Resident Member recognizes an
Associate’s exceptional service, Boardwalk believes that Associate should be celebrated.
In 2016, Boardwalk gave out 459 Bravos and awarded 12 Foundation of Excellence
Awards (“FOE Awards”) to well-deserving Associates. FOE Awards are given to Associates
who have been recognized by their peers for going above and beyond, and living
Boardwalk’s Mission, Vision, and Values on a daily basis.
In addition to supporting Associates in the workplace, Boardwalk also works to support
Associates outside of it. In each region that Boardwalk operates, an internal committee
(“The Rainbow of Hope”), dedicated to raising funds to help Associates during times of
need. Each Rainbow of Hope Committee grants wishes anonymously to Associates in
their region who are experiencing some type of hardship; and who have either contacted
The Rainbow of Hope themselves, or been nominated for a wish by another Associate.
To ensure there are enough resources available within every region, Boardwalk matches,
dollar for dollar, the fundraising efforts for each of the Rainbow of Hope Committee.
Boardwalk often refers to Associates as being part of the Boardwalk Family, and it
believes in supporting the families of its Associates. To accomplish this objective,
Boardwalk established the Chairman’s Scholarship, a fund set aside, and awarded in two
(2) installments, for the children of Associates to help with the cost of their post-second-
ary education. In 2016, Boardwalk awarded 32 children of Associates with scholarships,
totaling over $249 thousand.
Boardwalk’s efforts to create a great place to work and to maintain a happy, healthy
work environment for Associates continue to see success. As a result, Associate turnover
for 2016 was 16.66%, down substantially from 21.86% in 2015. Additionally, 27% of
Associates have chosen to remain with the Boardwalk Family for between five and ten
years, while 21% have been with the Boardwalk Family for more than 10 years, resulting
in a successful team of over 1,700 Associates who are dedicated and passionate about
Boardwalk’s mission, vision and values. Together with its team, Boardwalk continues to
foster community and achieving its goal of building better communities.
BOARDWALK CHAIRMAN’S SCHOLARSHIP RECIPIENTS
ASSOCIATE NAME
CITY
ASSOCIATE NAME
CITY
STUDENT
Nikki Volante
Armaigne Rivero
Renz Rivero
Allyssa Lusung
Carlito Volante
Armando Rivero
Armando Rivero
Eleazar Lusung
Myles Tuchscherer
Marcel Tuchscherer
William Chrystian
Curtis Chrystian
Fatima Bautista
Julia Klassen
Racheal Hessel
Stephanie Zwicker
Salma Djulbic
Monica Viray
Alleissa Cayanan
Raziel Gervacio
Selbi Tashlieva
Hermela Bene
Abelardo Bautista
Helen Klassen
Ryan Hessel
Jack Zwicker
Saca Djulbic
Solomon Viray
Alex Cayanan
Angela Gervacio
Maisa Tashlieva
Solomon Tareke
Red Deer
Regina
Regina
Regina
Saskatoon
Edmonton
Edmonton
London
London
London
London
Regina
Edmonton
Saskatoon
Edmonton
Calgary
STUDENT
Pavel Roman
Penolopi David
Elena Roman
Lourdito David
Catherine Paet-Pondanera
Cecilia Paet-Pondanera
Roanne Camalig
Lirio Camalig
Kimberly Macasaet
Florencia Macasaet
Edmonton
Edmonton
Edmonton
Saskatoon
Saskatoon
Dalina Hilario Mata
Fortuna Mata de Hilario
Edmonton
Ericka Ancheta
Morena Ancheta
Edmonton
Michelle Santelices
Felix Santelices
Christine Costa
Erika Pascua
Jhustine Rafael
Chealshe Viray
Constantino Costa
Renante Pascua
Jhoanna Rafael
Solomon Viray
Samantha Herreria
Samuel Herreria
Calgary
Regina
Regina
Saskatoon
Regina
Regina
Myriam Abou-Ghazaly
Carole Bachalany
Saint-laurent
Rasha Hammoud-Puelles
Julissa Puelles
Catherine Cabana
Helene Thomas
Montreal
Verdun
24 n n n B O A R D W A L K R E I T
O P E R A T I O N S R E V I E W A R 2 0 1 6
C O M M U N I T Y S T R O N G
Health and Safety
Boardwalk strives to create a safe work environment.
As a result, it has carried forward its Zero Injury
Campaign with the goal to eliminate all workplace
injuries and illnesses.
In 2016, 180 Boardwalk Communities remained injury free for the entire year.
HEALTH AND SAFETY
PROGRAMS
Boardwalk is pleased to offer the following
programs to ensure that our Associates
receive appropriate training and education
for their positions, and to ensure that they
remain safe in the workplace:
• Asbestos Management Plan
• Associate Training
• Bed Bug Control
• Bodily Fluids & Dead Animal Cleanup
• Chainsaw Safety
• Communication
• Company Vehicle Safety
• Confined Spaces
• Electrical Safety
• Emergency Response
• Environmental Policy
• Fall Protection
Communities that accomplish the Zero Injury goal are rewarded by Senior Management
• Firearms / Weapons Found on Site
for their commitment to safety through recognition in the Community Chest, on Bistro
and at TEAM luncheons. To ensure all Associates understand that Health and Safety is a
priority and is everyone’s responsibility, a Health and Safety component is included in all
annual performance reviews.
An internal Health and Safety audit was conducted in 2016, consisting of three verifica-
tion methods: documentation reviews, interviews, and site observations. The audit was
conducted to measure and evaluate Boardwalk’s Health and Safety Program against the
standards established by Alberta Employment and Immigration – Workplace Partnership
• First Aid
• Forklift Safety
• Hazard Detection Program
• Hazardous Materials, Storage and Disposal
• Housekeeping
•
•
•
•
Incident Reporting
Indoor Air Quality
Job Hazard Analysis
Joint Health & Safety Committee
• Ladder Safety
• Lockout and Tagging
- the final score was 99%. Areas where Boardwalk exceled were: Management Leadership,
• Material Safety Data Sheets (MSDS)
Organizational Commitment, Hazard Control, Ongoing Inspections, and Accident/
• Modified Duties
Incident Investigation. Along with identifying areas of excellence, the audit identified
areas in the Program where Boardwalk can still improve. Proactively, Boardwalk has
already begun implementing improvements based on those results.
A key to Health and Safety is the communication of the Program to over 1,700 Associates
• Monthly Site Safety Inspections
• Mould Remediation
• Needle / Syringe Safety
• Noise Exposure & Hearing Conservation
• Office Ergonomics
• Pandemic Response
located across Canada. Such communication is accomplished by using numerous vehi-
• Personal Protective Equipment
cles and tools, including articles in the Community Chest, posts on Bistro, at annual
TEAM luncheons, through monthly Health and Safety newsletters and at Site Safety
Meetings, as well as Joint (Leaders and Associates) Health and Safety Committees. This
• Pesticides Protocol
• Pool Safety
• Power Tool Safety
• Respirator Code of Practice
ensures every Associate is aware of the Program and is implementing its policies, keep-
• Right to Refuse Unsafe Work
ing Boardwalk a safe place to work.
The Province of Ontario adopted significant changes to the Accessibility for Ontarians
with Disabilities Act (the “AODA”) in 2016. In relation to those changes, Boardwalk com-
• Safety Infractions
• Site Safety Meetings
• Slip, Trip & Fall
• Snow Shoveling
• Sun & Heat Protection
pleted a comprehensive examination of its Health and Safety Program and made the
• Transportation of Dangerous Goods
necessary adjustments to ensure the Program remains in compliance with the AODA.
• Visitor Policy
AODA compliance means we are able to provide services to Residents, Associates and
others with disabilities.
• Workplace Hazardous Materials Information
Systems (WHMIS)
• Working Alone
• Workplace Violence
• Zero Injury Campaign
A R 2 0 1 6 O P E R A T I O N S R E V I E W
B O A R D W A L K R E I T n n n 25
B O A R D W A L K I S
Community
Strong
Boardwalk believes in the power of
community, and the positive effect that
this focus can have on our Residents and
our stakeholders.
Despite current economic volatility in Boardwalk’s Western
markets, it believes the quality of its communities leads to
Residents choosing Boardwalk as their preferred housing option,
resulting in sustainable returns for Unitholders while providing a
great place to work and call home.
as making ready a five-tonne truck filled with emergency equip-
ment and supplies to help the community with the transition.
In preparing affected buildings and suites for occupancy,
Boardwalk made every effort to ensure the health, welfare and
safety of Associates, Resident Members and the Community.
Complete interior and exterior clean-ups were done, and favour-
able test results for Boardwalk’s sites in Fort McMurray were
Illustrating Community Strong, we look to the wildfires in Alberta,
received, ensuring there were no health risks prior to allowing
leaving thousands of families in immediate need of assistance.
re-entry. Throughout the process, ongoing updates were pro-
Boardwalk and its Associates worked tirelessly to provide accom-
vided to Resident Members, Associates, investors and the com-
modation and aid not just for its Resident Members but for any
munity at large via Bistro and Boardwalk’s website.
evacuee, including initiating the “Quadruple Challenge” with
Associates raising an additional $21,000 for relief efforts.
Many Alberta Boardwalk Communities, including: Edmonton and
Red Deer (453 families), Calgary (67 families), and many others
To care for and support its team during this difficult time,
helped evacuees during and after the evacuation, providing
Boardwalk contacted Associates to confirm that they and their
assistance and support for 612 families. West Edmonton Village,
families were evacuating and were safe. Many were evacuated
in particular, proudly displays thank you cards received from
to the Edmonton area and greeted at Boardwalk’s Regional
evacuees on the reception desk. The kind words on these cards
office where they were given support and told that they, and
remind us of what Boardwalk stands for: Community.
Resident Members affected by the evacuation, would receive
$1,500 to help relieve some of their expenses and that Boardwalk
would continue to pay their salaries through the evacuation and
restoration periods.
Annually, Boardwalk supports Associates and Resident Members
giving back to their communities through involvement in over
100 community sponsorships and initiatives across Canada,
including Homes of Hope, blood drives, Stephen’s Backpacks
As re-entry
into Fort McMurray remained undetermined,
(4050 backpacks filled and 60 children sent to school), KidSport,
Boardwalk continued its support, offering security deposit waiv-
Corporate Challenge, food drives, seniors events and homeless-
ers, free rent for the months of May and June, a 25% rental rate
ness fundraisers, Walk for Wellspring, Youth Mentor Programs,
reduction, and flexible lease terms for those who chose to stay
Cornerstone Youth Centre meal preparations, The Memorial Cup,
longer at its other Communities.
art workshops, community clean-up events, Week of Caring (481
Once the evacuation order was lifted and clearance was received
volunteer hours), Feed the Hungry events and many more.
to return to Fort McMurray, Boardwalk Associates from all across
WE Day Alberta (“WE Day”), hosted annually by The WE
Alberta rallied, assisting with the early stages of re-entry as well
Organization, encourages youth to get involved in their local and
26 n n n B O A R D W A L K R E I T
O P E R A T I O N S R E V I E W A R 2 0 1 6
global communities, empowering youth to become the leaders of tomorrow. In 2016,
Boardwalk was once again a Platinum Sponsor, sending youths from a local after school
drop-in center to WE Day, who otherwise would not have had the opportunity to attend.
Partnering with the Community Service Learning Program at the University of Alberta,
each year, Boardwalk encourages students to give back to their communities by creating
their own community initiative in the hopes of receiving The Boardwalk Learning and
Change Award. Three to five initiatives are then selected for presentation to a panel
of judges with the winner receiving a $10,000 grant to put their plan into action. The
2016 winner was Punit Virk’s initiative, “YEG Newcomer Empowerment Through Stories
(“NETS”): A Summer Digital Storytelling Program”.
Boardwalk strives to ensure everyone has a place to call home by supporting commu-
nity events across Canada to help end homelessness, including events such as “Hockey
Helps the Homeless” (numerous cities), “Five Days for the Homeless” (held at post-sec-
ondary institutions), and partnering with organizations to provide affordable housing
across Canada. A few such organizations are Calgary Homeless Foundation, Homeward
Trust, London Housing Company, Red Deer Housing, the Mustard Seed, and many oth-
ers. In total, Boardwalk provides approximately 1,100 affordable housing units to these
programs.
Boardwalk is pleased to have recognized more than 100 sites in
the Boardwalk Angels Program.
Internationally, Boardwalk continues to offer its “Homes of Hope” benefit (in partner-
ship with “Youth With a Mission”), encouraging Associates and Resident Members to
We Day 2016
give back by building homes for families in need in Tijuana, Mexico. In 2016, Boardwalk
funded two trips, enabling 97 individuals to travel and to build six homes in total.
Nationally, Boardwalk continues its annual “Week of Caring” each December, offering
Associates the opportunity to volunteer for up to four paid hours with their favorite
local charity, including the “Operation Christmas Child” warehouses (a Samaritan’s Purse
initiative) preparing shoeboxes to travel around the world. In 2016, Associates dedicated
over 480 hours, with Resident Members joining in packing 2,123 shoeboxes full of gifts
for children in need.
Year-round, Boardwalk offers the “Charitable Match Donation Program”, enabling
Associates to donate a portion of their salary to a specific charity, which Boardwalk
Hockey Helps the Homeless
then matches (up to $1,000 per Associate, per year). In 2016, Boardwalk matched over
$29,700 in Associate donations.
Charitable events held in 2016 continued to demonstrate resilience of community, and
the positive effect that resiliency has on all stakeholders.
Boardwalk developed the Boardwalk Angels Program (the “Angels Program”) giving
recognition to Boardwalk buildings where Resident Members have participated in char-
itable events. To date, Boardwalk is pleased to have recognized more than 100 sites.
Boardwalk strives to build better communities, providing Resident Members and
Associates opportunities to contribute locally and globally, believing strong, lasting
communities are best built when we support one another and work together!
The Landmark Towers Annual Yard Sale was a wonder-
ful opportunity for our Resident Members to meet their
neighbours, and the sale raised $3,320 in support of the
Wellspring London and Region organization.
A R 2 0 1 6 O P E R A T I O N S R E V I E W
B O A R D W A L K R E I T n n n 27
C O M M U N I T Y S T R O N G
Environment
and Sustainability
Boardwalk takes pride in its commitment to be an
environmentally conscious organization, however, being a
sustainable company means much more than solely being
environmentally conscious.
Boardwalk takes a more robust view on sustainability and believes that in order to truly
excel in sustainability it must provide sustainable places for Associates to work and
Resident Members to live, as well as a sustainable balance sheet and returns for our
Unitholders.
Meadowside Estates, Edmonton – Before
Boardwalk minimizes its impact on the environment by installing low flow showerheads
Meadowside Estates – After
and toilets, purchasing energy star appliances, utilizing energy efficient fixtures, LED
lighting, and low VOC paint, as well as timers and photocells for outdoor lighting, to
ensure lights only stay on as long as needed. In addition to these efforts, Boardwalk
has ongoing capital projects that work towards creating energy efficient communities
though attic insulation, ventilation updates, roof replacements, building envelope
upgrades, siding upgrades and window replacements. The upgrades and replacements
have allowed Boardwalk to lower the amount of energy Boardwalk buildings consume
going forward.
Installation of variable frequency drives is being done on large motors across the
portfolio, which allows for better monitoring and regulation of energy consumption,
reduced operating costs and reduced greenhouse gas emissions. Across its portfolio,
carbon emissions of Boardwalk Buildings have been reduced by one-third of what was
previously being produced.
In an effort to further reduce operating costs and CO2 emissions, Boardwalk has installed,
and is continually monitoring, high-efficiency, hi-consumption, domestic hot water sys-
tems. The use of water and gas meters on both high-efficient and standard-efficiency
systems demonstrates provable effectiveness of this strategy.
Making use of intranet, the “Bistro”, and the secure Resident Member website, Boardwalk
is able to provide all communication and information for Associates and Resident
Members electronically, resulting in decreased use of printed paper. All Associates are
also encouraged to turn off lights and computers at the end of each day, over weekends
and while on vacation in all offices, while recycling programs for cardboard, paper, plas-
tic, computer and printer parts are available at Boardwalk buildings, all to ensure every
effort to foster environmental accountability and sustainability is being made.
Francois Rive Verdun, Quebec City – Parkade restoration – Before
Francois Rive Verdun – Parkade restoration – After
28 n n n B O A R D W A L K R E I T
O P E R A T I O N S R E V I E W A R 2 0 1 6
Meadowside Estates, Edmonton – Before
Meadowside Estates – After
Francois Rive Verdun, Quebec City – Parkade restoration – Before
Francois Rive Verdun – Parkade restoration – After
Aside from environmental sustainability, Boardwalk strives to be both
socially and financially sustainable. Boardwalk works towards social
sustainability through its various involvements in community initia-
tives and projects across its portfolio. This is accomplished through
partnerships with community organizations, financial sponsorships
and encouraging volunteerism amongst Associates and Resident
Members. Boardwalk also aims to bring awareness of, and find
solutions to, social issues, with a particular focus on homelessness.
As a result, Boardwalk partners with various organizations across
Canada to provide affordable housing to those in need, making
long strides to be both socially sustainable and a positive influence
in local and global communities. Boardwalk is encouraged by its team
of Associates, who drive community involvement, and continues to
empower its Associates and Resident Members to make a difference.
Continued
financial sustainability
provides value to Boardwalk’s
Unitholders, opportunities to grow and
build better local and global communities
and to provide Resident Members
and Associates with happy, safe,
resilient communities in which
to live and work.
Financial sustainability is driven through the guidance of Boardwalk’s Board of
Trustees, Management team and stakeholders. Through the valued input and guidance
from each of these groups, Boardwalk continues to maintain a strong balance sheet and
conservative fiscal management. Continued financial sustainability provides value to
Boardwalk’s Unitholders, opportunities to grow and build better local and global com-
munities and to provide Resident Members and Associates with happy, safe, resilient
communities in which to live and work.
A R 2 0 1 6 O P E R A T I O N S R E V I E W
B O A R D W A L K R E I T n n n 29
Portfolio
Summary
30 n n n B O A R D W A L K R E I T
O P E R A T I O N S R E V I E W A R 2 0 1 6
Auburn Landing, Calgary
Axxess, Edmonton
PROPERTY NAME
CALGARY, AB
Beltline Towers
Boardwalk Heights
Brentview Towers
Centre Pointe West
Chateau
Elbow Tower
Flintridge Place
Glamorgan Manor
Hillside Estates
Lakeside Estates
Lakeview
McKinnon Court
McKinnon Manor
Northwest Pointe
Oak Hill Estates
O’Neil Tower
Patrician Village
Pineridge
Prominence Place Apts.
Radisson Village I
Radisson Village II
Radisson Village III
Ridgeview Gardens
Royal Park Plaza
Russet Court
Sarcee Trail Place
Skygate Tower
Spruce Ridge Estates
Spruce Ridge Gardens
Travois
Varsity Place
Varsity Square
Vista Gardens
Westwinds Village
Willow Park Gardens
BUILDING
TYPE
# SUITES
NET
RENTABLE
SQ. FT.
AVERAGE
UNIT
SIZE
Highrise
Highrise
Highrise
Midrise
Highrise
Highrise
Midrise
Walk-Up
Walk-Up
Walk-Up
Walkup
Walk-Up
Walk-Up
Walk-Up
Townhouse
Highrise
Walk-Up
Lowrise
Walk-Up
TH & WU
TH & WU
Townhouse
Townhouse
Highrise
Garden
HR & MR
Highrise
Walk-Up
Walk-Up
Walk-Up
Walk-up
MR&LR
Townhouse
Walk-Up
Walk-Up
115
202
239
123
145
158
68
86
76
89
120
48
60
150
240
187
392
76
75
124
124
118
160
86
206
376
142
284
109
89
70
297
100
180
66
5,180
80,424
160,894
151,440
110,611
110,545
108,280
55,023
63,510
58,900
77,732
107,680
36,540
43,740
102,750
236,040
131,281
295,600
52,275
55,920
108,269
108,015
124,379
151,080
66,137
213,264
301,720
113,350
196,464
86,351
61,350
47,090
241,128
121,040
137,815
44,563
4,161,200
699
797
634
899
762
685
809
738
775
873
897
761
729
685
984
702
754
688
746
873
871
1,054
944
769
1,035
802
798
692
792
689
673
812
1,210
766
675
803
PROPERTY NAME
EDMONTON, AB
Alexander Plaza
Aspen Court
Boardwalk Arms A
Boardwalk Centre
Boardwalk Villages
Breton Manor
Briarwynd Court
Brookside Terrace
Cambrian Place
Camelot
Capital View Tower
Carmen
Castle Court
Castleridge Estates
Cedarville
Christopher Arms
Corian
Deville
Ermineskin Place
Fairmont Village
Fontana Place
Fort Garry House
Galbraith House
Garden Oaks
Granville Square
Greentree Village
Habitat Village
Imperial Tower
Kew Place
Lansdowne Park
Leewood Village
Lord Byron Towers
Lord Byron Townhouses
Lorelei House
Maple Gardens
Marlborough Manor
Maureen Manor
Meadowside Estates
Meadowview Manor
Monterey Pointe
Morningside Estates
Northridge Estates
Oak Tower
(continued on following page)
BUILDING
TYPE
# SUITES
NET
RENTABLE
SQ. FT.
AVERAGE
UNIT
SIZE
Walk-Up
Walk-Up
Walk-Up
Highrise
Townhouse
Walk-Up
TH & WU
TH & WU
Walk-Up
Walk-Up
Highrise
Walk-Up
Walk-Up
Townhouse
Walk-Up
Lowrise
Garden
Highrise
Highrise
Walk-Up
Lowrise
Highrise
Highrise
Garden
Townhouse
Walk-Up
Townhouse
Highrise
Walk-Up
Midrise
Walk-Up
Highrise
Townhouse
Walk-Up
Walk-Up
Walk-Up
Highrise
Walk-Up
Walk-Up
Walk-Up
Walk-Up
Walk-Up
Highrise
252
80
78
597
255
66
172
131
105
64
115
64
89
108
144
45
153
66
226
424
62
93
163
56
48
192
151
138
108
62
142
158
147
78
181
56
91
148
348
104
223
180
70
203,740
68,680
64,340
471,871
258,150
57,760
144,896
196,779
105,008
54,625
71,281
54,625
93,950
124,524
122,120
29,900
167,400
47,700
181,788
362,184
40,820
70,950
110,400
47,250
53,376
156,000
129,256
112,050
105,776
48,473
129,375
133,994
172,369
65,870
163,840
49,582
64,918
104,036
284,490
83,548
167,064
103,270
51,852
808
859
825
790
1,012
875
842
1,502
1,000
854
620
854
1,056
1,153
848
664
1,094
723
804
854
658
763
677
844
1,112
813
856
812
979
782
911
848
1,173
844
905
885
713
703
818
803
749
574
741
A R 2 0 1 6 O P E R A T I O N S R E V I E W
B O A R D W A L K R E I T n n n 31
The Edge, Edmonton
Pines Edge, Regina
PROPERTY NAME
EDMONTON, AB
(continued)
Parkside Tower
Parkview Estates
Pembroke Estates
Pinetree Village
Point West Townhouses
Primrose Lane
Prominence Place
Redwood Court
Riverview Manor
Royal Heights
Sandstone Pointe
Sir William Place
Solano House
Southgate Tower
Summerlea Place
Suncourt Place
Tamarack East & West
Terrace Garden Estates
Terrace Tower
The Palisades
The Westmount
Tower Hill
Tower On The Hill
Valley Ridge Tower
Victorian Arms
Viking Arms
Village Plaza
Warwick
West Edmonton Court
West Edmonton Village
Westborough Court
Westbrook Estates
Westmoreland
Westridge Estates B
Westridge Estates C
Westridge Manor
Westwinds of Summerlea
Whitehall Square
Wimbledon
BUILDING
TYPE
# SUITES
NET
RENTABLE
SQ. FT.
AVERAGE
UNIT
SIZE
Highrise
Townhouse
Walk-Up
Walk-Up
Townhouse
Walk-Up
Highrise
Lowrise
Highrise
Highrise
Walk-Up
HR & WU
Highrise
Highrise
Garden
Walk-Up
Garden
Walk-Up
Highrise
Highrise
Highrise
Highrise
Highrise
Highrise
Walk-Up
Highrise
Townhouse
Walk-Up
Walk-Up
HR, WU & TH
Walk-Up
Walk-Up
Lowrise
Lowrise
Lowrise
Garden
Garden
HR & WU
Highrise
179
104
198
142
69
153
91
116
81
74
81
220
91
170
39
62
132
114
84
94
133
82
100
49
96
240
68
60
82
1,176
60
172
56
91
90
64
48
598
165
11,957
162,049
88,432
198,360
106,740
72,810
151,310
73,310
107,680
62,092
41,550
83,800
126,940
79,325
153,385
43,297
55,144
212,486
101,980
66,000
77,200
124,825
46,360
85,008
30,546
91,524
257,410
65,280
49,092
73,209
1,138,368
50,250
148,616
45,865
56,950
56,950
69,038
53,872
545,934
117,216
10,500,083
905
850
1,002
752
1,055
989
806
928
767
561
1,035
577
872
902
1,110
889
1,610
895
786
821
939
565
850
623
953
1,073
960
818
893
968
838
864
819
626
633
1,079
1,122
913
710
878
PROPERTY NAME
RED DEER, AB
Canyon Pointe
Cloverhill Terrace
Inglewood Terrace
Parke Avenue Square
Riverbend Village
Saratoga Tower
Taylor Heights
Watson Tower
Westridge Estates
FORT MCMURR AY, AB
Birchwood Manor
Chanteclair
Edelweiss Terrace
Heatherton
Hillside Manor
Mallard Arms
McMurray Manor
The Granada
The Valencia
REGINA, SK
Ashok Portfolio
Boardwalk Estates
Boardwalk Manor
Centennial South
Centennial West
Eastside Estates
Evergreen Estates
Grace Manors
Greenbriar
Lockwood Arms
Pines of Normanview
Qu’appelle Village I & II
Qu’appelle Village III
Southpointe Plaza
The Meadows
Wascana Park Estates
BUILDING
TYPE
# SUITES
NET
RENTABLE
SQ. FT.
AVERAGE
UNIT
SIZE
Walk-Up
Midrise
Lowrise
Walk-up
Walk-Up
Midrise
Walk-Up
Midrise
Townhouse
Walk-Up
Walk-Up
Walk-Up
Walk-Up
Walk-Up
Walk-Up
Lowrise
Walk-Up
Walk-Up
Walk-Up
Walk-Up
Walk-Up
Garden
Garden
Townhouse
Walk-Up
Townhouse
Walk-Up
Walk-Up
Garden
TH & WU
Walk-Up
Midrise
Townhouse
Townhouse
163
120
68
88
150
48
140
50
112
939
24
79
32
23
30
36
44
44
40
352
140
665
72
170
60
150
150
72
72
96
133
154
180
140
52
316
2,622
114,039
102,225
42,407
87,268
114,750
53,762
103,512
43,988
113,664
775,615
18,120
68,138
27,226
16,750
21,248
30,497
30,350
35,775
33,850
281,954
81,098
452,719
60,360
129,080
46,032
167,550
125,660
69,120
57,600
69,000
115,973
133,200
144,160
117,560
57,824
303,360
2,130,296
700
852
624
992
765
1,120
739
880
1,015
826
755
863
851
728
708
847
690
813
846
801
579
681
838
759
767
1,117
838
960
800
719
872
865
801
840
1,112
960
812
32 n n n B O A R D W A L K R E I T
O P E R A T I O N S R E V I E W A R 2 0 1 6
201 Corot, Montreal
Complexe Laudance, Quebec City
PROPERTY NAME
SASK ATOON, SK
Carlton Tower
Chancellor Gate
Dorchester Tower
Heritage Townhomes
Lawson Village
Meadow Park Estates
Palace Gates
Penthouse
Regal Towers
Reid Park Estates
St. Charles Place
St. James Place
Stonebridge
Stonebridge Townhomes
Wildwood Ways B
LONDON, ON
Abbey Estates
Castlegrove Estates
Forest City Estates
Heritage Square
Landmark Towers
Maple Ridge On The Parc
Meadowcrest
Noel Meadows
Ridgewood Estates
Sandford
The Bristol
Topping Lane Terrace
Villages of Hyde Park
Westmount Ridge
MONTREAL , QC
Domaine d’Iberville
Le Bienville
Les Jardins Viva
Nuns’ Island Portfolio
Complexe Deguire
Le Quatre Cent
BUILDING
TYPE
# SUITES
NET
RENTABLE
SQ. FT.
AVERAGE
UNIT
SIZE
Highrise
Walk-Up
Highrise
Townhouse
Walk-Up
Townhouse
Walk-Up
Lowrise
Highrise
Walk-Up
Walk-Up
Walk-Up
Walk-Up
Townhouse
Walk-Up
Townhouse
Lowrise
Highrise
MR & WU
Highrise
Highrise
Walk-Up
Walk-Up
Townhouse
Walk-Up
Highrise
Midrise
Townhouse
Midrise
Highrise
Walk-up
Walk-up
HR, WU & TH
Highrise
Highrise
158
138
52
104
96
200
206
82
161
179
156
140
162
100
54
1,988
53
144
272
359
213
257
162
105
29
96
138
189
60
179
2,256
720
168
112
3,100
322
259
4,681
155,138
126,396
48,608
99,840
75,441
192,000
142,525
61,550
122,384
128,700
123,000
105,750
131,864
135,486
43,961
1,692,643
59,794
126,420
221,000
270,828
173,400
247,166
110,835
72,600
31,020
77,594
109,059
177,880
57,850
131,700
1,867,146
560,880
115,600
91,000
3,106,110
276,324
153,500
4,303,414
982
916
935
960
786
960
692
751
760
719
788
755
814
1,355
814
851
1,128
878
813
754
814
962
684
691
1,070
808
790
941
964
736
828
779
688
813
1,002
858
593
919
PROPERTY NAME
QUEBEC CIT Y, QC
Complexe Laudance
Appartements Du Verdier
Les Jardins de Merici
Place Charlesbourg
Place du Parc
Place Samuel de Champlain
Place Chamonix
OTHER
Grande Prairie, AB
Boardwalk Park Estates I
Boardwalk Park Estates II
Prairie Sunrise
Banff, AB
Elk Valley Estates
Airdrie, AB
Tower Lane Terrace
Spruce Grove, AB
Springwood Place
St. Albert, AB
Sturgeon Point Villas
Kitchener, ON
Kings Tower
Westheights Place
BUILDING
TYPE
# SUITES
NET
RENTABLE
SQ. FT.
AVERAGE
UNIT
SIZE
Midrise
Walk-Up
Highrise
Midrise
Midrise
Highrise
Townhouse
183
195
346
108
111
130
246
1,319
134,480
152,645
300,000
82,624
81,746
104,153
236,630
1,092,278
TH & WU
Townhouse
HR & WU
369
32
244
306,850
30,210
201,992
735
783
867
765
736
801
962
828
832
944
828
Walk-Up
76
53,340
702
Walk-Up
163
130,920
803
Lowrise
160
122,640
767
Walk-up
280
284,953
1,018
Highrise
Midrise
226
103
1,653
171,100
91,920
1,393,925
757
892
843
Total Stabilized – As at Dec 31, 2016
32,947
28,198,554
856
(Except occupancy as at Jan 1, 2017)
* Property Situated on Land Lease
NEW PROPERTIES
Auburn Landing
Axxess
The Edge
Vita Estates
Pines Edge
Lowrise
Lowrise
Lowrise
Lowrise
Garden
238
165
182
162
79
209,976
149,565
163,103
135,454
67,298
882
906
896
836
852
Total Un-stabilized – As at Dec 31, 2016
826
725,396
879
(Except occupancy as at Jan 1, 2017)
A R 2 0 1 6 O P E R A T I O N S R E V I E W
B O A R D W A L K R E I T n n n 33
C O M M U N I T Y S T R O N G
Governance
One of Boardwalk’s corporate values is
integrity, and Boardwalk prides itself on
striving to be honest, accountable and
transparent in all of its corporate reporting.
For the second consecutive
year, Boardwalk was
recognized in 2016 with
an Award of Excellence in
Corporate Reporting by
the Canadian Professional
Accountants Association of
Canada as the winner of the
Real Estate Sector.
As a result of its commitment to integrity, good corporate gov-
ernance has been the foundation of all of Boardwalk’s successes
over the past 32 years. Boardwalk was proud to be recognized by
The Journal of the Institute of Corporate Directors for effective
communication regarding its transition to International Financial
Reporting Standards (“IFRS”). Boardwalk provides important
information to stakeholders in a timely manner, following which,
open and honest dialogue between and with stakeholders is
encouraged in order to ensure Boardwalk’s continuing success.
The Board of Trustees follows a mandate, as described in their
Statement of Corporate Governance Practices, which explicitly
defines the expectations and limits of both the Board and of
Management. This comprehensive statement of governance prin-
ciples gives both authority and autonomy to the Board through
the articulation of key issues, including specific functions of the
Board, Board independence and integrity, Trustee selection, and
composition of the Board of Trustees and committees.
As a publicly traded Trust listed on the Toronto Stock Exchange
(“TSX”), Boardwalk either meets or exceeds the guidelines set
out by the TSX and Canadian Securities Administrators regarding
effective corporate governance. Governance of the Trust is based
on the mandate of its Board of Trustees, its Code of Business
Conduct and its guiding Mission, Vision and Values, which all
Associates and Management are expected to uphold. The guid-
ing principles, being derived from the Golden Rule of “Treating
others as we would like to be treated,” provide a framework for
Trustees and Associates as they deal with the often complex and
sensitive issues that arise over the normal course of the Trust’s
business.
Under the Trust’s mandate, a majority of Trustees must be inde-
pendent of Management and free from any business or other
relationship which could, or could reasonably be perceived to,
materially interfere with a Trustee’s ability to act with a view
to the best interests of the Trust and its Unitholders. Currently,
five of the seven Board members are independent. In addition
to assuming responsibility for the stewardship of the Trust, the
Board of Trustees is specifically charged with:
▲ Reviewing, discussing and approving the Trust’s Strategic Plan
which addresses, among other things, opportunities and risks
of the business.
▲ Identifying principal risks (including those risks concern-
ing credit, market, liquidity and operations), in addition to
reviewing risk management policies and processes of the
Trust’s business and ensuring implementation of appropriate
systems to manage those risks.
▲ Reviewing the performance of the CEO and other senior exec-
utives of the Trust.
▲ Creating and maintaining the communication policy of the
Trust, including approving the contents of major disclosure
documents of the Trust.
▲ Reviewing policies and programs related to the image of the
Trust and ensuring appropriate processes are in place for
communicating with all stakeholders.
▲ Reviewing how the Trust communicates and interacts with
analysts and the public to avoid selective disclosure.
▲ Managing the integrity of internal controls and management
information systems.
“CG&N Committee”),
The Board of Trustees is also responsible for three committees:
the Compensation, Governance and Nominations Committee
the Corporate Development
(the
Committee (the “CD Committee”) and, the Audit and Risk
Management Committee (the “ARM Committee”), each of which
is composed solely of outside, independent Trustees. The CG&N
Committee is charged with the responsibilities of identifying
and evaluating candidates to fill Board vacancies and assessing
Board/Committee effectiveness. The CG Committee assists
management in devising its strategic goals and priorities. The
ARM Committee assists the Board in overseeing integrity of the
Board’s financial statements, performance of the Trust’s external
auditors, adequacy and effectiveness of internal controls and
compliance with legal and regulatory matters.
34 n n n B O A R D W A L K R E I T
O P E R A T I O N S R E V I E W A R 2 0 1 6
Financial Review Contents
M A N A G E M E N T ’ S D I S C U S S I O N A N D A N A LY S I S
F I N A N C I A L S TAT E M E N T S
Forward-Looking Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
▲ Executive Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Business Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
MD&A Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
▲ Management’s Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94
▲
Independent Auditors’ Report . . . . . . . . . . . . . . . . . . . . . 95
▲ Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96
Outlook . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
▲ Notes to Financial Statements . . . . . . . . . . . . . . . . . . . . . 100
Fort McMurray Natural Disaster . . . . . . . . . . . . . . . . . . . . . . . . . . . . .39
Declaration of Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .40
Values, Vision and Objectives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .40
Non-GAAP Financial Measures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Investment Philosophy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .43
S U P P L E M E N TA L I N F O R M AT I O N
▲ Five Year Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 146
Hedging Activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .44
▲ Quarterly Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 148
▲ Market Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 150
▲ Corporate Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . 151
Performance Review Of 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .44
▲ Consolidated Operations and Earnings Review . . . . . . 49
Overall Review . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .49
Segmented Operational Review . . . . . . . . . . . . . . . . . . . . . . . . . . . .50
Operational Sensitivities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .53
Stabilized Property Results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
Financing Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .57
Administration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .58
Depreciation and Amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . .58
Other Income and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
▲ Financial Condition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
Review of Consolidated Statements of Cash Flows . . . . . . . . . . . 59
Review of Consolidated Statements of Financial Position . . . . .63
Capital Structure and Liquidity . . . . . . . . . . . . . . . . . . . . . . . . . . . . .65
▲ Risks and Risk Management . . . . . . . . . . . . . . . . . . . . . . . . 68
General Risks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
Specific Risks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
Certain Tax Risks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
Risks Associated with Disclosure Controls and Procedures
& Internal Control over Financial Reporting . . . . . . . . . . . . . . . . . . 75
▲ Accounting and Control Matters . . . . . . . . . . . . . . . . . . . . 75
Critical Accounting Policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
Application of New and Revised IFRSs and Future
Accounting Policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .86
Annual Improvements to IFRSS 2014-2016 Cycle . . . . . . . . . . . . . .90
International Financial Reporting Standards . . . . . . . . . . . . . . . . .90
Disclosure Controls and Procedures & Internal Control
Over Financial Reporting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .90
▲ 2017 Financial Outlook and Market Guidance . . . . . . . 91
Selected Consolidated Financial Information . . . . . . . . . . . . . . . .93
A R 2 0 1 6 B O A R D W A L K R E I T
F I N A N C I A L R E V I E W n n n 35
Management’s Discussion and Analysis
For the Years Ended, December 31, 2016 and 2015
F O R W A R D - L O O K I N G S TAT E M E N T S
Caution regarding forward-looking statements:
The terms “Boardwalk”, “Boardwalk REIT”, the “Trust”, “we”, “us” and “our” in the following Management’s Discussion and Analysis (“MD&A”) refer
to Boardwalk Real Estate Investment Trust, its consolidated financial position, and results of operations for the twelve months ended December 31,
2016 and 2015. Financial data provided has been prepared in accordance with International Financial Reporting Standards (“IFRS”), as issued by the
International Accounting Standards Board (“IASB”). This MD&A is current as of February 16, 2017 unless otherwise stated, and should be read in conjunc-
tion with Boardwalk’s audited annual consolidated financial statements for the years ended December 31, 2016 and 2015, which have been prepared
in accordance with IFRS, together with the MD&A related thereto, copies of which have been filed electronically with securities regulators in Canada
through the System for Electronic Document Analysis and Retrieval (“SEDAR”) and may be accessed through the SEDAR web site at www.sedar.com.
Historical results and percentage relationships contained in the annual consolidated financial statements and MD&A related thereto, including trends,
which might appear, should not be taken as indicative of future operations.
Unless otherwise indicated, all amounts are expressed in Canadian dollars.
Forward-Looking Statement Advisory:
Certain information included in this MD&A contains forward-looking statements within the meaning of applicable securities laws. These statements
include, but are not limited to, statements made concerning Boardwalk’s objectives, its strategies to achieve those objectives, as well as statements
with respect to management’s beliefs, plans, estimates, intentions, and similar statements concerning anticipated future events, results, circumstanc-
es, performance, or expectations that are not historical facts. Forward-looking statements generally can be identified by the use of forward-looking
terminology such as “outlook”, “objective”, “may”, “will”, “would”, “expect”, “intend”, “estimate”, “anticipate”, “believe”, “should”, “plan”, “continue”, or
similar expressions suggesting future outcomes or events. Such forward-looking statements reflect management’s current beliefs and are based on
information currently available to management. All forward-looking statements in this MD&A are qualified by these cautionary statements.
These forward-looking statements are not guarantees of future events or performance and, by their nature, are based on Boardwalk’s current esti-
mates and assumptions, which are subject to risks and uncertainties, including those described in Boardwalk REIT’s 2016 Annual Information Form
(“AIF”) dated February 16, 2017 under the heading “Challenges and Risks”, which could cause actual events or results to differ materially from the for-
ward-looking statements contained in this MD&A. Those risks and uncertainties include, but are not limited to, those related to liquidity in the global
marketplace associated with current economic conditions, tenant rental rate concessions, occupancy levels, access to debt and equity capital, changes
to Canada Mortgage and Housing Corporation rules regarding mortgage insurance, interest rates, joint ventures/partnerships, the relative illiquidity
of real property, unexpected costs or liabilities related to acquisitions, construction, environmental matters, uninsured perils, legal matters, reliance on
key personnel, Unitholder liability, income taxes, and changes to income tax rules that impair the ability of Boardwalk to qualify for the REIT Exemption
(as defined below). 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, the rental environment compared to several years ago, relatively stable interest costs, access to equity
and debt capital markets to fund (at acceptable costs), the future growth program to enable the Trust to refinance debts as they mature, the availability
of purchase opportunities for growth in Canada, and the impact of accounting principles under IFRS adopted by the Trust effective January 1, 2011.
Although the forward-looking information contained in this MD&A is based upon what management believes are reasonable assumptions, there can
be no assurance actual results will be consistent with these forward-looking statements. Certain statements included in this MD&A may be considered
“financial outlook” for purposes of applicable securities laws, and such financial outlook may not be appropriate for purposes other than this MD&A.
The Income Tax Act (Canada) (the “Tax Act”) contains legislation affecting the tax treatment of publicly traded trusts (the “SIFT Legislation”). The SIFT
Legislation generally will not impose tax on a trust which qualifies under such legislation as a real estate investment trust (the “REIT Exemption”) provid-
ed all of the Trust’s taxable income each year is paid, or made payable to, its Unitholders. Boardwalk qualified for the REIT Exemption and will continue
to qualify for the REIT Exemption provided all of its taxable income continues to be distributed to its Unitholders. Further discussion of this is contained
in this MD&A.
Except as required by applicable law, Boardwalk undertakes no obligation to publicly update or revise any forward-looking statement, whether as a
result of new information, future events, or otherwise.
36 n n n M A N A G E M E N T ’ S D I S C U S S I O N A N D A N A L Y S I S
B O A R D W A L K R E I T A R 2 0 1 6
EXECUTIVE SUMMARY
B U S I N E S S O V E R V I E W
Boardwalk Real Estate Investment Trust (“Boardwalk REIT”, “Boardwalk” or the “Trust”) is an unincorporated, open-ended real estate
investment trust created pursuant to a Declaration of Trust, dated January 9, 2004, and as amended and restated on various dates
between May 3, 2004 and May 12, 2016 (the “Declaration of Trust” or “DOT”), under the laws of the Province of Alberta . Boardwalk
REIT was created to invest in revenue producing multi-family residential properties, or interests, initially through the acquisition of
assets and operations of Boardwalk Equities Inc . (the “Corporation”) .
Boardwalk REIT Units trade on the Toronto Stock Exchange (“TSX”) under the trading symbol ‘BEI .UN’ . Boardwalk REIT’s principal
objectives are to provide its Unitholders (“Unitholders”) with stable and growing monthly cash distributions, partially on a Canadian
income tax-deferred basis, and to increase the value of its units through the effective management of its residential multi-family
investment properties and the acquisition and development of additional, accretive properties . As at December 31, 2016, Boardwalk
REIT owned and operated in excess of 200 properties, comprised of over 33,000 residential units and totaling over 28 million
net rentable square feet . At the end of 2016, Boardwalk REIT’s property portfolio was concentrated in the provinces of Alberta,
Saskatchewan, Ontario and Quebec .
At December 31, 2016 and 2015, the fair value of Boardwalk’s Investment Property assets was approximately $5 .6 billion and $5 .5
billion, respectively, which generated a profit of $129 .3 million and $166 .3 million for the years ended December 31, 2016 and 2015
(before fair value losses and income taxes) . During the years ended December 31, 2016 and 2015, the Trust earned $144 .5 million
and $184 .9 million, respectively, of Funds From Operations (“FFO”), or $2 .84 and $3 .56 per Unit on a diluted basis . Adjusted Funds
From Operations (“AFFO”) for the years ended December 31, 2016 and 2015 were $126 .9 million and $167 .8, respectively, or $2 .50
and $3 .23 per Unit on a diluted basis .
M D & A O V E R V I E W
This MD&A focuses on key areas from the consolidated financial statements and pertains to major known risks and uncertainties
relating to the real estate industry, in general, and the Trust’s business, in particular . This discussion should not be considered all-
inclusive as it excludes changes that may occur in general economic, political, and environmental conditions . Additionally, other
elements may or may not occur, which could affect the organization in the future . To ensure that the reader is obtaining the best
overall perspective, this discussion should be read in conjunction with material contained in other parts of Boardwalk REIT’s 2016
Annual Report, the audited consolidated financial statements for the years ended December 31, 2016 and 2015, and the Annual
Information Form (“AIF”) dated February 16, 2017, along with all other publicly posted information on the Corporation and Boardwalk
REIT . It is not our intent to reproduce information that is located in these other reported documents, but rather to highlight some of
the key points and refer you to these documents for more detailed information .
O U T L O O K
The Bank of Canada is projecting Canada’s GDP growth to be 2 .1% for 2017 and 2018, a positive compared to the 1 .1% recent
economic outlook for 2016 amid falling oil and commodity prices and the fallout from the Fort McMurray wildfire . Analysts are also
predicting Alberta will emerge from one of the worst recession in recent history, with oil price stabilizing above US $50, the recent
approval of oil pipeline expansion by the federal government, and the new US President giving new hope to the Keystone XL pipeline
project . The rebuilding of Fort McMurray is expected to add 0 .4% to Alberta GDP growth for 2017, which is forecasted to be 2 .3% .
Saskatchewan is also projected to turn positive in 2017, with GDP rising to 1 .7% after two years of negative contractions .
Fiscal 2016 was a challenging year for Boardwalk, after coming off record high results for 2015 . Market forces such as the Fort McMurray
wildfire, low oil prices, negative migration, high unemployment, excess supply of newly constructed rental units and a cutback in oil
and gas capital spending created headwinds as the Trust strived to maintain occupancy levels and optimize Net Operating Income,
particularly in the Alberta and Saskatchewan rental markets . The bright spot was the continued low interest rate environment, which
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help boosted Boardwalk’s 2016 bottom line . Low interest also help support buyers’ continued interest in acquiring properties in the
multi-family real estate asset class, keeping capitalization rates low and property value high .
In 2016, Boardwalk continued to offer short-term incentives to its new and existing Resident Members in an attempt to increase overall
occupancy . The economic slowdown and new supply of purpose-built rental units were major driving factors for higher incentives .
Canada Mortgage and Housing Corporation (CMHC) projected vacancy levels for Calgary and Edmonton of 8% and 7%, respectively,
for the latter part of 2016 . During the first eight months of 2016, 1,446 new apartment units were completed, with another 2,052
units under construction as of August 2016 for the Calgary market . The secondary rental market saw 2,866 new condominium units
completed during the same timeframe, with a portion becoming available for the secondary rental market . For the twelve months
ended June 2016, Edmonton had 3,162 new apartment rental units completed, with another 2,194 units under construction in August
2016 . A number of condominium projects were also completed or under construction, increasing the number of rental units in the
secondary market . This new supply, coupled with the softer rental market, put upward pressure on vacancy levels and downward
pressure on rental rates . On a positive note, demand for rental units continued to be strong and Boardwalk is continuing to see
positive absorption of this over-supply . Once the market is closer to a more balanced equilibrium, and in conjunction with consistent
rental demand, the use of these short-term incentives should begin to unwind and the Trust should once again witness an increase
in overall market rental rates .
During 2016, Boardwalk managed to capitalize on certain strategic initiatives to position itself for a recovery in Western Canada’s
rental market . Using its strong and healthy balance sheet, Boardwalk acquired four newly built multi-family properties . One property,
Vita Estates, located in Edmonton, Alberta, is comprised of 162 units and had a purchase price of $29 .6 million . The second property,
Axxess, consisting of 165 units in Edmonton, Alberta, had a purchase price of $30 .2 million . The third property, The Edge, consisting
of 182 units and located in Edmonton, Alberta, had a purchase price of $33 .3 million . All three properties formed part of the 509-unit
portfolio the Trust previously announced it had waived conditions on April 26, 2016 . The fourth property, Auburn Landing, located
in Calgary, Alberta, is comprised of 238 units and had a purchase price of $51 .2 million . Boardwalk also moved forward with its
development pipeline . Lease up of Pines Edge 1 in Regina, Saskatchewan, launched in February of 2016 and consisting of 79 units,
exceeded expectations with full occupancy after four months . Construction of Phase 2 started in May 2016 and, to date, is proceeding
on time and on budget . Phase 2, consisting of 79 units, is projected to be completed in the Summer of 2017 . Phase 3, consisting of
71 units, is slated to begin construction in early 2017 and projected to be completed mid-2018 . Boardwalk’s development pipeline
includes additional projects on excess density that the Trust holds in its existing portfolio . These developments are in various stages
of planning and approval, and will further add newly-constructed assets to the Trust’s portfolio .
In November of 2016, Boardwalk announced the formation of a joint venture with RioCan REIT (“RioCan”) to build a mixed use
retail and residential tower at RioCan’s Brentwood Village Shopping Centre . The project will include a twelve-storey tower with
approximately 120,000 square feet of residential and 10,000 square feet of retail space that will provide premium rental housing at
a desirable location that is along the Calgary Light Rail Transit Line, and with close proximity to the University of Calgary, Foothills
Hospital, and McMahon Stadium . Boardwalk looks forward to forming more strategic partnerships as a means of realizing its long-
term vision of building better communities .
In 2016, Boardwalk continued its value-added capital program . This program offers various levels of upgrades and renovations in
exchange for lower incentives for our existing and new Resident Members . Coupled with continuing high levels of customer service,
a larger suite size on average, and close proximity to established communities near schools and other desirable amenities, Boardwalk
believes these newly renovated and upgraded homes will further strengthen Boardwalk’s mission of providing the best value in
housing . Customer Service, Product Quality and Boardwalk’s continued focus on Building Better Communities are more important
now than ever, and Boardwalk continues to see the benefits resulting from its proactive focus in these areas . In addition to this
program, Boardwalk commenced a separate property repositioning program . This initiative, although at the early stage, is designed
to completely reposition a building . Significant upgrades are not only focused on the individual suites, but also include material
upgrades to common areas and enhanced building amenities .
Interest rates continued to remain low throughout much of 2016 . The Trust was able to renew approximately $247 million in
mortgage maturities, as well as obtain $197 million of additional mortgage funds with an average term of 7 years at a weighted
average interest rate of 2 .14%, a decrease from the 3 .92% maturing rate on these mortgages, and a significant decrease in the Trust’s
interest expense . As of February 2017, estimated CMHC-insured five and ten-year mortgage rates were estimated to be 2 .00% and
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2 .70% respectively, which will provide further interest cost savings on the Trust’s 2017 maturing mortgages . The Trust does, however,
take a balanced approach with its mortgage program with a priority to first stagger its maturities to limit future interest rate risk,
second capitalize on the current low rate environment by renewing maturities at accretive interest rates, and third, ensure sufficient
liquidity for the Trust’s strategic initiatives .
F O R T M C M U R R AY N AT U R A L D I S A S T E R
The Northern Alberta City of Fort McMurray is home to over 90,000 residents . Fort McMurray is the northern hub for the majority of
the oil sands projects in Alberta . On May 3, 2016, with only short notice, the entire town was told to evacuate as an out-of-control
wild fire was heading toward the city . The fire tore through the city and it has been estimated that about 10% of the city’s physical
structures were destroyed . The insurance industry estimates the cost of this disaster to be approximately $3 .6 billion, making it the
most expensive natural disaster in Canadian history . The impact of this fire could be felt economically across the entire country, as
GDP for Canada dropped approximately 0 .6% for the month of May 2016, a drop not been seen since the financial crisis of 2009 .
The driving force behind this drop was not only due to the economic impact of physically destroyed property, but also as a result of
reduced oil exports . GDP did see a slight recovery in June and July as oil sands production resumed following the wildfire .
First and foremost, the Trust concentrated its efforts on ensuring that all its Resident Members and Associates were safe . Once safety
was confirmed, the Trust moved quickly to offer a cash advance to each of Boardwalk’s Fort McMurray Resident Members – the
amount forwarded to each Boardwalk’s Resident Member was $1,500 to be applied as a refund against their paid rent for the month
of May . Boardwalk also arranged for all of its Fort McMurray team to come to Edmonton where it assisted in finding them temporary
housing as well as advancing each of them $500 while continuing to pay their salaries for the next two weeks .
For those evacuees who could provide proof of Fort McMurray residency, Boardwalk extended to them a very special rental offer .
Without requiring these evacuees to sign longer-term leases, the Trust offered free rent for the remainder of May and all of June 2016,
with no lease break penalties for early termination . The objective here was to offer flexibility to those experiencing a lot of uncertainty
during the fire . For those that wished to stay longer, Boardwalk offered an additional 25% discount until the end of the year . These
incentives were well in excess of what the Trust was offering at the time in these markets . The Trust welcomed over 600 evacuees into
this program . Unfortunately, only about 30% elected to stay on a longer-term basis while 70% chose to move out sooner . As a result,
the Trust saw increased turnover costs on the units as these units were turned over twice in less than two months .
On June 13, 2016, all nine (9) of Boardwalk’s Communities in Fort McMurray were reopened to welcome home its Fort McMurray
Resident Members . No major structural damage was sustained to any of Boardwalk’s Fort McMurray Communities and all units were
professionally cleaned to remove any residual smoke and soot . To ensure no unhealthy contaminants remained, Boardwalk had the
air quality tested as well . Boardwalk, as it does with all its properties, carries comprehensive insurance, including business interruption
coverage . According to its insurance providers, a reserve was set aside in the amount of $4 million . To date, of the approximately $3 .1
million of costs incurred, all but the $100,000 deductible limit has been covered by the insurers . Included in this coverage are costs
associated with loss of income and selective customer incentives such as gift cards .
The Trust estimated that the uninsured costs associated with these disaster relief efforts, the majority being associated with the
assistance of providing housing to Fort McMurray evacuees in Edmonton and Southern Alberta, to be approximately $2 million . It
is the Trust’s view that, given the urgency and uncertainty of the situation and consistent with its corporate values, the program
followed was the right approach and feel this has and will continue to provide current and future customer goodwill .
Reconstruction efforts to damaged or destroyed housing in Fort McMurray have begun and CMHC predicts a reconstruction boom in
2017 . Residents whose homes were destroyed, but who plan on remaining in Fort McMurray, could move into some of Boardwalk’s
rental apartments, which were undamaged during the wildfire . This should result in lowering rental vacancy rates in the region .
Construction workers moving into the city to assist with the rebuild will also help drive down vacancy rates .
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D E C L A R AT I O N O F T R U S T
The investment guidelines and operating policies of the Trust are outlined in the Trust’s DOT, a copy of which is available on request
to all Unitholders . Further information of the DOT can also be located in the AIF . Some of the main financial guidelines and operating
policies set out in the DOT are as follows:
Investment Guidelines
1 . Acquire, develop, and operate multi-family residential property in Canada; and,
2 .
No investment will be made that would disqualify Boardwalk REIT as a “mutual fund trust” or a “registered investment” as defined
in the Income Tax Act (Canada) .
Operating Policies
1 .
Interest Coverage Ratio of at least 1 .5 to 1;
2 .
No guaranteeing of third-party debt unless related to direct or indirect ownership or acquisition of real property, including
potential joint venture partner structures;
3 .
Third-party surveys of structural and environmental conditions are required prior to the acquisition of a multi-family asset; and,
4 .
Commitment to expending at least 8 .5% of its gross consolidated annual rental revenues generated from properties that
have been insured by CMHC on on-site maintenance compensation to Associates, repairs and maintenance, as well as capital
upgrades .
Distribution Policy
Boardwalk REIT may distribute to holders of REIT Units on or about each Distribution Date(1), respectively, such percentage of Funds
From Operations for the calendar month then ended as the Trustees determine in their discretion . Distributions will not be less than
Boardwalk REIT’s taxable income, unless the Trustees, in their absolute discretion, determine another amount .
Compliance with DOT
At December 31, 2016, the Trust was in material compliance with all investment guidelines and operating policies as stipulated in the
DOT, as amended . More details will be provided later in this document with respect to certain detailed calculations .
For the year ended December 31, 2016, Boardwalk REIT’s overall interest coverage ratio of adjusted EBITDA (i .e . Earnings Before
Interest, Taxes, Depreciation and Amortization) to interest expense, excluding distributions on LP B Units and fair value adjustments,
was 3 .14 (December 31, 2015 - 3 .64) .
VA L U E S , V I S I O N A N D O B J E C T I V E S
Boardwalk REIT is a fully integrated, Customer-oriented, multi-family residential real estate owner and property management
organization . The Trust was built by focusing on its values, vision and Golden Foundation .
A Commitment to Value
Boardwalk REIT’s Vision and business strategy are targeted on effectively meeting the needs of our Customers, or Resident Members .
It is our belief that this focus will result in long-term value creation for all our stakeholders . Our key stakeholders include our
Associates, major financial and mortgage partners, including CMHC, strategic operational partners and Unitholders .
(1) ‘’Distribution Date’’ means with respect to a distribution by Boardwalk REIT, a business day determined by the Trustees for any calendar month to be on or about the
15th day of the following month .
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Our Vision
Boardwalk REIT’s Vision is to continue to be Canada’s leading provider of multi-family residential housing . Boardwalk will accomplish
this through the continued careful cultivation of internal growth, selective development on excess land density it owns, and a
targeted and disciplined acquisition and disposition program .
Golden Foundation
Boardwalk REIT and its Associates operate under a ‘Golden Foundation’, which is built on the following objectives:
▲
The Golden Rule: “Treat others as you would like to be treated”
▲
The Golden Goal: “Be Good”
▲
The Golden Vision: “Love Community”
▲
The Golden Mission: “Have Fun”
Our Associates are expected to adhere to the following guiding principles:
We will:
▲
Work together in a team environment of mutual respect, trust, and honesty between all Associates and Resident Members;
▲
Serve our Resident Members’ need for an affordable, quality, well-kept home;
▲
Maintain building exteriors and landscaping, thereby increasing “curb appeal”, have well-kept common areas, and ensure our
homes are clean and well maintained;
▲
Maintain a balance between the needs of our Resident Members, Associates, Unitholders, communities and families;
▲
Nurture and promote a learning environment where our Associates’ skills and capabilities grow with the needs of both the Trust
and our Resident Members, and accept that these needs will be consistently evolving and improving the definition of “Rental
Communities”; and
▲
Provide access to and utilize the latest tools and technology to increase the operating efficiency of the Trust as a whole .
We value:
▲
Integrity
We will be honest, accountable, transparent, respectful, and trusting in our dealings with others, appreciating their views and
differences .
▲
Teamwork
We will effectively work as a team, appreciating and benefiting from each other’s unique talents and skills in an open environment
while recognizing that the team’s successes are our successes .
▲
Resident Member Service
We will promptly respond to Resident Member concerns and needs with thoughtfulness, compassion and innovation . We will
strive to develop proactive solutions through a support network and a positive service attitude .
▲
Social Responsibility
We will contribute to our communities and encourage our Associates to contribute in ways that reflect our Golden Foundation .
We will all practice the Golden Rule of ‘treating others in a way we would wish to be treated’, and balance our needs with those
of others; we will all also model our Golden Goal which is to ‘be good’, our Golden Mission which shows us how to ‘have fun’,
and our Golden Vision which asks each of us to ‘love community’ .
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▲
Our Associates
We will provide a safe and respectful work environment that attracts, supports, develops, and recognizes high-performing and
innovative team members .
Boardwalk believes that by adhering to the above Vision and Values, and implementing strategies consistent with these principles,
Boardwalk REIT will produce higher sustainable operating cash flows and a continued appreciation of its property values . The result
will be enhanced value for all our stakeholders .
Achieving this goal requires the full integration of our core strategies of focused investing, superior property management, and the
implementation and effective use of new technologies . Boardwalk REIT can best achieve this goal by strategically:
▲
Maximizing Resident Member satisfaction by providing above-average service and accommodation;
▲
Acquiring select multi-family residential properties;
▲
Selling properties (“Non-Core”) with lower future growth prospects or, on a limited basis, the conversion of properties into
condominium units for sale, and the reinvesting of these funds back into other accretive opportunities;
▲
Purchasing Trust Units on the open market;
▲
Enhancing property values, operating returns and cash flows through pro-active management, property stabilization, and
capital improvements;
▲
Reviewing and considering the development of new selective multi-family projects if the economics support such projects;
▲
Managing capital prudently while maintaining a conservative financial structure;
▲
Pursuing opportunities to form selective partnerships, joint ventures, or an exchange of assets; and
▲
Reinvesting the released equity from asset sales back into the Trust’s portfolio to create additional value-added opportunities .
To support our overall operating strategy, it is necessary to:
▲
Ensure ample capital is available at all times for acquisitions and value-added enhancements;
▲
Appropriately allocate available capital to existing project enhancement and on-going new acquisitions;
▲
Utilize appropriate levels of debt leverage;
▲
Determine and utilize sources with the lowest cost of capital;
▲
Actively manage our exposure to interest rate and debt renewal risk; and,
▲
Optimize the use of NHA insurance, which is administered by CMHC, to access more cost-effective debt capital .
N O N - G A A P F I N A N C I A L M E A S U R E S
Boardwalk REIT assesses and measures operating results based on performance measures referred to as Funds From Operations
(“FFO”), and Adjusted Funds From Operations (“AFFO”) . FFO is a widely accepted supplemental measure of the performance of a
Canadian real estate entity; however, it is not a measure defined by IFRS . In recent periods, additional attention has been given to
AFFO as a supplemental measurement . FFO and AFFO do not have any standardized meaning prescribed by IFRS and, therefore,
may not be comparable to similar measures presented by other entities . The IFRS measurement most comparable to FFO and AFFO
is Profit . We define FFO, after the adoption of IFRS, as income before fair value adjustments, distributions on the LP B Units, gains or
losses on the sale of Investment Properties, depreciation, deferred income tax, and certain other non-cash adjustments, if any . The
reconciliation from Profit under IFRS to FFO can be found below, under the section titled “Performance Measures” . The reconciliation
from FFO to AFFO can be found in the section titled “Maintenance of Productive Capacity” . FFO and AFFO, however, should not be
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construed as an alternative to profit determined in accordance with IFRS as indicators of Boardwalk REIT’s performance . In addition,
Boardwalk REIT’s calculation methodology for FFO and AFFO may differ from that of other real estate companies and trusts .
A reconciliation of FFO to cash flow from operating activities as shown in the Trust’s Consolidated Statements of Cash Flows is also
provided below in the section titled, “Review of Consolidated Statement of Cash Flows”, along with added commentary on the
sustainability of Boardwalk REIT’s Trust Unit distributions .
I N V E S T M E N T P H I L O S O P H Y
Throughout Boardwalk REIT’s history, the Trust has constantly looked for opportunities to create value for its Unitholders . This is
achieved by investing managerial resources and capital in activities that increase FFO per unit and AFFO per unit on a sustaining
basis and Net Asset Value (“NAV”) per unit . Prior to 2008, a large part of this opportunity was focused on investment opportunities,
both in capital improvements of our existing portfolio and through acquisition of additional properties . However, our investment
strategy is not simply one by which we are constantly looking to expand our existing footprint, but rather one by which we are
constantly looking to create value . Starting in 2008, but more pronounced during 2009 and 2010, it was evident that the Trust’s
investment opportunities were not in the acquisition of additional apartment units, but rather in the sale of Non-Core properties
and the deployment of capital to acquire additional Boardwalk REIT Trust Units in the public markets through our published Normal
Course Issuer Bids (“NCIBs”), as the Trust can purchase our own well-maintained assets (i .e . our Units) at less than what is available
through acquisitions . More recently, given the countercyclical nature of our investment philosophy, Boardwalk is becoming more
aggressive in its search for accretive investment opportunities, not only in the acquisition of existing investment properties, but also
expanding thorough the development of new apartments on existing land as well as investigating the acquisition of new land for
future development projects .
Cumulatively, since 2007, Boardwalk REIT purchased and cancelled approximately 6 .4 million Trust Units for a total purchase price of
$271 .9 million, or an average cost of $42 .34 per Trust Unit .
The Trust has an ongoing program of selling Non-Core properties in its portfolio and re-deploying the released capital to acquiring
or developing additional properties, potentially paying a special distribution to its Unitholders, reinvesting in its existing properties
to achieve superior returns, developing new multi-family properties, and/or purchasing its Trust Units for cancellation . The Trust
continues to review all available options that management believes will provide the greatest return to our Unitholders .
Cost of Capital
The Trust’s cost of capital is generally defined as its weighted average cost of raising incremental capital and, thus, its hurdle rate
for evaluating incremental investment opportunities . In other words, it can be thought of as the rate of return that the Trust would
otherwise be able to earn given the same level of risk . As with most real estate entities, the cost of capital is the combination of the
leverage target, the marginal cost of debt, and the marginal cost of equity . As will be discussed in a later section, the Trust currently
has access to a lower cost of debt through its access to the NHA insured market . However, even this market has different levels of risk
that are mainly priced through the term selected on the related mortgage . That is, the longer the mortgage finance term, the longer
the borrower is removing the interest rate risk from the investment . As of February 2017, estimated CMHC-insured five and ten-year
mortgage rates were estimated to be 2 .00% and 2 .70% respectively . The other major component in the cost of capital relates to the
marginal cost of equity required for the investment . The determination of this cost has a number of different models and definitions .
However, for simplicity purposes, Boardwalk determines its current cost of equity as the amount of AFFO reported compared to its
current market capitalization . For 2016, the Trust reported AFFO per Unit of $2 .50 on a fully diluted basis . When compared to the
Trust Unit’s market price of $48 .65 as at December 31, 2016, this equates to approximately 5 .14% as its cost of equity . Further details
of the Trust’s cost of capital can be found in Note 26 to the consolidated financial statements for the year ended December 31, 2016 .
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H E D G I N G A C T I V I T I E S
There were no new hedging activities for the fiscal year ended December 31, 2016 .
In 2008, the Trust entered into forward hedging arrangements with respect to some of its mortgage interest obligations . The strategy
consisted of hedging, or locking in, the interest rates on the underlying bonds used to set mortgage interest rates while layering
an interest rate swap on top of this to reduce overall interest rates and variability in cash flows from fluctuating interest rates The
bond forward transaction (the “Transaction”) with a major Canadian financial institution, which comprised bond forward contracts
on specific mortgages that matured and were renewed in 2008, was for a total notional amount of $101 .6 million with a weighted
average term and interest rate of 7 .2 years and 3 .63%, respectively . One of the bond forward contracts in the Transaction, which was
assessed to be an effective hedge, was settled for a loss of $284 thousand . As at December 31, 2015, this effective hedge was fully
amortized . The interest rate swap agreements on the mortgages of specific properties within its portfolio were an effort to hedge the
variability in cash flows attributed to fluctuating interest rates . These interest rate swap agreements were designated as cash flow
hedges on March 11, 2008, with an effective date of May 1, 2008, and continued to be designated as such until the May 1, 2015 date
of maturity . Hedge accounting was applied to these agreements in accordance with International Accounting Standard (“IAS”) 39 –
Financial Instruments: Recognition and Measurement (“IAS 39”) . On May 1, 2015, the interest rate swap agreements fully matured and
were terminated, and a gain of $1 .0 million was recognized in Other Comprehensive Income (“OCI”) .
P E R F O R M A N C E R E V I E W O F 2 016
Boardwalk REIT generates revenues, cash flows, and earnings from two separate sources: rental operations and the sale of “Non-Core”
real estate properties .
Boardwalk REIT’s most consistent and largest source of income comes from its rental operations . Income from this source is derived
from leasing individual apartment units to Customers (referred to as “Resident Members”) who have varying lease terms ranging from
month-to-month to twelve-month leases .
In the past, Boardwalk REIT has generated additional income from the sale of selective non-core real estate properties . The sale of
these properties is part of Boardwalk REIT’s overall operating strategy whereby the equity generated through the sale is then utilized
by Boardwalk REIT for the acquisition and/or development of new rental properties, to assist in its property value enhancement
program, or for the acquisition of Boardwalk REIT’s Trust Units in the public market . The Trust, however, will only proceed with the
sale of Non-Core real estate properties if market conditions justify the dispositions and Boardwalk has an alternative use for the net
proceeds generated . During the third quarter of 2015, the entire portfolio of assets in Windsor, Ontario, was sold, resulting in a total
loss on asset sales of $6 .9 million for the year . As Investment Properties are carried at fair value, a loss on sale arises primarily from
the transaction costs related to the sale .
Performance Measures
It continues to be the intention of the Trust to pay out, at a minimum, all taxable income to Unitholders in the form of monthly
distributions, unless the Board of Trustees, in its absolute discretion, determines a different amount . On February 17, 2016, the Board
of Trustees approved an increase to the monthly Trust Unit distribution to $0 .1875 per Trust Unit (or $2 .25 on an annualized basis)
commencing with the February 29, 2016 record date . The Trust also previously declared a special distribution of $1 .00 per Unit to all
Unitholders of record as at December 31, 2015, following the sale of its Windsor property portfolio . This special distribution was in
addition to the regular normal distribution that the Trust declares and pays on a monthly basis . The total dollar amount of this special
distribution was approximately $51 .3 million and was paid on January 15, 2016, in conjunction with the regular monthly distribution
to Unitholders of record as at December 31, 2015 .
For the year ended December 31, 2016, the Trust declared regular distributions of $113 .4 million (inclusive of distributions paid to
the LP Class B Unitholders), representing approximately 78 .5% of FFO . The reader should note the overall operating performance of
the first and fourth quarters tend to generate the highest payout ratio, mainly due to the high seasonality in operating expenses . In
particular, these quarters tend to be the highest demand periods for natural gas, a major operational cost for the Trust . The reader
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should not, therefore, simply annualize the reported results of a particular quarter . On a quarterly basis, the Trust’s Board of Trustees
reviews the current level of distributions and determines if any adjustments to the distributed amount is warranted .
Although the Trust believes it is important to distribute a significant portion of its FFO, it also maintains it should withhold a portion
of the available cash flow to assist with the execution of its business strategy . On an overall basis, the Trust aims to maintain a
conservative payout ratio and reviews this with its Board of Trustees on a quarterly basis .
Over the past few years, AFFO has begun to surface as an additional performance measurement . AFFO is determined by taking
the amounts reported as FFO and deducting what is commonly referred to as “Maintenance Capital Expenditures” . Maintenance
Capital Expenditures are referred to as expenditures that, by standard accounting definitions, are accounted for as capital in that the
expenditure itself has a useful life in excess of the current financial year and also adds or maintains the value of the related asset . A
more detailed discussion of this topic will be provided in the “Maintenance of Productive Capacity” section later in this document .
Special Distribution
As noted, during 2015, the Trust sold its Windsor property portfolio . The net proceeds of the sale of this property portfolio have
assisted in the purchase of REIT Units for cancellation on the open market . Although the Trust continues to be committed to this
Unit buyback strategy, consistent with our balanced approach, the sale of these non-core assets resulted in a significant profit to the
Trust for the 2015 fiscal year . The size of this profit, when combined with the existing income generated from continued operations,
resulted in a significant increase in the Trust’s reported taxable income and, as a result, a “Special Distribution” was declared for
Unitholders on record at the end of the 2015 fiscal year . In 2015, the amount of $1 .00 per outstanding Trust and LP Class B Unit for
Unitholders of record as of December 31, 2015 was declared . The payable date on the Special Distribution was January 15, 2016 to
Unitholders of record as of December 31, 2015 . The capital required for these distributions came directly from the net proceeds on
the sale of the Windsor property portfolio in 2015 .
Unlike many REITs and real estate companies, Boardwalk REIT does not include any gains reported on the sale of its properties in its
calculation of FFO . The Trust feels that such income is volatile and unpredictable, and would significantly dilute the relevance of FFO
as a measure of performance .
How Did We Do?
At the beginning of the 2016 fiscal year, certain selective performance targets were set out for fiscal 2016 . The assumptions used in
these performance targets were reviewed on a quarterly basis and the full-year guidance was adjusted if such assumptions changed .
The following table compares our forecasted performance to our actual results in fiscal 2016 .
Description
2016 Actual
Q3 2016
Revised Objectives
Q2 2016
Revised Objectives
Original
2016 Objectives
Dispositions of Investment Properties
No dispositions
No dispositions
No dispositions
No dispositions
Acquisition of Investment Properties
747 Apartment Units
747 Apartment Units
800 - 1,000
Apartment Units
No new apartment
acquisitions
Development
Stabilized Building NOI Growth
FFO Per Unit
AFFO Per Unit
Phase 1 of
Pines Edge,
Regina,
Saskatchewan –
79 Units
Commencement
of Phase 2 and the
review of Phase 3
of Pines Edge –
Regina,
Saskatchewan
– 150 Units
-12 .5%
$ 2 .84
$ 2 .50
Phase 1 of
Pines Edge,
Regina,
Saskatchewan –
79 Units
Commencement
of Phase 2 and the
review of Phase 3
of Pines Edge –
Regina,
Saskatchewan
– 150 Units
-12% to -10%
$2 .90 to $3 .00
$2 .56 to $2 .66
Phase 1 of
Pines Edge,
Regina,
Saskatchewan –
79 Units
Commencement
of Phase 2 and 3
of Pines Edge –
Regina,
Saskatchewan
– 150 Units
-10% to -5%
$3 .05 to $3 .20
$2 .71 to $2 .86
Pines Edge;
Regina,
Saskatchewan –
79 Units
-2% to 2%
$3 .40 to $3 .60
$3 .06 to $3 .26
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The reader is cautioned that the financial objectives, when generated, were considered forward-looking information and that actual
results may vary materially from these objectives reported .
Both actual FFO and AFFO for fiscal 2016 were lower than the revised guidance reported as part of the Trust’s disclosure for the third
quarter of 2016 . Lower rental revenue due to lower occupancy and higher incentives in Western Canada were the primary driver of
the financial results .
FFO Reconciliation from 2015 to 2016
The following table shows a reconciliation of changes in FFO from December 31, 2015 to December 31, 2016 . It should be noted that
FFO, as disclosed in the table below, reflects FFO derived from the Trust’s consolidated financial statements prepared in accordance
with IFRS . As previously noted, we define the calculation of FFO as net income before fair value adjustments, distributions on the LP
Class B Units, gains (losses) on the sale of Investment Properties, depreciation, deferred income taxes, and certain other non-cash
items . A more detailed disclosure of the calculation of FFO will be provided later in this report .
FFO Reconciliation
FFO Opening – Dec 31, 2015
NOI from Stabilized Properties
NOI from Unstabilized Properties
FFO Loss from Sold Properties
Financing Costs (1)
Administration and other
Unit Buyback
Non-recurring
Fort McMurray Wild fire
Strategic Review
Executive Retirements
FFO Closing – Dec 31, 2016
12 Months
$ 3 .56
(0 .66)
0 .04
(0 .08)
0 .03
0 .01
0 .03
$ (0 .63)
$ 2 .93
(0 .03)
(0 .03)
(0 .03)
(0 .09)
$ 2 .84
(1)
Financing costs above exclude the distribution payments for LP Class B Units, which are classified as financial liabilities under IFRS . Further discussion
related to this can be found later in this report .
Liquidity
The access to liquidity is an important element of the Trust as it allows the Trust to implement its overall strategy . The current low
interest rate environment has allowed Boardwalk to renew its existing maturing mortgages at more favourable interest rates than the
maturing interest rates . In addition, Boardwalk has been able to access additional capital from its properties through the continued
use of the current NHA insurance program, which is being offered at attractive rates . Further interest savings, however, will become
more limited if and when interest rates start to reverse their declining trends seen over the past several years .
Boardwalk defines liquidity to include cash and cash equivalents on hand and any unused committed revolving credit facility, plus
any committed secured upfinancings . The Trust’s cash position was $99 .1 million at December 31, 2016, compared to $237 .0 million
reported on December 31, 2015 . However, it should be noted that the cash position for December 31, 2015 is before the previously
noted Special Distribution declared to its Trust and LP Class B Unitholders in the amount of $51 .3 million, or $1 .00 per outstanding
Unit, on record as at December 31, 2015 . This Special Distribution was paid on January 15, 2016 . As at December 31, 2016, the Trust
also had $194 .0 million of unused credit facility (December 31, 2015 – $198 .0 million), bringing total liquidity to $293 .1 million
(December 31, 2015 – $435 .0 million) .
46 n n n M A N A G E M E N T ’ S D I S C U S S I O N A N D A N A L Y S I S
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FFO Reconciliations
In the following table, Boardwalk REIT provides a reconciliation of FFO (a non-IFRS measure) to profit for the period, its closely related
financial statement measurement for the years ended December 31, 2016 and 2015 . Adjustments are explained in the notes below,
as appropriate .
FFO Reconciliation
In $000’s, except per Unit amounts
(Loss) profit for the year
Adjustments
Loss on sale of assets
Fair value losses (1)
Add back distributions to LP Class B Units recorded as
financing charges (2)
Deferred income tax expense
Depreciation expense on Property Plant & Equipment
12 Months
Dec 31, 2016
$
(57,440)
12 Months
Dec 31, 2015
$
28,848
% Change
–
186,681
9,990
15
5,219
6,855
130,361
13,604
191
4,993
Funds from operations
Funds from operations – per Unit
$ 144,465
$
2 .84
$
$
184,852
3 .56
(21 .8)%
(20 .2)%
(1) Under IFRS, the Trust has a number of Statement of Financial Position items, which are measured using a fair value model with fluctuations related to these
fair value amounts from period to period flowing through the Statement of Comprehensive (Loss) Income . These fair value adjustments are considered
“non-cash items” and are added back in the calculation of FFO .
(2) Under IFRS, the LP Class B Units are considered financial instruments in accordance with IAS 32 – Financial Instruments: Presentation (“IAS 32”) . As a
result of this classification, their corresponding distribution amounts are considered “financing charges” under IFRS . The Trust believes these distribution
payments do not truly represent “financing charges”, as these amounts are only payable if the Trust declares distributions, and only for the amount of any
distributions declared, both of which are at the discretion of the Board of Trustees as outlined in the DOT . Therefore, these distributions are excluded from
the calculation of FFO, consistent with the treatment of distributions paid to all other Unitholders .
Overall, Boardwalk REIT earned FFO of $144 .5 million for fiscal 2016 compared to $184 .9 million for the same period in 2015 . FFO,
on a per Unit fully diluted basis, for the year ended December 31, 2016, decreased approximately 20 .2% compared to the prior
year from $3 .56 to $2 .84 . The decrease was primarily driven by lower rental revenue due to lower occupancy levels in Alberta and
Saskatchewan, coupled with the loss of FFO from the sale of the Windsor portfolio .
New Property Acquisitions and Dispositions
During the second quarter of 2016, the Trust closed on the purchase of two properties, one located in Edmonton, Alberta and one
located in Calgary, Alberta . The two newly-built properties totaled 400 units and had a purchase price of $80 .8 million (including
transaction costs) .
During the third quarter of 2016, the Trust closed on the purchase of two properties, both located in Edmonton, Alberta . The two
newly-built properties totaled 347 units and had a purchase price of $63 .6 million (including transaction costs) .
For 2015, there were no new investment property acquisitions . During the first quarter of 2015, the Trust purchased an office and
warehouse building in Verdun, Quebec, which has now been included under the Nun’s Island investment property for a purchase
price of $3 .1 million . The purchase closed on January 19, 2015 .
In 2015, the Trust sold a stand-alone building that was a part of the Boardwalk Estates portfolio in Regina, Saskatchewan . The building
contained 22 units and was sold for a sale price of $825 thousand . The Trust also sold its Windsor portfolio to a private buyer for $136 .2
million before selling costs .
Development
In October 2014, the Trust commenced the first phase of construction for a 79-unit, wood frame building on excess land on our
property known as Pines of Normanview in Regina, Saskatchewan . The project, named Pines Edge 1, was substantially completed
on January 29, 2016 with a total cost of $13 .4 million, below the original budget of $14 .1 million . The four-storey building consists
of 13 one-bedroom and 66 two-bedroom units with a single level of underground parking . The stabilized capitalization rate (“cap
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M A N A G E M E N T ’ S D I S C U S S I O N A N D A N A L Y S I S n n n 47
rate”) is estimated to range from 6 .50% to 7 .00% excluding land . Lease-up of the project began in February of 2016 . As of the end of
December 2016, the project was over 96% leased .
The Trust has commenced construction on Phase 2 of the project consisting of 79 rental units . It is estimated that this phase will
be completed in the summer of 2017 and, once stabilized, is estimated to operate at a cap rate range of 6 .25% to 6 .75% . The Trust
commenced stage two of this project due to the fact that the lease up of phase one is ahead of schedule, demonstrating demand for
this type of product . In fiscal 2016, $5 .2 million was incurred on the development of Phase 2 .
Phase 3 of Pines Edge is a similar project, consisting of 71 rental units . Construction drawings are being finalized and costs are
expected to be similar to Phase 2 . Subject to market and economic conditions, construction could begin as early as Q2 of 2017 .
We continue to explore other development opportunities in Regina, Calgary, and Edmonton . Each of these opportunities will be
evaluated separately to determine the viability of these projects .
Joint Venture Agreement
In the fourth quarter, Boardwalk and RioCan Real Estate Investment Trust (“RioCan”) entered into a joint venture agreement to
develop a mixed use tower consisting of an at-grade retail podium totaling approximately 10,000 square feet and an 12-storey
residential tower with approximately 120,000 square feet of residential space, totaling approximately 164 apartment units at RioCan’s
Brentwood Village Shopping Centre in Calgary, Alberta . The development will include two (2) levels of underground parking and
will provide premium rental housing minutes from downtown Calgary along the Northwest Light Rail Transit line, while providing
close proximity to the University of Calgary, McMahon Stadium and Foothills Hospital . Boardwalk views RioCan as a like-minded
partner who shares similar values and goals as its own, namely to maximize the potential of well-located, transit oriented mixed use
developments that can be constructed to create new communities that residents are proud to call home . The joint venture involves
an equal 50% interest in which both RioCan and Boardwalk will provide its best-in-class retail and residential expertise, respectively,
to co-develop the asset . To maximize the value of the development, RioCan will manage the retail component and Boardwalk will
manage the residential component, each on a cost basis .
The land is currently 100% owned by RioCan . Pursuant to a purchase and sale agreement dated October 19, 2016 between Boardwalk
and RioCan, Boardwalk will purchase a 50% interest in the parcel of land . Subject to the finalization of total buildable area, the
approximate price for Boardwalk’s interest in the land is $2 .9 million and is subject to certain conditions, including the subdivision
of the land and receipt of development permit on terms and conditions satisfactory to both Boardwalk and RioCan . As at December
31, 2016, Boardwalk paid $1 .3 million as a deposit on the land transaction . The land purchase is expected to close mid-2017, with
construction to begin as early as Q3 2017 . Subject to the finalization of building plans and specifications, it is estimated that the total
construction for the project will be between $60 million to $70 million ($30 million to $35 million per partner) .
Financial Performance Summary
At a Glance
In $000’s, except per Unit amounts
Total Assets
Total Rental Revenue
(Loss) Profit
Total Funds From Operations
(Loss) Profit Per Unit
Funds from Operations Per Unit
2016
2015
% Change
$ 5,768,613
$ 5,833,842
$ 438,846
$
(57,440)
$ 144,465
$
$
(1 .24)
2 .84
$
$
$
$
$
476,148
28,848
184,852
0 .61
3 .56
(1 .1)%
(7 .8)%
(299 .1)%
(21 .8)%
(303 .8)%
(20 .2)%
Total Assets decreased from the amounts reported in the prior year, mainly due to a decrease in cash as a result of the financing of
acquisitions though cash on hand and the payment of the special distribution . Total Rental Revenue decreased by 7 .8%, the result
of higher incentives and lower occupancy in western Canada . (Loss) profit decreased by 299 .1% compared to the prior year, due
primarily to a fair value loss of $186 .7 million recognized on its investment properties in 2016 compared to a $130 .4 million loss
in 2015 .
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CONSOLIDATED OPERATIONS AND EARNINGS REVIEW
O V E R A L L R E V I E W
Consolidated Statements of Comprehensive (Loss) Income
Rental Operations
Boardwalk REIT’s Net Operating Income Strategy includes a rental revenue strategy that focuses on enhancing overall rental revenues
through the balance between market rents, rental incentives, turnovers, and occupancy losses . The application of this rental revenue
strategy is ongoing, on a market-by-market analysis, again with the focus on obtaining the optimal balance of these variables given
existing market conditions .
In $000’s, except number of suites
Total rental revenue
Expenses
Operating expenses
Utilities
Property taxes
Net operating income
Operating margins
Number of suites at December 31
Rental Operations Excluding Windsor
In $000’s, except number of suites
Total rental revenue
Expenses
Operating expenses
Utilities
Property taxes
Net operating income
Operating margins
12 Months
Dec 31, 2016
12 Months
Dec 31, 2015
$ 438,846
$ 476,148
97,620
44,711
43,416
$ 185,747
$ 253,099
57 .7%
33,773
94,172
46,200
41,074
$ 181,446
$ 294,702
61 .9%
32,947
12 Months
Dec 31, 2016
12 Months
Dec 31, 2015
$ 438,846
$ 464,591
97,620
44,711
43,416
$ 185,747
$ 253,099
57 .7%
91,770
43,654
39,703
$ 175,127
$ 289,464
62 .3%
% Change
(7 .8)%
3 .7%
(3 .2)%
5 .7%
2 .4%
(14 .1)%
% Change
(5 .5)%
6 .4%
2 .4%
9 .4%
6 .1%
(12 .6)%
Overall, Boardwalk REIT’s rental operations for the year ended December 31, 2016, reported lower results compared to the same
period in the prior year, with total rental revenue decreasing 7 .8% . Excluding Windsor from 2015, rental revenue declined by 5 .5%,
driven by higher incentives and vacancy losses mainly in its Western Canada portfolio . Total rental expenses increased 2 .4% for the
twelve months ended December 31, 2016, compared to 2015 . Excluding Windsor, overall rental operating expenses increased by
6 .1% for the twelve months ended December 31, 2016, as compared to the same period in the prior year, due primarily to higher bad
debt, advertising expenses and property taxes .
The Trust continues to track, in detail, the actual work performed by our onsite Associates to assist in the operating effectiveness of
its overall operations . This program results in overall lower costs while allowing the Trust greater control over the timing of its capital
improvement projects, compared to contracting these same projects out to third parties . As with other estimates used by the Trust,
key assumptions used in estimating the amount of salaries and wages to be capitalized are reviewed on a regular basis and, based
on this review, Management will adjust the amount allocated to more accurately reflect how many internal resources were directed
towards specific capital improvements .
Operating expenses increased by 6 .4%, excluding Windsor for 2015, due to increased costs related to garbage removal, advertising
and bad debt expenses .
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Utility costs, excluding Windsor, increased by 2 .4% for the year ended December 31, 2016 . The increase is attributable to higher cable
costs in Saskatchewan as this province includes new bulk cable and internet services for Boardwalk’s Resident Members . Fixed price
physical commodity contracts have also helped to partially or fully-hedge its exposure to fluctuating natural gas prices . Further details
regarding the hedges on natural gas, as well as electricity prices in Alberta, can be found in NOTE 25 to the consolidated financial
statements for the year ended December 31, 2016 .
The reported increase in property taxes, when excluding Windsor from the prior year period, is mainly attributed to higher overall
property tax assessments . The Trust is constantly reviewing property tax assessments and related charges and, where it feels
appropriate, will appeal all, or a portion, of the related assessment . It is not uncommon for the Trust to receive property tax refunds
and adjustments; however, due to the uncertainty of the amount and timing of the refunds and adjustments, these amounts are only
reported when they are received .
Overall, excluding Windsor, the operating margin decreased from 62 .3% in fiscal 2015 to 57 .7% for the twelve months ended
December 31, 2016 .
Boardwalk REIT closely monitors and individually manages the performance of each of its rental properties . For the reader’s
convenience, we have provided the following summary of our operations on a province-by-province basis .
S E G M E N T E D O P E R AT I O N A L R E V I E W
Alberta Rental Operations
In $000’s, except number of suites
Total rental revenue
Expenses
Operating expenses
Utilities
Property taxes
Net operating income
Operating margin
Number of suites at December 31
12 Months
Dec 31, 2016
12 Months
Dec 31, 2015
$ 280,333
$ 305,270
57,915
25,577
27,690
$ 111,182
$ 169,151
60 .3%
20,499
54,537
25,082
24,109
$ 103,728
$ 201,542
66 .0%
19,752
% Change
(8 .2)%
6 .2%
2 .0%
14 .9%
7 .2%
(16 .1)%
Alberta is Boardwalk’s largest operating segment, representing 66 .8% of total reported net operating income for the year ended
December 31, 2016 . In addition, Alberta represents 60 .7% of total apartment units . Boardwalk REIT’s Alberta operations for the year
ended December 31, 2016, reported a 8 .2% decrease in total rental revenue, when compared to the same period reported in 2015 .
The reported rental revenue change is the combined effect of higher incentives, lower in-place rents and lower occupancy levels
compared to the prior year . Total rental expenses have increased by 7 .2% compared to the prior year due to increases in operating
expenses and property taxes .
Operating expenses increased by 6 .2% from the prior year due to increased suite maintenance and garbage removal costs, advertising
and bad debts, partially mitigated by lower wages and salaries .
Reported utilities for the year ended December 31, 2016 were up 2 .0% compared to the prior year . The reported increase is mainly
the result of higher water and sewer costs and higher natural gas consumption . Currently, the Trust has two outstanding electricity
contracts, one for Southern Alberta and one for Northern Alberta, with two utility companies to supply the Trust with its electrical
power needs . The Trust also has five outstanding natural gas contracts to hedge the price of its natural gas usage . More details can
be found in NOTE 25 to the consolidated financial statements .
Property taxes increased 14 .9% compared to the prior year as a result of higher property tax assessments as many municipalities look
to increase their property tax revenue base .
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Net operating income for Alberta decreased $32 .4 million, or 16 .1% for the twelve months ended December 31, 2016 . Alberta’s
operating margins for the year ended December 31, 2016 was 60 .3% compared to 66 .0% for the same period in 2015 .
Saskatchewan Rental Operations
In $000’s, except number of suites
Total rental revenue
Expenses
Operating expenses
Utilities
Property taxes
Net operating income
Operating margin
Number of suites at December 31 (1)
12 Months
Dec 31, 2016
12 Months
Dec 31, 2015
$ 58,996
$ 61,682
10,835
8,475
4,523
$ 23,833
$ 35,163
59 .6%
4,689
10,779
7,650
4,397
$ 22,826
$ 38,856
63 .0%
4,610
% Change
(4 .4)%
0 .5%
10 .8%
2 .9%
4 .4%
(9 .5)%
(1) Includes 79 units from the new Pines Edge 1 development project that was substantially completed in Q1 2016 .
For the year ended December 31, 2016, Saskatchewan total rental revenue decreased by 4 .4% compared to the prior year . The
revenue decrease is mainly due to higher incentives offered in both Regina and Saskatoon . Rental expenses increased by 4 .4% for the
year ended December 31, 2016, compared to the prior year, primarily due to higher utilities .
Operating expenses for the year ended December 31, 2016 increased marginally due mainly to higher wages and salaries .
Utility costs for the year increased from the previous year due primarily to higher cable and internet costs . The program provides
Resident Members a more cost-effective alternative to cable and internet service compared to subscribing individually with cable
service providers . The Trust also has three outstanding contracts to hedge its natural gas price for its Saskatchewan natural gas usage .
Details of the hedging contracts can be found in NOTE 25 to the consolidated financial statements for the current period .
Property taxes increased by 2 .9% for the year ended December 31, 2016 due to higher property tax assessments .
Reported operating margins for the year ended December 31, 2016 decreased to 59 .6% compared to 63 .0% reported for the prior
year .
Ontario Rental Operations
In $000’s, except number of suites
Total rental revenue
Expenses
Operating expenses
Utilities
Property taxes
Net operating income
Operating margin
Number of suites at December 31
12 Months
Dec 31, 2016
12 Months
Dec 31, 2015
$ 26,430
$
37,412
4,447
4,041
3,156
$ 11,644
$ 14,786
$
$
55 .9%
2,585
6,759
6,395
4,732
17,886
19,526
52 .2%
2,585
% Change
(29 .4)%
(34 .2)%
(36 .8)%
(33 .3)%
(34 .9)%
(24 .3)%
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Rental Operations Excluding Windsor
In $000’s, except number of suites
Total rental revenue
Expenses
Operating expenses
Utilities
Property taxes
Net operating income
Operating margin
Number of suites at December 31
12 Months
Dec 31, 2016
12 Months
Dec 31, 2015
$ 26,430
$ 25,851
4,447
4,041
3,156
$ 11,644
$ 14,786
55 .9%
2,585
4,448
3,838
3,361
$ 11,647
$ 14,204
54 .9%
2,585
% Change
2 .2%
(0 .0)%
5 .3%
(6 .1)%
(0 .0)%
4 .1%
Excluding Windsor, Boardwalk REIT’s Ontario operations reported an increase in total rental revenue of 2 .2% for the year ended
December 31, 2016, compared to the prior year, due to higher occupied rents and occupancy levels . Total rental expenses were
unchanged for the twelve months ended December 31, 2016 compared to the prior year .
Operating expenses, excluding Windsor, were flat for the year ended December 31, 2016 as compared to the prior year .
Utility costs were higher for the twelve months due primarily to higher water and sewer costs and electricity costs . The Trust has one
outstanding fixed price natural gas contract hedging 50% of its Ontario and Quebec natural gas usage . Details of the contract can be
found in NOTE 25 to the consolidated financial statements .
Property taxes were lower for the year ended December 31, 2016 as compared to the prior year, due to lower property tax assessments
received for Kitchener .
Net operating income increased by 4 .1% for the year ended December 31, 2016, as compared to the prior year . Reported operating
margins for the year ended December 31, 2016 were 55 .9% as compared to 54 .9% (excluding Windsor) for the prior year .
Quebec Rental Operations
In $000’s, except number of suites
Total rental revenue
Expenses
Operating expenses
Utilities
Property taxes
Net operating income
Operating margin
Number of suites at December 31
12 Months
Dec 31, 2016
12 Months
Dec 31, 2015
$ 72,865
$ 71,552
17,957
6,463
7,893
$ 32,313
$ 40,552
55 .7%
6,000
17,094
6,878
7,700
$ 31,672
$ 39,880
55 .7%
6,000
% Change
1 .8%
5 .0%
(6 .0)%
2 .5%
2 .0%
1 .7%
Boardwalk REIT’s Quebec operations reported a total rental revenue increase of 1 .8% for the year ended December 31, 2016,
compared to the prior year .
Total rental expenses for the year increased by 2 .0%, when compared to 2015, mainly due to higher operating expenses, and partially
offset by lower utility costs .
Operating expenses increased by 5 .0%, when compared to 2015 due to increased wages and salaries and higher suite maintenance
costs .
The reported decrease of 6 .0% in utilities for the twelve months ended December 31, 2016, was due to lower natural gas and
electricity expenses . In addition, during the third quarter of 2015, the Trust entered into a fixed price natural gas contract to hedge
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50% of its Ontario and Quebec natural gas usage . The details of the natural gas contracts are reported in NOTE 25 of the Trust’s
consolidated financial statements for the current period .
Property taxes increased 2 .5% for the year ended December 31, 2016, compared to the prior year due to higher property tax
assessments .
Reported operating margins for the twelve months ended December 31, 2016 and 2015 were flat at 55 .7% .
O P E R AT I O N A L S E N S I T I V I T I E S
Boardwalk’s Net Operating Income Optimization Strategy
Boardwalk’s current strategy is to focus on optimizing net operating income . This focus requires us to manage not only revenues
but also related operating costs, and take both into consideration when determining a service and pricing model . Lowering overall
turnover while maintaining reasonable lease rental rates and a focus on a high quality level of service continue to be the model
that has delivered the most stable and long-term income source to date . This strategy is region specific and these variables are in
constant flux .
In a more competitive market, the Trust takes a more preventive approach of increasing its offering of suite-specific rental incentives
as well as, where warranted, adjusting reported market rents . The higher frequency of these incentives, particularly in Alberta and
Saskatchewan, is an attempt by the Trust to keep occupancy levels higher than the overall market . When the market returns to
balance, the Trust will be well-positioned to unwind these incentives and increase market rents . It has been our experience that this
preemptive approach has resulted in optimizing net operating income .
In addition, in these competitive markets, the Trust approaches future upcoming maturing leases prior to lease maturity with the
intent of renewing their lease at this time rather than waiting for term maturity . In select markets, the Trust may also forward-lock
future rentals while not collecting revenues for certain months in the immediate future . This means the Trust may decide to rent
a suite in December with the Customer not moving in until the following year . Although the suite is rented, it will not generate
revenue until the Customer actually moves in, for example, in January, which corresponds to the next fiscal period . The percentages
reported as occupancy levels (see table below) represent those occupied units generating revenue for the period noted . The Trust
closely monitors ‘apartment availability’, which represents unoccupied units not generating revenue for the period, after taking into
account forward-committed leases . Although occupancy rates provide a good indication of current revenue, apartment availability
provides the reader a more relevant indication of future potential revenue . As a result of the acquisitions in the year of newly built
assets, portfolio occupancy is on a same store basis .
Boardwalk REIT’s Portfolio Occupancy (Same Store)
City
Calgary
Edmonton
Fort McMurray
Grande Prairie
Kitchener
London
Montreal
Quebec City
Red Deer
Regina
Saskatoon
Verdun
Total
2016
95 .14%
95 .31%
87 .85%
90 .09%
98 .27%
98 .05%
97 .61%
95 .46%
92 .30%
96 .43%
94 .62%
98 .35%
95 .69%
2015
98 .65%
97 .45%
85 .51%
95 .16%
98 .35%
98 .04%
96 .47%
95 .87%
98 .54%
96 .01%
96 .18%
97 .67%
97 .27%
Q4 2016
Q4 2015
92 .79%
93 .42%
95 .87%
83 .77%
98 .68%
98 .15%
97 .49%
95 .60%
87 .38%
96 .18%
91 .24%
98 .69%
94 .24%
98 .53%
97 .28%
85 .78%
93 .49%
99 .19%
97 .79%
97 .11%
95 .43%
98 .64%
97 .50%
97 .50%
97 .45%
97 .34%
A R 2 0 1 6 B O A R D W A L K R E I T
M A N A G E M E N T ’ S D I S C U S S I O N A N D A N A L Y S I S n n n 53
In fiscal 2016, the Trust reported a year-over-year decrease of 158 basis points in its overall same store occupancy rate, a decline from
97 .27% to 95 .69% . A softening in the Western Canadian markets contributed to the overall occupancy rate decrease . Boardwalk’s
overall rental revenue strategy focuses on the Trust balancing the key inputs, including occupancy levels, incentives and existing
rental market rates . As a strategy, the Trust is constantly adjusting market rents and incentives based on property-specific demand
and supply . Calgary and Edmonton saw occupancy levels decline by 351 and 214 basis points, respectively, to 95 .14% and 95 .31%,
respectively . Regina saw occupancy levels increase to 96 .43% in 2016 compared to 96 .01% for 2015 . Note that Regina does not
include the 79-unit new development, which commenced lease-up in February of 2016 . Including the new development in the
current quarter would result in an occupancy rate of 95 .61% for Regina . Saskatoon saw occupancy levels decrease to 94 .62% in 2016
compared to 96 .18% in 2015 .
Supply versus Demand & Impact on Reported Occupancy (Same Store)
s
t
u
O
e
v
o
M
/
s
l
a
t
n
e
R
2,000
1,800
1,600
1,400
1,200
1,000
800
600
400
200
0
J
M
M
J
S
N
J
M
M
J
S
N
J
M
M
J
S
N
J
M
M
J
S
N
J
2013
2014
2015
2016
100%
99%
98%
97%
96%
95%
94%
93%
92%
91%
90%
y
c
n
a
p
u
c
c
O
The issue of demand and supply, as with any industry, is an important performance indicator for multi-family real estate . The above
Move Outs
Occupancy %
Rentals
chart attempts to show the total move-outs (supply) compared to total move-ins (demand) and the resulting impact on reported
occupancy relating to our portfolio . The cumulative impact of demand being greater than supply, or vice versa, is the primary driver
in the reported occupancy rate . In recent years, Boardwalk focused on maintaining high occupancy levels while optimizing turnover
costs . The reader is cautioned that adjusting market rental rates is an ongoing process for the Trust and is consistent with its overall
strategy of optimizing overall net operating income; consequently, it will adjust rents upward or downward when it is deemed
necessary .
Vacancy Loss and Incentives
Vacancy Loss
Incentives
Total
$20,000
$18,000
$16,000
$14,000
$12,000
$10,000
s
’
0
0
0
$
$8,000
$6,000
$4,000
$2,000
$0
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
Vacancy loss and rental incentives are strong indicators of current and future revenue performance . Depending on specific market
conditions, to best manage overall economic rental revenue, the correct balance between rental incentives and vacancy loss is
important . On a quarterly basis, the chart details rental incentives versus vacancy loss . Select incentives are continuing in the Calgary,
Edmonton, Regina and Saskatoon markets to maintain occupancy levels . Boardwalk REIT will continue to manage its overall revenues
54 n n n M A N A G E M E N T ’ S D I S C U S S I O N A N D A N A L Y S I S
B O A R D W A L K R E I T A R 2 0 1 6
through three key revenue variables, notably, market rents, occupancy levels, and suite-selective incentives . The Trust continues to
focus on maximizing overall revenues through the management of these key revenue variables .
Occupancy Sensitivity
As with all real estate rental operators, Boardwalk REIT’s financial performance is sensitive to occupancy rates . Based on the current
reported market rents, a 1% annualized change in reported occupancy is estimated to impact overall rental revenue by approximately
$4 .3 million, or $0 .08 per Trust Unit on a diluted basis .
S TA B I L I Z E D P R O P E R T Y R E S U LT S
Boardwalk defines stabilized property as one that has been owned by the Trust for a period of 24 months or more from the reporting
date . Boardwalk REIT’s overall percentage of stabilized properties was 97 .6% of its total rental unit portfolio as at December 31,
2016, or a total of 32,947 units . The tables below provide a regional breakdown on these properties for fiscal 2016, as compared to
fiscal 2015 .
Dec 31 2016 – 12 M
Edmonton
Calgary
Red Deer
Grande Prairie
Fort McMurray
Quebec
Saskatchewan
Ontario
# of Units
12,397
5,419
939
645
352
6,000
4,610
2,585
32,947
% Revenue
Growth
% Operating
Expense Growth
% Net Operating
Income Growth
(7 .9)%
(9 .5)%
(10 .8)%
(16 .1)%
(21 .0)%
1 .8%
(5 .7)%
2 .2%
(6 .3)%
6 .9%
4 .8%
0 .2%
8 .7%
(5 .0)%
2 .0%
3 .5%
0 .7%
4 .5%
(16 .1)%
(15 .5)%
(17 .1)%
(32 .1)%
(30 .8)%
1 .7%
(11 .1)%
3 .5%
(12 .5)%
% of NOI
39 .8%
20 .6%
2 .4%
1 .3%
1 .1%
15 .7%
13 .4%
5 .7%
100 .0%
Stabilized revenue decreased by 6 .3% for the year ended December 31, 2016, compared to the prior year . Operating expenses
reported for the year increased by 4 .5% from 2015, resulting in a NOI decrease of 12 .5% compared to the prior year . The decrease in
reported stabilized revenue was driven by lower in-place occupied rents and higher incentives in Alberta and Saskatchewan, which
accounts for approximately 79% of the Trust’s reported stabilized Net Operating Income . Operating expenses increased primarily as
a result of higher advertising, bad debt, and property taxes .
Stabilized Revenue Growth
Edmonton
Calgary
Red Deer
Grande Prairie
Fort McMurray
Quebec
Saskatchewan
Ontario
# of Units
12,397
5,419
939
645
352
6,000
4,610
2,585
32,947
Q4 2016 vs
Q3 2016
Q4 2016 vs
Q2 2016
Q4 2016 vs
Q1 2016
Q4 2016 vs
Q4 2015
(3 .8)%
(4 .1)%
(6 .5)%
(10 .2)%
(0 .8)%
(0 .9)%
1 .9%
0 .9%
(2 .9)%
(6 .6)%
(8 .8)%
(13 .7)%
(17 .9)%
(16 .6)%
1 .1%
(4 .3)%
1 .4%
(5 .1)%
(10 .4)%
(12 .5)%
(17 .0)%
(23 .2)%
(0 .5)%
1 .9%
(6 .0)%
1 .9%
(7 .8)%
(12 .4)%
(14 .6)%
(19 .3)%
(25 .6)%
(10 .1)%
1 .1%
(8 .2)%
2 .5%
(9 .7)%
On a sequential basis, stabilized revenues reported in the fourth quarter of 2016 decreased by 2 .9% over Q3 2016, decreased by 5 .1%
compared to Q2 2016, decreased by 7 .8% compared to Q1 2016 and decreased 9 .7% compared to Q4 2015 . This smaller decline in
the current quarter is a signal that the market is heading towards a more balanced market . The Trust strives toward balancing the
optimum level of market rents, rental incentives and occupancy rates in order to achieve its net operating income optimization
strategy .
A R 2 0 1 6 B O A R D W A L K R E I T
M A N A G E M E N T ’ S D I S C U S S I O N A N D A N A L Y S I S n n n 55
Estimated Loss-to-Lease Calculation
Boardwalk REIT’s estimated loss-to-lease, representing the difference between estimated market rents and actual occupied rents in
December 2016, and adjusted for current occupancy levels, totaled approximately $6 .0 million on an annualized basis, representing
$0 .12 per Unit (Trust & LP B Units) . For the most part, Boardwalk REIT’s rental lease agreements last no longer than twelve months .
On physical turnover, the rental units are then re-leased directly at current market rent . By managing market rents and providing
suite-specific incentives to our Resident Members, the Trust and all its Stakeholders continue to benefit from lower turnover, reduced
expenses, and high occupancy . The reader should note estimated loss-to-lease, measured at a point in time, is a non-GAAP measure,
and that reported market rents can be very seasonal, and, as such, will vary from quarter to quarter . The significance of this change
could materially affect Boardwalk REIT’s “estimated loss-to-lease” amount . The importance of this estimate, however, is that it can be
an indicator of future rental performance, assuming continuing economic conditions and trends . The reader should also note that it
would take significant time for these market rents to be recognized by the Trust due to internal and external limitations on its ability
to charge these new market-based rents in the short term .
December
2016
Occupied Rent (1)
December
2016
Market Rent (1)
Mark to Market
Per Month
Annualized
Mark to Market
Adjusted
for Current
Occupancy levels
($000’s)
$
$
$
$
$
$
$
$
$
$
1,131
$
1,134
$
3
$
243
1,216
933
894
1,238
1,139
1,026
1,059
874
1,280
966
929
1,244
$
$
1,161
1,020
$
$
1,080
886
64
33
35
6
22
(6)
21
12
4,083
342
246
23
4,938
(461)
1,095
38
$
$
1,086
$
1,103
$
17
$
5,956
Weighted
Average
Apartment
Units
12,397
5,419
939
645
352
19,752
6,000
4,610
2,585
32,947
% of Portfolio
38%
16%
3%
2%
1%
60%
18%
14%
8%
100%
Same Store
Edmonton
Calgary
Red Deer
Grande Prairie
Fort McMurray
Alberta Portfolio
Quebec
Saskatchewan (2)
Ontario
Total Portfolio
(1) Ancillary rental revenue is included in the calculation of market and occupied rent . Occupied and market rent are net of incentives .
(2) Saskatchewan market rent now includes an increase for cable and internet service .
The increase in the loss-to-lease for our portfolio, from $2 .3
million at September 2016 to $6 .0 million at December 2016,
was due primarily to higher market rents in certain rental
markets of Alberta and Saskatchewan .
In fiscal 2016, as with prior periods, Boardwalk REIT continued
to focus on the optimization of all rental revenue, with
attention to appropriate levels of market rents and certain
s
d
n
a
s
u
o
h
T
occupancy level targets, as well as suite-selective incentives,
when warranted .
As was previously mentioned, given a softening of the rental
markets, particularly in Alberta and Saskatchewan, and the
impact uncertainty resulting from lower oil prices, Boardwalk’s
continued focus is on maintaining and increasing, in certain
regions, occupancy in the short term by offering various suite-
specific incentives in exchange for longer-term leases .
Revenue, Incentives, Vacancy Loss ($000’s)
$135,000
$125,000
$115,000
$105,000
$95,000
$85,000
$75,000
Q1 2015
Q2 2015
Q3 2015
Q4 2015
Q1 2016
Q2 2016
Q3 2016
Q4 2016
Vacancy Loss
Incentives
Rental Revenue
56 n n n M A N A G E M E N T ’ S D I S C U S S I O N A N D A N A L Y S I S
B O A R D W A L K R E I T A R 2 0 1 6
Investing In Our Properties
Boardwalk is continually re-investing in its properties . A detailed analysis of this investment can be found later in the MD&A under
the section titled, “Capital Improvements” . The purpose of the “Capital Improvements” section is to provide the reader with a
consolidated view of what the Trust spent on its real estate asset base .
F I N A N C I N G C O S T S
Financing costs for the year ended December 31, 2016 decreased from the same period in the prior year, from $85 .4 million to $79 .8
million, primarily due to the Trust being able to renew maturing mortgages at interest rates below maturing rates . At December
31, 2016, the reported weighted average interest rate of 2 .78% was down from the weighted average interest rate of 3 .01% at
December 31, 2015 . Boardwalk REIT has continued to take advantage of historically low interest rates to refinance and renew certain
mortgages, resulting in a lower overall weighted average interest rate . The average term to maturity of the Trust’s mortgage portfolio
is approximately 4 .8 years .
Boardwalk REIT concentrates on multi-family residential real estate . It is therefore eligible to obtain government-backed insurance
through the NHA program, administered by CMHC . The benefits of purchasing this insurance are two-fold .
The first benefit of using CMHC insurance is Boardwalk REIT can normally obtain lower interest rate spreads on its property financing
as compared to other financing alternatives in either the residential or any other real estate class, leading to lower overall cost of debt,
after including the cost of the NHA insurance .
The second benefit of the CMHC insurance relates to lowering Boardwalk REIT’s overall renewal risk . Once insurance is obtained on
the related mortgage, the insurance is transferable and follows the mortgage for the complete amortization period, typically between
25 and 40 years, depending on the type of asset being insured . With the insurance being transferable between approved lenders, it
lowers the overall risk of Boardwalk REIT not being able to refinance the asset on maturity .
Management cannot over-emphasize the importance of this Government-backed mortgage insurance program administered by
Canada Mortgage and Housing Corporation . Despite past volatility in the overall credit markets, the Trust has been able to find a
number of mortgage lenders willing to assume, or underwrite, additional mortgages under this program .
At December 31, 2016, approximately 99% of Boardwalk REIT’s mortgages were backed by this NHA insurance, with a weighted
average amortization period of approximately 30 years .
As was previously noted, the adoption of IFRS has also had an impact on the amount of financing costs reported on the Trust’s
Consolidated Statement of Comprehensive (Loss) Income . As a result of the Trust’s LP Class B Units being classified as financial
liabilities in accordance with IAS 32, the corresponding distributions paid to the Unitholders are classified as financing costs under
IFRS . The Trust believes these distribution payments do not truly represent “financing charges” as these amounts are only payable if
the Trust declares distributions, and only for the amount of any distributions declared, both of which are at the discretion of the Board
of Trustees as outlined in the DOT . The total amount of distributions paid to the LP Class B Unitholders for the year ended December
31, 2016, which have been recorded as financing charges, was $10 .0 million ($13 .6 million for the year ended December 31, 2015) .
Based on this rationale, these amounts have been added back in the calculation of FFO .
The reader should also note that, under IFRS, financing charges are recorded net of interest income the Trust has earned for the
period . The total amount of interest income earned for the year ended December 31, 2016 was $1 .7 million, compared to $1 .6
million for the prior year . Interest income will fluctuate depending on the cash on hand in the period . Further details on the Trust’s
investment of cash on hand using term deposits of 90 days or less can be found in NOTE 10 of the consolidated financial statements .
Interest Rate Sensitivity
Although Boardwalk REIT manages its financing risk in a variety of ways, as discussed later in the MD&A, it is important the reader
understands how significant interest rate changes could impact the Trust as a whole . Due to the size of Boardwalk’s overall mortgage
portfolio, it has been prudent to spread out the maturity of these mortgages over a number of years . In fiscal 2017, the Trust
anticipates having approximately $291 .7 million of secured mortgages maturing with a weighted average rate of 2 .91% . These
A R 2 0 1 6 B O A R D W A L K R E I T
M A N A G E M E N T ’ S D I S C U S S I O N A N D A N A L Y S I S n n n 57
maturing rates are above current NHA insured interest rates and the Trust should be able to recognize additional savings upon
renewal of these mortgages . If we were to renew these mortgages today with a 5-year term, we estimate, based upon interactions
with possible lenders, the new rate would be approximately 2 .00% (as of February 16, 2017), resulting in an estimated $2 .7 million
potential annualized reduction in interest expense in our 2017 maturing mortgages .
A D M I N I S T R AT I O N
Included in administration expenses are costs associated with Boardwalk REIT’s centralized administrative functions . The amount
reported for the year ended December 31, 2016, which relates to corporate administration from continuing operations, was $33 .9
million, compared to $33 .4 million for the same period in the prior year, an increase of approximately 1 .5% for the year .
For the current and prior comparative periods, Boardwalk REIT allocated certain administration costs between corporate and rental
operating expenses . The administration costs allocated to rental operating expenses consist primarily of specific amounts associated
with operation-specific staff and related support initiatives . Total administration costs, combining rental operating and corporate,
were $57 .5 million for the year ended December 31, 2016, compared to $56 .8 million for the same period in the prior year . The
increase in total administration costs of approximately $0 .7 million, or approximately 1 .2%, was due in part to increased professional
fees and executive retirements during the year .
D E P R E C I AT I O N A N D A M O R T I Z AT I O N
Depreciation and amortization recorded on the Consolidated Statements of Comprehensive (Loss) Income is made up of the
depreciation of property, plant and equipment, and the amortization of deferred financing costs .
Depreciation of property, plant and equipment
The Trust has elected to use the cost model under IAS 16 – Property, Plant and Equipment (“IAS 16”) to value its property, plant
and equipment, and, as a result of this method, depreciation expense is a charge taken against earnings to reflect the estimated
depreciation that has occurred to these assets as a result of their use during the reporting period in question .
Amortization of Deferred Financing Costs
The amortization of deferred financing costs relates primarily to the amortization of CMHC premiums, which are paid as part of
mortgage financing . If Boardwalk REIT replaces an existing mortgage with a new mortgage, all costs associated with the original
mortgage, including the unamortized balance of the CMHC premium, are required to be charged to income in the period that
this occurs . As a result, and due to the variable timing and strategy of each mortgage at maturity, the amounts reported will vary .
Rather than refinance the entire mortgage on term maturity to a higher amount, Boardwalk REIT continues to take advantage of
supplementing, rather than extinguishing, the original mortgage to increase its leverage .
Boardwalk reviews its key depreciation and amortization estimates on an ongoing basis and, if warranted, will adjust these estimates
on a prospective basis .
The total amount reported as depreciation and amortization for the year ended December 31, 2016, was $10 .1 million compared to
$9 .6 million recorded for the same period in the prior year .
58 n n n M A N A G E M E N T ’ S D I S C U S S I O N A N D A N A L Y S I S
B O A R D W A L K R E I T A R 2 0 1 6
O T H E R I N C O M E A N D E X P E N S E S
Income Tax Expense
Boardwalk REIT qualifies as a ‘mutual fund trust’ as defined in the Income Tax Act (Canada) . The Tax Act also contains legislation
affecting the tax treatment of publicly traded trusts and the criteria for qualifying for the real estate investment trust exemption (the
“REIT Exemption”), which would exempt Boardwalk REIT from income tax under the SIFT Legislation . For 2015 and 2016 to date, the
Trust qualified for the REIT Exemption .
Although Boardwalk REIT is exempted from income taxes, provided it distributes all of its taxable income to its Unitholders, this
exemption does not apply to its corporate subsidiaries, which are subject to income taxes .
LP Class B Units and the Deferred Unit Compensation Plan
The LP Class B Units are non-transferable, except under certain circumstances, but are exchangeable, on a one-for-one basis, into
Boardwalk REIT Units at any time at the option of the holder . The LP Class B Units and the deferred unit-based compensation plan are
classified as financial liabilities in accordance with IFRS standards, and, as a result, are recorded at their fair value at each reporting
date . As at December 31, 2016, the Trust used a price of $48 .65 based on the closing price of the TSX-listed Boardwalk REIT Trust Units
to determine the fair value of these financial liabilities at that date . The total fair value of these units recorded on the Consolidated
Statements of Financial Position at December 31, 2016, was $217 .7 million, and a corresponding fair value loss of $5 .4 million (year
ended December 31, 2015 – fair value gain of $63 .1 million) was recorded on the Consolidated Statements of Comprehensive (Loss)
Income for the year ended December 31, 2016 .
The deferred unit-based compensation plan had a fair value of $6 .0 million, and a corresponding fair value loss of $0 .5 million (year
ended December 31, 2015 – fair value gain of $1 .5 million) was recorded on the Consolidated Statements of Comprehensive (Loss)
Income for the year ended December 31, 2016 .
FINANCIAL CONDITION
R E V I E W O F C O N S O L I D AT E D S TAT E M E N T S O F C A S H F L O W S
Operating Activities
Cash Flow from Operations
Boardwalk REIT prepares its financial statements in accordance with International Financial Reporting Standards and with the
recommendations of the Real Property Association of Canada (“REALpac”) . REALpac has adopted measurements called Funds
From Operations and Adjusted Funds From Operations to supplement profits or earnings as measures of operating performance .
These measurements are considered to be meaningful and useful measures of real estate operating performance . Boardwalk REIT’s
presentation of FFO and AFFO are materially consistent with the definitions provided by REALpac . These measurements, however,
are not necessarily indicative of cash that is available to fund cash needs and should not be considered alternatives to cash flow as
a measure of liquidity . FFO and AFFO do not represent cash flow from operations as defined by IFRS . Boardwalk REIT considers FFO
and AFFO to be appropriate measurements of the performance of a publicly listed multi-family residential entity . In order to facilitate
a clear understanding of the combined historical operating results of Boardwalk REIT, management feels FFO and AFFO should be
considered in conjunction with profit as presented in the consolidated financial statements . Boardwalk REIT’s computation of FFO
from profit is highlighted above in the section titled, “FFO Reconciliations” . Boardwalk REIT’s computation of AFFO from FFO is
highlighted below in the section titled, “Maintenance of Productive Capacity” .
A R 2 0 1 6 B O A R D W A L K R E I T
M A N A G E M E N T ’ S D I S C U S S I O N A N D A N A L Y S I S n n n 59
A reconciliation of FFO to cash flow from operating activities as shown in the Consolidated Statements of Cash Flow prepared in
accordance with IFRS is highlighted below .
FFO Reconciliation
In $000’s, except per Unit amounts
Cash flow from operating activities
Adjustments
Operating working capital
Deferred financing amortization
Government grant earned
Add back distributions to LP Class B Units recorded as
financing charges (1)
Interest paid
Financing costs
Current income tax expense related to sale of assets
Funds from operations
Funds from operations – per unit
12 Months
Dec 31, 2016
12 Months
Dec 31, 2015
$ 133,687
$
172,220
% Change
788
(4,860)
378
9,990
84,256
(79,774)
–
1,197
(4,656)
378
13,604
87,498
(85,370)
(19)
$ 144,465
$
2 .84
$
$
184,852
3 .56
(21 .8)%
(20 .2)%
(1)
Under IFRS, the LP Class B Units are considered financial instruments in accordance with IAS 32 . As a result of this classification, their corresponding
distribution amounts are considered “financing charges” under IFRS . The Trust believes these distribution payments do not truly represent “financing
charges”, as these amounts are only payable if the Trust declares distributions, and only for the amount of any distributions declared, both of which are at
the discretion of the Board of Trustees as outlined in the DOT . Therefore, these distributions are excluded from the calculation of FFO, consistent with the
treatment of distributions paid to all other Unitholders .
The reader is cautioned that Boardwalk REIT’s calculation of FFO may be different from other real estate corporations or REITs and,
as such, a straight comparison may not be warranted . For the year ended December 31, 2016, Boardwalk REIT reported total FFO
of $144 .5 million, or $2 .84 per fully diluted Trust Unit . This represented a decrease of approximately 21 .8% and 20 .2%, respectively,
compared to $184 .9 million, or $3 .56 per fully diluted Trust Unit, reported for the same twelve months in 2015 . The decrease for the
year 2016 is primarily due to lower rental revenue (as a result of increased incentives) and higher property taxes, partially offset by
interest cost savings .
Financing Activities
Distributions
Boardwalk distributes payments on a monthly basis to its Unitholders . These payments are referred to as regular distributions . The
distinct nature and classification of these payments are unique to each trust and the components of these distributions may have
differing tax treatments . For the year ended December 31, 2016, the Trust paid regular distributions of $113 .4 million, to its Trust and
LP Class B Unitholders, compared to $105 .8 million, for the same period in 2015 . In addition a special distribution of $51 .3 million was
paid to Unitholders on record as at December 31, 2015 . Regular distributions declared for the twelve months ended December 31,
2016 represented a FFO payout ratio of 78 .5%, compared to 57 .3% for the prior year . Regular distributions (Trust and LP Class B Units)
declared in 2016 represented approximately 84 .8% of cash flow from operating activities compared to 61 .5% for 2015 . Note that the
Special Distribution paid in the first quarters of 2016 and 2015 to the LP B Units reduced cash flow from operating activities by $4 .5
million and $6 .3 million, respectively . As regular distributions are funded by the Trust’s liquidity and cash flow from operations, these
regular distributions appear sustainable in the foreseeable future .
Financing of Revenue Producing Properties
During the twelve months ended December 31, 2016, the financing and refinancing of existing properties totaled approximately
$281 .3 million . During the financing and refinancing process, Boardwalk REIT was able to decrease the weighted average interest rate
on its mortgage portfolio from 3 .01% at December 31, 2015 to 2 .78% at December 31, 2016 .
Acquisitions
On June 7, 2016, the Trust closed on the purchase of a 162-unit property for a purchase price of $29 .6 million . On August 9, 2016, the
Trust closed on the purchase of a 165-unit property for a purchase price of $30 .2 million . On August 17, 2016, the Trust closed on the
purchase of a 182-unit property for a purchase price of $33 .3 million . All three properties were part of the portfolio of 509 units located
60 n n n M A N A G E M E N T ’ S D I S C U S S I O N A N D A N A L Y S I S
B O A R D W A L K R E I T A R 2 0 1 6
in Edmonton, Alberta, which the Trust waived conditions on April 26, 2016 . On June 22, 2016, the Trust closed on the purchase of
a 238-unit property in Calgary, Alberta for a purchase price of $51 .2 million . All of the acquisitions were paid for with cash on hand .
On January 19, 2015, the Trust purchased an office building in Verdun, Quebec, which has now been included under the Nun’s Island
property for a purchase price of $3 .1 million . The purchase closed on January 19, 2015 . On April 15, 2015, the Trust closed on the
purchase of one unit in Edmonton, Alberta for a purchase price of $130 thousand . The Trust now owns 223 of the 224 units in the
property .
Due to the nature of multi-family residential real estate, the amount paid for apartment units may vary dramatically based on a
number of parameters, including location, type of ownership (free hold versus land lease) and type of construction . As required
under IFRS, on acquisition, an analysis is performed on the mortgage debt assumed, if any . The analysis focuses on the interest rates
of the debt assumed . If it is determined that the in-place rates are materially below or above market rates, an adjustment is made to
the book cost of the recorded asset . No mortgages were assumed in 2016 and 2015 and, therefore, no adjustment for fiscal 2016 or
2015 was made .
Capital Improvements
Boardwalk has a continuous capital improvement program with respect to its investment properties . The program is designed to
extend their useful lives, improve operating efficiency, enhance appeal, enhance as well as maintain earnings capacity and meet
Resident Members’ expectations, as well as meet health and safety regulations .
In 2016, Boardwalk REIT invested approximately $102 .5 million (comprised of $97 .7 million on its stabilized investment properties
and $4 .8 million on property, plant and equipment) back into its properties in the form of equipment and project enhancements to
upgrade existing suites, common areas, building exteriors and systems, compared to the $88 .7 million ($80 .2 million on its stabilized
investment properties and $8 .5 million property, plant and equipment) invested in 2015 . The amount of this investment will vary
from year-to-year .
A significant part of Boardwalk’s capital improvement program relates
to projects that are carried out by Boardwalk’s Associates . This internal
capital program was initiated in 1996 as a way to create more value for
2016 12M
Operational Capital Investments
the Trust . The Trust recognizes that there are certain efficiencies and
economies of scale available from having Boardwalk Associates perform
Internal Capital
Program 19%
Building
Improvements 27%
certain capital projects ourselves, or “in-house” . This results in the faster
execution and greater control of these projects while at the same time
eliminating the profit charged by third-party contractors . The Trust
focuses on specific projects where there is the largest opportunity for
value creation, like flooring and painting . Over the last few years, the
Trust has intensified this focus of performing capital projects “in-house”
rather than contracting such services . Included in capital improvements is
approximately $19 .4 million of on-site wages and salaries that have been
Other
(incl. Equipment)
6%
Suite
Improvements 30%
Elevators 6%
Boilers/Mech 4%
Hallway Improvements 2%
Appliances 6%
incurred towards these projects for 2016, compared to $17 .9 million for 2015 .
Maintenance of Productive Capacity
The Trust has two separate areas in which capital is invested back into its residential buildings . These are referred to as ‘maintenance
capital expenditures’ and ‘stabilizing and value enhancing capital expenditures’ .
Maintenance capital expenditures are funded from operating cash flows . These expenditures are deducted from FFO in order to
estimate a sustainable amount, called Adjusted Funds From Operations, which can be distributed to Unitholders . Maintenance capital
expenditures include those expenditures that are not considered betterments, and relate more to maintaining the existing earnings
capacity of our property portfolio . In contrast, stabilizing and value enhancing capital expenditures are more discretionary in nature
and focus on increasing the productivity of the property, with the goal of increasing the FFO generated at that location . In addition,
the Trust invests funds in its portfolio in the form of ongoing repairs and maintenance as well as on-site maintenance Associates . Both
of these expenditures are designed to maintain the operating capacity of our assets .
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The following table provides management’s estimate of these expenditure categories .
in $000’s, except for per suite amounts
Maintenance Capital Expenditures
Stabilizing & Value Enhancing Capital (excluding
Property, Plant & Equipment)
12 Months
Dec 31, 2016
$ 17,534
Per
Suite
12 Months
Dec 31, 2015
Per
Suite
$
525
$
17,056
$
500
80,210
$ 97,744
2,402
63,140
$ 2,927
$
80,196
1,851
$ 2,351
Items reported as capital are determined as investments in assets that have a useful life longer than the current reporting period .
Management has estimated that for fiscal 2016 and 2015, the amount allocated to maintenance capital was approximately $17 .5
million, or $525 per apartment unit, and $17 .1 million, or $500 per apartment unit, respectively, with investment in value-enhancing
expenditures to its stabilized investment properties totaling $80 .2 million and $63 .1 million, respectively, or $2,402 and $1,851 per
apartment unit .
The amount allocated to maintenance capital 2016 of approximately $17 .5 million, or $525 per apartment unit, was slightly higher
than the $500 per apartment unit in 2015 .
If we compare the funds generated by the Trust after adjusting for the required maintenance capital expenditures, we note the Trust
is currently paying out an estimated 78 .5% of reported FFO and 89 .3% of AFFO for the year ended December 31, 2016 compared
to 57 .3% and 63 .1%, respectively, for the previous year . The Trust feels that in addition to FFO, AFFO is an important measure of
economic performance . As an alternate measure to FFO, AFFO is indicative of the Trust’s ability to pay distributions to its Unitholders .
AFFO is a non-GAAP measure that does not have a standard meaning as defined by IFRS and, therefore, it may not be comparable
to AFFO as presented by other entities .
(000’s)
Funds From Operations (FFO)
Maintenance Capital Expenditures
Adjusted Funds From Operations (AFFO)
AFFO per Unit (Trust and LP B Units)
Unitholder Distributions – Regular (Trust Units and LP B Units)
Distribution as a % of FFO
Distribution as a % of AFFO
12 Months
Dec 31, 2016
12 Months
Dec 31, 2015
$ 144,465
$ 184,852
17,534
$ 126,931
$
2 .50
$ 113,390
78 .5%
89 .3%
17,056
$ 167,796
$
3 .23
$ 105,838
57 .3%
63 .1%
Maintenance capital expenditures for our income-producing properties are dependent upon many factors, including, but not limited
to, the number of suites, age and location of our properties, and the Trust’s policy of ongoing investment, resulting in safe and
desirable apartments for its Resident Members and Associates .
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Investment Properties
The Trust has elected to use the fair value model in accordance with IAS 40 – Investment Properties to report the value of its
investment properties at each reporting date .
External valuations were obtained from third-party appraisers (the “Appraisers”) based on a cross section of properties from different
geographical locations and markets across the Trust’s rental portfolio, as determined by management, to corroborate the Trust’s
internal fair value calculation for its entire investment property portfolio . External appraisals were obtained as follow:
Date
December 31, 2016
September 30, 2016
June 30, 2016
March 31, 2016
December 31, 2015
September 30, 2015
June 30, 2015
March 31, 2015
Number of
properties
5
5
4
4
5
4
4
5
Aggregate
fair value
$ 511,224
$ 177,677
$
$
82,027
97,993
$ 534,159
$ 125,278
$ 120,113
$ 168,992
Percentage
of portfolio
as of that date
9 .1%
3 .2%
1 .5%
1 .8%
9 .7%
2 .3%
2 .1%
2 .9%
The fair value of the Trust’s investment property portfolio was determined internally by the Trust using the same assumptions and
valuation techniques used by the external valuation professionals . In addition to performing a valuation on a selection of Trust’s
properties (and not performing a valuation on all of the Trust properties) to compare to the Trust’s internal valuation, the Appraisers
provided the Trust with a summary of the major assumptions and market data by city in order for the Trust to complete its internal
valuations .
The key valuation metrics for the Trust’s investment properties are set out in the following tables:
As at
December 31, 2016
December 31, 2015
Capitalization rate
Minimum
Maximum
Forecasted
total
standardized
net operating
income
Capitalization rate
Minimum
Maximum
Forecasted
total
standardized
net operating
income
4 .50%
5 .00%
5 .75%
5 .25%
5 .25%
5 .00%
5 .25%
5 .65%
5 .75%
4 .50%
4 .75%
6 .00%
$ 62,802
5 .52%
7 .25%
5 .25%
5 .50%
5 .75%
5 .75%
6 .00%
6 .00%
120,325
17,920
2,003
12,186
5,669
10,116
23,426
19,127
7 .25%
$ 273,574
18 .80%
$ 27,847
4 .50%
5 .00%
5 .75%
5 .25%
5 .50%
5 .00%
5 .25%
5 .75%
5 .75%
4 .50%
4 .75%
6 .00%
$
59,835
5 .50%
7 .25%
5 .25%
5 .75%
5 .75%
5 .75%
6 .00%
6 .00%
120,400
18,196
1,797
11,680
5,469
9,982
23,061
19,604
7 .25%
$ 270,024
16 .75%
$
27,310
Calgary
Edmonton
Other Alberta
Kitchener
London
Montreal
Quebec City
Regina
Saskatoon
Land Lease
Overall portfolio weighted average capitalization rate was 5 .38% as at December 31, 2016 and December 31, 2015 .
The “Overall Capitalization Rate” method requires a forecasted stabilized net operating income (“NOI”) be divided by a capitalization
rate (“cap rate”) to determine a fair value . NOI is calculated as a one-year income forecast based on rental income from current leases
and key assumptions about rental income, vacancies and inflation rates, among other factors, less property operating costs . As such,
fluctuations in both NOI and cap rates could significantly alter the fair value . Generally, an increase in stabilized NOI will result in an
increase to the fair value of an investment property . An increase in capitalization rate will result in a decrease to the fair value of an
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investment property . When the capitalization rate is applied to NOI to calculate fair value, there is a significant impact whereby the
lower the capitalization rate, the larger the impact . Below are tables that summarize the sensitivity impact of changes in both cap
rates and NOI on the Trust’s fair value of its investment properties (excluding development) as at December 31, 2016 and December
31, 2015:
As at December 31, 2016 (in $000’s)
Net Operating Income
Capitalization Rate
-0 .25%
Cap Rate As Reported
+0 .25%
As at December 31, 2015 (in $000’s)
Net Operating Income
Capitalization Rate
-0 .25%
Cap Rate As Reported
+0 .25%
5 .13%
5 .38%
5 .63%
5 .13%
5 .38%
5 .63%
-3%
-1% As Forecasted
+1%
+3%
$ 292,378 $ 298,406 $ 301,421 $ 304,435 $ 310,463
$
97,001 $ 214,592 $ 273,387 $ 332,183 $ 449,774
(168,185)
(409,806)
(56,062)
5,606,174
56,062
(302,664)
(249,093)
(195,522)
168,185
(88,381)
-3%
-1% As Forecasted
+1%
+3%
$ 288,414 $ 294,360 $ 297,334 $ 300,307 $ 306,254
$
95,451 $ 211,370 $ 269,330 $ 327,290 $ 443,209
(165,800)
(403,848)
(55,267)
5,526,651
55,267
(298,223)
(245,411)
(192,598)
165,800
(86,974)
Investment properties with a fair value of $522 .9 million as at December 31, 2016 ($516 .7 million – December 31, 2015), are situated
on land held under ground (or land) leases .
Investment properties with a fair value of $770 .5 million as at December 31, 2016 (December 31, 2015 – $679 .6 million), are pledged
as security against the Trust’s committed revolving credit facility . In addition, investment properties with a fair value of $5 .3 billion as
at December 31, 2016 (December 31, 2015 – $5 .3 billion), are pledged as security against the Trust’s mortgages payable .
For the year ended December 31, 2016, the Trust capitalized $97 .7 million in building improvements (and $6 .2 million in development
expenditures) and recorded a fair value loss of $180 .8 million on its financial statements as a result of changes in the fair value of
investment properties . Capitalized building improvements represent expenditures that provide future benefits to the Trust for a
period greater than twelve months, some of which may not be immediately reflected in the fair value of the investment properties,
under IFRS, for the current reporting period .
Investment Property Development
Over the last number of years, there has been a shift in the multi-family apartment environment in Canada . Over this period, Boardwalk
has witnessed a significant increase in the market value of rental apartments . This increase has been mainly driven by a significant
compression in market capitalization rates, which in turn has been the result of a prolonged low interest rate environment in Canada .
With this increase in the market value of apartments, there has been a significant decrease in the expected returns from existing
multi-family assets to a level that warrants a measured allocation of capital to the area of new apartment development, particularly
on excess land the Trust currently owns . In 2012, the Trust received development approval from the City of Calgary in Alberta,
and commenced construction of a 109-unit four storey, elevatored, wood frame building in the Southwest part of the city . The
development was substantially completed on November 7, 2013, and an Occupancy Permit allowing Boardwalk to commence the
lease-up of the units was issued by the City of Calgary for the project . The project was completed on time and within budget totaling
approximately $19 million . To assist in the development cost of this property, the Trust had applied for, and received, approval of
a grant from the Province of Alberta in the amount of $7 .5 million . In return for this grant, the Trust has agreed to classify 54 of the
109 units as ‘affordable’, with market rents set at 10% below average market rates for Calgary for a term of 20 years . We estimated
the stabilized capitalization rate on this project to be between 6 .5% and 7 .0%, including an estimated allocation of $4 .25 million, or
$39,000 per apartment unit, for the excess land allocated to this project . In accordance with IAS 20 – Accounting for Government
Grants and Disclosure of Government Assistance under IFRS, this grant will be recognized in profit or loss on a systematic basis over
the periods in which the Trust recognizes revenue from the 54 units classified as affordable units, resulting in achievable rents being
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much closer to market rents . For the year ended December 31, 2016 $378 thousand was recognized in profit under rental revenue for
this grant (December 31, 2015 – $378 thousand) .
In October 2014, the Trust commenced the first phase of construction for a 79-unit, wood frame building on excess land on our
property known as Pines of Normanview in Regina, Saskatchewan . The project, called ‘Pines Edge 1’, was substantially completed on
January 29, 2016 with a total cost of $13 .4 million, below the original budget of $14 .1 million . The four-storey building consists of 13
one-bedroom and 66 two-bedroom units with a single level of underground parking . The stabilized capitalization rate is estimated to
range from 6 .50% to 7 .00% excluding land . Lease-up of the project began in February of 2016, and at the end of December 2016, over
96% of the units were leased up . The Trust has commenced construction of Phase 2 of Pines Edge, an identical 79 unit, four-storey
wood frame building with completion expected in the summer of 2017 .
It is our intention to continue to investigate further development opportunities, particularity in Alberta and Saskatchewan; however,
each future opportunity will require a separate analysis and, depending on the analysis and economic conditions, Boardwalk REIT
will determine if additional development projects are warranted . Historically, one of the biggest risks to real estate evaluations is
the building of oversupply in a particular market, which results in significant corrections of property values market wide . The Trust
currently mitigates this risk by avoiding leverage and using cash on hand for new development and undertaking development as a
small part of Boardwalk’s overall strategy .
For the year ended December 31, 2016, the Trust expended $6 .2 million on total development costs compared to $10 .7 million for
the prior year . Interest costs of $69 thousand were capitalized for the year ended December 31, 2016 .
C A P I TA L S T R U C T U R E A N D L I Q U I D I T Y
Liquidity refers to the Trust’s ability to generate, and have available, sufficient cash to fund our ongoing operations and capital
commitments as well as its distributions to Unitholders . Generally, distributions are funded from FFO . However, in common with the
majority of real estate entities, we rely on lending institutions for a significant portion of capital required to fund mortgage principal
payments, capital expenditures, acquisitions, unit buybacks, and repayment of maturing debt . Over the past number of years,
Boardwalk has observed a significant increase in borrowing standards of many of our key lending partners as a result of heightened
sensitivity to possible weaknesses in the economy .
To mitigate the risk of renewal, the Trust utilizes NHA mortgage insurance, the benefits of which we discussed in detail above .
Approximately 99% of Boardwalk REIT’s secured mortgages carry NHA insurance . In volatile times, the ability to access this product
was very beneficial to the Trust as a whole .
The Trust’s liquidity position as at December 31, 2016 remains stable as the following table highlights:
($000)
Cash position December 31, 2016
Subsequent Committed Financing
Committed Revolving Credit Facility Available
Total Available Liquidity
$
99,102
33,810
194,026
$ 326,938
In addition to this, the Trust currently has 1,833 rental apartment units of unencumbered assets, of which 257 units are pledged
against the Trust’s committed revolving credit facility . It is estimated under current CMHC underwriting criteria, that the Trust could
obtain an additional $194 .4 million of new proceeds from the financing of its current unencumbered assets . Approximately 99% of
Boardwalk REIT’s secured mortgages carry NHA insurance .
The reader should also be aware that of the $291 .7 million of secured mortgages coming due in 2017 (as shown in the table below), all
have NHA insurance, and represent in aggregate approximately 44% of current estimated “underwriting” values on those individual
secured assets . Currently, interest rates on NHA insured mortgages are well below the weighted average interest rate of the $291 .7
million maturing mortgages of 2 .91% . The reader, however, is cautioned these rates do fluctuate and, by the time these maturing
mortgages are set for renewal, with or without additional financing, interest rates may have changed materially . Even with the NHA
insurance program attached to its secured mortgages, the Trust is still susceptible to changes in market interest rates . To address a
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portion of this risk, the Trust has forward locked or renewed $57 .1 million, or 20%, of its $291 .7 million of 2017 mortgage maturities .
The weighted average contracted interest rate on these renewals is 1 .99%, for an average term of 5 .0 years . These forward locked and
renewed mortgages represent an annualized interest savings of approximately $0 .1 million .
Mortgages Schedule
Boardwalk REIT’s long-term debt consists entirely of low-rate, fixed-term secured mortgage financing . The maturity dates on the
secured mortgages have been staggered to lower the overall interest rate risk on renewal .
Total mortgages payable (net of unamortized transaction costs) on December 31, 2016, were $2 .4 billion, compared to $2 .3 billion
reported on December 31, 2015 .
Boardwalk REIT’s overall weighted average interest rate on its long-term debt has decreased from the prior year . The weighted average
interest rate on December 31, 2016 was 2 .78% compared to 3 .01% on December 31, 2015 . To better maintain cost effectiveness and
flexibility of capital, Boardwalk REIT continuously monitors short and long-term interest rates . If the environment warrants, the Trust
will convert short-term, floating rate debt, if any, to longer term, fixed rate mortgages to reduce interest rate renewal risk .
Year of Maturity
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
Total Principal Outstanding
Unamortized Deferred Financing Costs
Per Financial Statements
Interest Coverage
Weighted
Average
Interest Rate By
Maturity
2 .91%
3 .00%
2 .91%
2 .66%
2 .30%
3 .06%
2 .86%
2 .98%
2 .63%
2 .38%
2 .43%
2 .78%
Principal
Outstanding as
at Dec 31, 2016
$
291,720
199,044
381,222
238,987
270,588
306,236
208,088
173,505
294,636
139,371
17,147
2,520,544
(84,878)
$ 2,435,666
% of Total
11 .6%
7 .9%
15 .1%
9 .5%
10 .7%
12 .1%
8 .3%
6 .9%
11 .7%
5 .5%
0 .7%
100 .0%
Notwithstanding the Trust’s current liquidity situation, Boardwalk’s liquidity and access to capital resources is constrained by certain
tests that have been adopted in both its Declaration of Trust, as well as in its credit facility . The Declaration of Trust stipulates an
interest coverage ratio limit of 1 .5 to 1 . For the purpose of the interest coverage ratio calculation, gains or losses on the sale or
disposition of investment properties are excluded from earnings . Additionally, distributions on the LP Class B Units are excluded from
interest expense, despite the LP Class B Units being classified as a financial liability under IFRS .
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The following table sets out the Trust’s interest coverage ratio calculation as at December 31, 2016 and December 31, 2015, based on
the most recently completed four fiscal quarters .
As at
Net operating income
Administration expenses
Consolidated EBITDA (1) (12 months ended)
Consolidated interest expense (12 months ended)
Interest coverage ratio
Minimum threshold
(1) Earnings before interest, taxes, depreciation and amortization
December 31, 2016
December 31, 2015
$ 253,099
$ 294,702
(33,947)
219,152
69,784
3 .14
1 .50
(33,407)
261,295
71,766
3 .64
1 .50
For the year ended December 31, 2016, Boardwalk REIT’s overall interest coverage ratio of adjusted EBITDA (i .e . Earnings Before
Interest, Taxes, Depreciation and Amortization) to interest expense, excluding distributions on LP B Units and fair value adjustments,
was 3 .14, compared to 3 .64 for the year ended December 31, 2015 . The reader should note upon the adoption of IFRS standards, the
distributions made to the LP Class B Unitholders are now considered financing charges and is the result of the reclassification of these
Units as financial liabilities . The calculation of the interest coverage ratio above does not include these distribution payments in the
calculation of interest expense .
Unitholders’ Equity
The following table discloses the changes in REIT Trust Units issued and outstanding:
Summary of Unitholders’ Capital Contributions
December 31, 2014
Units issued for vested deferred units
Units purchased and cancelled
December 31, 2015
Units issued for vested deferred units
Units purchased and cancelled
December 31, 2016
Units
47,520,953
67,311
(740,800)
46,847,464
82,165
(666,000)
46,263,629
Boardwalk REIT has one class of publicly traded voting securities known as “REIT Units” . As at December 31, 2016, there were
46,263,629 REIT Units issued and outstanding . In addition, there were 4,475,000 special voting units issued to holders of “Class B
Units” of Boardwalk REIT Limited Partnership (“LP B Units”), each of which also has a special voting unit in the REIT . Each LP B Unit
is exchangeable for a REIT Unit on a one-for-one basis at the option of the holder . Each LP B Unit, through the special voting unit,
entitles the holder to one vote at any meeting of Unitholders . Accordingly, if all of the LP B Units were exchanged for REIT Units, the
total issued and outstanding REIT Units would be 50,738,629 . These LP Class B Units are classified as “FVTPL” financial liabilities under
IFRS and are recorded at their fair value as liabilities on the Consolidated Statements of Financial Position .
On June 30, 2015, the Trust received regulatory approval for a Normal Course Issuer Bid (the “Bid”) to purchase and cancel up to
3,855,766 Trust Units, representing 10% of the public float at the time of the TSX approval . The Bid commenced July 3, 2015, and
terminated on July 2, 2016 . The Trust’s daily purchase pursuant to this Bid was 38,006 Trust Units .
On June 29, 2016, the Trust received regulatory approval for a Normal Course Issuer Bid (the “Bid”) to purchase and cancel up to
3,700,292 Trust Units, representing 10% of the public float at the time of the TSX approval . The Bid commenced on July 3, 2016, and
will terminate on July 2, 2017, or when the Bid is completed . The Trust’s daily purchases under this Bid will be limited to 57,614 Trust
Units .
During 2015, the Trust purchased and cancelled 740,800 Units at an average purchase cost of $50 .10 per Trust Unit . During 2016, the
Trust purchased and cancelled 666,000 Units at an average purchase cost of $49 .02 per Trust Unit .
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Equity
Boardwalk has an equity market capitalization of approximately $2 .5 billion based on the Trust Unit closing price of $48 .65 on the
Toronto Stock Exchange on December 31, 2016 .
Enterprise Value
With a total enterprise value of approximately $4 .9 billion (consisting of total debt of $2 .4 billion and market capitalization of $2 .5
billion) as at December 31, 2016, Boardwalk’s total debt is approximately 49% of total enterprise value .
RISKS AND RISK MANAGEMENT
Boardwalk REIT, like most real estate rental entities, is exposed to a variety of risk areas . These areas are categorized between
general and specific risks . General risks are the risks associated with general conditions in the real estate sector, and consist mainly
of commonly exposed risks that affect the real estate industry . Specific risks focus more on risks uniquely identified with the Trust,
such as credit, market, liquidity and operational risks . The following will address each of these risks . In addition, this section should be
read in conjunction with the Trust’s AIF dated February 16, 2017, where additional risks and their related management are also noted .
G E N E R A L R I S K S
Real Estate Industry Risk: Real estate investments are generally subject to varying degrees of risk depending on the nature of the
property . These risks include changes in general economic conditions (such as the availability and cost of mortgage funds), local
conditions (such as an oversupply of space or a reduction in demand for real estate in the area), government regulations (such as
new or revised residential tenant legislation), the attractiveness of the properties to tenants, competition from others with available
space, and the ability of the owner to provide adequate maintenance at an economic cost . Currently, we operate in Canada, in the
provinces of Alberta, Saskatchewan, Ontario and Quebec . Neither of Alberta and Saskatchewan is subject to rent control legislation;
however, under Alberta legislation, a landlord is only entitled to increase rents once every twelve months . A more detailed discussion
on rent controls will follow in a later section .
Certain significant expenditures, including property taxes, maintenance costs, mortgage payments, insurance costs and related
charges, must be made regardless of whether or not a property is producing sufficient income to service these expenses . Boardwalk
REIT’s properties are subject to mortgages, which require significant debt service payments . If the Trust were unable or unwilling to
meet mortgage payments on any property, losses could be sustained as a result of the mortgagee’s exercise of its rights of foreclosure
or of sale . Real estate is relatively illiquid . Such illiquidity will tend to limit our ability to vary our portfolio promptly in response to
changing economic or investment conditions . In addition, financial difficulties of other property owners resulting in distress sales may
depress real estate values in the markets in which the Trust operates .
Multi-Family Residential Sector Risk: Income producing properties generate income through rent payments made by tenants of the
properties . Upon the expiry of any lease, there can be no assurance that the lease will be renewed or the tenant replaced . The terms
of any subsequent lease may be less favourable to us than the existing lease . To mitigate this risk, the Trust does not have any one
or small group of significant tenants . Each operating lease signed is for a period of twelve months or less . The Trust is dependent on
leasing markets to ensure vacant residential space is leased, expiring leases are renewed and new tenants are found to fill vacancies .
With the drastic drop in oil prices and speculation that lower oil prices will continue over an extended period of time, the risk of a
downturn in the economy has dramatically increased . A disruption in the economy could have a significant impact on how much
space tenants will lease and the rental rates paid by tenants . This would affect the income produced by our properties as a result of
downward pressure on rents .
Development Risk: Development risk arises from the possibility that completed developments will not be leased on a timely basis
or that costs of development will exceed original estimates, resulting in an uneconomic return from the leasing of such space .
Boardwalk’s construction commitments are subject to those risks usually attributable to construction projects, which include: (i)
construction or other unforeseen delays including municipal approvals; (ii) cost overruns; and (iii) the failure of tenants to occupy
and pay rent in accordance with existing lease agreements . Construction risks are minimized by utilizing established developers and
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knowledgeable third-party consultants . In addition, construction is currently being undertaken on excess land the Trust currently
owns rather than on undeveloped land purchased from a third-party .
Environmental Risks: As an owner and manager of real property, Boardwalk REIT is subject to various Canadian federal, provincial,
and municipal laws relating to environmental matters . These laws could encumber us with liability for the costs of removal and
remediation of certain hazardous substances or wastes released or deposited on or in its properties or disposed of at other locations .
The failure to remove or remediate such substances, if any, could adversely affect Boardwalk’s ability to sell its real estate, or to borrow
using real estate as collateral, and could potentially also result in claims or other proceedings against Boardwalk REIT . Boardwalk
REIT is not aware of any material non-compliance with environmental laws at any of its properties . The Trust is also not aware of any
pending or threatened investigations or actions by environmental regulatory authorities in connection with any of its properties or
any material pending or threatened claims relating to environmental conditions at its properties . Boardwalk REIT has formal policies
and procedures to review and monitor environmental exposure . The Trust has made, and will continue to make, the necessary capital
expenditures for compliance with environmental laws and regulations . Environmental laws and regulations can change rapidly and
may become more stringent in the future . Compliance with more stringent environmental laws and regulations could have a material
adverse effect on our business, financial condition or results of operation .
Ground Lease Risk: Five of our properties, located in Banff, Calgary, Edmonton, and two in Montreal, are subject to long-term
ground (or land) leases and similar arrangements; in each instance, the underlying land is owned by a third party and leased to the
Trust . Under the terms of a typical ground lease, the lessee must pay rent for the use of the land and is generally responsible for all
costs and expenses associated with the building and improvements, including taxes, utilities, insurance, maintenance, repairs and
replacements . Unless the lease term is extended, the land together with all improvements made will revert to the owner of the land
upon the expiration of the lease term . These leases are set to expire between 2028 and 2095 . Approximately 10% of the Trust’s FFO
derives from the properties in its portfolio, which are held as long-term ground leases . The Trust will actively seek to either renew the
terms of such leases or purchase the freehold interest in the lands forming the subject matter of such leases prior to the expiry of their
terms . However, if the Trust cannot or chooses not to renew such leases, or buy the land of which they form the subject matter, as
the case may be, the net operating income and cash flow associated with such properties would no longer contribute to Boardwalk’s
results of operations and could adversely impact its ability to make distributions to Unitholders . The ground lease for the largest
Montreal property, known as the Nuns’ Island portfolio, was also subject to a rent revision clause, which commenced on December
1, 2008 (based on a valuation date of March 16, 2008) . The rent increases will be phased in on a property-by-property basis through
to 2019, and was based on 75% of the land value in its current use . After that revision, the land rent will remain constant thereafter
through to 2064 . An event of default by us, under the terms of a ground lease, could also result in a loss of the property, subject to
such ground lease, should the default not be rectified in a reasonable period of time . The Trust is not aware of any default under the
terms of the ground leases .
Competition Risk: Each segment of the real estate business is competitive . Numerous other residential developers and apartment
owners compete in seeking tenants . Although it is our strategy to own multi-family properties in premier locations in each market in
which we operate, some of the apartments of our competitors may be newer, better located or better capitalized . The existence of
alternative housing could have a material adverse effect on our ability to lease space in our properties and on the rents charged or
concessions granted, and could adversely affect Boardwalk REIT’s revenues and its ability to meet its obligations .
General Uninsured Losses: Boardwalk REIT carries comprehensive general liability, fire, flood, extended coverage and rental loss
insurance with policy specifications, limits and deductibles customarily carried for similar properties . There are, however, certain
types of risks (generally of a catastrophic nature such as war or environmental contamination), which are either uninsurable or not
economically insurable . Boardwalk REIT currently has insurance for earthquake risks, subject to certain policy limits, deductibles
and self-insurance arrangements, and will continue to carry such insurance if it is economical to do so . Should an uninsured or
underinsured loss occur, Boardwalk REIT could lose its investment in, and anticipated profits and cash flows from, one or more of its
properties, and would continue to be obligated to repay any recourse mortgage indebtedness on such properties .
Fluctuations of Cash Distributions: Although Boardwalk REIT intends to continue to make distributions, the actual amount of
distributions in respect of the REIT Units will depend upon numerous factors, including, but not limited to, the amount of principal
repayments, tenant allowances, leasing commissions, capital expenditures and REIT Unit redemptions and other factors that may
be beyond the control of Boardwalk REIT . The distribution policy of Boardwalk REIT is established by the Trustees and is subject to
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change at the discretion of the Trustees . The recourse of Unitholders who disagree with any change in policy is limited and could
require such Unitholders to seek to replace the Trustees . Distributions may exceed actual cash available to Boardwalk REIT from
time to time because of items such as principal repayments, tenant allowances, leasing commissions, capital expenditures, and
redemption of REIT Units, if any . Boardwalk REIT may be required to use part of its debt capacity or to reduce distributions in order
to accommodate such items . Boardwalk REIT may temporarily fund such items, if necessary, through an operating line of credit in
expectation of refinancing long-term debt on its maturity .
Cybersecurity Risk: A cyber incident is considered to be any adverse event that threatens the confidentiality, integrity or availability
of Boardwalk REIT’s information resources . More specifically, a cyber incident is an intentional attack or an unintentional event that
can include gaining unauthorized access to information systems to disrupt operations, corrupt data or steal confidential information .
As Boardwalk REIT’s reliance on technology has increased, so have the risks posed to its systems . Boardwalk REIT’s primary risks that
could directly result from the occurrence of a cyber incident include operational interruption, damage to its reputation, damage to
Boardwalk’s business relationships with its Resident Members/Customers and disclosure of confidential information regarding its
Resident Members and Associates . Boardwalk REIT has implemented processes, procedures and controls to help mitigate these risks,
but these measures, as well as its increased awareness of a risk of a cyber incident, do not guarantee that its financial results will not
be negatively impacted by such an incident .
Workforce Availability
Boardwalk’s ability to provide services to its existing Customers is somewhat dependent on the availability of well-trained Associates
and contractors to service our Customers as well as complete required maintenance and capital upgrades on our buildings . The Trust
must also balance requirements to maintain adequate staffing levels while balancing the overall cost to the Trust .
Within Boardwalk, our most experienced Associates are employed full-time; this full-time force is supplemented by additional
part-time Associates as well as specific contract services needed by the Trust . We are constantly reviewing existing overall market
factors to ensure that our existing compensation program is in-line with existing levels of responsibility and, if warranted, we adjust
the program accordingly . We also encourage Associate feedback in these areas to ensure the existing programs are meeting their
personal needs .
S P E C I F I C R I S K S
Credit Risk is the risk of loss due to failure of a contracted Customer to fulfill the obligation of required payments.
For us, one of the key credit risks involves the possibility that our Resident Members will be unable or unwilling to fulfill their lease
term commitments . Due to the very nature of the multi–family business, credit risk is not deemed to be very high . The Trust currently
has 33,773 rental apartment units . The result of this is that we are not unduly reliant on any one Resident Member or lease . To further
mitigate this risk, Boardwalk REIT continues to diversify its portfolio to various major centers across Canada . Further, each of our
rental units has its own individual lease agreement, thus Boardwalk REIT has no material financial exposure to any particular Resident
Member or group of Resident Members . The Trust continues to utilize extensive screening processes for all potential Resident
Members including, but not limited to, detailed credit checks .
Market Risk is the risk that the Trust could be adversely affected due to market changes in product supply, interest rates and regional rent controls.
Our principal exposures to market risk are in the areas of new multi-family housing supply, changes to rent controls, utility price
increases, property tax increases, higher interest rates and mortgage renewal risk .
Supply Risk is the risk that the Trust would be negatively affected by the new supply of, and demand for, multi-family residential units in its major
market areas.
Key drivers of demand include employment levels, population growth, demographic trends and consumer confidence . Any
significant amount of new construction will typically result in an imbalance in supply and cause downward price pressure on rents .
No signs of significant new rental construction are currently evident in any of our existing markets . Past studies have shown that
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in order to economically justify new rental construction in Boardwalk REIT’s major markets, an increase in existing rental rates of
hundreds of dollars will be necessary . In recent years, however, there has been a change in the multi-family apartment environment in
Canada . During this period, we have witnessed a significant increase in the market value of rental apartments . This increase, although
somewhat helped by a steady increase in reported market rental rates, has been mainly driven by a significant compression in market
capitalization rates, which in turn has been the result of a prolonged low interest rate environment here in Canada . With this increase
in the market value of apartments, there has been a significant decrease in the expected returns from the acquisition of existing
multi-family rental properties to a level that warrants a measured allocation of capital to the area of new apartment development,
particularly on excess land Boardwalk REIT currently owns . Accordingly, the Trust has pursued new apartment development on some
of its excess density .
Risk Management for Supply
Our performance will always be affected by the supply and demand for multi-family rental real estate in Canada . The potential for
reduced rental revenue exists in the event that Boardwalk REIT is not able to maintain its properties at a high level of occupancy, or
in the event of a downturn in the economy, which could result in lower rents or higher vacancy rates . Boardwalk REIT has minimized
these risks by:
▲
Increasing Resident Member satisfaction;
▲
Diversifying its portfolio across Canada, thus lowering its exposure to regional economic swings;
▲
Acquiring properties only in desirable locations, where vacancy rates for properties are higher than city-wide averages but can
be reduced by repositioning the properties through better management and selective upgrades;
▲
Holding a balanced portfolio which includes a variety of multi-family building types including high-rise, townhouse, garden and
walkups, each with its own market niche;
▲
Maintaining a wide variety of suite mix, including bachelor suites, one, two, three and four-bedroom units;
▲
Building a broad and varied Resident Member base, thereby avoiding economic dependence on larger-scale tenants;
▲
Focusing on affordable multi-family housing, which is considered a stable commodity;
▲
Developing a specific rental program characterized by rental adjustments that are the result of enhanced service and superior
product; and,
▲
Developing regional management teams with significant experience in the local marketplace, and combining this experience
with our existing operations and management expertise .
Interest Risk is the combined risk that the Trust would experience a loss as a result of its exposure to a higher interest rate environment (Interest
Rate Risk) and the possibility that at the term end of a mortgage the Trust would be unable to renew the maturing debt with either the existing or
an additional lender (Renewal Risk).
The Trust continues to manage this risk by maintaining a balanced maturing portfolio with no significant amount coming due in
any one particular period . In addition, the majority of Boardwalk REIT’s debt is insured with NHA insurance . This insurance allows us
to increase the overall credit quality of the mortgage and, as such, enable the Trust to obtain preferential interest rates as well as
facilitating easier renewal on its due dates .
The use of NHA insurance also assists Boardwalk REIT in managing its renewal risk . Given the increased credit quality of such debt,
the probability of the Trust being unable to renew the maturing debt or transfer this debt to another accredited lending institution
is significantly reduced .
To date, the Trust has had no problem obtaining mortgage renewals on term maturing loans, and additional funds, if needed,
continue to be available on its investment properties . Although we have seen fluctuations in the quoted interest spread over the
corresponding benchmark bonds, the all-in quoted rates, due to a general decline in interest rates, continue to be at levels well below
the term maturing interest rate and, as such, are accretive to the Trust as a whole .
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In 2013, the Canadian government announced it has capped the total amount of insurance that CMHC can have in force at $600
billion . This decision has primarily affected the amount of portfolio or bulk insurance CMHC offers to banks, and, to date, has had a
minimal impact on the renewal of Boardwalk’s mortgages, or the cost of secured debt capital . However, there is no assurance the
decision to cap the amount of CMHC insurance will not affect mortgages for multi-family residential properties in future periods .
We continue to monitor this situation . Depending on the changes, if any, the Government of Canada places on the NHA insurance
product, the impact on the Trust could vary . It is our understanding that this cap would not affect any pre-existing insurance
agreements . Over 99% of Boardwalk’s secured debt has this insurance on it with an average of 30 years of amortization remaining .
The larger risk may be the ability to issue new secured debt under this program at a much lower cost due to the use of this insurance,
the proceeds of which the Trust uses to assist in the execution of its overall strategy .
Joint Ventures and Co-ownerships
Boardwalk commenced participating in joint ventures, partnerships and similar arrangements that may involve risks and
uncertainties associated with third-party involvement, including, but not limited to, Boardwalk’s dependency on partners, co-tenants
or co-venturers that are not under our control and that might compete with Boardwalk for opportunities, become bankrupt or
otherwise fail to fund their share of required capital contributions, or suffer reputational damage that could have an adverse impact
on the Trust . Additionally, our partners might at any time have economic or other business interests or goals that are different than
or inconsistent with those of the Trust, and may require Boardwalk to take actions that are in the interest of the partners collectively,
but not in Boardwalk’s sole best interests . Accordingly, Boardwalk may not be able to favourably resolve issues with respect to such
decisions, or the Trust could become engaged in a dispute with any of them that might affect its ability to operate the business or
assets in question .
Structural Subordination
Liabilities of a parent entity with assets held by various subsidiaries may result in the structural subordination of the lenders of the
parent entity . The parent entity is entitled only to the residual equity of its subsidiaries after all debt obligations of its subsidiaries are
discharged . In the event of a bankruptcy, liquidation or reorganization of the Trust, holders of indebtedness of the Trust may become
subordinate to lenders to the subsidiaries of the Trust .
Certain subsidiaries of the Trust will provide a form of guarantee pursuant to which the Indenture Trustee will, subject to the Trust
Indenture, be entitled to seek redress from such subsidiaries for the guaranteed indebtedness . These guarantees are intended to
eliminate structural subordination, which arises as a consequence of the Trust’s assets being held in various subsidiaries . Although
all subsidiaries, which own material assets, will provide a guarantee, not all subsidiaries of the Trust will provide such a guarantee . In
addition, there can be no assurance the Indenture Trustee will, or will be able to, effectively enforce the guarantee .
Rent Control Risk is the risk of the implementation or amendment of new or existing legislative rent controls in the markets Boardwalk REIT oper-
ates, which may have an adverse impact on the Trust’s operations.
Under Ontario’s rent control legislation, commonly known as “rent de-control”, a landlord is entitled to increase the rent for existing
tenants once every twelve months by no more than the “guideline amount” established by regulation . For the calendar years 2015
and 2016, the guideline amounts have been established at 1 .6% and 2 .0%, respectively, and for 2017 the guideline amount has
been set at 1 .5% . Further details on Ontario’s Annual Rental Increase Guidelines can be found at http://www .landlordselfhelp .com/
RentIncreaseGuideline .htm . This adjustment is meant to take into account the income of the building, the municipal and school taxes,
the insurance bills, the energy costs, maintenance, and service costs . Landlords may apply to the Ontario Rental Housing Tribunal for
an increase above the guideline amounts if annual costs for heat, hydro, water, or municipal taxes have increased significantly, or if
building security costs have increased . When a unit is vacated, however, the landlord is entitled to lease the unit to a new tenant at
any rental amount, after which annual increases are limited to the applicable guideline amount . The landlord may also be entitled to
a greater increase in rent for a unit under certain circumstances, including, for example, where extra expenses have been incurred as
a result of a renovation of that unit .
Under Quebec’s rent control legislation, a landlord is entitled to increase the rent for existing tenants once a year for the rent period
starting after April 1st of the current year but before April 1st of the following year . There is no fixed rate increase specified by the
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regulation . Rent increases also take into account a return on capital expenditures (for 2017 this return is 2 .4% compared to 2 .5%
for 2016, 2 .9% for 2015 and 2 .6% for 2014), if such expenditures were incurred, and an indexing of the net income of the building .
Average rent increase estimates for the period starting after April 1st, 2017 and before April 2nd, 2018, before any consideration for
increases to municipal and school taxes as well as capital expenditures, are: 1 .0% for electricity heated dwellings, -4 .6% for gas heated
dwellings, and -17 .1% for oil heated dwellings, plus 4 .1% to cover the cost of maintenance, service and management contracts .
Presently, rent control legislation does not exist in, and is not planned for, Alberta or Saskatchewan, although in April of 2007, the
province of Alberta amended its existing rental legislation .
To manage this risk prior to entering a market where rent controls are in place, an extensive amount of time is spent researching the
existing rules, and, where possible, the Trust will ensure it employs Associates who are experienced in working in these controlled
environments . In addition, the Trust adjusts forecast assumptions on new acquisitions to ensure they are reasonable given the rent
control environment .
Utility and Tax Risk relates to the potential loss the Trust may experience as a result of higher resource prices as well as its exposure to significant
increases in property taxes.
Over the past few years, property taxes have increased as a result of re-valuations of municipal properties and their adherent tax
rates . For us, these re-valuations have resulted in significant increases in some property assessments due to enhancements, which
are not represented on our balance sheet (as such representations are contrary to existing IFRS reporting standards) . To address this
risk, Boardwalk REIT has compiled a specialized team of property reviewers who, with the assistance of outside authorities, constantly
review property tax assessments and, where warranted, appeal them .
Utility expenses, mainly consisting of natural gas and electricity service charges, have been subject to considerable price fluctuations
over the past several years . In recent years, water and sewer costs have increased significantly as another form of “taxes” imposed
by various municipalities . In addition, the recently introduced Alberta Carbon Tax will increase the costs associated with natural gas
usage . Effective January 1st, 2017, an additional $1 .12 per gigajoule (“GJ”) consumed will be charged . The rate is noted to increase
to $1 .65/GJ for 2018 . Any significant increase in these resource costs that Boardwalk REIT cannot pass on to the Customer may
have a negative material impact on the Trust . To mitigate this risk, the Trust has begun to play a more active role in controlling the
fluctuation and predictability of this risk . Through the combined use of financial instruments and resource contracts with varying
maturity dates, exposure to these fluctuations has been reduced . In addition to this, the following steps have been implemented:
▲
Where possible, economical electrical sub-metering devices are being installed, passing on the responsibility for electricity
charges to the end Customer .
▲
In other cases, rents have been, or will be, adjusted upward to cover these increased costs .
Operational Risk is the risk that a direct or indirect loss may result from an inadequate or failed technology, from a human process, or
from external events . The impact of this loss may be financial loss, loss of reputation, or legal and regulatory proceedings .
The Trust endeavors to minimize losses in this area by ensuring that effective infrastructure and controls exist . These controls are
constantly reviewed and improvements are implemented, if deemed necessary .
C E R TA I N TA X R I S K S
Mutual Fund Trust Status
Boardwalk qualified as a mutual fund trust for Canadian income tax purposes . It is the current policy of Boardwalk to annually
distribute all of its taxable income to Unitholders and is therefore generally not subject to tax on such amount . In order to maintain its
current mutual fund trust status, Boardwalk is required to comply with specific restrictions regarding its activities and the investments
held by it . If Boardwalk was to cease to qualify as a mutual fund trust, the consequences could be adverse .
In accordance with the Income Tax Act (Canada) (the “Tax Act”), for fiscal 2015 and 2016, the Trust qualified as a real estate investment
trust (“REIT”) for income tax purposes and, as such, was exempted from the specified investment flow-through rules (the SIFT Rules) .
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A REIT is defined under the SIFT Rules as a trust that is resident in Canada throughout the taxation year and that satisfies all of the
following criteria:
(a)
at each time in the taxation year the total fair market value at that time of all non-portfolio properties that are qualified REIT
properties held by the trust is at least 90% of the total fair market value at that time of all non-portfolio properties held by the
trust;
(b)
not less than 90% of the trust’s gross REIT revenue for the taxation year is from one or more of the following: rent from real or
immovable properties, interest, dispositions of real or immovable properties that are capital properties, dividends, royalties, and
dispositions of eligible resale properties;
(c)
not less than 75% of the trust’s gross REIT revenue for the taxation year is from one or more of the following: rent from real
or immovable properties, interest from mortgages, or hypothecs, on real or immovable properties, and dispositions of real or
immovable properties that are capital properties;
(d)
at each time in the taxation year an amount, that is equal to 75% or more of the equity value of the trust at that time, is the
amount that is the total fair market value of all properties held by the trust each of which is a real or immovable property that is
a capital property, an eligible resale property, an indebtedness of a Canadian corporation represented by a bankers’ acceptance,
a property described by either paragraph (a) or (b) of the definition “qualified investment” in section 204, or a deposit with a
credit union; and,
(e)
investments in the trust are, at any time in the taxation year, listed or traded on a stock exchange or other public market .
For this purpose, “real or immovable property” includes a security of any trust, corporation or partnership that itself satisfies the above
criteria, but does not include any depreciable property of a prescribed class for which the rate of capital cost allowance exceeds 5% .
If Boardwalk REIT, or any other trust, does not qualify as a real estate investment trust, it will no longer be able to deduct for
tax purposes its taxable distributions, and, as such, will be required to pay tax on this amount prior to distribution . Any amount
distributed that is determined to be a return of capital would not be subject to this tax .
Existing Tax Filing Positions
Although Boardwalk REIT is of the view that all expenses to be claimed by Boardwalk REIT, the Operating Trust and the Partnership
will be reasonable and deductible, that the cost amount and capital cost allowance claims of entities indirectly owned by Boardwalk
REIT will have been correctly determined, and that the allocation of the Partnership’s income for purposes of the Tax Act among its
partners is reasonable, there can be no assurance that the Tax Act or the interpretation of the Tax Act will not change, or that the
Canada Revenue Agency (“CRA”) will agree . If the CRA successfully challenges the deductibility of such expenses or the allocation of
such income, the Partnership’s allocation of income to the Operating Trust, and indirectly the taxable income of Boardwalk REIT and
the Unitholders, may be adversely affected . The extent to which distributions will be tax-deferred in the future will depend in part on
the extent to which entities indirectly owned by Boardwalk REIT are able to deduct capital cost allowance relating to the Contributed
Assets held by them, which was acquired by Boardwalk REIT on May 3, 2004, pursuant to a Plan of Arrangement under section 193 of
the Business Corporations Act (Alberta) .
Since the Partnership acquired the relevant properties on a tax-deferred basis, its tax cost in certain properties may be less than
their fair market value . Accordingly, if one or more properties are disposed of, the gain recognized by the Partnership may be in
excess of that which it would have realized if it had acquired the properties at their fair market values . Immediately prior to the
Plan of Arrangement becoming effective, the Corporation transferred the Contributed Assets to the Partnership and received, as
consideration therefore, (i) an assumption of all of the indebtedness of the Corporation associated with the Contributed Assets (other
than the Retained Debt), (ii) the LP Note, and (iii) a credit to the capital accounts in respect of each of the LP Class B Units and the
LP Class C Units, all of which were owned at that time by the Corporation . See “Overview of the Acquisition and the Arrangement
Replacing the Corporation as a Public Entity with Boardwalk REIT – Pre-Arrangement Reorganization” in the AIF dated February 16,
2017 . The transfer and contribution were effected as a “rollover” under subsection 97(2) of the Tax Act, and the Corporation, based
on the advice of legal counsel, is of the view that there is no income tax payable in connection therewith . There can be no assurance
that the CRA will not take a contrary view; however, the Corporation has been advised by counsel that, in such event, the CRA would
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not be successful . If, contrary to this, the CRA successfully challenges the rollover, income tax may be payable by the Corporation
in connection with the transfer and contribution of the Contributed Assets at the applicable tax rate on the value of the capital
contribution in respect of the LP Class C Units . The Partnership has agreed to indemnify the Corporation for all liabilities incurred by
it in connection with the Acquisition and the Arrangement, including the transfer and contribution of the Contributed Assets to the
Partnership and any associated tax that might be payable by the Corporation in respect thereof . See “Overview of the Acquisition
and the Arrangement replacing the Corporation as a Public Entity with Boardwalk REIT – Ancillary Agreements in Connection with
the Arrangement” in the AIF dated February 16, 2017 . The amount of such indemnification would be significant and have a material
adverse effect on the amount of distributable cash of the Partnership and, consequently, on the distributions of Boardwalk REIT .
R I S K S A S S O C I AT E D W I T H D I S C L O S U R E C O N T R O L S A N D P R O C E D U R E S & I N T E R N A L C O N T R O L
O V E R F I N A N C I A L R E P O R T I N G
Our business could be adversely impacted if we have deficiencies in our disclosure controls and procedures or internal control over
financial reporting .
The design and effectiveness of our disclosure controls and procedures and internal control over financial reporting may not
prevent all errors, misstatements or misrepresentations . While management continues to review the design and effectiveness of our
disclosure controls and procedures and internal control over financial reporting, we cannot assure you that our disclosure controls
and procedures or internal control over financial reporting will be effective in accomplishing all control objectives all of the time .
Deficiencies, particularly material weaknesses, in internal control over financial reporting which may occur in the future could result
in misstatements of our results of operations, restatements of our financial statements, a decline in our trust unit price, or otherwise
materially adversely affect our business, reputation, results of operation, financial condition or liquidity .
ACCOUNTING AND CONTROL MATTERS
C R I T I C A L A C C O U N T I N G P O L I C I E S
The Trust adopted IFRS as its basis of financial reporting, effective January 1, 2011 . The significant accounting policies adopted by the
Trust are included in Note 2 of the notes to the audited Consolidated Financial Statements for the year ended December 31, 2016 .
The preparation of the financial statements requires management to make estimates and judgments that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the
reported amounts of revenue and expenses during the reporting period . Actual results may differ from those estimates under
different assumptions and conditions . In determining estimates, management uses the information available to the Trust at the
time . Management reviews key estimates on a quarterly basis to determine their appropriateness . Any change to these estimates is
applied prospectively in compliance with IFRS . We believe that the application of judgments and assessments is consistently applied
and produces financial information that fairly depicts the results of operations for all periods presented . Boardwalk REIT considers
the following policies to be critical in determining the judgments that are involved in the preparation of the consolidated financial
statements and the uncertainties that could affect the reported results .
(a)
Investment properties
Investment properties consist of multi-family residential properties held to earn rental income and properties being constructed
or developed for future use to earn rental income, and include interests held under long-term operating land leases . Investment
properties are measured initially at cost (which is equivalent to fair value) . Cost includes all amounts relating to the acquisition
(excluding transaction costs related to a business combination as outlined in NOTE 2(g)) and improvement of the properties . All costs
associated with upgrading and extending the economic life of the existing facilities, other than ordinary repairs and maintenance, are
capitalized to investment property . Included in these costs are internal amounts that are directly attributable to a specific investment
property, which are capitalized to the extent that they upgrade or extend the economic life of the asset .
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Subsequent to initial recognition, investment properties are recorded at fair value, in accordance with International Accounting
Standard (“IAS”) 40 - Investment Property (“IAS 40”) . Fair value is determined based on a combination of internal and external
processes and valuation techniques . Gains or losses arising from differences between current period fair value and the sum of
previously measured fair value and capitalized costs as described above are recorded in profit or loss in the period in which they arise .
Properties owned by the Trust where a significant portion of the property is used for administrative purposes by the Trust are
considered “Property, Plant and Equipment” and, therefore, fall within the scope of IAS 16 – Property, Plant and Equipment (“IAS 16”)
and are recorded in accordance with that standard . Where part of a building is used for administrative purposes by the Trust, but this
portion is considered insignificant, this space is included as part of Investment Property under IAS 40 .
Investment properties are reclassified to “Assets Held for Sale” when the criteria set out in IFRS 5 - Non-Current Assets Held for Sale
and Discontinued Operations (“IFRS 5”) are met (see NOTE 2(h)) .
An investment property is derecognized upon disposal or when the investment property is permanently withdrawn from use and no
future economic benefits are expected from the disposal . Prior to its disposal, the carrying value of the investment property is adjusted
to reflect its fair value as outlined in the purchase and sale agreement (as the purchase and sale agreement is the best evidence of
fair value) . This adjustment shall be recorded as a fair value gain or loss . Any remaining gain or loss arising on derecognition of the
property (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in profit
or loss in the period in which the property is derecognized .
Excess land represents land owned by the Trust located contiguous to land included as investment property . The Trust has the ability
to develop additional multi-family residential buildings on this land or sell it separately from the Investment Property at a later date .
Excess land is held for capital appreciation and, therefore, is treated as Investment Property and recorded in accordance with IAS 40
as outlined above . When determining the fair value of a project with excess land, the capitalization rate used in determining the value
is adjusted accordingly .
(b) Properties under development
Properties under development include new development on excess land density or acquired land, re-development or re-positioning
of buildings the Trust currently owns that require substantial renovations and incomplete Apartment Units acquired from third parties
that will take 12 months or longer to complete . The cost of land, if applicable, and buildings under development or re-development
(consisting of development sites, density or intensification rights and related infrastructure) are specifically identifiable costs incurred
in the period before construction is complete . Capitalized costs include pre-construction costs essential to the development or
re-development of the property, construction costs, borrowing costs directly attributable to the development, real estate taxes and
other costs incurred during the period of development or re-development . Additions to investment properties consist of costs of a
capital nature and, in the case of properties under development and/or redevelopment, capitalized interest . Directly attributable
borrowing costs are also capitalized on land or properties acquired specifically for development or redevelopment when activities
necessary to prepare the asset for development or redevelopment are in progress in accordance with IAS 23 – Borrowing Costs
(“IAS 23”) . Where borrowings are associated with specific developments, the amount capitalized is the total cost incurred on those
borrowings .
The capitalization of borrowing costs commences when the activities necessary to prepare an asset for development or redevelopment
begins, and continues until the date that substantially all of the construction is complete and all necessary occupancy and related
permits have been received, whether or not the space is leased . If the Trust is required, as a condition of a lease, to construct tenant
improvements that enhance the value of the property, then capitalization of costs continues until such improvements are completed .
Capitalization ceases if there is a prolonged period where development activity is interrupted .
Properties under active development are generally valued at market land values, if applicable, plus costs invested to date . Where
significant leasing and construction is in place and the future income stream is reasonably determinable, the valuation methodology
used is similar to that of revenue-producing properties, less estimates of future capital outlays, construction and development costs,
to determine a net “as-is” market value . Development risks such as planning, zoning, licenses, and building permits are considered
in the valuation process . Properties not under active development, such as land parcels held for future development, are valued
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based on comparable sales of land . Significant increases (decreases) in construction costs, cost escalation rates and estimated time to
complete construction in isolation would result in a significantly lower (higher) fair value for properties under development .
(c) Property, plant and equipment
Tangible assets that are held for use in the production or supply of goods and services, or for administrative purposes, and are
expected to be used during more than one period, except when another accounting standard requires or permits a different
accounting treatment, are recorded in accordance with IAS 16 using the cost model . IAS 16, therefore, excludes tangible assets that
are accounted for in accordance with IAS 40 (see NOTE 2(d) above) and IFRS 5 (see NOTE 2(h) below) .
In accordance with IAS 16, the cost model, after initial recognition of the property, plant and equipment, requires the tangible
asset to be carried at its cost less accumulated depreciation and any accumulated impairment losses (see NOTE 2(i)) . Depreciation
is recognized in a manner that reflects the pattern in which the future economic benefits of the tangible asset are expected to be
consumed and realized by the Trust . The amount of depreciation will be charged systematically to the consolidated statement of
comprehensive (loss) income and is the cost less residual value of the asset over its useful economic life . IAS 16 also requires that the
cost and useful economic life of each significant component of a tangible asset be determined based on the circumstances of each
tangible asset . The method of depreciation, residual values and estimates of the useful economic life of a tangible asset, or other
property, plant and equipment, are reviewed at each financial year-end and any changes are accounted for as a change in accounting
estimate in accordance with IAS 8 – Accounting Policies, Changes in Accounting Estimates and Errors (“IAS 8”) .
Property, Plant and Equipment (“PP&E”) is valued using the cost model under IAS 16 . PP&E is categorized into the following classes
and their respective useful economic life is used to calculate the amount of depreciation or amortization for each period . Categories
of PP&E with the same or similar useful lives are included in the same class .
PP&E Class
PP&E Category (NOTE 5)
Useful Life/Depreciation Rate
Depreciation method used
Administrative building
Administrative building
Site equipment
Automobiles
Warehouse assets
Corporate assets
Computer hardware
Computer software*
Site equipment and other assets
Site equipment and other assets
Site equipment and other assets
Site equipment and other assets
Corporate technology assets
Corporate technology assets
40 years
15%
20%
10% to 20%
10% to 20%
35%
35%
Straight-line
Declining balance
Declining balance
Declining balance
Declining balance
Declining balance
Declining balance
* In addition to the purchase of software from external sources, the Trust capitalizes certain programmers’ salaries related to internally developed software
applications used in the normal course of operations of Boardwalk REIT . The programmers’ work is directly attributable to software development .
(d) Business combinations
In accordance with IFRS 3 – Business Combinations (“IFRS 3”), the acquisition of an asset or group of assets is recorded as a business
combination if the assets acquired and the liabilities assumed constitute a business . A business is defined as an integrated set of
activities and assets that is capable of being conducted and managed for the purpose of providing a return in the form of dividends,
lower costs or other economic benefit . Building and other asset acquisitions, which meet the above definition of a business, are
recorded as business combinations and the acquisition method of accounting for these transactions is applied . Building and other
asset acquisitions, which do not meet the above definition of a business, are recorded as an asset addition .
The acquisition method requires that an acquirer be identified, a specific acquisition date be determined (which is typically the date
on which control changes), all identifiable assets and liabilities assumed, as well as any non-controlling interest in the acquiree, be
recognized and measured, and any goodwill or gains from a bargain purchase price are recognized and measured at fair value,
including contingent liabilities when these contingent considerations are part of the consideration being transferred . All acquisition
costs associated with a transaction identified as a business combination are expensed as incurred .
Goodwill is measured as the excess of the sum of the consideration transferred, the amount of any non-controlling interest in the
acquiree, and the fair value of the acquirer’s previously held equity interest in the acquiree (if any) over the net of the acquisition-
date amounts of the identifiable assets acquired and the liabilities assumed . If, after the assessment, the net of the acquisition-date
amounts of the identifiable assets acquired and liabilities assumed exceeds the sum of the consideration transferred, the amount of
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any non-controlling interests in the acquiree and the fair value of the acquirer’s previously held interest in the acquiree (if any), the
excess is recognized immediately in profit as a bargain purchase gain .
Non-controlling interests that are present ownership interests and entitle their holders to a proportionate share of the entity’s net
assets in the event of liquidation may be initially measured either at fair value or at the non-controlling interests’ proportionate share
of the recognized amounts of the acquiree’s identifiable net assets . The choice of measurement basis is made on a transaction-by-
transaction basis . Other types of non-controlling interests are measured at fair value or, when applicable, on the basis specified in
another IFRS .
When the consideration transferred by the Trust in a business combination includes assets or liabilities resulting from a contingent
consideration arrangement, the contingent consideration is measured at its acquisition date fair value and included as part of
the consideration transferred in a business combination . Changes in the fair value of the contingent consideration that qualify as
measurement period adjustments are adjusted retrospectively, with corresponding adjustments against goodwill . Measurement
period adjustments are adjustments that arise from additional information obtained during the “measurement period” (which cannot
exceed one year from the acquisition date and is shorter than one year if all information is received) about facts and circumstances
that existed at the acquisition date .
The subsequent accounting for changes in the fair value of the contingent consideration that do not qualify as measurement period
adjustments depends on how the contingent consideration is classified . Contingent consideration that is classified as equity is not
remeasured at subsequent reporting dates and its subsequent settlement is accounted for within equity . Contingent consideration
that is classified as an asset or a liability is remeasured at subsequent reporting dates in accordance with IAS 39 – Financial
Instruments: Recognition and Measurement, or IAS 37 - Provisions, Contingent Liabilities and Contingent Assets, as appropriate,
with the corresponding gain or loss being recognized in profit or loss in the consolidated statement of comprehensive (loss) income .
When a business combination is achieved in stages, the Trust’s previously held equity interest in the acquiree is remeasured to fair
value at the acquisition date (i .e . the date when the Trust obtains control) and the resulting gain or loss, if any, is recognized in profit
or loss in the consolidated statement of comprehensive (loss) income . Amounts arising from interests in the acquiree prior to the
acquisition date that have previously been recognized in other comprehensive income are reclassified to profit or loss where such
treatment would be appropriate if that interest was disposed of .
If the initial accounting for a business combination is incomplete by the end of the reporting period in which the combination occurs,
the Trust reports provisional amounts for the items for which the accounting is incomplete . These provisional amounts are adjusted
during the measurement period (see above), or additional assets or liabilities are recognized, to reflect new information obtained
about facts and circumstances that existed at the acquisition date that, if known, would have affected the amounts recognized at
that date .
(e) Assets held for sale and discontinued operations
(i) Assets (or disposal groups) held for sale
Non-current assets and groups of assets and liabilities, which comprise disposal groups, are categorized as assets (or disposal
groups) held for sale where the asset (or disposal group) is available for sale in its present condition, and the sale is highly
probable . For this purpose, a sale is highly probable: (a) if management is committed to a plan to achieve the sale, (b) there is an
active program to find a buyer, (c) the non-current asset (or disposal group) is being actively marketed at a reasonable price, (d)
the sale is anticipated to be completed within one year from the date of classification, and (e) it is unlikely there will be changes
to the plan . Where an asset (or disposal group) is acquired with a view to resale, it is classified as a non-current asset (or disposal
group) held for sale if the disposal is expected to take place within one year of the acquisition and it is highly likely that the
other conditions referred to above will be met within a short period following the acquisition . Retrospective application is not
required; therefore, comparative figures will not be adjusted to reflect non-current assets held for sale . The gains or losses arising
on a sale of assets (or disposal groups) that does not meet the definition of discontinued operations will be recognized as part
of continuing operations, while the gains or losses arising on a sale of assets (or disposal groups) that meets the definition of
discontinued operations will be reported as part of discontinued operations in the consolidated statement of comprehensive
(loss) income .
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(ii) Discontinued operations
An asset or group of assets will be classified as a discontinued operation when it is a component of an entity that has either been
disposed of or is classified as held for sale and represents a separate major line of business, it is part of a single coordinated plan
to dispose of a separate major line of business or geographical area of operations, or it is a subsidiary acquired exclusively with a
view to resell . Profits and gains or losses related to the disposal of discontinued operations are measured based on fair value less
cost to sell or on the disposal of the assets (or disposal groups) and are presented in the consolidated financial statements on
an after tax basis in accordance with IFRS 5 . In addition, retrospective application is required; therefore, comparative figures will
be changed to reflect discontinued operations . As an individual building or a group of buildings in a non-core municipal region
does not constitute a major line of business, these sales are not treated as discontinued operations .
(f)
Impairment of assets
At the end of each reporting period, assets, other than those identified in the standard as not being applicable to IAS 36 – Impairment
of Assets (“IAS 36”), such as investment properties recorded at fair value, are assessed for any indication of impairment . Should the
indication of impairment exist, the recoverable amount (see below) of the asset is estimated in order to determine the extent of the
impairment loss (if any) . Where it is not possible to estimate the recoverable amount of an individual asset, the Trust estimates the
recoverable amount of the cash-generating unit to which the asset belongs . Where a reasonable and consistent basis of allocation
can be identified, corporate assets are also allocated to individual cash-generating units, or otherwise they are allocated to the
smallest group of cash-generating units for which a reasonable and consistent allocation basis can be identified .
Recoverable amount is defined as the higher of an asset’s “fair value less cost to sell” and its “value-in-use” . In assessing value-in-
use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market
assessments of the time value of money and the risks specific to the asset for which the estimate of future cash flows have not been
adjusted .
Where the carrying amount of an asset exceeds the recoverable amount determined, an impairment loss is recognized in the
consolidated statement of comprehensive (loss) income . After the recognition of an impairment loss, the depreciation charge related
to that asset is also revised for the adjusted carrying amount on a systematic basis over the remaining useful life of the asset . Should
this impairment loss be determined to have reversed in a future period (with the exception of goodwill), a reversal of the impairment
loss is recorded in profit or loss . However, the reversal of an impairment loss will not increase the carrying amount that would have
been determined (net of amortization) had no impairment loss been recognized .
(g)
Inventories
Inventories are measured at the lower of cost and net realizable value . The costs of inventories comprise the purchase price, import
duties and other taxes (other than those subsequently recoverable by the entity from the taxing authorities), and third-party
transport, handling and other costs directly attributable to the acquisition of goods and materials, less any trade discounts, rebates
and other similar items, using the first-in, first-out method of cost assignment . Net realizable value represents the estimated selling
price for inventories less all estimated costs necessary to make the sale .
(h) Taxation
For fiscal 2015 and 2016, Boardwalk REIT qualified as a “mutual fund trust” as defined under the Income Tax Act (Canada) (the “Tax
Act”) and as a Real Estate Investment Trust (“REIT”) eligible for the ‘REIT Exemption’ in accordance with the rules affecting the tax
treatment of publicly traded trusts . Accordingly, the Trust is not taxable on its income provided that all of its taxable income is
distributed to its Unitholders . This exemption, however, does not extend to the corporate subsidiaries of Boardwalk REIT that are
subject to income tax (NOTE 30 summarizes the Trust’s subsidiaries, including its corporate subsidiaries) .
Current tax
The tax currently payable, if any, is based on taxable profit for the year for certain corporate subsidiaries of the Trust . Taxable profit
differs from profit as reported in the consolidated statement of comprehensive (loss) income because of items of income or expense
that are taxable or deductible in other years and items that are never taxable or deductible . The Trust’s liability for current tax is
calculated using tax rates that have been enacted or substantively enacted by the end of the reporting period .
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Deferred tax
Deferred tax is recognized on temporary differences between the carrying amounts of assets and liabilities in the consolidated
financial statements and the corresponding tax bases used in the computation of taxable profit .
Deferred income tax liabilities are generally recognized for all taxable temporary differences . Deferred income tax assets are
recognized for all deductible temporary differences, carry forward of unused tax credits and unused tax losses, to the extent that it is
probable that deductions, tax credits and tax losses can be utilized . The carrying amounts of deferred income tax assets are reviewed
at each reporting date and reduced to the extent it is no longer probable that the income tax assets will be recovered . Deferred
income tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the asset is realized or
the liability settled, based on tax rates and laws that have been enacted or substantively enacted at the reporting date . In addition,
deferred income tax assets and liabilities are measured using the rate that is consistent with the expected manner of recovery (i .e .
using the asset versus selling the asset) . Where applicable, current and deferred income taxes relating to items recognized directly in
equity or comprehensive income are also recognized directly in equity or comprehensive income, respectively .
(i) Provisions
In accordance with IAS 37 – Provisions, Contingent Liabilities and Contingent Assets (“IAS 37”), a provision is a liability of uncertain
timing or amount . Provisions are recognized when the entity has a present legal or constructive obligation as a result of past
events and when it is probable that an outflow of resources will be required to settle the obligation and the amount can be reliably
estimated . Provisions are not recognized for future operating losses . Provisions are measured at the present value of the expenditures
expected to be required to settle the obligation using a discounted rate that reflects current market assessment of the time value of
money and the risks and uncertainties specific to the obligation . Provisions are re-measured at each reporting date using the current
discount rate . The increase in the provision due to the passage of time is recognized as a financing cost .
(j) Unit-based payments
Equity-settled unit-based payments to employees and Trustees are measured at the fair value of the deferred unit at the grant date
and expensed over the vesting period based on the Trust’s estimate of the deferred units that will actually vest . At the end of each
reporting period, the Trust revises its estimate of the number of equity instruments expected to vest . The impact of the revision
of the original estimates, if any, is recognized in profit or loss prospectively such that the cumulative expense reflects the revised
estimate . In accordance with IAS 32 – Financial Instruments: Presentation (“IAS 32”), the deferred units are presented as a liability
on the consolidated statement of financial position as the Trust is obliged to provide the holder with REIT Units once the deferred
units vest . Under IAS 39 – Financial Instruments: Recognition and Measurement (“IAS 39”), the deferred units are classified as ‘fair
value through profit or loss’ and are measured at each reporting period at fair value with changes in fair value recognized in the
consolidated statement of comprehensive (loss) income . Fair value of the deferred units is calculated based on the observable market
price of Boardwalk REIT’s Trust Units .
(k) Government assistance and grants
The Trust receives government assistance in order to complement and partially assist the Trust’s initiatives in providing affordable
housing to low income-earning individuals . Government grants are not recognized until there is reasonable assurance that the Trust
will comply with the conditions attached to them and that the grants will be received . In accordance with IAS 20 – Accounting for
Government Grants and Disclosure of Government Assistance, grant proceeds will be recognized in profit or loss on a systematic basis
over the periods in which the Trust recognizes revenue or incurs expenses .
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(l) Revenue recognition
(i)
Rental revenue
The Trust has retained substantially all of the risks and benefits of ownership of its investment properties, and, therefore,
accounts for leases with its tenants as operating leases . Revenue recognition under a lease commences when the tenant has a
right to use the leased asset . Generally, this occurs on lease inception date when the tenant occupies their leased space . Rental
revenue is recognized systematically over the term of the lease, which is generally not more than twelve months . Any suite
specific incentives offered or initial direct costs incurred in negotiating and arranging an operating lease are also amortized over
the term of the operating lease . Rental revenue is recorded based on the amount received or to be received in accordance with
the operating lease .
(ii) Building sales
The gain or loss from the sale of an investment property is recognized when title passes to the purchaser (control is transferred)
upon closing at which time all or substantially all of the funds are receivable, or have been received, and the conditions of the
sale have been completed .
(iii)
Interest income
Interest income from a financial asset is recognized when it is probable that the economic benefits will flow to the Trust and
the amount of income can be measured reliably . Interest income is accrued on a time basis when earned, by reference to
the principal outstanding and at the effective interest rate applicable . Interest income is included in financing costs in the
consolidated statement of comprehensive (loss) income .
(iv) Ancillary rental income
Ancillary rental income comprises revenue from coin laundry machines located on the Trust’s existing building sites, and income
received from telephone and cable providers and is recorded when earned .
(m) Financial instruments and derivatives
Financial instruments and derivatives are accounted for, presented, and disclosed in accordance with IFRS 7 – Financial Instruments:
Disclosures (“IFRS 7”), IAS 32 and IAS 39 . Financial assets and financial liabilities are initially measured at fair value . Transaction costs
that are directly attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets and
financial liabilities at fair value through profit or loss) are added to or deducted from the fair value of the financial assets or financial
liabilities, as appropriate, on initial recognition . Transaction costs directly attributable to the acquisition of financial assets or financial
liabilities at fair value through profit or loss are recognized immediately in profit or loss .
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Financial assets
Financial assets are classified into the following specified categories: financial assets at ‘fair value through profit or loss’ (“FVTPL”),
‘held-to-maturity’ investments, ‘available-for-sale’ financial assets, and ‘loans and receivables’ . The classification depends on the
nature and purpose of the financial asset and is determined at the time of initial recognition . Financial assets are classified as at FVTPL
when the financial asset either is held for trading or is designated as at FVTPL . Financial assets categories are defined and measured
as follows:
Classification
Definition
Measurement
FVTPL
Classified as FVTPL when the financial asset is either held for trading
or it is designated as at FVTPL as discussed below:
Classified as held for trading if: it has been acquired principally for
the purpose of selling it in the near term; or, on initial recognition,
it is part of a portfolio of identified financial instruments that the
Trust manages together, and has a recent actual pattern of short-
term profit taking; or, it is a derivative that is not designated and
effective as a hedging instrument .
Classified as FVTPL upon initial recognition if: such designation
eliminates or significantly reduces a measurement or recognition
inconsistency that would otherwise arise; or the financial asset
forms part of a group which is managed and its performance
is evaluated on a fair value basis; or it forms part of a contract
containing one or more embedded derivatives .
Stated at fair value, with gains or
losses arising on measurement
recognized in profit or loss .
Stated at fair value, with gains or
losses arising on measurement
recognized in profit or loss .
Held-to-maturity investments
Non-derivative financial assets with fixed or determinable
payments and fixed maturity dates that the Trust has the positive
intent and ability to hold to maturity .
Measured at amortized cost using
the effective interest method less
any impairment . (1) (2)
Available-for-sale
Non-derivative financial assets that either are designated as
available-for-sale or are not classified as (a) loans and receivables,
(b) held-to-maturity investments or (c) financial assets at FVTPL .
Measured at fair value through
other comprehensive income .
Loans and receivables
Non-derivative financial assets with fixed or determinable
payments that are not quoted in an active market .
Measured at amortized cost using
the effective interest method less
any impairment . (1) (2)
(1)
The effective interest method is a method of calculating the amortized cost of a debt instrument and of allocating interest income over the relevant
period . The effective interest rate is the rate that exactly discounts estimated future cash receipts through the expected life of the debt instrument or
where appropriate, a shorter period, to the net carrying amount on initial recognition .
(2)
Financial assets, other than those at FVTPL, are assessed for indicators of impairment at the end of each reporting period . Generally, the carrying amount
of the financial asset is reduced by the impairment loss .
Boardwalk REIT’s financial assets are as follows:
Financial asset
Classification
Trade and other receivables
Loans and receivables
Segregated tenants’ security deposits
Loans and receivables
Cash and cash equivalents
Loans and receivables
Measurement
Amortized cost
Amortized cost
Amortized cost
The Trust derecognizes a financial asset only when the contractual rights to the cash flows from the asset expire, or when it transfers
the financial asset and substantially all the risks and rewards of ownership of the asset to another entity .
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Financial liabilities and equity
Debt and equity instruments issued are classified either as financial liabilities or as equity in accordance with the substance of the
contractual arrangements and the definitions of a financial liability and an equity instrument . An equity instrument is any contract
that evidences a residual interest in the assets of an entity after deducting all of its liabilities . Equity instruments issued by the Trust are
recognized at the proceeds received, net of direct issue costs . Repurchase of Boardwalk REIT’s own equity instruments is recognized
and deducted directly in equity . No gain or loss is recognized in profit or loss on the purchase, sale, issue or cancellation of the Trust’s
own equity instruments . Distributions paid on the Trust’s equity instruments subsequent to, declared prior to, and with a record date
at or prior to, the reporting date, are recorded as a liability .
Financial liabilities are classified as either financial liabilities ‘at FVTPL’ or ‘other financial liabilities’ . Financial liabilities categories are
defined and measured as follows:
Classification
Definition
Measurement
FVTPL
Classified as FVTPL when the financial liability is either held for
trading or it is designated as at FVTPL as discussed below:
Classified as held for trading if: it has been acquired principally
for the purpose of repurchasing it in the near term; or, on
initial recognition, it is part of a portfolio of identified financial
instruments that the Trust manages together and has a recent
actual pattern of short-term profit taking; or, it is a derivative that is
not designated and effective as a hedging instrument .
Classified as FVTPL upon initial recognition if: such designation
eliminates or significantly reduces a measurement or recognition
inconsistency that would otherwise arise; or the financial liability
forms part of a group which is managed and its performance
is evaluated on a fair value basis; or it forms part of a contract
containing one or more embedded derivatives .
Stated at fair value, with gains or
losses arising on measurement
recognized in profit or loss .
Stated at fair value, with gains or
losses arising on measurement
recognized in profit or loss .
Other financial liabilities
All other liabilities .
Measured at amortized cost using
the effective interest method . (1)
(1)
The effective interest method is a method of calculating the amortized cost of a financial liability and of allocating interest expense over the relevant
period . The effective interest rate is the rate that exactly discounts estimated future cash payments through the expected life of the financial liability or
where appropriate, a shorter period, to the net carrying amount on initial recognition .
Boardwalk REIT’s financial liabilities are as follows:
Financial liability
Classification
Mortgages payable
Other financial liabilities
LP Class B Units
Deferred unit-based compensation
FVTPL
FVTPL
Refundable tenants’ security deposits
Other financial liabilities
Trade and other payables
Other financial liabilities
Measurement
Amortized cost
Fair value
Fair value
Amortized cost
Amortized cost
The Trust derecognizes a financial liability when, and only when, the Trust’s obligations are discharged, cancelled or they expire . The
difference between the carrying amount of the financial liability derecognized and the consideration paid and payable is recognized
in profit or loss .
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Derivatives
The Trust may enter into a variety of derivative financial instruments to manage its exposure to interest rate risks, including interest
rate swaps and bond forward contracts . Further details of derivative financial instruments are disclosed in NOTE 27 . Derivatives are
initially recognized at fair value at the date the derivative contracts are entered into and are subsequently measured at their fair
value at the end of each reporting period . The resulting gain or loss is recognized in profit or loss immediately unless the derivative
is designated and effective as a hedging instrument, in which case the timing of the recognition in profit or loss depends on the
nature of the hedge relationship . Derivatives embedded in host contracts are treated as separate derivatives when their risks and
characteristics are not closely related to the host contracts and the host contracts are not measured at FVTPL . For the years ended
December 31, 2016 and 2015, the Trust had no embedded derivatives requiring separate recognition .
(n) Hedge accounting
The Trust applies hedge accounting to derivative financial instruments in cash flow hedging relationships . At the inception of the
hedging relationship, the Trust documents the relationship between the hedging instrument and the hedged item, along with its risk
management objectives and its strategy for undertaking various hedge transactions . Furthermore, at inception of the hedge and on
an ongoing basis, the Trust documents whether the hedging instrument is highly effective in offsetting changes in cash flows of the
hedged item attributable to the hedged risk .
In cash flow hedging relationships, the effective portion of the change in the fair value of the hedging derivative is recognized in
the consolidated statement of comprehensive (loss) income as other comprehensive income (“OCI”) while the ineffective portion
is recognized immediately in profit or loss . Hedging gains and losses previously recognized in OCI and accumulated in equity are
reclassified to profit or loss in the periods when the hedged item is recognized in profit or loss, in the same line of the consolidated
statement of comprehensive (loss) income as the recognized hedged item .
Hedge accounting is discontinued when the Trust revokes the hedging relationship, when the hedging instrument expires or is sold,
terminated, or exercised, or when it no longer qualifies for hedge accounting . Any gain or loss recognized in OCI and accumulated in
equity at that time remains in equity and is recognized when the forecast transaction is ultimately recognized in profit or loss . When a
forecast transaction is no longer expected to occur, the gain or loss accumulated in equity is recognized immediately in profit or loss .
(o) Cash and cash equivalents
Cash is comprised of bank balances, interest-earning bank accounts and term deposits with maturities of 90 days or less .
(p) Critical judgment in applying accounting policies
The following are the critical judgments, apart from those involving estimations (see NOTE 2(t) below), that have been made in
applying the Trust’s accounting policies and that have the most significant effect on the reported amounts in the consolidated
financial statements:
(i)
Income taxes
The Trust applies judgment in determining the tax rates applicable to its corporate subsidiaries and identifying the temporary
differences in each of such legal subsidiaries in respect of which deferred income taxes are recognized . Deferred taxes related to
temporary differences arising from its corporate subsidiaries are measured based on the tax rates that are expected to apply in
the year when the asset is realized or the liability is settled . Temporary differences are differences that are expected to reverse in
the future and arise from differences between accounting and tax asset values .
(ii)
Leases
The Trust’s revenue recognition policy related to leases is described in NOTE 2(o)(i) . The Trust makes judgments in determining
whether certain leases, in particular tenant leases, as well as leased warehouse space and long-term land leases, which are
considered leases under IFRS, where the Trust is the lessor, are operating or finance leases . The Trust has determined that all of
its leases are operating leases .
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(iii)
Investment property and internal capital program
The Trust’s accounting policy relating to investment property is described in NOTE 2(d) above . In applying this policy, judgment
is applied in determining the extent and frequency of utilizing independent, third-party appraisals to measure the fair value
of the Trust’s investment property . Additionally, judgment is applied in determining the appropriate classes of investment
properties in order to measure fair value . The Trust also undertakes internal capital improvements and upgrades . Such work
is specifically identified, and the Trust applies judgment in the estimated amount of directly attributable on-site wages to be
allocated to capital improvements and upgrades of its real estate assets .
(iv) Financial instruments
The Trust’s accounting policies relating to financial instruments are described in NOTE 2(p) . Critical judgments inherent in these
policies related to applying the criteria set out in IAS 39 to designate financial instruments into categories (i .e . FVTPL, etc .), assess
the effectiveness of hedging relationships (for the Trust’s cash flow hedges) and determine the identification of embedded
derivatives, if any, in certain hybrid instruments that are subject to fair value measurement .
(v) Basis of consolidation
The consolidated financial statements of the Trust include the accounts of Boardwalk REIT and its wholly owned subsidiaries, as
well as entities over which the Trust exercises control on a basis other than ownership of voting interest within the scope of IFRS
10 . Judgment is applied in determining if an entity meets the criteria of control as defined in the accounting standard .
(vi) Deferred unit-based compensation
The Trust applies judgment in determining the best available estimate of the number of deferred units that are expected to vest
at each reporting period .
(q) Key accounting estimates and assumptions
The following are the key assumptions concerning the future, and other key sources of estimation uncertainty at the end of the
reporting period, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within
the next financial year . Actual results could differ from estimates .
(i)
Investment properties
The choice of valuation method for fair valuing and the critical estimates and assumptions underlying the fair value determination
of investment properties are set out in NOTE 4 . Significant estimates used in determining the fair value of the Trust’s investment
properties includes capitalization rates and net operating income (which is influenced by inflation rates, vacancy rates and
standard costs) used in the overall capitalization rate valuation method as well as discount rates and forecasted cash flows used
in the discounted cash flow valuation method . A change to any one of these inputs could significantly alter the fair value of an
investment property . Please refer to NOTE 4 for sensitivity analysis .
(ii) Property, plant and equipment
The useful economic life of property, plant and equipment for the purposes of calculating depreciation and amortization, as
disclosed in NOTE 5 and forecast of economic factors to determine recoverable amounts for the purpose of determining any
impairment of assets, are based on data and information from various sources including industry practice and entity specific
history .
(iii)
Internal Capital Program
The Trust’s internal capital program is based on internal allocations, including parts, supplies and on-site wages identified as part
of a specific upgrade or capital improvement .
(iv) Utility accrual
Amount of utility accrual for charges related to the current or prior year is based on estimates of usage and price for the time
period in which invoices have not been received from the utility providers .
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(v) Deferred unit-based compensation plan
The compensation costs relating to the deferred unit plan are based on estimates of how many deferred units will actually vest
and be exercised .
(vi) Deferred taxes
The amount of the temporary differences between the accounting carrying value of the Trust’s assets and liabilities held in
various corporate subsidiaries versus the tax bases of those assets and liabilities and the tax rates at which the differences will
be realized are outlined in NOTE 15 .
A P P L I C AT I O N O F N E W A N D R E V I S E D I F R S S A N D F U T U R E A C C O U N T I N G P O L I C I E S
Boardwalk REIT monitors new IFRS accounting pronouncements to assess the applicability and impact, if any, these new
pronouncements may have on the consolidated financial statements and note disclosures .
(a) Application of new and revised IFRSs
In the current year, the Trust has applied a number of new and revised IFRSs issued by the IASB, and incorporated in the Chartered
Professional Accountants of Canada Handbook . The following highlights these changes and the effect, if any, on the Trust’s
consolidated financial statements .
Standard
Details of amendment
Impact
IFRS 11 – Joint Arrangements
(“IFRS 11”)
The amendments to IFRS 11 provide guidance on how to account
for the acquisition of an interest in a joint operation in which the
activities constitute a business as defined in IFRS 3 – Business
Combinations . Specifically, the amendments state that the relevant
principles on accounting for business combinations in IFRS 3 and
other standards should be applied .
The previously announced
transaction between Boardwalk
and RioCan REIT is expected to
close mid-2017 and the impact of
these amendments (see NOTE 4)
will be assessed at that time .
IAS 1 – Presentation of Financial
Statements
The application of these
amendments has not resulted
in any material impact on
the financial performance or
financial position of the Trust .
These amendments were labelled the “Disclosure Initiative” . The
amendments clarify that an entity need not provide a specific
disclosure required by an IFRS if the information resulting from
that disclosure is not material, and give guidance on the basis
of aggregating and disaggregating information for disclosure
purposes . However, the amendments reiterate that an entity should
consider providing additional disclosures when compliance with
the specific requirements in IFRS is insufficient to enable users
of financial statements to understand the impact of particular
transactions, events and conditions on the entity’s financial
position and financial performance .
In addition, the amendments clarify that an entity’s share of the
other comprehensive income of associates and joint ventures
accounted for using the equity method should be presented
separately from those arising from the Group, and should be
separated into the share of items that, in accordance with other
IFRSs; (i) will not be reclassified subsequently to profit or loss; and
(ii) will be reclassified subsequently to profit or loss when specific
conditions are met .
As regards to the structure of the financial statements, the
amendments provide examples of systematic ordering or grouping
of the notes .
86 n n n M A N A G E M E N T ’ S D I S C U S S I O N A N D A N A L Y S I S
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Standard
Details of amendment
Impact
2012-2014 Cycle
IFRS 5 – Non-current Assets
Held for Sale and Discontinued
Operations
Provides specific guidance for when an entity reclassifies assets
(or a disposal group) from held for sale to held for distribution to
owners (or vice versa) .
IFRS 7 – Financial Instruments:
Disclosures
Provides additional guidance to clarify whether a servicing contract
is continuing involvement in a transferred asset for the purpose of
the disclosures required in relation to transferred assets .
This clarification was not
applicable for the current year
as the Trust did not reclassify
any assets held for sale to held
for distribution to owners on
disposal of any assets, but will
be considered should a disposal
transaction occur .
The Trust is not involved
in servicing contracts with
transferred assets; therefore, this
amendment was not applicable .
IAS 19 – Employee Benefits
The amendments clarify that the rate used to discount post-
employment benefit obligations should be determined by
reference to market yields at the end of the reporting period on
high quality corporate bonds .
The Trust does not provide
post-employment benefits;
therefore, this amendment is not
applicable .
In addition, the following new or amended standards did not have any impact on the Trust’s consolidated financial statements:
▲
IFRS 14 – Regulatory Deferral Accounts was not applicable to the Trust as the Trust does not provide goods or services at a price
or rate that is subject to rate regulation . Additionally, it is only applicable for entities which are a first time adopter of IFRS .
▲
Investment Entities: Applying the Consolidation Exception (Amendments to IFRS 10, IFRS 12 and IAS 28) was not applicable to
the Trust as it is not an Investment Entity .
▲
Clarification of Acceptable Methods of Depreciation and Amortization (Amendments to IAS 16 and IAS 38) was not applicable to
the Trust as it had not previously used a revenue-based depreciation method .
▲
Agriculture: Bearer Plants (Amendments to IAS 16 and IAS 41) was not applicable to the Trust as the Trust does not engage in
agricultural activities .
▲
Amendments to IAS 27 – Equity Method in Separate Financial Statements are not applicable as the Trust presents consolidated
financial statements .
(b) Future accounting policies
The following accounting standards under IFRS have been issued or revised; however, they are not yet effective, and, as such, have
not been applied to these consolidated financial statements:
New or amended
standards
IFRS 9 - Financial
Instruments (“IFRS 9”)
Summary of requirements
IFRS 9, published in July 2014, replaces the existing guidance in IAS 39 .
IFRS 9 includes revised guidance on the classification and measurement
of financial instruments, including a new expected credit loss model
for calculating impairment on financial assets, and the new general
hedge accounting requirements . It also carries forward the guidance on
recognition and derecognition of financial instruments from IAS 39 .
IFRS 9 is effective for annual reporting periods beginning on or after
January 1, 2018, with early adoption permitted .
Possible impact on consolidated
financial statements
The Trust is assessing the
potential impact on its
consolidated financial statements
but does not expect it to have a
significant impact .
A R 2 0 1 6 B O A R D W A L K R E I T
M A N A G E M E N T ’ S D I S C U S S I O N A N D A N A L Y S I S n n n 87
New or amended
standards
Summary of requirements
IFRS 15 - Revenue from
Contracts with Customers
(“IFRS 15”)
IFRS 15 establishes a comprehensive framework for determining whether,
how much, and when revenue is recognized . It replaces existing revenue
recognition guidance, including IAS 18 – Revenue (“IAS 18”), IAS 11 –
Construction Contracts and IFRIC 13 – Customer Loyalty Programmes .
IFRS 15 is effective for annual reporting periods beginning on or after
January 1, 2018, with early adoption permitted .
IFRS 16 – Leases (“IFRS 16”)
IFRS 16 supersedes IAS 17 – Leases and has been established to increase
the transparency of lease obligations reported on an entity’s financial
report . Under this new standard, entities may be required to report more
of their previously disclosed off balance sheet leases on the face of the
balance sheet . The standard also provides guidance on the calculation
and presentation of the lease obligations .
IFRS 16 is effective for annual reporting periods beginning on or after
January 1, 2019, with early adoption permitted, only if the entity also
applies IFRS 15 .
Transfers of Investment
Properties (amendments
to IAS 40)
Paragraph 57 of IAS 40 has been amended to state that an entity shall
transfer a property to, or from, investment property when, and only
when, there is evidence of a change in use . A change in use occurs if
property meets, or ceases to meet, the definition of investment property .
A change in management’s intentions for the use of a property by itself
does not constitute evidence of a change in use .
This amendment is effective for annual periods beginning on or after
January 1, 2018 .
Possible impact on consolidated
financial statements
The Trust is assessing the potential
impact on its consolidated
financial statements .
The Trust recognizes revenue
from the following sources:
• Rental revenue and other
charges based on operating
tenant leases, which should
not change under IFRS 15, as
they are scoped out of IFRS 15
and included in IFRS 16 – Leases
(discussed below)
• Ancillary rental income
comprises revenue from coin
laundry machines and income
received from telephone and
cable providers
• Interest income
Each revenue stream is currently
being assessed under the new
standard .
The Trust is assessing the potential
impact on its consolidated
financial statements .
It is expected that leases with
tenants shall be accounted for
as operating leases in the same
manner they are currently being
reported .
The Trust has Investment
Properties located on land which
is leased . Currently, these lease
payments are expensed . It is
expected that under the new
lease standard, a right-of-use
asset addition to Investment
Property and a lease obligation
liability shall be recorded along
with the corresponding financing
charges .
The Trust will ensure these
amendments are considered
when evaluating/determining its
Investment Properties .
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New or amended
standards
Recognition of Deferred
Tax Assets for Unrealized
Losses (Amendment to
IAS 12 – Income Taxes
(“IAS 12”))
Summary of requirements
The amendments made to IAS 12 clarify the following items:
• Unrealized losses on debt instruments measured at fair value and
measured at cost for tax purposes give rise to a deductible temporary
difference regardless of whether the carrying amount is expected to be
recovered .
• The carrying amount of an asset does not limit the estimation of
probable future taxable benefits .
• Estimates for future taxable profits exclude tax deductions resulting
from the reversal of deductible temporary differences .
• An entity assesses a deferred tax asset in combination with other
deferred tax assets .
The amendment is effective for annual periods beginning on or after
January 1, 2017 .
Possible impact on consolidated
financial statements
The Trust is assessing the
potential impact on its
consolidated financial statements
but does not expect it to have a
significant impact .
Disclosure Initiative
(Amendment to IAS 7 –
Statement of Cash Flows)
The amendment clarifies that entities shall provide disclosures that
enables users of financial statements to evaluate changes in liabilities
arising from financing activities .
The Trust does not expect there
to be a significant impact on its
consolidated financial statements .
The Trust is assessing the potential
impact on its consolidated
financial statements .
Classification and
Measurement of
Share-based Payment
Transactions (Amendment
to IFRS 2 – Share-based
Payment (“IFRS 2”))
The amendment is effective for annual periods beginning on or after
January 1, 2017 .
The amendments made to IFRS 2 clarify the following items:
• In estimating the fair value of a cash-settled share-based payment, the
accounting for the effects of vesting and non-vesting conditions should
follow the same approach as for equity-settled share-based payments .
• Where tax law or regulation requires an entity to withhold a specified
number of equity instruments equal to the monetary value of the
employer’s tax obligation to meet the employer’s tax liability which
is then remitted to the tax authority, such an arrangement should be
classified as equity-settled in its entirety, provided that the share-
based payment would have been classified as equity-settled had it not
included the net settlement feature .
• A modification of a share-based payment that changes the transaction
from cash-settled to equity-settled should be accounted for as follows:
- the original liability is derecognized;
- the equity-settled share-based payment is recognized at the
modification date fair value;
- any difference in value should be recognized in profit or loss
immediately .
The amendment is effective for annual periods beginning on or after
January 1, 2018 .
Sale or Contribution
of Assets between
an Investor and its
Associate or Joint Venture
(Amendments to IFRS 10
– Consolidated Financial
Statements and IAS 28 –
Investments in Associates
and Joint Ventures)
The amendments deal with situations where there is a sale or
contribution of assets between an investor and its associate or joint
venture . Specifically, they state that gains or losses resulting from the loss
of control of a subsidiary that does not contain a business transaction
with an associate or joint venture that is accounted for using the equity
method, are recognized in the parent’s profit or loss only to the extent of
the unrelated investors’ interests in that associate or joint venture .
The effective date for this amendment has yet to be determined .
The Trust is assessing the potential
impact on its consolidated
financial statements .
A R 2 0 1 6 B O A R D W A L K R E I T
M A N A G E M E N T ’ S D I S C U S S I O N A N D A N A L Y S I S n n n 89
The following interpretation is not expected to have any impact on the Trust’s consolidated financial statements:
▲
IFRIC 22 – Foreign Currency Transactions and Advance Consideration
A N N U A L I M P R O V E M E N T S T O I F R S S 2 014 -2 016 C YC L E
The IASB has released the final amendments for the 2014-2016 annual improvement project with the majority of these amendments
applying for annual periods beginning on or after January 1, 2017 . Only those standards which may have a significant impact on the
Trust’s consolidated financial statements are included below .
Standard
2014-2016 Cycle
IFRS 12 – Disclosure of Interests in Other
Entities
Details of amendment
Expected impact
Provides clarification that the scope of
the standard should include interests
that are classified as held for sale, held for
distribution or as discontinued operations .
This amendment is effective for annual
periods beginning on or after January 1,
2017 .
The Trust will determine the impact of this
amendment should an asset held for sale
or discontinued operations arise .
I N T E R N AT I O N A L F I N A N C I A L R E P O R T I N G S TA N D A R D S
The Trust’s Consolidated Financial Statements have been prepared in accordance with International Financial Reporting Standards as
issued by the International Accounting Standards Board (“IASB”) and interpretations of the IFRS Committee (“IFRIC”) .
D I S C L O S U R E C O N T R O L S A N D P R O C E D U R E S & I N T E R N A L C O N T R O L O V E R F I N A N C I A L R E P O R T I N G
Disclosure controls and procedures are designed to provide reasonable assurance that all relevant information is gathered and
reported to senior management, including the CEO, President, and CFO on a timely basis so appropriate decisions can be made
regarding public disclosure .
The preparation of this information is supported by a set of disclosure controls and procedures (“DC&P”) implemented by
management . In fiscal 2016, these controls and procedures were reviewed and the effectiveness of their design and operation was
evaluated . This evaluation confirmed the effectiveness of both the design and the operation of disclosure controls and procedures
as at December 31, 2016 . The evaluation was performed in accordance with the Committee of Sponsoring Organizations of the
Treadway Commission (“2013 COSO”) control framework (the “2013 Framework”) adopted by the Trust and the requirements of
National Instrument 52-109 of the Canadian Securities Administrators titled, Certification of Disclosure in Issuers’ Annual and Interim
Filings .
There were no changes made to our disclosure controls and procedures during the year ended December 31, 2016 . Boardwalk REIT
continues to review the design of disclosure controls and procedures to provide reasonable assurance that material information
relating to Boardwalk REIT is properly communicated to certifying officers responsible for establishing and maintaining disclosure
controls and procedures, as those terms are defined in National Instrument 52-109 Certification of Disclosure in Issuers’ Annual and
Interim Filings .
As at December 31, 2016, Boardwalk REIT confirmed the effectiveness of both the design and the operation of its internal control
over financial reporting (“ICFR”) to provide reasonable assurance regarding the reliability of financial statements and information .
Boardwalk REIT may, from time to time, make changes aimed at enhancing their effectiveness and ensuring that our systems evolve
with our business . There were no changes made in our internal controls over financial reporting during the year ended December 31,
2016, that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting .
90 n n n M A N A G E M E N T ’ S D I S C U S S I O N A N D A N A L Y S I S
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2017 FINANCIAL OUTLOOK AND MARKET GUIDANCE
At the end of the third quarter of 2016, the Trust announced its financial outlook for the upcoming 2017 year . As is customary, the
Trust reviews its base level assumptions and strategy to determine if any material change is warranted in the reported guidance .
Based on this review, the Trust has revised its 2017 objectives as follows;
Description
2017 Revised Objectives
2017 Objectives
Acquisition of Investment Properties
No new apartment
acquisitions
No new apartment
acquisitions
Disposition of Investment Properties
No dispositions
No dispositions
2016 Actual
Acquired 747
Apartment Units
No dispositions
Development
Phase 2 of Pines Edge,
Regina, Saskatchewan –
79 Units
Phase 2 of Pines Edge,
Regina, Saskatchewan –
79 Units
Phase 1 of Pines Edge,
Regina, Saskatchewan –
79 Units
Continue with Phase 3
of Pines Edge,
Regina, Saskatchewan –
71 Units
Commencement of
Brentwood Village joint
venture with RioCan,
Calgary, Alberta –
164 Units
-15% to -9%
$2 .30 to $2 .65
$1 .96 to $2 .31
Continue with Phase 3
of Pines Edge,
Regina, Saskatchewan –
71 Units
Commencement of
Brentwood Village joint
venture with RioCan,
Calgary, Alberta –
164 Units
-8% to -3%
$2 .70 to $2 .90
$2 .36 to $2 .56
Commencement of
Phase 2 and the review of
Phase 3 of Pines Edge,
Regina, Saskatchewan –
150 Units
-12 .50%
$2 .84
$2 .50
Stabilized Building NOI Growth
FFO Per Unit
AFFO Per Unit
The Trust experienced a much weaker fourth quarter than anticipated, mainly driven by lower reported revenue, the result of
increased competition in our western Canadian markets . This lower revenue was the result of higher vacancy loss and rental
incentives . To address this increased competition, the Trust aggressively approached existing Resident Members with an increased
level of incentives to renew their leases early . In addition, we increased the level of short term incentives offered to potential new
Resident Members . We believe that these initiatives, combined with increased capital investment in our properties, will lower future
turnover and increase rental demand . This should result in increased occupancy levels and lower reported vacancy loss for future
months . However, in the majority of these early renewals, the existing rental rate has been higher than the new net rent offered when
including the increased incentives . The result of this has been a short term deterioration of reported rents during the latter part of
2016, as the rental market rebalances . By focusing on both retaining existing Resident Members and attracting new Residents, the
Trust will be positioned to take advantage of future market improvement .
Although we are still in the early stages of this program, we have noted that overall turnover is substantially lower than the previous
year, while overall rentals are also ahead of prior years, which has traditionally proven to be a leading indicator for increased revenue
in the future months . Due to current market volatility, predicting future revenue trends has become more difficult . As such, we have
increased the revenue sensitivity disclosure of our guidance . The main assumption that we changed was the base level of rent used
in determining the original 2017 guidance . Adjusting base rent has
correspondingly lowered our revenue expectation for 2017 .
Since our main adjustment is related to revenue, we have provided
an additional chart showing FFO outcomes using separate revenue
assumptions with the lower end of the reported guidance based on
the most recent financial information annualized with no provision
for improvement throughout the remainder of the year . For example,
if the Trust does not see any revenue improvement for the remainder
of 2017, we estimate reported FFO of $2 .30 . The Trust’s adjusted FFO
guidance range is between $2 .30 and $2 .65 per Trust Unit . In order to
reach the higher end of the guidance, rents will have to increase by 4%
above the base revenue level through 2017 .
FFO Sensitivity on Revenue
$2.30
$2.35
$2.46
$2.55
$2.65
$2.80
Low End
of Guidance
1% Revenue
Growth
2% Revenue
Growth
3% Revenue
Growth
High End
of Guidance
Original
Guidance
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M A N A G E M E N T ’ S D I S C U S S I O N A N D A N A L Y S I S n n n 91
In deriving these forecasts, we have adjusted for the treatment of the LP B Units to be treated as equity (versus debt under IFRS) and
their related treatment of the distributions paid (which are classified as financing charges under IFRS) . In addition, we are assuming
no additional acquisition or disposition of properties .
The reader is cautioned that this information is forward-looking and actual results may vary materially from those reported . One of
the key estimates is the performance of the Trust’s stabilized properties . Any significant change in assumptions deriving ‘Stabilized
Building NOI performance’ would have a material effect on the final reported amount . The Trust reviews these key assumptions
quarterly and based on this review may change its outlook .
In addition to the above financial guidance for 2017, the Trust has assumed the following capital will be reinvested in its existing
portfolio for the 2017 fiscal year .
Capital Budget ($000’s)
Maintenance Capital
Stabilizing & Value Added Capital (including Property,
Plant & Equipment)
Total Operational Capital
Total Operational Capital
Repositioning Capital
Development
Total Capital Investment
2017 Budget
$ 17,731
80,003
$ 97,734
$ 97,734
20,000
24,071
$ 141,805
Per Suite
$
525
2,369
$ 2,894
2016 Actual
$
17,534
85,052
$ 102,586
$ 102,586
–
6,167
$ 108,753
Per Suite
$
525
2,547
$ 3,072
In total, we expect to invest $97 .7 million (or $2,894 per apartment unit) on operational capital in 2017 as compared to $102 .6 million
(or $3,072 per apartment unit) actually spent in 2016 . The Trust has maintained its Maintenance Capital estimate for 2017 at $525
per apartment unit per year . Additionally, for the year ended December 31, 2016, the Trust invested $6 .2 million of development and
$144 .4 million on acquisitions in Alberta .
Stabilizing and Value Added capital is subject to continuous review and will only be invested if the Trust can earn a significant return
on this investment .
Included in the 2017 Budget is $20 million for the Trust’s suite upgrade and repositioning program . This Fund is targeted for specific
properties and will focus on significant upgrades to existing suites, common areas, as well as internal amenities . This reserve is subject
to continuous review and internally set rates of return and is consistent with the Trust’s Long Term Strategy of upgrading its existing
property portfolio .
Timing of Future Financial Guidance Release
The Trust has previously released its forward guidance along with its third quarter results . The Trust continues to be committed to
financial transparency by making this information public . Recent events have highlighted that additional information through the
final months of each year will allow the Trust to improve the accuracy of these estimates prior to the release of its forward financial
guidance .
As a result, future financial forecasts for subsequent years will be released as part of its fourth quarter and year end results . The Trust
will continue to review its key assumptions on a quarterly basis and where warranted make changes to its financial guidance .
92 n n n M A N A G E M E N T ’ S D I S C U S S I O N A N D A N A L Y S I S
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S E L E C T E D C O N S O L I D AT E D F I N A N C I A L I N F O R M AT I O N
The following selected financial information should be read in conjunction with ‘‘Management’s Discussion and Analysis’’, the audited
consolidated financial statements and accompanying notes for the years ended December 31, 2016 and 2015, and the unaudited
interim consolidated financial statements of Boardwalk REIT and accompanying notes, both incorporated herein by reference .
The statements of comprehensive (loss) income and financial position information set forth in the following tables has been derived
from the audited consolidated financial statements referred to above and the unaudited consolidated financial statements of the
Trust for various quarterly interim periods .
Annual Comparative
Cdn$ Thousands, except per unit amount
Total rental revenue
(Loss) profit
Funds from operations
Profit per unit
– Basic
– Diluted
Funds from operations per unit
– Basic
– Diluted
Mortgages
Total assets
Number of apartment units
Rentable square feet (000’s)
Twelve Months Ended
Dec 31, 2016
Dec 31, 2015
$ 438,846
$ 476,148
(57,440)
144,465
$ (1 .24)
$ (1 .24)
$ 3 .12
$ 2 .84
2,435,666
5,768,613
33,773
28,924
28,848
184,852
$ 0 .61
$ (0 .40)
$ 3 .90
$ 3 .56
2,272,447
5,833,842
32,947
28,199
Quarterly Comparative
Cdn$ Thousands, except per unit amount
Dec 31,
2016
Sep 30,
2016
Jun 30,
2016
Mar 31,
2016
Dec 31,
2015
Sep 30,
2015
Jun 30,
2015
Mar 31,
2015
Three Months Ended
Total rental revenue
Profit (loss)
Funds from operations
Profit per unit
– Basic
– Diluted
Funds from operations per unit
– Basic
– Diluted
Additional Information
$ 106,121 $ 108,951 $ 110,406 $ 113,368 $ 115,687 $ 119,679 $ 120,747 $ 120,035
(84,687)
(35,518)
29,601
37,186
6,568
38,554
56,197
39,124
114,448
(191,617)
44,225
47,588
34,593
48,857
71,424
44,181
$ (1 .83) $ (0 .77) $ 0 .14 $ 1 .21 $ 2 .43 $ (4 .00) $ 0 .73 $ 1 .50
$ (1 .89) $ (1 .16) $ 0 .14 $ 1 .21 $ 1 .71 $ (4 .00) $ 0 .51 $ 1 .19
$ 0 .64 $ 0 .80 $ 0 .83 $ 0 .84 $ 0 .94 $ 1 .00 $ 1 .03 $ 0 .93
$ 0 .58 $ 0 .73 $ 0 .76 $ 0 .77 $ 0 .86 $ 0 .92 $ 0 .94 $ 0 .85
Additional information relating to Boardwalk Equities Inc . and Boardwalk REIT, including the Annual Information Form of Boardwalk
REIT, is available on SEDAR at www .sedar .com .
Respectfully,
Roberto A . Geremia
President
February 16, 2017
William Wong
Chief Financial Officer
A R 2 0 1 6 B O A R D W A L K R E I T
M A N A G E M E N T ’ S D I S C U S S I O N A N D A N A L Y S I S n n n 93
Management’s Report
To the Unitholders of Boardwalk Real Estate Investment Trust
The accompanying consolidated financial statements and all information in the Annual Report are the responsibility of management .
The consolidated financial statements have been prepared by management in accordance with the accounting policies in the notes
to the consolidated financial statements . In the opinion of management, the consolidated financial statements have been prepared
within acceptable limits of materiality, and are in accordance with International Financial Reporting Standards appropriate in the
circumstances . The financial information elsewhere in the Annual Report has been reviewed to ensure consistency with that in the
consolidated financial statements .
Management maintains appropriate systems of internal control . Policies and procedures are designed to give reasonable assurance
that transactions are properly authorized, assets are safeguarded and financial records properly maintained to provide reliable
information for the preparation of consolidated financial statements .
The consolidated financial statements have been further examined by the Board of Trustees and by its Audit and Risk Management
Committee which meets regularly with the auditors and management to review the activities of each . The Audit and Risk Management
Committee, which comprises of three independent Trustees, reports to the Board of Trustees .
Deloitte LLP, an independent firm of chartered accountants, has been engaged to audit the consolidated financial statements in
accordance with Canadian generally accepted auditing standards and provide an independent auditors’ opinion .
Sam Kolias
Chief Executive Officer
February 16, 2017
Roberto A . Geremia
President
William Wong
Chief Financial Officer
94 n n n C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S
B O A R D W A L K R E I T A R 2 0 1 6
Independent Auditors’ Report
To the Unitholders of Boardwalk Real Estate Investment Trust
We have audited the accompanying consolidated financial statements of Boardwalk Real Estate Investment Trust, which comprise the
consolidated statements of financial position as at December 31, 2016 and 2015, and the consolidated statements of comprehensive
(loss) income, consolidated statements of changes in unitholders’ equity and consolidated statements of cash flows for the years then
ended, and a summary of significant accounting policies and other explanatory information .
Management's Responsibility for the consolidated financial statements
Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with
International Financial Reporting Standards, and for such internal control as management determines is necessary to enable the
preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error .
Auditor's Responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our audits . We conducted our
audits in accordance with Canadian generally accepted auditing standards . Those standards require that we comply with ethical
requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements
are free from material misstatement .
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated
financial statements . The procedures selected depend on the auditor's judgment, including the assessment of the risks of material
misstatement of the consolidated financial statements, whether due to fraud or error . In making those risk assessments, the auditor
considers internal control relevant to the entity's preparation and fair presentation of the consolidated financial statements in order
to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the entity's internal control . An audit also includes evaluating the appropriateness of accounting policies used and
the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the consolidated
financial statements .
We believe that the audit evidence we have obtained in our audits is sufficient and appropriate to provide a basis for our audit
opinion .
Opinion
In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of Boardwalk Real
Estate Investment Trust as at December 31, 2016 and 2015, and its financial performance and its cash flows for the years then ended
in accordance with International Financial Reporting Standards .
/s/ Deloitte LLP
Chartered Professional Accountants
February 16, 2017
Calgary, Alberta
A R 2 0 1 6 B O A R D W A L K R E I T
C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S n n n 95
Consolidated Statements of Financial Position
(CDN $ THOUSANDS)
As at
Assets
Non-current assets
Investment properties
Property, plant and equipment
Deferred tax assets
Current assets
Inventories
Prepaid assets
Trade and other receivables
Segregated tenants’ security deposits
Cash and cash equivalents
Total Assets
Liabilities
Non-current liabilities
Mortgages payable
LP Class B Units
Deferred unit-based compensation
Deferred tax liabilities
Deferred government grant
Current liabilities
Mortgages payable
Deferred unit-based compensation
Deferred government grant
Refundable tenants’ security deposits
Trade and other payables
Total Liabilities
Equity
Unitholders’ equity
Total Equity
Note
Dec 31, 2016
Dec 31, 2015
4
5
15
6
7
8
9
10
11
12
13
15
16
11
13
16
14
17
$ 5,612,568
$ 5,540,299
24,147
164
5,636,879
7,277
9,148
5,502
10,705
99,102
131,734
29,320
191
5,569,810
4,026
5,965
5,230
11,795
237,016
264,032
$ 5,768,613
$ 5,833,842
$ 2,091,844
$ 1,973,307
217,709
3,219
4
6,019
212,339
3,715
17
6,397
2,318,795
2,195,775
343,822
2,762
378
13,275
68,262
428,499
2,747,294
3,021,319
3,021,319
299,140
2,218
378
14,241
111,352
427,329
2,623,104
3,210,738
3,210,738
Total Liabilities and Equity
$ 5,768,613
$ 5,833,842
See accompanying notes to these consolidated financial statements
On behalf of the Trust:
Sam Kolias
Trustee
Gary Goodman
Trustee
96 n n n C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S
B O A R D W A L K R E I T A R 2 0 1 6
Consolidated Statements of Comprehensive (Loss) Income
(CDN $ THOUSANDS)
Rental revenue
Ancillary rental income
Total rental revenue
Rental expenses
Operating expenses
Utilities
Property taxes
Net operating income
Financing costs
Administration
Depreciation and amortization
Profit before the undernoted
Loss on sale of assets
Fair value losses
(Loss) profit before income tax
Income tax expense
(Loss) profit for the year
Other comprehensive income
Total comprehensive (loss) income
See accompanying notes to these consolidated financial statements
Note
18
19
20
21
22
23
15
Year ended
Dec 31, 2016
Year ended
Dec 31, 2015
$ 432,140
$
469,209
6,706
438,846
97,620
44,711
43,416
253,099
79,774
33,947
10,079
129,299
–
(186,681)
(57,382)
(58)
(57,440)
–
6,939
476,148
94,172
46,200
41,074
294,702
85,370
33,407
9,649
166,276
(6,855)
(130,361)
29,060
(212)
28,848
1,014
$
(57,440)
$
29,862
A R 2 0 1 6 B O A R D W A L K R E I T
C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S n n n 97
Consolidated Statements of Changes in Unitholders’ Equity
(CDN $ THOUSANDS)
Trust Units
Cumulative
profit
Cumulative
distributions
to
Unitholders
Accumulated
other
comprehensive
income
Total
Unitholders’
equity
Retained
earnings
Balance, December 31, 2014
$ 195,951 $ 4,154,039 $
(990,988) $ 3,163,051
$
(1,014) $ 3,357,988
Units issued
Units purchased and cancelled
Profit for the year
Other comprehensive income
Total comprehensive income for the year
Distributions declared to Unitholders
3,560
(6,175)
–
–
–
–
–
(30,940)
28,848
–
28,848
–
–
–
–
–
–
(30,940)
28,848
–
28,848
–
–
1,014
1,014
3,560
(37,115)
28,848
1,014
29,862
–
(143,557)
(143,557)
–
(143,557)
Balance, December 31, 2015
$ 193,336 $ 4,151,947 $ (1,134,545) $ 3,017,402
$
– $ 3,210,738
Units issued
Units purchased and cancelled
Loss for the year
Total comprehensive loss for the year
Distributions declared to Unitholders
4,066
(5,659)
–
–
–
–
(26,987)
(57,440)
(57,440)
–
–
–
–
–
(26,987)
(57,440)
(57,440)
–
(103,399)
(103,399)
–
–
–
–
–
4,066
(32,646)
(57,440)
(57,440)
(103,399)
Balance, December 31, 2016
$ 191,743 $ 4,067,520 $ (1,237,944) $ 2,829,576
$
– $ 3,021,319
See accompanying notes to these consolidated financial statements
98 n n n C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S
B O A R D W A L K R E I T A R 2 0 1 6
Consolidated Statements of Cash Flows
(CDN $ THOUSANDS)
Operating activities
(Loss) profit for the year
Loss on sale of assets
Financing costs
Interest paid
Fair value losses
Income tax expense
Income tax paid
Government grant amortization
Depreciation and amortization
Net change in operating working capital
Investing activities
Purchase of investment properties
Improvements to investment properties
Development of investment properties
Additions to property, plant and equipment
Net cash proceeds from sale of investment properties
Net change in investing working capital
Financing activities
Distributions paid
Unit repurchase program
Proceeds from mortgage financings
Mortgage payments upon refinancing
Scheduled mortgage principal repayments
Mortgages discharged due to sale of investment properties
Deferred financing costs incurred
Bond forward settlement, net of amortization
Net change in financing working capital
Net (decrease) increase in cash
Cash and cash equivalents, beginning of year
Note
Year ended
Dec 31, 2016
Year ended
Dec 31, 2015
$
(57,440)
$
28,848
22
20
23
15
16
21
32
4
4
4
5
32
32
17
17
32
–
79,774
(84,256)
186,681
58
(43)
(378)
10,079
134,475
(788)
133,687
(144,406)
(97,744)
(6,167)
(4,842)
–
5,297
(247,862)
(149,537)
(32,646)
281,348
(56,404)
(54,878)
–
(11,683)
–
61
(23,739)
(137,914)
237,016
6,855
85,370
(87,498)
130,361
212
(2)
(378)
9,649
173,417
(1,197)
172,220
(3,290)
(80,196)
(10,650)
(8,464)
130,170
(37)
27,533
(163,353)
(37,115)
200,564
(23,666)
(49,519)
(20,532)
(9,025)
41
304
(102,301)
97,452
139,564
Cash and cash equivalents, end of year
10
$
99,102
$ 237,016
See accompanying notes to these consolidated financial statements
A R 2 0 1 6 B O A R D W A L K R E I T
C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S n n n 99
Notes to the Consolidated Financial Statements
For the Years Ended, December 31, 2016 and 2015
(Tabular amounts in Cdn $ thousands, except number of units and per unit amounts UNLESS OTHERWISE STATED)
N O T E 1: O R G A N I Z AT I O N O F T H E T R U S T
Boardwalk Real Estate Investment Trust (“Boardwalk REIT” or the “Trust” or the “Entity”) is an unincorporated, open-ended
real estate investment trust created pursuant to the Declaration of Trust (“DOT”), dated January 9, 2004, and as amended
and restated on various dates between May 3, 2004 and May 12, 2016, under the laws of the Province of Alberta . Boardwalk
REIT was created to invest in multi-family residential investment properties or similar interests, initially through the acqui-
sition of the assets and operations of Boardwalk Equities Inc . (the “Corporation”), which was acquired on May 3, 2004 .
Boardwalk REIT Trust Units are listed on the Toronto Stock Exchange under the symbol ‘BEI .UN’ . The registered office of the
Trust and its head office operations are located at First West Place, Suite 200, 1501 1st Street SW, Calgary, Alberta, T2R 0W1 .
N O T E 2 : S I G N I F I C A N T A C C O U N T I N G P O L I C I E S
(a) Statement of compliance
These consolidated financial statements have been prepared in accordance with International Financial Reporting
Standards (“IFRS”), as issued by the International Accounting Standards Board (“IASB”) .
(b) Basis of presentation
The Trust’s consolidated financial statements have been prepared on the historical cost basis, except for investment
properties and certain financial instruments that are measured at fair value, as explained in the accounting policies below .
Historical cost is generally based on the fair value of the consideration given in exchange for assets . These consolidated
financial statements were prepared on a going concern basis and have been presented in Canadian dollars rounded to the
nearest thousand . The accounting policies set out below have been applied consistently in all material respects . Standards
and guidelines not effective for the current accounting period are described in NOTE 3 .
(c) Basis of consolidation
These consolidated financial statements include the accounts of the Trust and its consolidated subsidiaries (see NOTE
30), which are the entities over which Boardwalk REIT has control . Control is achieved when the entity has power over the
investee; is exposed, or has rights, to variable returns from its involvement with the investee; and has the ability to use its
power to affect its returns . The Trust reassesses whether or not it controls an investee if facts, circumstances and events
indicate that there are changes to one or more of the three elements of control listed above .
In accordance with IFRS 10 – Consolidated Financial Statements (“IFRS 10”), an entity can exercise control on a basis other
than ownership of voting interests . When the Trust has less than a majority of the voting rights of an investee, it has power
over the investee when the voting rights are sufficient to give it the practical ability to direct the relevant activities of the
investee unilaterally . The Trust considers all relevant facts and circumstances in assessing whether or not the Trust’s voting
rights in an investee are sufficient to give it power . These facts and circumstances can include: the size of the Trust’s holding
of voting rights relative to the size and dispersion of holdings of the other vote holders; potential voting rights held by the
Trust, other vote holders or other parties; rights arising from contractual arrangements; and any other additional facts or
circumstances .
Currently, the Trust has control over all of the subsidiaries reported in the consolidated financial statements (either directly
or indirectly) and non-controlling interests either do not exist or are immaterial for the Trust at this time . All intra-group
transactions, balances, revenues and expenses eliminate on consolidation .
100 n n n N O T E S T O C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S
B O A R D W A L K R E I T A R 2 0 1 6
(d)
Investment properties
Investment properties consist of multi-family residential properties held to earn rental income and properties being con-
structed or developed for future use to earn rental income, and include interests held under long-term operating land
leases . Investment properties are measured initially at cost (which is equivalent to fair value) . Cost includes all amounts
relating to the acquisition (excluding transaction costs related to a business combination as outlined in NOTE 2(g)) and
improvement of the properties . All costs associated with upgrading and extending the economic life of the existing
facilities, other than ordinary repairs and maintenance, are capitalized to investment property . Included in these costs are
internal amounts that are directly attributable to a specific investment property, which are capitalized to the extent that
they upgrade or extend the economic life of the asset .
Subsequent to initial recognition, investment properties are recorded at fair value, in accordance with International
Accounting Standard (“IAS”) 40 - Investment Property (“IAS 40”) . Fair value is determined based on a combination of
internal and external processes and valuation techniques . Gains or losses arising from differences between current period
fair value and the sum of previously measured fair value and capitalized costs as described above are recorded in profit or
loss in the period in which they arise .
Properties owned by the Trust where a significant portion of the property is used for administrative purposes by the
Trust are considered “Property, Plant and Equipment” and, therefore, fall within the scope of IAS 16 – Property, Plant and
Equipment (“IAS 16”) and are recorded in accordance with that standard . Where part of a building is used for administrative
purposes by the Trust, but this portion is considered insignificant, this space is included as part of Investment Property
under IAS 40 .
Investment properties are reclassified to “Assets Held for Sale” when the criteria set out in IFRS 5 - Non-Current Assets Held
for Sale and Discontinued Operations (“IFRS 5”) are met (see NOTE 2(h)) .
An investment property is derecognized upon disposal or when the investment property is permanently withdrawn from
use and no future economic benefits are expected from the disposal . Prior to its disposal, the carrying value of the invest-
ment property is adjusted to reflect its fair value as outlined in the purchase and sale agreement (as the purchase and sale
agreement is the best evidence of fair value) . This adjustment shall be recorded as a fair value gain or loss . Any remaining
gain or loss arising on derecognition of the property (calculated as the difference between the net disposal proceeds and
the carrying amount of the asset) is included in profit or loss in the period in which the property is derecognized .
Excess land represents land owned by the Trust located contiguous to land included as investment property . The Trust has
the ability to develop additional multi-family residential buildings on this land or sell it separately from the Investment
Property at a later date . Excess land is held for capital appreciation and, therefore, is treated as Investment Property and
recorded in accordance with IAS 40 as outlined above . When determining the fair value of a project with excess land, the
capitalization rate used in determining the value is adjusted accordingly .
(e) Properties under development
Properties under development include new development on excess land density or acquired land, re-development or
re-positioning of buildings the Trust currently owns that require substantial renovations and incomplete Apartment Units
acquired from third parties that will take 12 months or longer to complete . The cost of land, if applicable, and buildings
under development or re-development (consisting of development sites, density or intensification rights and related infra-
structure) are specifically identifiable costs incurred in the period before construction is complete . Capitalized costs include
pre-construction costs essential to the development or re-development of the property, construction costs, borrowing
costs directly attributable to the development, real estate taxes and other costs incurred during the period of development
or re-development . Additions to investment properties consist of costs of a capital nature and, in the case of properties
under development and/or redevelopment, capitalized interest . Directly attributable borrowing costs are also capitalized
on land or properties acquired specifically for development or redevelopment when activities necessary to prepare the
asset for development or redevelopment are in progress in accordance with IAS 23 – Borrowing Costs (“IAS 23”) . Where bor-
rowings are associated with specific developments, the amount capitalized is the total cost incurred on those borrowings .
A R 2 0 1 6 B O A R D W A L K R E I T
N O T E S T O C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S n n n 101
The capitalization of borrowing costs commences when the activities necessary to prepare an asset for development or
redevelopment begins, and continues until the date that substantially all of the construction is complete and all necessary
occupancy and related permits have been received, whether or not the space is leased . If the Trust is required, as a con-
dition of a lease, to construct tenant improvements that enhance the value of the property, then capitalization of costs
continues until such improvements are completed . Capitalization ceases if there is a prolonged period where development
activity is interrupted .
Properties under active development are generally valued at market land values, if applicable, plus costs invested to
date . Where significant leasing and construction is in place and the future income stream is reasonably determinable, the
valuation methodology used is similar to that of revenue-producing properties, less estimates of future capital outlays,
construction and development costs, to determine a net “as-is” market value . Development risks such as planning, zoning,
licenses, and building permits are considered in the valuation process . Properties not under active development, such as
land parcels held for future development, are valued based on comparable sales of land . Significant increases (decreases)
in construction costs, cost escalation rates and estimated time to complete construction in isolation would result in a sig-
nificantly lower (higher) fair value for properties under development .
(f) Property, plant and equipment
Tangible assets that are held for use in the production or supply of goods and services, or for administrative purposes, and
are expected to be used during more than one period, except when another accounting standard requires or permits a
different accounting treatment, are recorded in accordance with IAS 16 using the cost model . IAS 16, therefore, excludes
tangible assets that are accounted for in accordance with IAS 40 (see NOTE 2(d) above) and IFRS 5 (see NOTE 2(h) below) .
In accordance with IAS 16, the cost model, after initial recognition of the property, plant and equipment, requires the
tangible asset to be carried at its cost less accumulated depreciation and any accumulated impairment losses (see NOTE
2(i)) . Depreciation is recognized in a manner that reflects the pattern in which the future economic benefits of the tangible
asset are expected to be consumed and realized by the Trust . The amount of depreciation will be charged systematically
to the consolidated statement of comprehensive (loss) income and is the cost less residual value of the asset over its useful
economic life . IAS 16 also requires that the cost and useful economic life of each significant component of a tangible asset
be determined based on the circumstances of each tangible asset . The method of depreciation, residual values and esti-
mates of the useful economic life of a tangible asset, or other property, plant and equipment, are reviewed at each financial
year-end and any changes are accounted for as a change in accounting estimate in accordance with IAS 8 – Accounting
Policies, Changes in Accounting Estimates and Errors (“IAS 8”) .
Property, Plant and Equipment (“PP&E”) is valued using the cost model under IAS 16 . PP&E is categorized into the following
classes and their respective useful economic life is used to calculate the amount of depreciation or amortization for each
period . Categories of PP&E with the same or similar useful lives are included in the same class .
PP&E Class
PP&E Category (NOTE 5)
Administrative building
Administrative building
Site equipment
Automobiles
Site equipment and other assets
Site equipment and other assets
Warehouse assets
Site equipment and other assets
Corporate assets
Site equipment and other assets
Computer hardware
Corporate technology assets
Computer software*
Corporate technology assets
Useful Life/
Depreciation Rate
Depreciation method used
40 years
15%
20%
10% to 20%
10% to 20%
35%
35%
Straight-line
Declining balance
Declining balance
Declining balance
Declining balance
Declining balance
Declining balance
* In addition to the purchase of software from external sources, the Trust capitalizes certain programmers’ salaries related to internally
developed software applications used in the normal course of operations of Boardwalk REIT . The programmers’ work is directly attributable
to software development .
102 n n n N O T E S T O C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S
B O A R D W A L K R E I T A R 2 0 1 6
(g) Business combinations
In accordance with IFRS 3 – Business Combinations (“IFRS 3”), the acquisition of an asset or group of assets is recorded as
a business combination if the assets acquired and the liabilities assumed constitute a business . A business is defined as
an integrated set of activities and assets that is capable of being conducted and managed for the purpose of providing a
return in the form of dividends, lower costs or other economic benefit . Building and other asset acquisitions, which meet
the above definition of a business, are recorded as business combinations and the acquisition method of accounting for
these transactions is applied . Building and other asset acquisitions, which do not meet the above definition of a business,
are recorded as an asset addition .
The acquisition method requires that an acquirer be identified, a specific acquisition date be determined (which is typically
the date on which control changes), all identifiable assets and liabilities assumed, as well as any non-controlling interest in
the acquiree, be recognized and measured, and any goodwill or gains from a bargain purchase price are recognized and
measured at fair value, including contingent liabilities when these contingent considerations are part of the consideration
being transferred . All acquisition costs associated with a transaction identified as a business combination are expensed as
incurred .
Goodwill is measured as the excess of the sum of the consideration transferred, the amount of any non-controlling interest
in the acquiree, and the fair value of the acquirer’s previously held equity interest in the acquiree (if any) over the net of the
acquisition-date amounts of the identifiable assets acquired and the liabilities assumed . If, after the assessment, the net of
the acquisition-date amounts of the identifiable assets acquired and liabilities assumed exceeds the sum of the consider-
ation transferred, the amount of any non-controlling interests in the acquiree and the fair value of the acquirer’s previously
held interest in the acquiree (if any), the excess is recognized immediately in profit as a bargain purchase gain .
Non-controlling interests that are present ownership interests and entitle their holders to a proportionate share of the
entity’s net assets in the event of liquidation may be initially measured either at fair value or at the non-controlling interests’
proportionate share of the recognized amounts of the acquiree’s identifiable net assets . The choice of measurement basis
is made on a transaction-by-transaction basis . Other types of non-controlling interests are measured at fair value or, when
applicable, on the basis specified in another IFRS .
When the consideration transferred by the Trust in a business combination includes assets or liabilities resulting from a con-
tingent consideration arrangement, the contingent consideration is measured at its acquisition date fair value and included
as part of the consideration transferred in a business combination . Changes in the fair value of the contingent consideration
that qualify as measurement period adjustments are adjusted retrospectively, with corresponding adjustments against
goodwill . Measurement period adjustments are adjustments that arise from additional information obtained during the
“measurement period” (which cannot exceed one year from the acquisition date and is shorter than one year if all informa-
tion is received) about facts and circumstances that existed at the acquisition date .
The subsequent accounting for changes in the fair value of the contingent consideration that do not qualify as measure-
ment period adjustments depends on how the contingent consideration is classified . Contingent consideration that is
classified as equity is not remeasured at subsequent reporting dates and its subsequent settlement is accounted for within
equity . Contingent consideration that is classified as an asset or a liability is remeasured at subsequent reporting dates in
accordance with IAS 39 – Financial Instruments: Recognition and Measurement, or IAS 37 - Provisions, Contingent Liabilities
and Contingent Assets, as appropriate, with the corresponding gain or loss being recognized in profit or loss in the consol-
idated statement of comprehensive (loss) income .
When a business combination is achieved in stages, the Trust’s previously held equity interest in the acquiree is remeasured
to fair value at the acquisition date (i .e . the date when the Trust obtains control) and the resulting gain or loss, if any, is rec-
ognized in profit or loss in the consolidated statement of comprehensive (loss) income . Amounts arising from interests in
the acquiree prior to the acquisition date that have previously been recognized in other comprehensive (loss) income are
reclassified to profit or loss where such treatment would be appropriate if that interest was disposed of .
If the initial accounting for a business combination is incomplete by the end of the reporting period in which the combina-
tion occurs, the Trust reports provisional amounts for the items for which the accounting is incomplete . These provisional
A R 2 0 1 6 B O A R D W A L K R E I T
N O T E S T O C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S n n n 103
amounts are adjusted during the measurement period (see above), or additional assets or liabilities are recognized, to
reflect new information obtained about facts and circumstances that existed at the acquisition date that, if known, would
have affected the amounts recognized at that date .
(h) Assets held for sale and discontinued operations
(i)
Assets (or disposal groups) held for sale
Non-current assets and groups of assets and liabilities, which comprise disposal groups, are categorized as assets (or
disposal groups) held for sale where the asset (or disposal group) is available for sale in its present condition, and the
sale is highly probable . For this purpose, a sale is highly probable: (a) if management is committed to a plan to achieve
the sale, (b) there is an active program to find a buyer, (c) the non-current asset (or disposal group) is being actively
marketed at a reasonable price, (d) the sale is anticipated to be completed within one year from the date of classifica-
tion, and (e) it is unlikely there will be changes to the plan . Where an asset (or disposal group) is acquired with a view
to resale, it is classified as a non-current asset (or disposal group) held for sale if the disposal is expected to take place
within one year of the acquisition and it is highly likely that the other conditions referred to above will be met within
a short period following the acquisition . Retrospective application is not required; therefore, comparative figures will
not be adjusted to reflect non-current assets held for sale . The gains or losses arising on a sale of assets (or disposal
groups) that does not meet the definition of discontinued operations will be recognized as part of continuing opera-
tions, while the gains or losses arising on a sale of assets (or disposal groups) that meets the definition of discontinued
operations will be reported as part of discontinued operations in the consolidated statement of comprehensive (loss)
income .
(ii) Discontinued operations
An asset or group of assets will be classified as a discontinued operation when it is a component of an entity that has
either been disposed of or is classified as held for sale and represents a separate major line of business, it is part of a
single coordinated plan to dispose of a separate major line of business or geographical area of operations, or it is a
subsidiary acquired exclusively with a view to resell . Profits and gains or losses related to the disposal of discontinued
operations are measured based on fair value less cost to sell or on the disposal of the assets (or disposal groups) and
are presented in the consolidated financial statements on an after tax basis in accordance with IFRS 5 . In addition, ret-
rospective application is required; therefore, comparative figures will be changed to reflect discontinued operations .
As an individual building or a group of buildings in a non-core municipal region does not constitute a major line of
business, these sales are not treated as discontinued operations .
(i)
Impairment of assets
At the end of each reporting period, assets, other than those identified in the standard as not being applicable to IAS
36 – Impairment of Assets (“IAS 36”), such as investment properties recorded at fair value, are assessed for any indication
of impairment . Should the indication of impairment exist, the recoverable amount (see below) of the asset is estimated in
order to determine the extent of the impairment loss (if any) . Where it is not possible to estimate the recoverable amount
of an individual asset, the Trust estimates the recoverable amount of the cash-generating unit to which the asset belongs .
Where a reasonable and consistent basis of allocation can be identified, corporate assets are also allocated to individual
cash-generating units, or otherwise they are allocated to the smallest group of cash-generating units for which a reason-
able and consistent allocation basis can be identified .
Recoverable amount is defined as the higher of an asset’s “fair value less cost to sell” and its “value-in-use” . In assessing val-
ue-in-use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects
current market assessments of the time value of money and the risks specific to the asset for which the estimate of future
cash flows have not been adjusted .
Where the carrying amount of an asset exceeds the recoverable amount determined, an impairment loss is recognized in
the consolidated statement of comprehensive (loss) income . After the recognition of an impairment loss, the depreciation
charge related to that asset is also revised for the adjusted carrying amount on a systematic basis over the remaining
useful life of the asset . Should this impairment loss be determined to have reversed in a future period (with the exception
of goodwill), a reversal of the impairment loss is recorded in profit or loss . However, the reversal of an impairment loss will
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not increase the carrying amount that would have been determined (net of amortization) had no impairment loss been
recognized .
(j)
Inventories
Inventories are measured at the lower of cost and net realizable value . The costs of inventories comprise the purchase
price, import duties and other taxes (other than those subsequently recoverable by the entity from the taxing authorities),
and third-party transport, handling and other costs directly attributable to the acquisition of goods and materials, less any
trade discounts, rebates and other similar items, using the first-in, first-out method of cost assignment . Net realizable value
represents the estimated selling price for inventories less all estimated costs necessary to make the sale .
(k) Taxation
For fiscal 2015 and 2016, Boardwalk REIT qualified as a “mutual fund trust” as defined under the Income Tax Act (Canada)
(the “Tax Act”) and as a Real Estate Investment Trust (“REIT”) eligible for the ‘REIT Exemption’ in accordance with the rules
affecting the tax treatment of publicly traded trusts . Accordingly, the Trust is not taxable on its income provided that all of
its taxable income is distributed to its Unitholders . This exemption, however, does not extend to the corporate subsidiar-
ies of Boardwalk REIT that are subject to income tax (NOTE 30 summarizes the Trust’s subsidiaries, including its corporate
subsidiaries) .
Current tax
The tax currently payable, if any, is based on taxable profit for the year for certain corporate subsidiaries of the Trust .
Taxable profit differs from profit as reported in the consolidated statement of comprehensive (loss) income because
of items of income or expense that are taxable or deductible in other years and items that are never taxable or deduct-
ible . The Trust’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted
by the end of the reporting period .
Deferred tax
Deferred tax is recognized on temporary differences between the carrying amounts of assets and liabilities in the
consolidated financial statements and the corresponding tax bases used in the computation of taxable profit .
Deferred income tax liabilities are generally recognized for all taxable temporary differences . Deferred income tax
assets are recognized for all deductible temporary differences, carry forward of unused tax credits and unused tax
losses, to the extent that it is probable that deductions, tax credits and tax losses can be utilized . The carrying amounts
of deferred income tax assets are reviewed at each reporting date and reduced to the extent it is no longer probable
that the income tax assets will be recovered . Deferred income tax assets and liabilities are measured at the tax rates
that are expected to apply in the year when the asset is realized or the liability settled, based on tax rates and laws
that have been enacted or substantively enacted at the reporting date . In addition, deferred income tax assets and
liabilities are measured using the rate that is consistent with the expected manner of recovery (i .e . using the asset
versus selling the asset) . Where applicable, current and deferred income taxes relating to items recognized directly in
equity or comprehensive income are also recognized directly in equity or comprehensive income, respectively .
(l) Provisions
In accordance with IAS 37 – Provisions, Contingent Liabilities and Contingent Assets (“IAS 37”), a provision is a liability of
uncertain timing or amount . Provisions are recognized when the entity has a present legal or constructive obligation as a
result of past events and when it is probable that an outflow of resources will be required to settle the obligation and the
amount can be reliably estimated . Provisions are not recognized for future operating losses . Provisions are measured at
the present value of the expenditures expected to be required to settle the obligation using a discounted rate that reflects
current market assessment of the time value of money and the risks and uncertainties specific to the obligation . Provisions
are re-measured at each reporting date using the current discount rate . The increase in the provision due to the passage
of time is recognized as a financing cost .
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(m) Unit-based payments
Equity-settled unit-based payments to employees and Trustees are measured at the fair value of the deferred unit at the
grant date and expensed over the vesting period based on the Trust’s estimate of the deferred units that will actually
vest . At the end of each reporting period, the Trust revises its estimate of the number of equity instruments expected to
vest . The impact of the revision of the original estimates, if any, is recognized in profit or loss prospectively such that the
cumulative expense reflects the revised estimate . In accordance with IAS 32 – Financial Instruments: Presentation (“IAS 32”),
the deferred units are presented as a liability on the consolidated statement of financial position as the Trust is obliged
to provide the holder with REIT Units once the deferred units vest . Under IAS 39 – Financial Instruments: Recognition and
Measurement (“IAS 39”), the deferred units are classified as ‘fair value through profit or loss’ and are measured at each
reporting period at fair value with changes in fair value recognized in the consolidated statement of comprehensive (loss)
income . Fair value of the deferred units is calculated based on the observable market price of Boardwalk REIT’s Trust Units .
(n) Government assistance and grants
The Trust receives government assistance in order to complement and partially assist the Trust’s initiatives in providing
affordable housing to low income-earning individuals . Government grants are not recognized until there is reasonable
assurance that the Trust will comply with the conditions attached to them and that the grants will be received . In accor-
dance with IAS 20 – Accounting for Government Grants and Disclosure of Government Assistance, grant proceeds will be
recognized in profit or loss on a systematic basis over the periods in which the Trust recognizes revenue or incurs expenses .
(o) Revenue recognition
(i)
Rental revenue
The Trust has retained substantially all of the risks and benefits of ownership of its investment properties, and, there-
fore, accounts for leases with its tenants as operating leases . Revenue recognition under a lease commences when
the tenant has a right to use the leased asset . Generally, this occurs on lease inception date when the tenant occupies
their leased space . Rental revenue is recognized systematically over the term of the lease, which is generally not more
than twelve months . Any suite specific incentives offered or initial direct costs incurred in negotiating and arranging
an operating lease are also amortized over the term of the operating lease . Rental revenue is recorded based on the
amount received or to be received in accordance with the operating lease .
(ii) Building sales
The gain or loss from the sale of an investment property is recognized when title passes to the purchaser (control is
transferred) upon closing at which time all or substantially all of the funds are receivable, or have been received, and
the conditions of the sale have been completed .
(iii)
Interest income
Interest income from a financial asset is recognized when it is probable that the economic benefits will flow to the
Trust and the amount of income can be measured reliably . Interest income is accrued on a time basis when earned,
by reference to the principal outstanding and at the effective interest rate applicable . Interest income is included in
financing costs in the consolidated statement of comprehensive (loss) income .
(iv) Ancillary rental income
Ancillary rental income comprises revenue from coin laundry machines located on the Trust’s existing building sites,
and income received from telephone and cable providers and is recorded when earned .
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(p) Financial instruments and derivatives
Financial instruments and derivatives are accounted for, presented, and disclosed in accordance with IFRS 7 – Financial
Instruments: Disclosures (“IFRS 7”), IAS 32 and IAS 39 . Financial assets and financial liabilities are initially measured at fair
value . Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities
(other than financial assets and financial liabilities at fair value through profit or loss) are added to or deducted from the
fair value of the financial assets or financial liabilities, as appropriate, on initial recognition . Transaction costs directly
attributable to the acquisition of financial assets or financial liabilities at fair value through profit or loss are recognized
immediately in profit or loss .
Financial assets
Financial assets are classified into the following specified categories: financial assets at ‘fair value through profit or
loss’ (“FVTPL”), ‘held-to-maturity’ investments, ‘available-for-sale’ financial assets, and ‘loans and receivables’ . The clas-
sification depends on the nature and purpose of the financial asset and is determined at the time of initial recognition .
Financial assets are classified as at FVTPL when the financial asset either is held for trading or is designated as at FVTPL .
Financial assets categories are defined and measured as follows:
Classification
Definition
Measurement
FVTPL
Classified as FVTPL when the financial asset is either held for trading
or it is designated as at FVTPL as discussed below:
Classified as held for trading if: it has been acquired principally for
the purpose of selling it in the near term; or, on initial recognition,
it is part of a portfolio of identified financial instruments that the
Trust manages together, and has a recent actual pattern of short-
term profit taking; or, it is a derivative that is not designated and
effective as a hedging instrument .
Classified as FVTPL upon initial recognition if: such designation
eliminates or significantly reduces a measurement or recognition
inconsistency that would otherwise arise; or the financial asset
forms part of a group which is managed and its performance
is evaluated on a fair value basis; or it forms part of a contract
containing one or more embedded derivatives .
Held-to-maturity
investments
Non-derivative financial assets with fixed or determinable
payments and fixed maturity dates that the Trust has the positive
intent and ability to hold to maturity .
Stated at fair value, with
gains or losses arising on
measurement recognized
in profit or loss .
Stated at fair value, with
gains or losses arising on
measurement recognized
in profit or loss .
Measured at amortized
cost using the effective
interest method less any
impairment . (1) (2)
Available-for-sale
Non-derivative financial assets that either are designated as
available-for-sale or are not classified as (a) loans and receivables,
(b) held-to-maturity investments or (c) financial assets at FVTPL .
Measured at fair
value through other
comprehensive income .
Loans and
receivables
Non-derivative financial assets with fixed or determinable
payments that are not quoted in an active market .
Measured at amortized
cost using the effective
interest method less any
impairment . (1) (2)
(1)
The effective interest method is a method of calculating the amortized cost of a debt instrument and of allocating interest income
over the relevant period . The effective interest rate is the rate that exactly discounts estimated future cash receipts through the
expected life of the debt instrument or where appropriate, a shorter period, to the net carrying amount on initial recognition .
(2)
Financial assets, other than those at FVTPL, are assessed for indicators of impairment at the end of each reporting period . Generally,
the carrying amount of the financial asset is reduced by the impairment loss .
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Boardwalk REIT’s financial assets are as follows:
Financial asset
Classification
Trade and other receivables
Loans and receivables
Segregated tenants’ security deposits
Loans and receivables
Cash and cash equivalents
Loans and receivables
Measurement
Amortized cost
Amortized cost
Amortized cost
The Trust derecognizes a financial asset only when the contractual rights to the cash flows from the asset expire, or
when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another
entity .
Financial liabilities and equity
Debt and equity instruments issued are classified either as financial liabilities or as equity in accordance with the sub-
stance of the contractual arrangements and the definitions of a financial liability and an equity instrument . An equity
instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities .
Equity instruments issued by the Trust are recognized at the proceeds received, net of direct issue costs . Repurchase of
Boardwalk REIT’s own equity instruments is recognized and deducted directly in equity . No gain or loss is recognized
in profit or loss on the purchase, sale, issue or cancellation of the Trust’s own equity instruments . Distributions paid
on the Trust’s equity instruments subsequent to, declared prior to, and with a record date at or prior to, the reporting
date, are recorded as a liability .
Financial liabilities are classified as either financial liabilities ‘at FVTPL’ or ‘other financial liabilities’ . Financial liabilities
categories are defined and measured as follows:
Classification
Definition
Measurement
FVTPL
Classified as FVTPL when the financial liability is either held for
trading or it is designated as at FVTPL as discussed below:
Classified as held for trading if: it has been acquired principally
for the purpose of repurchasing it in the near term; or, on
initial recognition, it is part of a portfolio of identified financial
instruments that the Trust manages together and has a recent
actual pattern of short-term profit taking; or, it is a derivative that is
not designated and effective as a hedging instrument .
Stated at fair value, with
gains or losses arising on
measurement recognized
in profit or loss .
Classified as FVTPL upon initial recognition if: such designation
eliminates or significantly reduces a measurement or recognition
inconsistency that would otherwise arise; or the financial liability
forms part of a group which is managed and its performance
is evaluated on a fair value basis; or it forms part of a contract
containing one or more embedded derivatives .
Other financial
liabilities
All other liabilities .
Stated at fair value, with
gains or losses arising on
measurement recognized
in profit or loss .
Measured at amortized
cost using the effective
interest method . (1)
(1)
The effective interest method is a method of calculating the amortized cost of a financial liability and of allocating interest expense
over the relevant period . The effective interest rate is the rate that exactly discounts estimated future cash payments through the
expected life of the financial liability or where appropriate, a shorter period, to the net carrying amount on initial recognition .
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Boardwalk REIT’s financial liabilities are as follows:
Financial liability
Classification
Measurement
Mortgages payable
Other financial liabilities
Amortized cost
LP Class B Units
Deferred unit-based compensation
FVTPL
FVTPL
Fair value
Fair value
Refundable tenants’ security deposits
Other financial liabilities
Amortized cost
Trade and other payables
Other financial liabilities
Amortized cost
The Trust derecognizes a financial liability when, and only when, the Trust’s obligations are discharged, cancelled or
they expire . The difference between the carrying amount of the financial liability derecognized and the consideration
paid and payable is recognized in profit or loss .
Derivatives
The Trust may enter into a variety of derivative financial instruments to manage its exposure to interest rate risks,
including interest rate swaps and bond forward contracts . Further details of derivative financial instruments are
disclosed in NOTE 27 . Derivatives are initially recognized at fair value at the date the derivative contracts are entered
into and are subsequently measured at their fair value at the end of each reporting period . The resulting gain or loss is
recognized in profit or loss immediately unless the derivative is designated and effective as a hedging instrument, in
which case the timing of the recognition in profit or loss depends on the nature of the hedge relationship . Derivatives
embedded in host contracts are treated as separate derivatives when their risks and characteristics are not closely
related to the host contracts and the host contracts are not measured at FVTPL . For the years ended December 31,
2016 and 2015, the Trust had no embedded derivatives requiring separate recognition .
(q) Hedge accounting
The Trust applies hedge accounting to derivative financial instruments in cash flow hedging relationships . At the inception
of the hedging relationship, the Trust documents the relationship between the hedging instrument and the hedged item,
along with its risk management objectives and its strategy for undertaking various hedge transactions . Furthermore, at
inception of the hedge and on an ongoing basis, the Trust documents whether the hedging instrument is highly effective
in offsetting changes in cash flows of the hedged item attributable to the hedged risk .
In cash flow hedging relationships, the effective portion of the change in the fair value of the hedging derivative is rec-
ognized in the consolidated statement of comprehensive (loss) income as other comprehensive income (“OCI”) while the
ineffective portion is recognized immediately in profit or loss . Hedging gains and losses previously recognized in OCI and
accumulated in equity are reclassified to profit or loss in the periods when the hedged item is recognized in profit or loss,
in the same line of the consolidated statement of comprehensive (loss) income as the recognized hedged item .
Hedge accounting is discontinued when the Trust revokes the hedging relationship, when the hedging instrument expires
or is sold, terminated, or exercised, or when it no longer qualifies for hedge accounting . Any gain or loss recognized in OCI
and accumulated in equity at that time remains in equity and is recognized when the forecast transaction is ultimately rec-
ognized in profit or loss . When a forecast transaction is no longer expected to occur, the gain or loss accumulated in equity
is recognized immediately in profit or loss .
(r) Cash and cash equivalents
Cash is comprised of bank balances, interest-earning bank accounts and term deposits with maturities of 90 days or less .
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(s) Critical judgment in applying accounting policies
The following are the critical judgments, apart from those involving estimations (see NOTE 2(t) below), that have been
made in applying the Trust’s accounting policies and that have the most significant effect on the reported amounts in the
consolidated financial statements:
(i)
Income taxes
The Trust applies judgment in determining the tax rates applicable to its corporate subsidiaries and identifying the
temporary differences in each of such legal subsidiaries in respect of which deferred income taxes are recognized .
Deferred taxes related to temporary differences arising from its corporate subsidiaries are measured based on the tax
rates that are expected to apply in the year when the asset is realized or the liability is settled . Temporary differences
are differences that are expected to reverse in the future and arise from differences between accounting and tax asset
values .
(ii)
Leases
The Trust’s revenue recognition policy related to leases is described in NOTE 2(o)(i) . The Trust makes judgments in
determining whether certain leases, in particular tenant leases, as well as leased warehouse space and long-term land
leases, which are considered leases under IFRS, where the Trust is the lessor, are operating or finance leases . The Trust
has determined that all of its leases are operating leases .
(iii)
Investment property and internal capital program
The Trust’s accounting policy relating to investment property is described in NOTE 2(d) above . In applying this
policy, judgment is applied in determining the extent and frequency of utilizing independent, third-party appraisals
to measure the fair value of the Trust’s investment property . Additionally, judgment is applied in determining the
appropriate classes of investment properties in order to measure fair value . The Trust also undertakes internal capital
improvements and upgrades . Such work is specifically identified, and the Trust applies judgment in the estimated
amount of directly attributable on-site wages to be allocated to capital improvements and upgrades of its real estate
assets .
(iv) Financial instruments
The Trust’s accounting policies relating to financial instruments are described in NOTE 2(p) . Critical judgments
inherent in these policies related to applying the criteria set out in IAS 39 to designate financial instruments into
categories (i .e . FVTPL, etc .), assess the effectiveness of hedging relationships (for the Trust’s cash flow hedges) and
determine the identification of embedded derivatives, if any, in certain hybrid instruments that are subject to fair
value measurement .
(v) Basis of consolidation
The consolidated financial statements of the Trust include the accounts of Boardwalk REIT and its wholly owned
subsidiaries, as well as entities over which the Trust exercises control on a basis other than ownership of voting interest
within the scope of IFRS 10 . Judgment is applied in determining if an entity meets the criteria of control as defined in
the accounting standard .
(vi) Deferred unit-based compensation
The Trust applies judgment in determining the best available estimate of the number of deferred units that are
expected to vest at each reporting period .
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(t) Key accounting estimates and assumptions
The following are the key assumptions concerning the future, and other key sources of estimation uncertainty at the end
of the reporting period, that have a significant risk of causing a material adjustment to the carrying amounts of assets and
liabilities within the next financial year . Actual results could differ from estimates .
(i)
Investment properties
The choice of valuation method for fair valuing and the critical estimates and assumptions underlying the fair value
determination of investment properties are set out in NOTE 4 . Significant estimates used in determining the fair value
of the Trust’s investment properties includes capitalization rates and net operating income (which is influenced by
inflation rates, vacancy rates and standard costs) used in the overall capitalization rate valuation method as well as
discount rates and forecasted cash flows used in the discounted cash flow valuation method . A change to any one
of these inputs could significantly alter the fair value of an investment property . Please refer to NOTE 4 for sensitivity
analysis .
(ii) Property, plant and equipment
The useful economic life of property, plant and equipment for the purposes of calculating depreciation and amorti-
zation, as disclosed in NOTE 5 and forecast of economic factors to determine recoverable amounts for the purpose
of determining any impairment of assets, are based on data and information from various sources including industry
practice and entity specific history .
(iii)
Internal Capital Program
The Trust’s internal capital program is based on internal allocations, including parts, supplies and on-site wages
identified as part of a specific upgrade or capital improvement .
(iv) Utility accrual
Amount of utility accrual for charges related to the current or prior year is based on estimates of usage and price for
the time period in which invoices have not been received from the utility providers .
(v) Deferred unit-based compensation plan
The compensation costs relating to the deferred unit plan are based on estimates of how many deferred units will
actually vest and be exercised .
(vi) Deferred taxes
The amount of the temporary differences between the accounting carrying value of the Trust’s assets and liabilities
held in various corporate subsidiaries versus the tax bases of those assets and liabilities and the tax rates at which the
differences will be realized are outlined in NOTE 15 .
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N O T E 3 : A P P L I C AT I O N O F N E W A N D R E V I S E D I F R S S A N D F U T U R E A C C O U N T I N G P O L I C I E S
(a) Application of new and revised IFRSs
In the current year, the Trust has applied a number of new and revised IFRSs issued by the IASB, and incorporated in the
Chartered Professional Accountants of Canada Handbook . The following highlights these changes and the effect, if any, on
the Trust’s consolidated financial statements .
Standard
Details of amendment
Impact
The amendments to IFRS 11 provide guidance on how to account
for the acquisition of an interest in a joint operation in which the
activities constitute a business as defined in IFRS 3 – Business
Combinations . Specifically, the amendments state that the relevant
principles on accounting for business combinations in IFRS 3 and
other standards should be applied .
The previously announced
transaction between Boardwalk
and RioCan REIT is expected to
close mid-2017 and the impact of
these amendments (see NOTE 4)
will be assessed at that time .
IFRS 11 – Joint
Arrangements
(“IFRS 11”)
IAS 1 –
Presentation
of Financial
Statements
2012-2014 Cycle
IFRS 5 – Non-
current Assets
Held for Sale and
Discontinued
Operations
These amendments were labelled the “Disclosure Initiative” . The
amendments clarify that an entity need not provide a specific
disclosure required by an IFRS if the information resulting from
that disclosure is not material, and give guidance on the basis
of aggregating and disaggregating information for disclosure
purposes . However, the amendments reiterate that an entity should
consider providing additional disclosures when compliance with
the specific requirements in IFRS is insufficient to enable users
of financial statements to understand the impact of particular
transactions, events and conditions on the entity’s financial
position and financial performance .
In addition, the amendments clarify that an entity’s share of the
other comprehensive income of associates and joint ventures
accounted for using the equity method should be presented
separately from those arising from the Group, and should be
separated into the share of items that, in accordance with other
IFRSs; (i) will not be reclassified subsequently to profit or loss; and
(ii) will be reclassified subsequently to profit or loss when specific
conditions are met .
As regards to the structure of the financial statements, the
amendments provide examples of systematic ordering or grouping
of the notes .
Provides specific guidance for when an entity reclassifies assets
(or a disposal group) from held for sale to held for distribution to
owners (or vice versa) .
The application of these
amendments has not resulted
in any material impact on
the financial performance or
financial position of the Trust .
This clarification was not
applicable for the current year
as the Trust did not reclassify
any assets held for sale to held
for distribution to owners on
disposal of any assets, but will
be considered should a disposal
transaction occur .
The Trust is not involved
in servicing contracts with
transferred assets; therefore, this
amendment was not applicable .
IFRS 7 – Financial
Instruments:
Disclosures
Provides additional guidance to clarify whether a servicing contract
is continuing involvement in a transferred asset for the purpose of
the disclosures required in relation to transferred assets .
IAS 19 –
Employee
Benefits
The amendments clarify that the rate used to discount post-
employment benefit obligations should be determined by
reference to market yields at the end of the reporting period on
high quality corporate bonds .
The Trust does not provide
post-employment benefits;
therefore, this amendment is not
applicable .
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In addition, the following new or amended standards did not have any impact on the Trust’s consolidated financial
statements:
▲
IFRS 14 – Regulatory Deferral Accounts was not applicable to the Trust as the Trust does not provide goods or services
at a price or rate that is subject to rate regulation . Additionally, it is only applicable for entities which are a first time
adopter of IFRS .
▲
Investment Entities: Applying the Consolidation Exception (Amendments to IFRS 10, IFRS 12 and IAS 28) was not appli-
cable to the Trust as it is not an Investment Entity .
▲
Clarification of Acceptable Methods of Depreciation and Amortization (Amendments to IAS 16 and IAS 38) was not
applicable to the Trust as it had not previously used a revenue-based depreciation method .
▲
Agriculture: Bearer Plants (Amendments to IAS 16 and IAS 41) was not applicable to the Trust as the Trust does not
engage in agricultural activities .
▲
Amendments to IAS 27 – Equity Method in Separate Financial Statements are not applicable as the Trust presents
consolidated financial statements .
(b) Future accounting policies
The following accounting standards under IFRS have been issued or revised; however, they are not yet effective, and, as
such, have not been applied to these consolidated financial statements:
New or amended
standards
IFRS 9 - Financial
Instruments
(“IFRS 9”)
IFRS 15 - Revenue
from Contracts
with Customers
(“IFRS 15”)
Summary of requirements
IFRS 9, published in July 2014, replaces the existing
guidance in IAS 39 . IFRS 9 includes revised guidance on the
classification and measurement of financial instruments,
including a new expected credit loss model for calculating
impairment on financial assets, and the new general
hedge accounting requirements . It also carries forward the
guidance on recognition and derecognition of financial
instruments from IAS 39 .
IFRS 9 is effective for annual reporting periods beginning
on or after January 1, 2018, with early adoption permitted .
IFRS 15 establishes a comprehensive framework for
determining whether, how much, and when revenue
is recognized . It replaces existing revenue recognition
guidance, including IAS 18 – Revenue (“IAS 18”), IAS 11 –
Construction Contracts and IFRIC 13 – Customer Loyalty
Programmes .
IFRS 15 is effective for annual reporting periods beginning
on or after January 1, 2018, with early adoption permitted .
Possible impact on consolidated
financial statements
The Trust is assessing the potential
impact on its consolidated financial
statements but does not expect it to
have a significant impact .
The Trust is assessing the potential
impact on its consolidated financial
statements .
The Trust recognizes revenue from the
following sources:
•
•
Rental revenue and other charges
based on operating tenant leases,
which should not change under IFRS
15, as they are scoped out of IFRS
15 and included in IFRS 16 – Leases
(discussed below)
Ancillary rental income comprises
revenue from coin laundry machines
and income received from telephone
and cable providers
•
Interest income
Each revenue stream is currently being
assessed under the new standard .
A R 2 0 1 6 B O A R D W A L K R E I T
N O T E S T O C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S n n n 113
Possible impact on consolidated
financial statements
The Trust is assessing the potential
impact on its consolidated financial
statements .
It is expected that leases with tenants
shall be accounted for as operating
leases in the same manner they are
currently being reported .
The Trust has Investment Properties
located on land which is leased .
Currently, these lease payments are
expensed . It is expected that under
the new lease standard, a right-of-use
asset addition to Investment Property
and a lease obligation liability shall be
recorded along with the corresponding
financing charges .
The Trust will ensure these
amendments are considered when
evaluating/determining its Investment
Properties .
The Trust is assessing the potential
impact on its consolidated financial
statements but does not expect it to
have a significant impact .
New or amended
standards
IFRS 16 – Leases
(“IFRS 16”)
Summary of requirements
IFRS 16 supersedes IAS 17 – Leases and has been established
to increase the transparency of lease obligations reported
on an entity’s financial report . Under this new standard,
entities may be required to report more of their previously
disclosed off balance sheet leases on the face of the
balance sheet . The standard also provides guidance on the
calculation and presentation of the lease obligations .
IFRS 16 is effective for annual reporting periods beginning
on or after January 1, 2019, with early adoption permitted,
only if the entity also applies IFRS 15 .
Transfers of
Investment
Properties
(Amendments to
IAS 40)
Recognition
of Deferred
Tax Assets for
Unrealized Losses
(Amendment to
IAS 12 – Income
Taxes (“IAS 12”))
Paragraph 57 of IAS 40 has been amended to state that
an entity shall transfer a property to, or from, investment
property when, and only when, there is evidence of a
change in use . A change in use occurs if property meets,
or ceases to meet, the definition of investment property .
A change in management’s intentions for the use of a
property by itself does not constitute evidence of a change
in use .
This amendment is effective for annual periods beginning
on or after January 1, 2018 .
The amendments made to IAS 12 clarify the following items:
•
•
•
•
Unrealized losses on debt instruments measured at fair
value and measured at cost for tax purposes give rise to
a deductible temporary difference regardless of whether
the carrying amount is expected to be recovered .
The carrying amount of an asset does not limit the
estimation of probable future taxable benefits .
Estimates for future taxable profits exclude tax
deductions resulting from the reversal of deductible
temporary differences .
An entity assesses a deferred tax asset in combination
with other deferred tax assets .
The amendment is effective for annual periods beginning
on or after January 1, 2017 .
Disclosure
Initiative
(Amendment to
IAS 7 – Statement
of Cash Flows)
The amendment clarifies that entities shall provide
disclosures that enables users of financial statements
to evaluate changes in liabilities arising from financing
activities .
The amendment is effective for annual periods beginning
on or after January 1, 2017 .
The Trust does not expect there to be a
significant impact on its consolidated
financial statements .
114 n n n N O T E S T O C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S
B O A R D W A L K R E I T A R 2 0 1 6
Possible impact on consolidated
financial statements
The Trust is assessing the potential
impact on its consolidated financial
statements .
The Trust is assessing the potential
impact on its consolidated financial
statements .
Summary of requirements
The amendments made to IFRS 2 clarify the following items:
•
•
In estimating the fair value of a cash-settled share-based
payment, the accounting for the effects of vesting and
non-vesting conditions should follow the same approach
as for equity-settled share-based payments .
Where tax law or regulation requires an entity to
withhold a specified number of equity instruments equal
to the monetary value of the employer’s tax obligation to
meet the employer’s tax liability which is then remitted
to the tax authority, such an arrangement should be
classified as equity-settled in its entirety, provided that
the share-based payment would have been classified
as equity-settled had it not included the net settlement
feature .
•
A modification of a share-based payment that changes
the transaction from cash-settled to equity-settled
should be accounted for as follows:
- the original liability is derecognized;
-
-
the equity-settled share-based payment is recognized
at the modification date fair value;
any difference in value should be recognized in profit
or loss immediately .
The amendment is effective for annual periods beginning
on or after January 1, 2018 .
The amendments deal with situations where there is a
sale or contribution of assets between an investor and its
associate or joint venture . Specifically, they state that gains
or losses resulting from the loss of control of a subsidiary
that does not contain a business transaction with an
associate or joint venture that is accounted for using the
equity method, are recognized in the parent’s profit or loss
only to the extent of the unrelated investors’ interests in
that associate or joint venture .
The effective date for this amendment has yet to be
determined .
New or amended
standards
Classification and
Measurement
of Share-based
Payment
Transactions
(Amendment to
IFRS 2 – Share-
based Payment
(“IFRS 2”))
Sale or
Contribution of
Assets between
an Investor and
its Associate or
Joint Venture
(Amendments
to IFRS 10 –
Consolidated
Financial
Statements
and IAS 28 –
Investments in
Associates and
Joint Ventures)
The following interpretation is not expected to have any impact on the Trust’s consolidated financial statements:
▲
IFRIC 22 – Foreign Currency Transactions and Advance Consideration
A R 2 0 1 6 B O A R D W A L K R E I T
N O T E S T O C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S n n n 115
Annual Improvements to IFRSs 2014-2016 Cycle
The IASB has released the final amendments for the 2014-2016 annual improvement project with the majority of these
amendments applying for annual periods beginning on or after January 1, 2017 . Only those standards which may have a
significant impact on the Trust’s consolidated financial statements are included below .
Standard
Details of amendment
Expected impact
2014-2016 Cycle
IFRS 12 – Disclosure of
Interests in Other Entities
Provides clarification that the scope of the standard should
include interests that are classified as held for sale, held for
distribution or as discontinued operations .
This amendment is effective for annual periods beginning
on or after January 1, 2017 .
The Trust will determine the
impact of this amendment
should an asset held for sale or
discontinued operations arise .
N O T E 4 :
I N V E S T M E N T P R O P E R T I E S
As at
Balance, beginning of year
Additions
Building acquisitions
Building improvements (incl . internal capital program)
Development of investment properties
Reclass from Property, plant and equipment
Dispositions
Fair value losses, unrealized
Balance, end of year
Revenue producing properties
Properties under development (1)
Total
Year ended
Dec 31, 2016
Year ended
Dec 31, 2015
$
5,540,299
$
5,778,108
144,406
97,744
6,167
4,795
–
(180,843)
5,612,568
5,606,174
6,394
5,612,568
$
$
$
$
$
$
3,290
80,196
10,650
–
(137,025)
(194,920)
5,540,299
5,526,651
13,648
5,540,299
(1) On January 29, 2016, a 79-unit development project in Regina, Saskatchewan, totaling $13 .4 million in costs was transferred from
development to revenue producing properties . Total cost of the project at December 31, 2015 was $12 .6 million .
On June 7, 2016, the Trust closed on the purchase of a 162-unit property for a purchase price of $29 .6 million . On August 9,
2016, the Trust closed on the purchase of a 165-unit property for a purchase price of $30 .2 million . On August 17, 2016, the
Trust closed on the purchase of a 182-unit property for a purchase price of $33 .3 million . All three properties were part of
the portfolio of 509 units located in Edmonton, Alberta, which the Trust waived conditions on April 26, 2016 . On June 22,
2016, the Trust closed on the purchase of a 238-unit property in Calgary, Alberta for a purchase price of $51 .2 million . All of
the acquisitions were paid for with cash on hand .
On January 19, 2015, the Trust purchased an office building in Verdun, Quebec, which has now been included as part of the
Nun’s Island property, for a purchase price of $3 .1 million . On April 15, 2015, the Trust closed on the purchase of one unit in
Edmonton, Alberta for a purchase price of $130 thousand .
Acquisitions
Purchase price
Transaction costs
Total cash paid
Allocation of fair value to investment properties
Multi-family units acquired
Year ended
Dec 31, 2016
$ 144,190
216
$ 144,406
$ 144,406
747
Year ended
Dec 31, 2015
$
$
$
3,290
–
3,290
3,290
1
116 n n n N O T E S T O C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S
B O A R D W A L K R E I T A R 2 0 1 6
Subsequent to initial recognition at cost, investment properties are recorded at fair value in accordance with IAS 40 . Fair
value is determined based on a combination of internal and external processes and valuation techniques . Fair value under
IFRS is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date . Investment properties are valued on a highest and best use basis .
For all of the Trust’s investment properties, the current use is considered to be the highest and best use . For the year ended
December 31, 2016, there has been no change to the valuation techniques .
In determining the appropriate classes of investment properties in order to determine the fair value measurement, the
Trust has considered the nature, characteristics and risk of its properties . The classification of investment properties is
based primarily on the geographical location of the asset, with the exception of properties situated on land leases . Below
is a continuity schedule based on investment property classes:
Year ended December 31, 2016
Balance,
beginning
of year
Building
improvements
(incl . internal
capital program)
Building
Acquisitions
Development
of investment
properties
Reclass from
Property,
plant and
equipment Dispositions
Fair value
gains (losses)
Balance,
end of year
Recurring
measurements
Investment properties
Calgary
Edmonton
Other Alberta
Kitchener
London
Montreal
Quebec City
Regina
Saskatoon
Land leases
$ 1,197,629
$ 16,351
$ 51,222
$
85
$ 1,300
$
– $
(14,619) $ 1,251,968
2,279,601
35,977
93,184
11
2,030
285,064
34,232
211,999
104,384
183,254
398,033
329,439
516,664
6,483
1,532
6,341
1,780
4,463
5,281
3,638
15,898
–
–
–
–
–
–
–
–
–
–
–
–
–
6,071
–
–
412
36
248
–
–
242
445
82
–
–
–
–
–
–
–
–
–
(136,483)
2,274,320
(11,423)
280,536
2,360
38,160
13,121
231,709
1,768
107,932
(1,856)
185,861
(11,928)
397,699
(12,072)
321,450
(9,711)
522,933
Total
$ 5,540,299
$ 97,744
$ 144,406
$ 6,167
$ 4,795
$
– $ (180,843) $ 5,612,568
Year ended December 31, 2015
Balance,
beginning
of year
Building
improvements
(incl . internal
capital program)
Building
Acquisitions
Development
of investment
properties
Reclass from
Property,
plant and
equipment Dispositions
Fair value
gains (losses)
Balance,
end of year
Recurring
measurements
Investment properties
Calgary
Edmonton
Other Alberta
Kitchener
London
Windsor
Montreal
Quebec City
Regina
Saskatoon
Land leases
$ 1,278,174
$
12,099
$
–
$
66
$
–
$
– $
(92,710) $ 1,197,629
2,396,720
26,815
130
319,765
31,897
188,836
100,935
95,878
166,943
388,380
330,607
479,973
6,010
778
3,608
2,181
1,276
6,838
5,601
6,190
8,800
–
–
–
–
–
–
–
–
3,160
3
–
–
–
–
–
–
10,581
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(136,200)
–
–
(825)
–
–
(144,067)
2,279,601
(40,711)
285,064
1,557
19,555
33,084
7,230
9,473
(5,704)
(7,358)
24,731
34,232
211,999
–
104,384
183,254
398,033
329,439
516,664
Total
$ 5,778,108
$
80,196
$ 3,290
$ 10,650
$
–
$ (137,025) $
(194,920) $ 5,540,299
A R 2 0 1 6 B O A R D W A L K R E I T
N O T E S T O C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S n n n 117
Investment properties measured at fair value in the statement of financial position are categorized by level according to the
significance of the inputs used in making the measurements . The levels of inputs are defined as follows:
Level 1 inputs: Quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access
at the measurement date .
Level 2 inputs: Inputs other than quoted prices included within Level 1 that are observable for the asset or the liability,
either directly or indirectly .
Level 3 inputs: Unobservable inputs for the asset or liability .
The Trust’s policy is to recognize transfers out of fair value hierarchy levels as of the date of the event or change in circum-
stances that caused the transfer . As at December 31, 2016, all of the Trust’s investment properties were Level 3 inputs . There
were no transfers into or out of Level 3 fair value measurements for investment properties held as at December 31, 2016
and December 31, 2015 .
External valuations were obtained from third-party external valuation professionals (the “Appraisers”) based on a cross
section of properties from different geographical locations and markets across the Trust’s rental portfolio as determined
by the Trust’s management and approved by the Trust’s Board of Trustees . The Appraisers are an independent valuation
firm not related to the Trust and employ valuation professionals who are members of the Appraisal Institute of Canada and
the Ordre des Evaluateurs Agrees du Quebec who have appropriate qualifications and recent experience in the valuation
of properties in the relevant locations . External appraisals were obtained as follows:
Date
December 31, 2016
September 30, 2016
June 30, 2016
March 31, 2016
December 31, 2015
September 30, 2015
June 30, 2015
March 31, 2015
Number of properties
5
5
4
4
5
4
4
5
Aggregate
fair value
$ 511,224
$ 177,677
$
$
82,027
97,993
$ 534,159
$ 125,278
$ 120,113
$ 168,992
Percentage of portfolio
as of that date
9 .1%
3 .2%
1 .5%
1 .8%
9 .7%
2 .3%
2 .1%
2 .9%
The fair value of the remainder of the Trust’s investment property portfolio was determined internally by the Trust using
the same assumptions and valuation techniques used by the external valuation professionals . In addition to performing a
valuation on a selection of the Trust’s properties (and not performing a valuation on all of the Trust’s properties) to corrob-
orate the Trust’s internal valuation, the Appraisers provided the Trust with a summary of the major assumptions and market
data by city in order for the Trust to complete its internal valuations . This summary includes the Appraisers’ estimates of
Capitalization Rates for each region (city) as well as confirmation of the reasonableness of the assumptions used in deter-
mining stabilized net operating income used in calculating fair values .
The third-party valuation technique of the Trust’s investment property portfolio primarily utilizes the “Overall Capitalization
Rate” method . This method requires that rental income from current leases and key assumptions about rental income,
vacancies and inflation rates, among other factors, be used to determine a one-year income forecast for each individual
property within the Trust’s portfolio, and also considers any capital expenditures anticipated within the year . Given the
short term nature of residential leases (typically one year), revenue and costs are not discounted . A Capitalization Rate was
also determined for each property based on market information related to the external sale of similar buildings within a
similar geographic location . These factors were used to determine the fair value of investment properties at each reporting
date .
Five of the Trust’s properties: one in Calgary, one in Banff, one in Edmonton and two in Montreal, are subject to long-
term land leases and similar arrangements in which the underlying land is owned by a third party and leased to the Trust .
Under the terms of a typical land lease, the lessee must pay rent for the use of the land and is generally responsible for
118 n n n N O T E S T O C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S
B O A R D W A L K R E I T A R 2 0 1 6
all costs and expenses associated with the building and improvements, including taxes, utilities, insurance, maintenance,
repairs and replacements in respect of all the leased premises . Unless the lease term is extended, the land together with all
improvements made will revert to the owner of the land upon the expiration of the lease term . Due to the relatively short
term remaining on one of the land leases in Montreal (with an expiry date of 2028), this property utilized the Discounted
Cash Flow (“DCF”) approach to derive the fair value . The DCF Method calculates the present value of the future cash flows
over a specified time period to determine the fair value for each property at each reporting date . The most significant
assumption using the DCF method is the discount rate applied over the term of the lease . The discount rate reflects the
uncertainty regarding the renegotiation of the land lease payments and the ability to extend the land lease at the expiry
date . Forecasted cash flows are reduced for contractual land lease payments during the term of the leases .
The key valuation metrics (and significant unobservable inputs in Level 3) for the Trust’s investment properties are set out
in the following tables:
Dec 31, 2016
Dec 31, 2015
Capitalization rate
Minimum
Maximum
Forecasted
total
standardized
net operating
income
Capitalization rate
Minimum
Maximum
Forecasted
total
standardized
net operating
income
4 .50%
5 .00%
5 .75%
5 .25%
5 .25%
5 .00%
5 .25%
5 .65%
5 .75%
4 .50%
4 .75%
6 .00%
$
62,802
5 .52%
7 .25%
5 .25%
5 .50%
5 .75%
5 .75%
6 .00%
6 .00%
120,325
17,920
2,003
12,186
5,669
10,116
23,426
19,127
7 .25%
$ 273,574
18 .80%
$
27,847
4 .50%
5 .00%
5 .75%
5 .25%
5 .50%
5 .00%
5 .25%
5 .75%
5 .75%
4 .50%
4 .75%
6 .00%
$
59,835
5 .50%
7 .25%
5 .25%
5 .75%
5 .75%
5 .75%
6 .00%
6 .00%
120,400
18,196
1,797
11,680
5,469
9,982
23,061
19,604
7 .25%
$ 270,024
16 .75%
$
27,310
As at
Calgary
Edmonton
Other Alberta
Kitchener
London
Montreal
Quebec City
Regina
Saskatoon
Land Lease
The overall weighted average Capitalization Rates for fair valuing the Trust’s investment properties at December 31, 2016
and 2015 was 5 .38% .
The “Overall Capitalization Rate” method requires that a forecasted stabilized net operating income (“NOI”) be divided
by a Capitalization Rate (“Cap Rate”) to determine a fair value . NOI is calculated as a one-year income forecast based on
rental income from current leases and key assumptions about rental income, vacancies and inflation rates, among other
factors, less property operating costs . As such, fluctuations in both NOI and Cap Rates could significantly alter the fair value .
Generally, an increase in stabilized NOI will result in an increase to the fair value of an investment property . An increase
in capitalization rate will result in a decrease to the fair value of an investment property . When the capitalization rate is
applied to NOI to calculate fair value, there is a significant impact as the lower the capitalization rate, the larger the impact .
Below are tables that summarize the impact of changes in both the Cap Rates and NOI on the Trust’s fair value of investment
properties (excluding development):
A R 2 0 1 6 B O A R D W A L K R E I T
N O T E S T O C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S n n n 119
As at December 31, 2016
Net Operating Income
Capitalization Rate
-0 .25%
Cap Rate As Reported
+0 .25%
As at December 31, 2015
Net Operating Income
Capitalization Rate
-0 .25%
Cap Rate As Reported
+0 .25%
-3%
-1% As Forecasted
+1%
+3%
$ 292,378
$ 298,406
$ 301,421
$ 304,435
$ 310,463
5 .13%
$ 97,001
$ 214,592
$ 273,387
$ 332,183
$ 449,774
5 .38%
5 .63%
(168,185)
(409,806)
(56,062)
5,606,174
56,062
(302,664)
(249,093)
(195,522)
168,185
(88,381)
-3%
-1% As Forecasted
+1%
+3%
$ 288,414
$ 294,360
$ 297,334
$ 300,307
$ 306,254
5 .13%
$
95,451
$ 211,370
$ 269,330
$ 327,290
$ 443,209
5 .38%
5 .63%
(165,800)
(403,848)
(55,267)
5,526,651
55,267
(298,223)
(245,411)
(192,598)
165,800
(86,974)
Investment properties with a fair value of $522 .9 million (December 31, 2015 – $516 .7 million) are situated on land held
under land leases .
Investment properties with a fair value of $770 .5 million (December 31, 2015 – $679 .6 million) are pledged as security
against the Trust’s committed revolving credit facility . Assets pledged as security for the committed revolving credit
facility may also be pledged as security for the Trust’s mortgages payable . In addition, investment properties with a fair
value of $5 .3 billion (December 31, 2015 – $5 .3 billion) are pledged as security against the Trust’s mortgages payable . As
at December 31, 2016, there are no contractual obligations to purchase, construct or develop investment properties or
for repairs, maintenance and enhancements, except for the fixed-price contract in place for the construction of the new
development project in Regina, Saskatchewan and the joint venture project to develop a mixed-use tower in Northwest
Calgary, Alberta, subject to certain conditions, including the receipt of both the development permit and the subdivision of
the lands on terms and conditions satisfactory to both parties, with closing expected to occur in mid-2017 and construction
beginning as early as Q3 of 2017 .
For the years ended December 31, 2016 and 2015, investment properties earned rental revenue (excluding ancillary rental
income) of $432 .1 million and $469 .2 million, respectively . Direct operating expenses in relation to investment properties
were $185 .7 million and $181 .4 million for the years ended December 31, 2016 and 2015, respectively .
N O T E 5 : P R O P E R T Y, P L A N T A N D E Q U I P M E N T
The carrying amounts of PP&E were as follows:
As at
Dec 31, 2016
Accumulated
depreciation
Cost
Carrying
amount
Dec 31, 2015
Accumulated
depreciation
Cost
Carrying
amount
Administration building $
6,186 $
(3,079) $
3,107 $
6,153 $
(2,820) $
3,333
Site equipment
and other
Corporate technology
assets
Total
43,351
(25,629)
17,722
46,705
(24,026)
22,679
29,246
(25,928)
3,318
27,829
(24,521)
3,308
$
78,783 $
(54,636) $
24,147 $
80,687 $
(51,367) $
29,320
120 n n n N O T E S T O C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S
B O A R D W A L K R E I T A R 2 0 1 6
The following table outlines a reconciliation of the carrying amount of PP&E as at December 31, 2016
Balance,
beginning
of year
Reclass to
Investment
properties
Additions
Disposals
Depreciation
Balance,
end of year
Administration building
$ 3,333
$
33
$
–
$
–
$
(259)
$ 3,107
Site equipment and
other
Corporate technology
assets (1)
Total
22,679
3,308
3,392
1,417
(4,795)
–
–
–
(3,553)
17,722
(1,407)
3,318
$ 29,320
$ 4,842
$
(4,795)
$
–
$
(5,219)
$ 24,147
(1) Included in computer software for the year ended December 31, 2016 was $638 thousand of capitalized programmers’ salaries related to
the internally developed software applications used by the Trust in the normal course of its operations .
The following table outlines a reconciliation of the carrying amount of PP&E as at December 31, 2015
Balance,
beginning
of year
Reclass to
Investment
properties
Additions
Disposals
Depreciation
Balance,
end of year
Administration building
$ 3,393
$
210
$
–
$
–
$
(270)
$
3,333
Site equipment and
other
Corporate technology
assets (1)
Total
19,249
3,482
6,984
1,270
–
–
(273)
(3,281)
22,679
(2)
(1,442)
3,308
$ 26,124
$ 8,464
$
–
$
(275)
$
(4,993)
$ 29,320
(1) Included in computer software for the year ended December 31, 2015 was $610 thousand of capitalized programmers’ salaries related to
the internally developed software applications used by the Trust in the normal course of its operations .
N O T E 6 :
I N V E N T O R I E S
Inventories consists of parts and supplies and items such as baseboards, carpet and linoleum, which the Trust routinely uses
in the maintenance and upgrading of its investment properties . These items are kept on hand so they are readily available
for use . When items of inventory are used, they are expensed as part of maintenance expense or they are capitalized to
investment properties depending on the nature of the inventory used and whether or not the useful life of an asset has
been extended as a result of its use . The Trust’s inventories are as follows:
As at
Cabinets, appliances, baseboard, carpet and linoleum
Dec 31, 2016
Dec 31, 2015
$ 7,277
$
4,026
N O T E 7 : P R E P A I D A S S E T S
The major components of prepaid assets are as follows:
As at
Prepaid property taxes
Prepaid land leases
Prepaid expenses and other
Dec 31, 2016
Dec 31, 2015
$
822
$
829
2,886
5,440
2,858
2,278
$ 9,148
$
5,965
A R 2 0 1 6 B O A R D W A L K R E I T
N O T E S T O C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S n n n 121
N O T E 8 : T R A D E A N D O T H E R R E C E I V A B L E S
Trade and other receivables consist mainly of mortgage holdbacks, refundable mortgage fees and amounts owed to
Boardwalk REIT by tenants, insurers and revenue-sharing business partners and totaled $5 .5 million at December 31, 2016
(December 31, 2015 - $5 .2 million) .
As at
Trade and other receivables
Mortgage holdbacks and refundable mortgage fees
Dec 31, 2016
Dec 31, 2015
$ 5,281
$
4,948
221
282
$ 5,502
$
5,230
Refer to NOTE 29(b) for the Trust’s exposure to credit risk in relation to its trade and other receivables and how the Trust
accounts for past due balances .
N O T E 9 : S E G R E G AT E D T E N A N T S ’ S E C U R I T Y D E P O S I T S
Segregated tenants’ security deposits are considered restricted cash as they are held in trust bank accounts and subject
to the contingent rights of third parties . Restricted cash and deposits totaled $10 .7 million at December 31, 2016 and $11 .8
million at December 31, 2015 .
N O T E 10 : C A S H A N D C A S H E Q U I V A L E N T S
Cash and cash equivalents include bank indebtedness of $4 .1 million and term deposits with maturities of 90 days or less
of $103 .2 million (December 31, 2015 – cash of $15 .8 million and term deposits of $221 .2 million) .
N O T E 11: M O R T G A G E S P AYA B L E
As at
Dec 31, 2016
Dec 31, 2015
Weighted
Average Interest
Debt
Balance
Weighted
Average Interest
Debt
Balance
Mortgages payable
Fixed rate
Total
Current
Non-current
2 .78%
$ 2,435,666
3 .01%
$ 2,272,447
$ 2,435,666
$
343,822
2,091,844
$ 2,435,666
$ 2,272,447
$
299,140
1,973,307
$ 2,272,447
Estimated future principal payments required to meet mortgage obligations as at December 31, 2016 are as follows:
12 months ending December 31, 2017
12 months ending December 31, 2018
12 months ending December 31, 2019
12 months ending December 31, 2020
12 months ending December 31, 2021
Subsequent
Unamortized deferred financing costs
Secured By
Investment Properties
$
343,822
239,912
399,060
252,614
271,060
1,014,076
2,520,544
(84,878)
$ 2,435,666
122 n n n N O T E S T O C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S
B O A R D W A L K R E I T A R 2 0 1 6
Canada Mortgage and Housing Corporation (“CMHC”) provides mortgage loan insurance in connection with mortgages
made to Boardwalk REIT . In an agreement dated September 13, 2002, and as amended and restated on January 19, 2005
and April 25, 2006, the Trust agreed to provide certain financial information to CMHC and be subject to certain restrictive
covenants, including limitation on additional debt, payment of distributions in respect of Unitholders’ capital in the event
of default, and maintenance of certain financial ratios . In the event of default, the Trust’s total financial liability under this
Agreement is limited to a one-time penalty payment of $250 thousand under a Letter of Credit issued in favor of CMHC .
During the years ended December 31, 2016 and 2015, the Trust had a committed revolving credit facility with a major
financial institution . This credit facility is secured by a first or second mortgage charge on specific real estate assets . The
maximum amount available varies with the value of pledged assets to a maximum not to exceed $200 million and an avail-
able limit of $200 million as at December 31, 2016 (December 31, 2015 - $200 million) . The credit facility requires monthly
interest payments and is renewable annually subject to the mutual consent of the lender and the Trust . This credit facility
currently has a maturity date of July 27, 2021 . In the event the committed revolving credit facility is not extended, the
drawn-down principal would be due on the maturity date of the credit agreement .
As at December 31, 2016, $5 .0 million (December 31, 2015 - $nil) was outstanding under this facility, in addition to Letters
of Credit (“LCs”) issued and outstanding . The LCs totaled $6 .0 million as at December 31, 2016 (December 31, 2015 – $2 .0
million) . As such, approximately $194 .0 million was unused and available from this facility on December 31, 2016 (December
31, 2015 - $198 .0 million) . The credit facility carries interest rates ranging from prime to prime plus 1 .0% per annum and has
no fixed terms of repayment .
The covenants in relation to the credit facility are discussed in NOTE 29 (d) .
N O T E 12 : L P C L A S S B U N I T S
The LP Class B Units, as defined in NOTE 17, representing an aggregate fair value of $217 .7 million at December 31, 2016
(December 31, 2015 – $212 .3 million), are non-transferable, except under certain circumstances, but are exchangeable, on
a one-for-one basis, into Boardwalk REIT Units at any time at the option of the holder . Prior to such exchange, distributions
will be made on these exchangeable units in an amount equivalent to the distributions which would have been made
had the units been exchanged for Boardwalk REIT Units . Each LP Class B Unit was accompanied by a Special Voting Unit,
which entitles the holder to receive notice of, attend, and vote at all meetings of Unitholders . There is no value assigned to
the Special Voting Units . The LP Class B Units have been classified as “FVTPL” financial liabilities in accordance with IAS 39 .
Gains or losses resulting from changes in the fair value at each reporting date are recorded in the consolidated statement
of comprehensive (loss) income and are included in NOTE 23 .
As at December 31, 2016 and December 31, 2015, there were 4,475,000 LP Class B Units issued and outstanding .
N O T E 13 : D E F E R R E D U N I T - B A S E D C O M P E N S AT I O N
Deferred unit-based compensation is comprised of the following:
As at
Current
Non-current
Dec 31, 2016
Dec 31, 2015
$ 2,762
3,219
$ 5,981
$
2,218
3,715
$
5,933
The total of $6 .0 million represents the fair value of the underlying deferred units at December 31, 2016 (December 31,
2015 - $5 .9 million) . These units have been classified as “FVTPL” financial liabilities in accordance with IAS 39 . Gains or losses
resulting from changes in the fair value at each reporting date are recorded in the consolidated statement of comprehen-
sive (loss) income and are included in NOTE 23 .
A R 2 0 1 6 B O A R D W A L K R E I T
N O T E S T O C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S n n n 123
Details of the deferred unit-compensation plan:
During 2006, the Trust implemented a deferred unit-based compensation plan . The plan entitles Trustees and executives, at
the participant’s option, to receive deferred units in consideration for trustee fees or a portion of executive cash bonuses,
respectively, with the Trust matching the number of units received . The deferred units in consideration for trustee fees or
a portion of executive cash bonuses vest immediately while the matching number of units received vest 50% on the third
anniversary and 25% on each of the fourth and fifth anniversaries, subject to provisions for earlier vesting in certain events .
The deferred units earn additional deferred units for the distributions that would otherwise have been paid on the deferred
units (i .e . had they instead been issued as Trust Units on the date of grant) . Once vested, participants are entitled to receive
an equivalent number of Trust Units representing the vesting deferred units and the corresponding additional deferred
units . Cash is granted for any fractional units . The deferred unit plan was approved by Unitholders on May 10, 2006 and
amended on May 13, 2008 and 2009 .
As at December 31, 2016 and 2015, the unexpired deferred units, in whole or in part, were granted as follows:
Deferred Units
granted in
2012
2013
2014
2015
2016
Number
Grant Date
Expiry Date
50,946
53,206
55,098
55,236
63,697
February, June & December 2012
February, June & December 2017
February, June & December 2013
February, June & December 2018
February, June & December 2014
February, June & December 2019
February, June & December 2015
February, June & December 2020
February, June & December 2016
February, June & December 2021
Fair value at
grant date
$
2,946
3,234
3,409
3,094
3,065
$ 15,748
The initial cost of the deferred unit-based transactions is determined, in accordance with IFRS 2 – Share-based Payments,
as the fair value of the units on the grant date . The fair value of each unit granted is determined based on the weighted
average observable closing market prices of Boardwalk REIT’s Trusts Units ten trading days preceding the grant date . This
initial cost of deferred units in consideration for trustee fees or a portion of executive cash bonuses is expensed immedi-
ately while the cost of the matching deferred units is generally expensed over the vesting period as follows, unless earlier
vesting is triggered in certain events:
One third of the 50%, which vests in year 3, is recognized in each of years 1, 2 and 3 .
One quarter of the 25%, which vests in year 4, is recognized in each of years 1, 2, 3 and 4 .
One fifth of the 25%, which vests in year 5, is recognized in each of years 1, 2, 3, 4 and 5 .
For the year ended December 31, 2016, total costs of $3 .6 million (December 31, 2015 – $3 .2 million) were recorded in
expenses related to executive bonuses and trustee fees under the deferred unit plan .
The status of the outstanding deferred units was as follows:
Balance, December 31, 2014
Deferred units granted
Additional deferred units earned on units
Deferred units converted to Trust Units or cash
Balance, December 31, 2015
Deferred units granted
Additional deferred units earned on units
Deferred units converted to Trust Units or cash
Balance, December 31, 2016
# of Units Outstanding
# of Units vested
201,499
55,236
12,036
(67,320)
201,451
63,697
14,224
(82,165)
197,207
–
58,434
8,886
(67,320)
–
70,634
11,531
(82,165)
–
124 n n n N O T E S T O C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S
B O A R D W A L K R E I T A R 2 0 1 6
N O T E 14 : T R A D E A N D O T H E R P AYA B L E S
The components of the Trust’s accounts payable and accrued liabilities are as follows:
As at
Dec 31, 2016
Dec 31, 2015
Trade payables and accrued liabilities
$
54,462
$
Distribution payable
Provisions
9,513
4,287
47,480
60,047
3,825
$
68,262
$
111,352
Included in distributions payable as at December 31, 2015 was a special distribution declared for LP Class B and Boardwalk
REIT Trust Unitholders on record as at December 31, 2015 totaling $4 .5 million and $46 .8 million, respectively, or $1 .00 per
unit, payable on January 15, 2016 .
As at December 31, 2016 and 2015, the Trust’s most significant provision relates to vacation payable to its employees within
each employee’s individual employment agreement . The remaining provisions relate to insignificant legal claims arising
from minor tenant injuries . As at December 31, 2016 and 2015, the Trust does not have any material contingent liabilities .
N O T E 15 : I N C O M E TA X E S
Current income tax
For the year ended December 31, 2016 and 2015, none of the Trust’s corporate entities had current tax expense, except for
one Ontario numbered company that legally owned the property known as Sun Ray Manor, which was sold as part of the
Windsor portfolio in September 2015 . As such, $43 thousand of current income tax expense was recorded for the Trust’s
corporate entities for the year ended December 31, 2016 (December 31, 2015 - $21 thousand) . All other corporate entities
either have sufficient tax deductions to offset any taxable income or have operating losses from previous years to apply
against any taxable income .
Deferred income tax
For fiscal 2015 and 2016, Boardwalk REIT is a “mutual fund trust” as defined under the Income Tax Act (Canada) (the “Tax
Act”) and as a Real Estate Investment Trust (“REIT”) eligible for the “REIT Exemption” in accordance with the rules affecting
the tax treatment of publicly traded trusts . Accordingly, the Trust is not taxable on its income provided all of its taxable
income is distributed to its Unitholders . This exemption, however, does not extend to the corporate subsidiaries of
Boardwalk REIT that are subject to income tax .
A R 2 0 1 6 B O A R D W A L K R E I T
N O T E S T O C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S n n n 125
The sources of deferred tax balances and movements were as follow:
As at
Deferred tax assets (liabilities) related to:
Operating losses
Differences in tax base and carrying amount,
net, investment properties and PP&E for
corporate entities
Other
Net deferred tax assets (liabilities)
Deferred tax assets
Deferred tax liabilities
Dec 31, 2015
Recognized
in profit (loss)
Dec 31, 2016
$ 191
$
(27)
$ 164
–
(17)
$ 174
$ 191
(17)
–
13
(14)
(28)
13
$
$
–
(4)
$ 160
$ 164
(4)
$ 160
Net deferred tax assets (liabilities)
$ 174
$
(15)
As at
Deferred tax assets (liabilities) related to:
Operating losses
Differences in tax base and carrying amount,
net, investment properties and PP&E for
corporate entities
Other
Net deferred tax assets (liabilities)
Deferred tax assets
Deferred tax liabilities
Net deferred tax assets (liabilities)
Dec 31, 2014
Recognized
in profit (loss)
Dec 31, 2015
$ 378
$
(187)
$ 191
(8)
(5)
$ 365
$ 378
(13)
$ 365
8
(12)
$
(191)
$
(187)
(4)
$
(191)
–
(17)
$ 174
$ 191
(17)
$ 174
No current income taxes or deferred income taxes were recognized in equity, other than through profit or OCI, for the years
ended December 31, 2016 and 2015 .
As at December 31, 2016, wholly owned Canadian corporate subsidiaries have deferred tax assets of $0 .2 million (December
31, 2015 – $0 .2 million) related to operating losses, which expire over the next thirteen to twenty years . The Trust believes
that the future income of these entities will be sufficient to utilize these deferred tax assets prior to their expiration .
The major components of income tax expense include the following:
Current tax expense
Deferred tax expense
Total income tax expense
Year ended
Dec 31, 2016
Year ended
Dec 31, 2015
$
43
15
$
58
$
21
191
$ 212
126 n n n N O T E S T O C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S
B O A R D W A L K R E I T A R 2 0 1 6
The income tax expense for the year can be reconciled to the accounting profit as follows:
(Loss) profit before income tax expense
Add (remove) profit from non-taxable entities
Accounting profit subject to tax
Deduct management fee charged to corporate entities
Taxable profit
Weighted average substantively enacted tax rate
Calculated income tax expense
Changes to other deferred tax liabilities
Total income tax expense
N O T E 16 : D E F E R R E D G O V E R N M E N T G R A N T
Year ended
Dec 31, 2016
$ (57,382)
Year ended
Dec 31, 2015
$
29,060
99,541
42,159
(41,403)
756
26 .80%
203
(145)
$
58
$
12,848
41,908
(41,012)
896
34 .77%
312
(100)
212
In December 2013, the Trust completed the construction of a 109-unit, four storey, elevatored, wood frame building in the
southwest part of Calgary, Alberta (the “Project” or “Development”) . The Development was constructed on excess land
density the Trust currently had on a property known as ‘Spruce Ridge’ . In conjunction with this Development, the Trust
applied for and received a government grant from the Province of Alberta totaling approximately $7 .5 million . In return for
this grant, the Trust has agreed to provide 54 of the 109 units at rents to be 10% below the average market rates for Calgary
(“affordable units”) for a term of 20 years .
Since the $7 .5 million grant did not exceed 65% of the contracted construction costs of the Development, including land
value, attributable to the affordable units, no amount of the grant required immediate repayment to the government .
However, a portion of the grant is repayable to the Province of Alberta, in proportion to the years remaining in the 20-year
term, if the agreement to provide affordable units terminates earlier .
In accordance with IAS 20 - Accounting for Government Grants and Disclosure of Government Assistance, this grant will be
recognized in profit or loss on a systematic basis over the periods in which the Trust recognizes revenue from the 54 units
classified as affordable units . For the year ended December 31, 2016, $378 thousand was recognized in profit under rental
revenue for this grant (December 31, 2015 – $378 thousand) .
N O T E 17 : U N I T H O L D E R S ’ E Q U I T Y
The Plan of Arrangement (the “Arrangement”) converting the Corporation to a real estate investment trust was completed
on May 3, 2004 . Under the Arrangement, the former shareholders of the Corporation received Boardwalk REIT Units or
Class B Limited Partnership Units (“LP Class B Units”) of a controlled limited partnership of the Trust, Boardwalk REIT Limited
Partnership . The interests in Boardwalk REIT are represented by two classes of units: a class described and designated as
“REIT Units” and a class described and designated as “Special Voting Units” . The LP Class B Units are classified as a financial
liability in accordance with IAS 32 and are discussed in NOTE 13 .
(a) REIT Units
REIT Units represent an undivided beneficial interest in Boardwalk REIT and in distributions made by Boardwalk REIT . The
REIT Units are freely transferable, subject to applicable securities regulatory requirements . Each REIT Unit entitles the
holder to one vote at all meetings of Unitholders . Except as set out under the redemption rights below, the REIT Units have
no conversion, retraction, redemption or pre-emptive rights .
A R 2 0 1 6 B O A R D W A L K R E I T
N O T E S T O C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S n n n 127
REIT Units are redeemable at any time, in whole or in part, on demand by the holders . Upon receipt by Boardwalk REIT of
a written redemption notice and other documents that may be required, all rights to and under the REIT Units tendered
for redemption shall be surrendered and the holder shall be entitled to receive a price per REIT Unit equal to the lesser of:
(i)
90% of the “market price” of the REIT Units on the principal market on which the REIT Units are quoted for trading
during the twenty-day period ending on the trading day prior to the day on which the REIT Units were surrendered to
Boardwalk REIT for redemption; and,
(ii) 100% of the “closing market price” of the REIT Units on the principal market on which the REIT Units are quoted
for trading on the redemption date .
The Declaration of Trust authorizes Boardwalk REIT to issue an unlimited number of Units for the consideration and on
terms and conditions established by the Trustees without the approval of any Unitholders .
The Trust has the following capital securities outstanding:
As at
REIT Units outstanding, beginning of year
Units issued for vested deferred units
Units purchased and cancelled
REIT Units outstanding, end of year
Dec 31, 2016
46,847,464
82,165
(666,000)
Dec 31, 2015
47,520,953
67,311
(740,800)
46,263,629
46,847,464
On a periodic basis, Boardwalk REIT will apply to the Toronto Stock Exchange (“TSX”) for approval of Normal Course Issuer
Bids (the “Bids”) . Pursuant to regulations of these Bids, Boardwalk REIT will receive approval to purchase and cancel a spec-
ified number of Trust Units, representing 10% of the public float of its Trust Units at the time of the TSX approval . The Bids
will terminate on the earlier of the termination date or at such time as the purchases under the Bid are completed .
On June 30, 2015, Boardwalk REIT requested and received regulatory approval for a Normal Course Issuer Bid (a “Bid”)
(Boardwalk’s ninth Bid since its first Bid in August of 2007), which commenced on July 3, 2015 and terminated on July 2,
2016 . The Bid allowed Boardwalk REIT to purchase and cancel up to 3,855,766 Trust Units .
On June 29, 2016, Boardwalk REIT requested and received regulatory approval for a Bid (Boardwalk’s tenth Bid since its first
Bid in August of 2007), which commenced on July 3, 2016 and terminates on July 2, 2017 . The Bid allows Boardwalk REIT to
purchase and cancel up to 3,700,292 Trust Units .
For the year ended December 31, 2016, Boardwalk REIT purchased and cancelled the following Trust Units:
Bid Number
9
Year ended December 31, 2016
Number of Trust Units
Purchased and Cancelled
Purchase Cost
Cost per Trust Unit
666,000
$ 32,646
$
49 .02
For the year ended December 31, 2015, Boardwalk REIT purchased and cancelled the following Trust Units:
Bid Number
9
Year ended December 31, 2015
Number of Trust Units
Purchased and Cancelled
Purchase Cost
Cost per Trust Unit
740,800
$ 37,115
$
50 .10
Since the Trust began utilizing normal course issuer bids in 2007, Boardwalk REIT has purchased and cancelled 6,421,647
Trust Units at a total purchase cost of $271 .9 million, or an average cost of $42 .34 per Trust Unit .
128 n n n N O T E S T O C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S
B O A R D W A L K R E I T A R 2 0 1 6
(b) Special Voting Units
The Declaration of Trust provides for the issuance of an unlimited number of Special Voting Units that will be used to
provide voting rights to holders of LP Class B Units or other securities that are, directly or indirectly, exchangeable for REIT
Units . Each Special Voting Unit entitles the holder to the number of votes at any meeting of Unitholders, which is equal
to the number of REIT Units that may be obtained upon surrender of the LP Class B Units or other securities to which the
Special Voting Unit relates . The Special Voting Units do not entitle or give any rights to the holders to receive distributions
or any amount upon liquidation, dissolution or winding-up of Boardwalk REIT .
In summary, the Trust has the following capital securities outstanding:
Boardwalk REIT Units
Special Voting Units
Units outstanding
Dec 31, 2016
46,263,629
4,475,000
Monthly
Distribution
$0 .1875/unit
N/A
Units outstanding
Dec 31, 2015
46,847,464
4,475,000
Monthly
Distribution (1)
$0 .17/unit
N/A
(1) In addition to the regular monthly distribution, as at December 31, 2015, the Trust recorded a distribution payable in the amount of
$46 .8 million in relation to a $1 .00 per unit special distribution paid on January 15, 2016 to all Boardwalk REIT Units with a record date of
December 31, 2015 .
Monthly distributions and special distributions are determined at the discretion of the Board of Trustees . The Board of
Trustees declares distributions to be paid on, or about, the 15th of the month following the record date . Distributions to
be paid on the Boardwalk REIT Units with a record date of January 31, 2017 (to be paid on February 15, 2017) totaled $8 .7
million ($0 .1875 per unit) and have not been included as a liability in the consolidated statement of financial position as at
December 31, 2016 .
(c) Accumulated other comprehensive income (“AOCI”)
For the years ended December 31, 2016 and 2015, AOCI consists of the following amounts:
AOCI, beginning of year
Change in fair value of the effective portion of the interest rate swaps
Losses on settlement of effective bond forward
AOCI, end of year
Year ended
Dec 31, 2016
$
$
–
–
–
–
Year ended
Dec 31, 2015
$
(1,014)
973
41
–
$
In 2008, Boardwalk REIT entered into an interest rate swap agreement on the mortgages of specific properties within its
portfolio in an effort to hedge the variability in cash flows attributed to fluctuating interest rates . Details of the interest rate
swap agreement are disclosed in NOTE 27 .
In 2008, the Trust entered into a forward bond transaction (the “Transaction”) with a major Canadian financial institution .
Details of the forward bond transaction are disclosed in NOTE 27 .
A R 2 0 1 6 B O A R D W A L K R E I T
N O T E S T O C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S n n n 129
(d) Earnings per unit
Numerator – basic
(Loss) profit – basic
Distribution declared on LP Class B units
Gain on fair value adjustments on LP Class B Units
Numerator – diluted
Denominator
Weighted average units outstanding – basic
Conversion of LP Class B units
Weighted average units outstanding – diluted
(Loss) earnings per unit
– basic
– diluted
Year ended
Dec 31, 2016
Year ended
Dec 31, 2015
$
(57,440)
$
–
–
28,848
13,604
(63,053)
$
(57,440)
$
(20,601)
46,343,403
–
46,343,403
47,438,491
4,475,000
51,913,491
$
$
(1 .24)
(1 .24)
$
$
0 .61
(0 .40)
All dilutive elements were included in the calculation of diluted per unit amounts . For the year ended December 31, 2016,
all items were anti-dilutive as the conversion of LP Class B Units would have increased the loss per unit . As such, they were
excluded from the calculation of diluted loss per unit . For the year ended December 31, 2015, all items were dilutive .
N O T E 18 : R E N TA L R E V E N U E
As lessor, the Trust leases residential rental properties under operating leases generally with a term of not more than 12
months and in many cases tenants lease rental space on a month-to-month basis . Rental incentives may be offered as part
of a rental agreement and the costs associated with these incentives are amortized over the term of the lease and netted
against residential rental revenue . As such, rental revenue represents all revenue earned from the Trust’s operating leases
and totaled $432 .1 million for the year ended December 31, 2016 (December 31, 2015 – $469 .2 million) .
As at December 31, 2016, under its non-cancellable operating leases, Boardwalk REIT was entitled to the following
minimum future payments:
Operating leases
Within 12 months
$
204,672
2 to 5 years
$
12,714
Over 5 years
$
754
N O T E 19 : A N C I L L A R Y R E N T A L I N C O M E
Ancillary rental income was comprised of the following:
Revenue from coin laundry machines
Revenue from telephone and cable providers
Total
Year ended
Dec 31, 2016
Year ended
Dec 31, 2015
$ 4,569
$
5,114
2,137
1,825
$ 6,706
$
6,939
130 n n n N O T E S T O C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S
B O A R D W A L K R E I T A R 2 0 1 6
N O T E 2 0 : F I N A N C I N G C O S T S
Financing costs are comprised of interest on mortgages payable, distributions paid to the LP Class B Unitholders and other
interest charges . Financing costs are net of interest income earned . Financing costs total $79 .8 million for the year ended
December 31, 2016 (December 31, 2015 – $85 .4 million) and can be summarized as follows:
Interest on secured debt (mortgages payable)
Interest capitalized to properties under development
LP Class B unit distribution
Other interest charges
Interest income
Total
Year ended
Dec 31, 2016
Year ended
Dec 31, 2015
$ 70,148
$ 71,922
(69)
9,990
1,431
(1,726)
–
13,604
1,478
(1,634)
$ 79,774
$ 85,370
For the year ended December 31, 2016, interest was capitalized to properties under development at a weighted average
effective interest rate of 2 .91% .
N O T E 21: D E P R E C I AT I O N A N D A M O R T I Z AT I O N
The components of depreciation and amortization were as follows:
Amortization of deferred financing costs
Depreciation of property, plant and equipment
Total
N O T E 2 2 : L O S S O N S A L E O F A S S E T S
Year ended
Dec 31, 2016
Year ended
Dec 31, 2015
$ 4,860
$
4,656
5,219
4,993
$ 10,079
$
9,649
On September 10, 2015, the Trust closed on the sale of all its properties in the City of Windsor, which forms part of the
Ontario geographical segment, for the sale price of $136 .2 million .
On June 1, 2015, the Trust disposed of a 22-unit stand-alone building that was part of the Trust’s Boardwalk Estates property
in Regina, Saskatchewan (Saskatchewan segment) for gross proceeds of approximately $0 .8 million .
The loss on these sales was as follows:
Cash received
Cost of disposition
Net proceeds
Net book value
Loss on sale of assets
Year ended
Dec 31, 2016
$
$
–
–
–
–
–
Year ended
Dec 31, 2015
$ 137,025
(6,855)
130,170
137,025
$
(6,855)
A R 2 0 1 6 B O A R D W A L K R E I T
N O T E S T O C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S n n n 131
N O T E 2 3 : F A I R V A L U E L O S S E S
The components of fair value losses were as follows:
Investment properties (Note 4)
Financial liabilities designated as FVTPL
Deferred unit-based compensation
LP Class B Units
Total fair value losses
N O T E 2 4 : O P E R AT I N G L E A S E S
Year ended
Dec 31, 2016
Year ended
Dec 31, 2015
$
(180,843)
$
(194,920)
(468)
(5,370)
1,506
63,053
$
(186,681)
$
(130,361)
As lessee, the Trust has entered into various lease agreements as part of the normal course of its operations . The following
represents the major type of leases the Trust maintains as lessee, all of which qualify as operating leases in accordance with
IAS 17 - Leases (“IAS 17”):
(i)
Land leases
The Trust has entered into non-cancellable land leases for land related to five of its properties, which sit on land that
is not owned by the Trust . Approximate remaining terms of the Trust’s land leases range from 11 to 79 years as at
December 31, 2016 . Two of the land leases provide for annual rent and one of the land leases provides for annual rent
and additional rent based on rental revenue collected .
(ii) Warehouse and office space leases
The Trust has entered into lease agreements for warehouse and some office and data centre space it utilizes but does
not own . All of the leasing arrangements related to warehouse space have renewal options of between one and five
years, with the exception of one of the leasing arrangements for which no renewal option exists . The lease agreement
for the office space and the sublease agreement for the data centre space are for five years and both end on December
15, 2017 .
As at December 31, 2016, future minimum lease payments related to these leases were as follows:
Land leases
Warehouse and office space
Total future minimum lease payments
Within 12 months
$ 5,254
686
$ 5,940
2 to 5 years
$ 21,021
487
$ 21,508
Over 5 years
$ 189,800
–
$ 189,800
The Trust recognized lease expenses of $6 .1 million for the year ended December 31, 2016 ($5 .5 million for the year ended
December 31, 2015) .
N O T E 2 5 : G U A R A N T E E S , C O N T I N G E N C I E S , C O M M I T M E N T S A N D O T H E R
As discussed in NOTE 24 above, the Trust has five properties that are situated on land leases . One of the land leases situated
in Montreal is set to expire in 2028 . The Trust is actively seeking to either renew the term of this lease or purchase the
freehold interest in the land prior to the expiry of the lease term . However, if the Trust cannot or chooses not to renew the
lease, or buy the land, as the case may be, the net operating income and cash flow associated with the property would no
longer contribute to Boardwalk’s results of operations and could impact its ability to make distributions to Unitholders .
Another land lease, situated in Calgary, which expires in 2065, was scheduled for a reset to the annual rent in 2016 to 7%
of the agreed upon land value in 2016 . Although the agreed upon land value in 2016 is still being negotiated, the Trust,
however, can reasonably estimate with certainty the new rental amount throughout the term of this lease .
132 n n n N O T E S T O C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S
B O A R D W A L K R E I T A R 2 0 1 6
From time to time, the Trust enters into various physical supply contracts for energy commodities to hedge its own usage,
which is summarized below:
Natural Gas:
Area
Alberta
Alberta
Alberta
Alberta
Saskatchewan
Saskatchewan
Saskatchewan
Ontario and Quebec
Electrical:
Area
Southern Alberta
Northern Alberta
Usage Coverage
Term
Cost
25%
25%
25%
25%
50%
50%
50%
50%
Usage Coverage
Term
November 1, 2014 to October 31, 2016
$4 .25/ Gigajoule (“GJ”)
November 1, 2014 to October 31, 2017
November 1, 2016 to October 31, 2018
November 1, 2016 to October 31, 2019
November 1, 2014 to October 31, 2017
November 1, 2015 to October 31, 2016
November 1, 2016 to October 31, 2018
November 1, 2015 to October 31, 2017
$4 .22/GJ
$3 .08/GJ
$3 .17/GJ
$4 .53/GJ
$3 .66/GJ
$3 .19/GJ
$2 .93/GJ
Cost
100%
100%
October 1, 2010 to September 30, 2017
$0 .06/Kilowatt-hour (“kWh”)
October 1, 2015 to September 30, 2020
$0 .05/kWh
Boardwalk REIT, in the normal course of operations, will become subject to a variety of legal and other claims against the
Trust, most of which are minor in nature . Management and the Trust’s legal counsel evaluate all claims on their apparent
merits, and accrue management’s best estimate of the estimated costs to satisfy such claims . Management believes the
outcome of claims of this nature at December 31, 2016 will not have a material impact on the Trust .
In the normal course of business, various agreements may be entered into that may contain features that meet the defi-
nition of a contingent liability in accordance with IFRS . With the BC Property Portfolio sale, mortgage balances totaling
approximately $62 .0 million were assumed by the purchaser . One of the three mortgages, with a term maturity of October
1, 2022 and a mortgage balance of approximately $22 .1 million as at December 31, 2016, assumed by the purchaser has
an indirect guarantee provided to the lender by the Trust until this mortgage is renewed or refinanced by the purchaser,
whichever occurs sooner . In the event of default by the purchaser, the Trust would be liable for the outstanding mortgage
balance . These guarantees are considered contingent liabilities as payment of the amount will only occur if the purchaser
defaults . If the purchaser does not default, the balance is not payable . Boardwalk REIT’s maximum exposure at December
31, 2016 is approximately $22 .1 million (December 31, 2015 - $22 .5 million) . In the event of default by the purchaser,
Boardwalk REIT’s recourse for recovery includes the sale of the respective building assets . Boardwalk REIT expects that the
proceeds from the sale of the building assets will cover, and in most likelihood exceed, the maximum potential liability
associated with the amount being guaranteed . Therefore, at December 31, 2016 and 2015, no amounts have been recorded
in the consolidated financial statements with respect to the above noted indirect guarantees .
N O T E 2 6 : C A P I TA L M A N A G E M E N T A N D L I Q U I D I T Y
The Trust defines capital resources as the aggregate of Unitholders’ equity at market value, debt (both secured and unse-
cured), cash flows from operations, and amounts available under credit facilities net of cash on hand . The Trust’s capital
management framework is designed to maintain a level of capital that allows it to implement its business strategy while
complying with investment and debt restrictions pursuant to Boardwalk REIT’s DOT as well as existing debt covenants and
continue building long-term Unitholder value while maintaining sufficient capital contingency . The main components
of the Trust’s capital allocation are approved by its Unitholders as stipulated in the Trust’s DOT and on a regular basis by
its Board of Trustees (the “Board”) through its annual review of the Trust’s strategic plan and budget, supplemented by
periodic Board and Board Committee meetings . Capital adequacy is monitored by the Trust by assessing performance
against the approved annual plan throughout the year, which is updated accordingly, and by monitoring adherence to
investment and debt restrictions contained in the DOT and debt covenants . Boardwalk REIT’s DOT, as amended, provides
A R 2 0 1 6 B O A R D W A L K R E I T
N O T E S T O C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S n n n 133
for a minimum interest coverage ratio of 1 .5 to 1 calculated on the most recently completed four fiscal quarters . The DOT
also defines interest expense to exclude distributions on the LP Class B Units, which under IFRS are considered financing
charges .
The following table highlights Boardwalk REIT’s interest service coverage ratio in accordance with the DOT:
As at
Net operating income
Administration expenses
Consolidated EBITDA (1) (12 months ended)
Consolidated interest expense (12 months ended)
Interest coverage ratio
Minimum threshold
(1) Earnings Before Interest, Taxes, Depreciation and Amortization
Dec 31, 2016
Dec 31, 2015
$ 253,099
$
294,702
(33,947)
219,152
69,784
3 .14
1 .50
(33,407)
261,295
71,766
3 .64
1 .50
The Trust employs a broad range of financing strategies to facilitate growth and manage financial risk . The Trust’s objective
is to reduce its weighted average cost of capital and improve Unitholder distributions through value enhancement initia-
tives and consistent monitoring of the balance between debt and equity financing . As at December 31, 2016, the Trust’s
weighted average cost of capital was calculated to be 3 .96% .
The following schedule details the components of the Trust’s capital and the related costs thereof:
As at
Dec 31, 2016
Dec 31, 2015
Cost of Capital (1) Underlying Value (2)
Cost of Capital (1)
Underlying Value (2)
Liabilities
Mortgages payable
LP Class B Units
Deferred unit-based
compensation
Unitholders’ equity
Boardwalk REIT Units
Total
2 .78%
$ 2,468,840
5 .14%
5 .14%
217,709
5,981
5 .14%
2,250,726
3 .96%
$ 4,943,256
3 .01%
6 .81%
6 .81%
6 .81%
4 .94%
$ 2,358,833
212,339
5,933
2,222,912
$ 4,800,017
(1) As a percentage of average carrying value unless otherwise noted .
(2) Underlying value of liabilities represents carrying value or the cost to retire on maturity . Underlying value of equity is based on the
closing stock price of the Trust’s Units .
Mortgages payable – These are the mortgages outstanding on the Trust’s investment properties . The debt is primarily fixed
rate debt and approximately 99% of this debt at December 31, 2016 is insured under the National Housing Act (“NHA”) and
administered by the Canada Mortgage and Housing Corporation (“CMHC”) . These financings are typically structured on
a loan to appraised value basis between 75-80% . The Trust currently has a level of indebtedness of approximately of the
fair value of the Trust’s investment properties . This level of indebtedness is considered by the Trust to be within its target .
LP Class B Units – These units are non-transferable, except under certain circumstances, but are exchangeable, on a one-for-
one basis, into Boardwalk REIT Units at any time at the option of the holder . Prior to such exchange, distributions will be
made on the exchangeable units in an amount equivalent to the distributions which would have been made had the units
of Boardwalk REIT been issued . Each LP Class B Unit was accompanied by a Special Voting Unit, which entitles the holder to
receive notice of, attend and vote at all meetings of Unitholders . There is no value assigned to the Special Voting Units . The
LP Class B Units have been classified as “FVTPL” financial liabilities in accordance with IAS 32 . Gains or losses resulting from
changes in the fair value at each reporting date are recorded in the consolidated statement of comprehensive (loss) income .
As outlined in NOTE 29(d), Boardwalk REIT’s committed revolving credit facility agreements contain financial covenants .
134 n n n N O T E S T O C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S
B O A R D W A L K R E I T A R 2 0 1 6
Available liquidity as at December 31, 2016 included cash and cash equivalents on hand of $99 .1 million (December 31,
2015 – $237 .0 million) as well as an unused committed revolving credit facility of $194 .0 million (December 31, 2015 – $198 .0
million) . The Trust monitors its ratios and as at December 31, 2016 and December 31, 2015, the Trust was in compliance with
all covenants in both its DOT and all existing debt facilities .
N O T E 2 7 : F I N A N C I A L I N S T R U M E N T S
Hedging transactions
In 2008, the Trust entered into a bond forward transaction (the “Transaction”) with a major Canadian financial institution .
In total, the Transaction, which comprised bond forward contracts on specific mortgages set to mature and be renewed
in 2008, was for a total notional amount of $101 .6 million with a weighted average term and interest rate of 7 .2 years and
3 .63%, respectively; except for one of the contracts, all remaining contracts were assessed to be ineffective hedges . The
bond forward contract assessed to be an effective hedge was settled for a loss of $284 thousand and was amortized over
the term of the hedged item . The balance was fully amortized as at December 31, 2015 and $41 thousand was recognized
in profit under financing charges for the year ended December 31, 2015 .
During the first quarter of 2008, the Trust entered into interest rate swap agreements on the mortgages of specific prop-
erties within its portfolio in an effort to hedge the variability in cash flows attributed to fluctuating interest rates . These
interest rate swap agreements were designated as cash flow hedges on March 11, 2008 . The effective date of the hedge
was May 1, 2008 and the agreements were designated as such until May 1, 2015, at which point the hedge terms expired .
Settlements on both the fixed and variable portion of the interest rate swap occurred on a monthly basis up until the date
of termination with a fixed interest rate of 4 .15%, plus a stamping fee of 0 .25% . As at December 31, 2016 and 2015, there
were no mortgage debts subject to interest rate swaps .
For the year ended December 31, 2015, a gain of $1 .0 million was recognized in OCI for the fair value change of the interest
rate swaps .
N O T E 2 8 : F A I R V A L U E M E A S U R E M E N T
(a) Fair value of financial instruments
Fair value is the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date . The fair value of interest bearing financial assets and liabilities is
determined by discounting the contractual principal and interest payments at estimated current market interest rates for
the instrument . Current market rates are determined by reference to current benchmark rates for similar term and current
credit spreads for debt with similar terms and risk . The fair values of the Trust’s financial instruments were determined as
follows:
(i)
the carrying amounts of trade and other receivables, segregated tenants’ security deposits, cash and cash equiv-
alents, refundable tenants’ security deposits and trade and other payables approximate their fair values due to their
short-term nature .
(ii)
the fair values of the Trust’s mortgages payable are estimates made at a specific point in time, based on relevant
market information . These estimates are based on quoted market prices for the same or similar issues or on the current
rates offered to the Trust for similar financial instruments subject to similar risks and maturities .
(iii) the fair values of the deferred unit compensation plan and the LP Class B Units are estimates at a specific point in
time, based on the closing market price of the REIT Units listed on the Toronto Stock Exchange .
(iv) the fair values of the effective portion of the interest rate swaps, reported as other current liabilities, are estimates
at a specific point in time, based on quoted prices in markets that are not active for substantially the same term as the
remaining effective portion of the derivatives .
A R 2 0 1 6 B O A R D W A L K R E I T
N O T E S T O C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S n n n 135
These estimates are subjective in nature and involve uncertainties and matters of significant judgment and, therefore,
cannot be determined with precision . Changes in estimates could significantly affect fair values . The significant financial
instruments of Boardwalk REIT and their carrying values as at December 31, 2016 and December 31, 2015 are as follows:
As at
Dec 31, 2016
Dec 31, 2015
Carrying Value
Fair Value
Carrying Value
Fair Value
Financial liabilities carried at amortized
cost
Mortgages payable
Financial liabilities carried at FVTPL
LP Class B Units
Deferred unit-based compensation
$ 2,435,666
$ 2,468,840
$ 2,272,447
$ 2,358,833
217,709
5,981
217,709
5,981
212,339
5,933
212,339
5,933
The fair value of the Trust’s mortgages payable was higher than the recorded value by approximately $33 .2 million at
December 31, 2016 (December 31, 2015 - $86 .4 million), due to changes in interest rates since the dates on which the
individual mortgages were last contracted . The fair values of the mortgages payable have been estimated based on the
current market rates for mortgages with similar terms and conditions . The fair value of the Trust’s mortgages payable is an
amount computed based on the interest rate environment prevailing at December 31, 2016 and December 31, 2015, respec-
tively; the amount is subject to change and the future amounts will converge . There are no additional costs or penalties to
Boardwalk REIT if the mortgages are held to maturity .
As at December 31, 2016 and December 31, 2015, the Trust had no embedded derivatives requiring separate recognition .
The nature of these financial instruments and the Trust’s operations expose the Trust to certain principal financial risks . The
main objective of the Trust’s risk management process is to properly identify financial risks and minimize the exposure to
potential losses arising from those risks . The principal financial risks to which the Trust is exposed are described in NOTE 29 .
(b) Assets and liabilities measured at fair value
The fair value hierarchy of assets and liabilities measured at fair value on a recurring basis in the consolidated statement of
financial position is as follows:
As at
Assets
Dec 31, 2016
Dec 31, 2015
Level 1
Level 2
Level 3
Level 1
Level 2
Level 3
Investment properties
$
–
$
– $ 5,612,568
$
–
$
– $ 5,540,299
Liabilities
LP Class B Units
Deferred unit-based
compensation
217,709
5,981
–
–
–
–
212,339
5,933
–
–
–
–
The three levels of the fair value hierarchy are described in NOTE 4 .
Transfers between levels in the fair value hierarchy are recognized on the date of the event or change in circumstances that
caused the transfer . For assets and liabilities measured at fair value as at December 31, 2016 and December 31, 2015, there
were no transfers between Level 1, Level 2 and Level 3 assets and liabilities .
136 n n n N O T E S T O C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S
B O A R D W A L K R E I T A R 2 0 1 6
N O T E 2 9 : R I S K M A N A G E M E N T
(a)
Interest rate risk
The Trust is exposed to interest rate risk as a result of its mortgages payable and credit facilities; however, this risk is min-
imized through the Trust’s current strategy of having the majority of its mortgages payable in fixed-term arrangements .
As such, the Trust’s cash flows are not significantly impacted by a change in market interest rates . In addition, the Trust
structures its financings so as to stagger the maturities of its debt, thereby minimizing the Trust’s exposure to interest rates
in any one year . The majority of the Trust’s mortgages are also insured by the CMHC under the National Housing Act (“NHA”)
mortgage program . This added level of insurance offered to lenders allows the Trust to receive advantageous interest rates
while minimizing the risk of mortgage renewals or extensions, and significantly reduces the potential for a lender to call
a loan prematurely . In addition, management is constantly reviewing its committed revolving credit facility (floating-rate
debt) and, if market conditions warrant, the Trust has the ability to convert its existing floating-rate debt to fixed rate debt .
As at December 31, 2016, the Trust had $5 million outstanding on its committed revolving credit facility and, as such, of
the Trust’s total debt at December 31, 2016, 99 .8% was fixed-rate debt and 0 .2% was floating-rate debt . For the year ended
December 31, 2016, all else being equal, the increase or decrease in net earnings for each 1% change in market interest rates
would be $50 thousand (December 31, 2015 – $nil) .
(b) Credit risk
The Trust is exposed to credit risk as a result of its trade and other receivables . This balance is comprised of mortgage hold-
backs and refundable mortgage fees, accounts receivable from significant customers and insurers and tenant receivables .
As at December 31, 2016 and December 31, 2015, no balance relating to mortgage holdbacks, refundable mortgage fees or
accounts receivable from significant customers and insurers was past due .
In relation to mortgage holdbacks and refundable mortgage fees, the Trust’s exposure to credit risk is low given the nature
of these balances . These funds will be advanced when the Trust has met the conditions pursuant to the mortgage agree-
ment (in the case of the mortgage holdback) or when financing is completed (in the case of refundable mortgage fees),
both of which are expected to occur .
Similar to mortgage holdbacks and refundable mortgage fees, the Trust assesses the credit risk on accounts receivable to
be low due to the assured collection of these balances . The majority of the balance relates to money owing from the Trust’s
revenue sharing initiatives . Given the Trust’s collection history and the nature of these customers, credit risk is assessed as
low . Additionally, an amount is owed by insurance companies in relation to current outstanding claims . In all circumstances,
the insurance deductible has been paid and amounts incurred and owing for reimbursement are due to an insurable event .
Recoverability may differ from the amount owing solely due to discrepancies between the Trust and the insurance provider
regarding the value of replacement costs .
With tenant receivables, credit risk arises from the possibility tenants may experience financial difficulty and be unable to
fulfill their lease term commitments . The maximum exposure to credit risk is equal to the carrying value of the financial
assets . Rent payments from tenants are due on the first of the month and tenants generally pay a security deposit – both
of these actions mitigate against bad debts .
As stated above, the carrying amount of tenant receivables reflects management’s assessment of the credit risk associated
with its tenants; however, the Trust mitigates this risk of credit loss by geographically diversifying its existing portfolio, by
limiting its exposure to any one tenant and by conducting thorough credit checks with respect to all new rental-leasing
arrangements . In addition, where legislation allows, the Trust obtains a security deposit from a tenant to assist in the
recovery of monies owed to the Trust .
Past due receivables (receivables which are greater than 30 days) are reviewed by management on a monthly basis and
tenant receivables are considered for impairment on a case-by-case basis . The Trust takes into consideration the tenant’s
payment history, their credit worthiness and the current economic environment; however, tenant receivable balances
exceeding 60 days are typically written off to bad debt expense as the Trust does not utilize an allowance for doubtful
A R 2 0 1 6 B O A R D W A L K R E I T
N O T E S T O C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S n n n 137
accounts . The amount of the loss is recognized in the consolidated statement of comprehensive (loss) income as part of
operating expenses . Subsequent recoveries of amounts previously written off are credited against operating expenses
during the period of settlement . As tenant receivables are typically written off after 60 days, none of the balance is consid-
ered to be past due by the Trust . For the twelve months ended December 31, 2016, bad debt expense totaled $5 .5 million
(twelve months ended December 31, 2015 – $4 .2 million) .
The credit risk of both Boardwalk REIT and the counter party have been taken into account in determining the fair value of
Boardwalk REIT’s trade and other receivables .
(c) Liquidity risk
Liquidity risk is the risk that the Trust will not be able to meet its financial obligations as they become due . The Trust main-
tains what it believes to be conservatively leveraged assets and can finance any future growth through one or a combi-
nation of internally generated cash flows, borrowing under an existing committed revolving credit facility, the issuance of
debt, or the issuance of equity, according to its capital management objectives . In addition, the Trust structures its financ-
ings so as to stagger the maturities of its debt, thereby minimizing the Trust’s exposure to liquidity risk in any one year . In
addition, cash flow projections are completed and reviewed on a regular basis to ensure the Trust has sufficient cash flows
to make its monthly distributions to its Unitholders . Finally, financial assets, such as cash and trade and other receivables,
will be realized within the next twelve months and can be utilized to satisfy the Trust’s financial liabilities . Given the Trust’s
currently available liquid resources (from both financial assets and on-going operations) as compared to its contractual
obligations, management assesses the Trust’s liquidity risk to be low .
The following table details the Trust’s remaining contractual maturity for its non-derivative and derivative (i .e . vested
deferred units) financial liabilities listed by year of maturity date:
Year of Maturity
2017
2018
2019
2020
2021
Subsequent
Unamortized
deferred
financing costs
Weighted
average
interest
rate
Mortgage
principal
outstanding
Mortgage
interest (1)
Tenants’
security
deposits
Distribution
Payable
Trades
and other
payables
Total
2 .91% $
291,720
$
64,608
$
13,275
$
9,513
$
58,749
$ 437,865
3 .00%
2 .91%
2 .66%
2 .30%
2 .77%
2 .78%
199,044
381,222
238,987
270,588
1,138,983
2,520,544
56,162
48,675
38,437
32,046
62,490
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
255,206
429,897
277,424
302,634
1,201,473
302,418
13,275
9,513
58,749
2,904,499
(84,878)
–
–
–
–
(84,878)
$ 2,435,666
$ 302,418
$
13,275
$
9,513
$
58,749
$ 2,819,621
(1) Based on current in-place interest rates for the remaining term to maturity .
(d) Debt covenants
As outlined in its mortgages payable agreements, the Trust is required to make equal monthly payments of principal and
interest based on the respective amortization period . Additionally, the Trust must ensure that all property taxes have been
paid in full when they become due and that no arrears exist .
CMHC provides mortgage loan insurance in connection with mortgages made to Boardwalk REIT . In an agreement dated
September 13, 2002, and as amended and restated on January 19, 2005 and April 25, 2006, the Trust agreed to provide
certain financial information to the CMHC and be subject to certain restrictive covenants, including limitation on additional
debt, payment of distributions in respect to Unitholders’ capital in the event of default, and maintenance of certain finan-
cial ratios . In the event of default, the Trust’s total financial liability under this agreement is limited to a one-time penalty
payment of $250 thousand under a Letter of Credit issued in favor of CMHC .
138 n n n N O T E S T O C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S
B O A R D W A L K R E I T A R 2 0 1 6
The Trust has a committed revolving credit facility with a major financial institution . This credit facility is secured by a
pledge of a group of specific real estate assets (fair value at December 31, 2016 of approximately $770 .5 million) . The
amount available through the committed revolving credit facility varies with the value of the pledged assets, with a
maximum limit not to exceed $200 .0 million and an available limit of $194 .0 million as at December 31, 2016 (December 31,
2015 – $198 .0 million) . The revolving facility requires monthly interest payments, is for a five-year term maturing on July
27, 2021, and can be extended annually thereafter, subject to the mutual consent of the lender and the Trust . In the event
the committed revolving credit facility is not extended, the drawn-down principal would be due on the maturity date of
the credit agreement .
The credit facility contains three financial covenants as follows:
(i)
The Trust will maintain an overall Debt Service Coverage Ratio of at least 1 .20, calculated on the most recent
completed trailing four fiscal quarter basis . As at December 31, 2016, this ratio was 1 .76 (December 31, 2015 – 2 .15) .
(ii) The Trust will maintain a Debt Service Coverage Ratio, specific to the Security Portfolio of at least 1 .15 (tested
semi-annually) . As at December 31, 2016, this ratio was – 1 .44 (December 31, 2015 – 1 .63) .
(iii) Total indebtedness of the Trust will not exceed 75% of the Gross Book Value (“GBV”) of all assets for the two most
recent quarters as defined in the credit agreement . As at December 31, 2016, this ratio was 41 .5% (December 31, 2015
– 38 .8%) .
As at December 31, 2016 and December 31, 2015, the Trust was in compliance with all financial covenants .
(e) Utility risk
The Trust is exposed to utility risk as a result of fluctuations in the prices of natural gas and electricity . As outlined in NOTE
25, the Trust has commitments to certain utility contracts to reduce the risk of exposure to adverse changes in commodity
prices .
N O T E 3 0 : S U B S I D I A R I E S
The entities included in the Trust’s consolidated financial statements are as follows:
Entity
Type
Relationship
Boardwalk Real Estate Investment Trust (“BREIT”)
Trust
Parent
Boardwalk Real Estate Management Ltd .
Corporation
100% owned by BREIT
Top Hat Operating Trust (“TOT”)
Trust
100% owned by BREIT
BPCL Holdings Inc . (“BPCL”)
Corporation
Meets the principle of control
Boardwalk REIT Limited Partnership (“BLP”)
Partnership
A Units are 100% owned by TOT
B Units and C Units are 100% owned by BPCL
Boardwalk REIT Properties Holdings (Alberta) Ltd .
Corporation
100% owned by BLP
Boardwalk REIT Quebec Inc .
Corporation
100% owned by BLP
Boardwalk Quebec Trust
Trust
100% owned by BLP
Boardwalk St . Laurent Limited Partnership
Partnership
99 .99% owned by Boardwalk Quebec Trust
0 .01% owned by 9165-5795 Quebec Inc .
9108-4749 Quebec Inc .
Corporation
100% owned by BLP
A R 2 0 1 6 B O A R D W A L K R E I T
N O T E S T O C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S n n n 139
Entity
Type
Relationship
9165-5795 Quebec Inc .
Corporation
100% owned by 9108-4749 Quebec Inc .
Nun’s Island Trust 1
Nun’s Island Trust 2
Trust
Trust
100% owned by BLP
100% owned by BLP
Metropolitan Structures (MSI) Inc .
Corporation
100% owned by BLP
Boardwalk GP Holding Trust
Trust
100% owned by BLP
6222285 Canada Inc .
Corporation
100% owned by BLP
Boardwalk GP Operating Trust
Trust
100% owned by 6222285 Canada Inc .
Boardwalk General Partnership (“BGP”)
Partnership
99 .99% owned by Boardwalk GP Holding Trust
0 .01% owned by Boardwalk GP Operating Trust
Boardwalk REIT Properties Holdings Ltd .
Corporation
100% owned by BGP
BPCL represents the only entity which is not 100% owned by the Trust or one of its subsidiaries . BPCL (formerly called
Boardwalk Equities Inc .) was created to accomplish a narrow and well-defined objective, which was to transfer the benefi-
cial interest in the Corporation’s assets (the “Assets”) (pursuant to the Master Asset Contribution Agreement) . The Trust does
not have any voting interest in BPCL; however, the Trust controls BPCL because the Trust has the decision-making powers to
obtain the majority of the benefits of the activities of BPCL and the Trust retains the majority of the residual or ownership
risks related to BPCL . Specifically, BLP controls all of the Assets previously held by BPCL, and is responsible for BPCL’s debt
by guaranteeing the principal and interest owed to the lenders . BLP must make distributions to the LP Class C Units equiv-
alent to the principal and interest owed on BPCL’s debt . As beneficial owner of the Assets, BLP has power over BPCL as it
can direct their relevant activities (i .e . impose and collect rental income, manage and pay operating costs, etc .) in order to
generate cash flows and make distributions on the LP Class C Units . It has exposure, or rights, to variable returns based on
its beneficial ownership of the Assets . The Trust controls BPCL, because the Trust has the decision making power to obtain
the majority of the benefits from the activities of BPCL . Due to the above, BPCL is part of the Trust’s consolidated group .
N O T E 31: R E L AT E D P A R T Y D I S C L O S U R E S
IAS 24 – Related Party Disclosures requires entities to disclose in their financial statements information about transactions
with related parties . Generally, two parties are related to each other if one party controls, or significantly influences, the
other party . Balances and transactions between the Trust and its subsidiaries (as outlined in NOTE 30), which are related
parties of the Trust, have been eliminated on consolidation and are not disclosed in this note disclosure .
The following outlines the individuals considered key personnel of the Trust:
(a) Trustees
The Trustees of Boardwalk REIT during the year ended December 31, 2016 and up to the date of this report were:
James R . Dewald
Gary Goodman
Arthur L . Havener, Jr .
Sam Kolias
Samantha Kolias
Al W . Mawani
Andrea Stephen
140 n n n N O T E S T O C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S
B O A R D W A L K R E I T A R 2 0 1 6
(b) Key management personnel
Key management personnel of the Trust during the year ended December 31, 2016 and up to the date of this report were:
P . Dean Burns, General Counsel & Corporate Secretary
William Chidley, Senior VP, Corporate Development (retired June 30, 2016)
Roberto Geremia, President
Sam Kolias, Chief Executive Officer
Van Kolias, Senior VP, Quality Control
Lisa Russell, senior VP, Corporate Development (effective July 1, 2016)
William Wong, Chief Financial Officer
The remuneration of the Trust’s key management personnel was as follows:
Short-term benefits
Post-employment benefits
Other long-term benefits
Deferred unit-based compensation
Year ended
Dec 31, 2016
Year ended
Dec 31, 2015
$
1,246
$
1,076
52
5
1,358
$
2,661
$
53
6
1,581
2,716
In addition, the LP Class B Units are held by Mr . Sam Kolias (Chairman of the Board, Chief Executive Officer and Trustee) and
Mr . Van Kolias (Senior Vice President, Quality Control) . Under IAS 32 – Financial Instruments: Presentation, the LP B Units
issued by a wholly owned subsidiary of the Trust are considered financial liabilities, and are reclassified from equity to liabil-
ities on the consolidated financial statements . Additionally, as the LP Class B Units are liabilities, all distributions paid (both
regular and special) are recorded as a financing charge under IFRS . For the year ended December 31, 2016, distributions on
the LP Class B Units totaled $10 .0 million (December 31, 2015 – $13 .6 million) . Distributions on the LP Class B Units are made
on terms equal to distributions made on Boardwalk REIT Units .
As at December 31, 2016, there was $839 thousand owed to related parties (December 31, 2015 – $5 .3 million, comprised of
$761 thousand in relation to the monthly regular LP Class B Units distribution and $4 .5 million in relation to the $1 .00 special
distribution on the LP Class B Units) based on the LP Class B Units distribution outlined above .
A R 2 0 1 6 B O A R D W A L K R E I T
N O T E S T O C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S n n n 141
N O T E 3 2 : O T H E R I N F O R M AT I O N
(a) Supplemental cash flow information
Net change in operating working capital
Net change in inventories
Net change in prepaid assets
Net change in trade and other receivables
Net change in segregated and refundable tenants’ security deposits
Net change in deferred unit-based compensation
Net change in trade and other payables
Net change in investing working capital
Net change in trade and other payables
Net change in financing working capital
Net change in trade and other payables
Distributions paid
Distributions declared
Distributions declared in prior period paid in current period
Distributions declared in current period paid in next period
Distributions paid
Year ended
Dec 31, 2016
Year ended
Dec 31, 2015
$
(3,251)
$
(432)
(3,183)
(272)
124
3,645
2,149
(1,472)
2,016
(1,316)
3,240
(3,233)
$
(788)
$
(1,197)
$
5,297
$
61
$
$
(37)
304
$ (103,399)
$ (143,557)
(54,812)
8,674
(74,608)
54,812
$ (149,537)
$ (163,353)
(b)
Included in administration costs was $2 .7 million relating to Registered Retirement Savings Plan (“RRSP”) matching for
the year ended December 31, 2016 (December 31, 2015 – $2 .6 million) .
(c)
Included in operating expenses was $1 .4 million related to transition payments paid to eligible associates for the year
ended December 31, 2015 .
142 n n n N O T E S T O C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S
B O A R D W A L K R E I T A R 2 0 1 6
N O T E 3 3 : S E G M E N T E D I N F O R M AT I O N
Boardwalk REIT specializes in multi-family residential housing and operates primarily within one business segment in five
provinces located wholly in Canada . Each provincial segment operates with a high degree of autonomy . Management
monitors the operating results on a regional basis . Segment performance is evaluated on a number of measures, including
net profit . Financial information reported is on the same basis as used for internal evaluation and allocation of resources .
Boardwalk REIT does not have any one major tenant or a significant group of tenants . Either expiring leases are renewed
or new tenants are found .
Net debt, interest income and expenses, and income taxes are managed on a group basis . Transfer prices between
locations are set on an arm’s-length basis in a manner similar to transactions with third parties and are eliminated upon
inter-company consolidation .
Corporate represents corporate functions, technology assets, activities incidental to operations, and certain comparative
data for divested assets .
Details of segmented information are as follows:
As at
Assets
Liabilities
As at
Assets
Liabilities
December 31, 2016
Alberta Saskatchewan
Ontario
Quebec
Corporate
Total
$ 3,876,081 $ 716,127 $ 270,324
$ 818,622 $
87,459 $ 5,768,613
1,771,533
275,028
105,743
322,611
272,379
2,747,294
December 31, 2015
Alberta Saskatchewan
Ontario
Quebec
Corporate
Total
$ 3,826,007 $ 716,341 $ 246,612
$ 807,290 $ 237,592 $ 5,833,842
1,640,502
264,309
93,257
312,457
312,579
2,623,104
A R 2 0 1 6 B O A R D W A L K R E I T
N O T E S T O C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S n n n 143
Year ended December 31, 2016
Alberta Saskatchewan
Ontario
Quebec
Corporate
Total
$ 275,606 $ 58,591 $ 25,903
$ 71,834 $
206 $ 432,140
4,727
405
527
280,333
58,996
26,430
Rental revenue
Ancillary rental income
Total rental revenue
Rental expenses
Operating expenses
Utilities
Property taxes
Net operating income (loss)
Financing costs (a)
Administration
Depreciation and amortization (b)
57,915
25,577
27,690
169,151
51,312
320
4,023
10,835
8,475
4,523
35,163
8,428
7
798
Profit (loss) before the undernoted
113,496
25,930
Fair value (losses) gains
(162,636)
(24,000)
Profit (loss) before income tax
(49,140)
1,930
Income tax expense (c)
–
–
1,031
72,865
17,957
6,463
7,893
40,552
7,826
117
809
31,800
(9,689)
22,111
16
222
6,706
438,846
6,466
155
154
97,620
44,711
43,416
(6,553)
253,099
9,404
33,461
4,242
79,774
33,947
10,079
(53,660)
129,299
(5,837)
(186,681)
(59,497)
(57,382)
–
(58)
(58)
4,447
4,041
3,156
14,786
2,804
42
207
11,733
15,481
27,214
–
Profit (loss) for the year
$ (49,140) $
1,930 $ 27,214
$ 22,111 $ (59,555) $ (57,440)
Other comprehensive income
–
–
–
–
–
–
Total comprehensive (loss) income
$ (49,140) $
1,930 $ 27,214
$ 22,111 $ (59,555) $ (57,440)
Additions to non–current assets (d)
$ 209,162 $ 10,699 $
8,415
$ 19,026 $
5,857 $ 253,159
Rental revenue
Ancillary rental income
Total rental revenue
Rental expenses
Operating expenses
Utilities
Property taxes
Net operating income (loss)
Financing costs (a)
Administration
Depreciation and amortization (b)
Loss on sale of assets
Fair value (losses) gains
Profit (loss) before income tax
Income tax expense (c)
Profit (loss) for the year
Year ended December 31, 2015
Alberta Saskatchewan
Ontario
Quebec
Corporate
Total
$ 300,515 $ 61,248 $ 36,669
$ 70,546 $
231 $ 469,209
4,755
305,270
54,537
25,082
24,109
201,542
51,154
401
3,703
434
61,682
10,779
7,650
4,397
38,856
9,121
(80)
747
–
(286,627)
(140,343)
–
(4)
(13,062)
16,002
–
743
37,412
6,759
6,395
4,732
19,526
3,572
58
267
15,629
(6,524)
54,196
63,301
–
1,006
71,552
17,094
6,878
7,700
39,880
8,302
189
805
1
232
5,003
195
136
6,939
476,148
94,172
46,200
41,074
(5,102)
294,702
13,221
32,839
4,127
85,370
33,407
9,649
30,584
(55,289)
166,276
–
50,572
81,156
–
(327)
(6,855)
64,560
8,944
(212)
(130,361)
29,060
(212)
Profit (loss) before the undernoted
146,284
29,068
$ (140,343) $ 16,002 $ 63,301
$ 81,156 $
8,732 $ 28,848
Other comprehensive income
563
451
–
–
–
1,014
Total comprehensive (loss) income
$ (139,780) $ 16,453 $ 63,301
$ 81,156 $
8,732 $ 29,862
Additions to non–current assets (d)
$ 47,226 $ 11,946 $
6,654
$ 18,280 $ 18,494 $ 102,600
144 n n n N O T E S T O C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S
B O A R D W A L K R E I T A R 2 0 1 6
(a) Financing costs
Financing costs were as follows:
Year ended December 31, 2016
Alberta Saskatchewan
Ontario
Quebec
Corporate
Total
Interest on secured debt (mortgages
payable)
$ 51,168 $
8,421 $
2,757
$
7,802 $
– $ 70,148
Interest capitalized to properties
under development
LP Class B unit distribution
Other interest charges
Interest income
Total
–
–
144
–
(9)
–
16
–
–
–
47
–
–
–
28
(4)
(60)
9,990
1,196
(69)
9,990
1,431
(1,722)
(1,726)
$ 51,312 $
8,428 $
2,804
$
7,826 $
9,404 $ 79,774
Year ended December 31, 2015
Alberta Saskatchewan
Ontario
Quebec
Corporate
Total
Interest on secured debt (mortgages
payable)
$ 51,014 $
9,107 $
3,522
$
8,279 $
– $ 71,922
Interest capitalized to properties
under development
LP Class B unit distribution
Other interest charges
Interest income
Total
–
–
141
(1)
–
–
14
–
–
–
61
(11)
–
–
23
–
–
13,604
1,239
(1,622)
–
13,604
1,478
(1,634)
$ 51,154 $
9,121 $
3,572
$
8,302 $ 13,221 $ 85,370
(b) Depreciation and amortization
This represents depreciation and amortization on items carried at cost and primarily includes deferred financing charged,
corporate assets, technology assets, site equipment and other assets . These figures exclude any impairment charges .
(c)
Income tax recovery
This relates to any current and deferred taxes .
(d) Additions to non-current assets (other than financial instruments and deferred tax assets)
This represents the total cost incurred during the year to acquire non-current assets (other than financial instruments and
deferred tax assets), measured on an accrual basis .
N O T E 3 4 : S U B S E Q U E N T E V E N T S
One of the Trust’s properties known as Westridge B in Edmonton, Alberta, consisting of 91 units, was severely damaged by
a fire the morning of February 16, 2017 . There were no injuries and everyone was evacuated safely from the building . Cost
of the damage, if the entire building needs to be rebuilt, is estimated to be up to $20 million . Although the fire investigation
has not yet started, the Trust believes its property insurance will adequately cover the damage costs, less a deductible of
$100 thousand, and has business interruption coverage for the next 24 months .
N O T E 3 5 : A P P R O V A L O F C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S
The consolidated financial statements were approved by the Board of Trustees and authorized on February 16, 2017 .
A R 2 0 1 6 B O A R D W A L K R E I T
N O T E S T O C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S n n n 145
Five Year Summary
($000’s except per unit and per square foot)
2012
(IFRS)
2013
(IFRS)
2014
(IFRS)
2015
(IFRS)
2016
(IFRS)
Assets
Investment properties
Other assets
Total assets
Mortgages payable
Other liabilities
Deferred income taxes
Unitholders’ equity
$ 5,493,448
$ 5,745,207
$ 5,778,108
$ 5,540,299
$ 5,612,568
181,854
180,476
193,537
293,543
156,045
$ 5,675,302
$ 5,925,683
$ 5,971,645
$ 5,833,842
$ 5,768,613
$ 2,248,176
$ 2,261,412
$ 2,169,499
$ 2,272,447
$ 2,435,666
377,018
364,699
444,145
350,640
311,624
$ 2,625,194
$ 2,626,111
$ 2,613,644
$ 2,623,087
$ 2,747,290
7
50
13
17
4
3,050,101
3,299,522
3,357,988
3,210,738
3,021,319
Total liabilities and unitholders’ equity
$ 5,675,302
$ 5,925,683
$ 5,971,645
$ 5,833,842
$ 5,768,613
Trust units outstanding (000) (including LP B Units)
52,327
52,395
51,996
51,322
50,739
Trust unit price at year-end ($)
Market capitalization ($MM)
Number of rental units
Fair value per rental unit ($000)
Long-term debt per rental unit ($000)
Net rentable square feet (000)
Fair value per square foot ($)
Long-term debt per square foot ($)
Average net rentable SF per unit
$
64 .53
$
59 .85
$
61 .54
$
47 .45
$
48 .65
3,376 .7
35,277
156
64
3,135 .8
35,386
162
64
3,199 .8
34,626
167
63
2,435 .2
32,947
168
69
2,468 .4
33,773
166
72
29,936
30,022
29,466
28,199
28,924
184
75
849
191
75
848
196
74
851
196
81
856
194
84
856
L/T debt weighted average interest rate
3 .69%
3 .46%
3 .34%
3 .01%
2 .78%
146 n n n F I V E Y E A R S U M M A R Y
B O A R D W A L K R E I T A R 2 0 1 6
Five Year Summary
($000’s except per unit)
Rental revenue
Ancillary rental income
Total rental revenue
Rental expenses
Operating expenses
Utilities
Property taxes
Net operating income
Operating margin
Financing costs
Administration
Depreciation and amortization
Profit from continuing operations before
the undernoted
Gain (loss) on sale of assets
Fair value gains (losses)
Profit (loss) from continuing operations before
income tax (expense) recovery
Income tax (expense) recovery
Profit (loss) from continuing operations
Profit from discontinued operations, net of tax
Profit (loss) for the year
Other comprehensive income
2012
(IFRS)
2013
(IFRS)
2014
(IFRS)
2015
(IFRS)
2016
(IFRS)
$ 433,205
$ 446,626
$ 466,435
$ 469,209
$ 432,140
6,696
6,958
6,810
6,939
6,706
439,901
453,584
473,245
476,148
438,846
87,143
39,921
36,773
89,002
42,121
38,272
93,969
47,572
40,091
94,172
46,200
41,074
97,620
44,711
43,416
276,064
284,189
291,613
294,702
253,099
63%
98,062
28,909
10,922
63%
88,818
32,202
11,920
62%
91,977
32,943
11,933
62%
85,370
33,407
9,649
58%
79,774
33,947
10,079
138,171
151,249
154,760
166,276
129,299
135
–
(235)
(6,855)
–
549,986
174,424
81,126
(130,361)
(186,681)
688,292
325,673
235,651
29,060
(57,382)
222
688,514
–
688,514
2,850
(538)
325,135
12,595
337,730
2,149
(41)
235,610
11,181
246,791
2,445
(212)
28,848
–
28,848
1,014
(58)
(57,440)
–
(57,440)
–
Total comprehensive income (loss)
$ 691,364
$ 339,879
$ 249,236
$
29,862
$
(57,440)
Earnings (loss) per unit – continuing operations
– diluted
$
14 .40
$
5 .98
$
4 .93
$
(0 .40)
$
(1 .24)
Earnings per unit – discontinued operations – diluted $
–
$
0 .24
$
0 .23
$
–
$
–
Funds from operations
$ 150,343
$ 168,184
$ 175,825
$ 184,852
$ 144,465
Funds from operations per unit – fully diluted
$
2 .87
$
3 .21
$
3 .37
$
Interest Coverage Ratio, Continuing operations
2 .76
3 .15
3 .37
$
3 .56
3 .64
2 .84
3 .14
Fiscal year ended December 31, 2013 has been restated to present discontinued operations consistent with fiscal year ended December 31, 2014 .
A R 2 0 1 6 B O A R D W A L K R E I T
F I V E Y E A R S U M M A R Y n n n 147
2016 Quarterly Results
(in $000’s except per unit amounts)
Q1
Q2
Q3
Q4
31-Dec-16
Rental revenue
Ancillary rental income
Total rental revenue
Rental expenses
Operating expenses
Utilities
Property taxes
Net operating income
Financing costs
Administration
Depreciation and amortization
Profit before the undernoted
Fair value gains (losses)
Profit (loss) before income tax
Income tax (expense) recovery
Profit (loss) for the period
$ 111,590
$ 108,805
$ 107,283
$ 104,462
$ 432,140
1,778
1,601
1,668
1,659
6,706
113,368
110,406
108,951
106,121
438,846
23,227
13,137
9,940
67,064
19,762
9,430
2,342
35,530
20,536
56,066
131
56,197
23,973
9,998
9,956
66,479
20,122
9,160
2,422
34,775
(28,122)
6,653
(85)
6,568
24,339
9,455
11,999
63,158
20,011
7,242
2,564
33,341
(68,900)
(35,559)
26,081
12,121
11,521
56,398
19,879
8,115
2,751
97,620
44,711
43,416
253,099
79,774
33,947
10,079
25,653
129,299
(110,195)
(186,681)
(84,542)
(57,382)
41
(145)
(58)
(35,518)
(84,687)
(57,440)
Total comprehensive income (loss)
$
56,197
$
6,568
$
(35,518) $
(84,687) $
(57,440)
Earnings (loss) per unit – diluted
$
1 .21
$
0 .14
$
(1 .16) $
(1 .89) $
(1 .24)
Funds from operations
$
39,124
$
38,554
$
37,186
$
29,601
$ 144,465
Funds from operations per unit – fully diluted
$
0 .77
$
0 .76
$
0 .73
$
0 .58
$
2 .84
148 n n n Q U A R T E R L Y R E S U L T S
B O A R D W A L K R E I T A R 2 0 1 6
2015 Quarterly Results
(in $000’s except per unit amounts)
Q1
Q2
Q3
Q4
31–Dec–15
Rental revenue
Ancillary rental income
Total rental revenue
Rental expenses
Operating expenses
Utilities
Property taxes
Net operating income
Financing costs
Administration
Depreciation and amortization
Profit before the undernoted
Loss on sale of assets
Fair value gains (losses)
Profit (loss) before income tax
Income tax (expense) recovery
Profit (loss) for the period
Other comprehensive income
$ 118,303
$ 119,105
$ 117,897
$ 113,904
$ 469,209
1,732
1,642
1,782
1,783
6,939
120,035
120,747
119,679
115,687
476,148
23,047
14,811
10,093
72,084
20,782
8,293
2,218
40,791
–
30,856
71,647
(223)
71,424
23,573
10,229
10,115
76,830
20,315
8,651
2,486
45,378
(4)
(10,906)
34,468
24,145
9,959
10,670
74,905
20,131
8,320
2,375
44,079
(6,841)
(228,801)
(191,563)
23,407
11,201
10,196
70,883
24,142
8,143
2,570
36,028
(10)
78,490
114,508
125
(54)
(60)
34,593
(191,617)
114,448
94,172
46,200
41,074
294,702
85,370
33,407
9,649
166,276
(6,855)
(130,361)
29,060
(212)
28,848
555
459
–
–
1,014
Total comprehensive income (loss)
$
71,979
$
35,052
$ (191,617) $ 114,448
$
29,862
Earnings (loss) per unit – diluted
$
1 .19
$
0 .51
$
(4 .03) $
1 .93
$
(0 .40)
Funds from operations
$
44,181
$
48,857
$
47,588
$
44,225
$ 184,852
Funds from operations per unit – fully diluted
$
0 .85
$
0 .94
$
0 .92
$
0 .86
$
3 .56
A R 2 0 1 6 B O A R D W A L K R E I T
Q U A R T E R L Y R E S U L T S n n n 149
Market and Unitholder Information
SOLICITORS
Gowling Lafleur Henderson llp
1600, 421 - 7 Avenue SW
Calgary AB T2P 4K9
Butlin Oke Roberts & Nobles
100, 1501 - 1 Street SW
Calgary, Alberta T2R 0W1
BANKERS
Toronto Dominion Bank
Suite 1100, 421 - 7th Avenue SW
Calgary, Alberta T2P 4K9
AUDITORS
Deloitte llp
700, 850 – 2 Street SW
Calgary, Alberta T2P 0R8
REGISTRAR & TRANSFER AGENT
Computershare Trust Company of Canada
Our Transfer Agent can help you with a variety of
unitholder related services, including change of address,
tax forms, accounts consolidation and transfer of stock .
600, 530 – 8 Avenue SW
Calgary, Alberta T2P 3S8
Telephone: 403 267-6800
INVESTOR RELATIONS
Unitholders seeking financial and operating
information may contact:
James Ha, Director; Mortgage and Finance
Telephone: 403 531-9255
Investor Relations Toll Free: 1-855-626-6739
Fax: 403 531-9565
Web: www .BoardwalkREIT .com
Email: investor@bwalk .com
ONLINE INFORMATION
For an online version of the current and past annual reports,
quarterly reports, press releases and other Trust information,
please visit our investor website at www .BoardwalkREIT .com .
ANNUAL GENERAL MEETING
The Annual General Meeting of the Unitholders of Boardwalk REIT
will be held at the Petroleum Club, 319-5 Ave SW, Calgary, Alberta,
at 3:00 pm (MT) on May 11, 2017 .
Unitholders are encouraged to attend and those unable to do so
are requested to complete the Form of Proxy and forward it at
their earliest convenience .
EXCHANGE LISTINGS
The Toronto Stock Exchange
Symbol: BEI .UN
TRADING PROFILE
TSX: Jan 1, 2016 to Dec 31, 2016
High: $59 .76
Low: $38 .47
Year End Closing Price: $48 .65
Monthly Distributions
Month
Per Unit
Annualized
Jan-16
$0 .170
Feb-16
$0 .1875
Mar-16
$0 .1875
Apr-16
$0 .1875
May-16
$0 .1875
Jun-16
$0 .1875
Jul-16
$0 .1875
Aug-16
$0 .1875
Sep-16
Oct-16
$0 .1875
$0 .1875
Nov-16
$0 .1875
Dec-16
$0 .1875
Jan-17
$0 .1875
Feb-17
$0 .1875
Mar-17
$0 .1875
Apr-17
$0 .1875
$2 .04
$2 .25
$2 .25
$2 .25
$2 .25
$2 .25
$2 .25
$2 .25
$2 .25
$2 .25
$2 .25
$2 .25
$2 .25
$2 .25
$2 .25
$2 .25
Record
Date
Distribution
Date
29-Jan-16
15-Feb-16
29-Feb-16
15-Mar-16
31-Mar-16
15-Apr-16
29-Apr-16
16-May-16
31-May-16
15-Jun-16
30-Jun-16
15-Jul-16
29-Jul-16
15-Aug-16
31-Aug-16
15-Sep-16
30-Sep-16
17-Oct-16
31-Oct-16
15-Nov-16
30-Nov-16
15-Dec-16
30-Dec-16
16-Jan-17
31-Jan-17
15-Feb-17
28-Feb-17
15-Mar-17
31-Mar-17
17-Apr-17
28-Apr-17
15-May-17
150 n n n M A R K E T A N D U N I T H O L D E R I N F O R M A T I O N
B O A R D W A L K R E I T A R 2 0 1 6
Corporate Information
EXECUTIVE OFFICE
First West Professional Building
Suite 200, 1501 – 1 Street SW
Calgary, Alberta T2R 0W1
Phone: 403 531-9255
Investor Relations
Toll Free: 1-855-626-6739
Fax: 403 531-9565
Web: www .BoardwalkREIT .com
BOARD OF TRUSTEES
Sam Kolias
Chairman of the Board
Calgary, Alberta
James Dewald (3)
Calgary, Alberta
Gary Goodman (2)
Toronto, Ontario
Art Havener (1) (2) (3)
St . Louis, MO
Samantha Kolias
Calgary, Alberta
Al Mawani (3)
Thornhill, Ontario
Andrea Stephen (2)
Toronto, Ontario
(1) Lead Trustee
(2) Member of the Audit and
Risk Management Committee
(3) Member of the Compensation, Governance
and Nominations Committee
SENIOR MANAGEMENT
Jonathan Brimmell
Vice President, Operations, Ontario and
Quebec
Dean Burns
General Counsel and Secretary
Ian Dingle
Vice President, Purchasing and Contracts
Roberto Geremia
President
Sam Kolias
Chief Executive Officer
Van Kolias
Senior Vice President, Quality Control
Kelly Mahajan
Vice President, Customer Service and
Process Design
Helen Mix
Vice President, Human Resources
Lisa Russell
Senior Vice President, Acquisition and
Development
William Wong
Chief Financial Officer
A R 2 0 1 6 B O A R D W A L K R E I T
C O R P O R A T E I N F O R M A T I O N n n n 151
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BOARDWALK REIT
First West Professional Building
Suite 200, 1501 – 1 Street SW
Calgary, Alberta T2R 0W1
Phone: 403 531-9255 Fax: 403 531-9565
Website: www.BoardwalkREIT.com
printed in Canada