BOARDWALK
2019 ANNUAL REPORT
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16.3%
GROWTH IN FFO PER TRUST UNIT
$2.57
FFO PER TRUST UNIT
8.2%
SAME-PROPERTY NOI GROWTH
$258 million
LIQUIDITY AVAILABLE AT THE END OF 2019
$63.72
NET ASSET VALUE PER TRUST UNIT
>25%
MANAGEMENT OWNERSHIP
Boardwalk REIT strives to provide
Canada’s friendliest communities
and currently owns and operates
more than 200 communities
with over 33,000 residential
units totaling over 28 million net
rentable square feet. Boardwalk’s
principal objectives are to provide
its Residents with the best quality
communities and superior customer
service, provide Unitholders with
enhanced returns, 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
1,600 Associates, all helping to
bring Residents home to properties
located in Alberta, Saskatchewan,
Ontario, and Quebec.
Transformative.
Collaborative.
Innovative.
Boardwalk has transformed the product
quality, service, and experience it
provides to its Resident Members by
re-engineering many of its communities
through its three distinct brands
offering a diverse product offering
that caters to a broader demographic
in all of Boardwalk Regions, including
its largest cities of Edmonton,
Calgary, Montreal and London. This
transformation has been rewarded by
higher market share, strong retention,
and solid operating and financial
performance in each of our regions.
Boardwalk’s peak-performance
culture has increased our productivity,
accountability, and efficiency in the
way we deliver the best quality
communities for our Resident
Members. Collaboration between
our team and our Resident Members
has created a feedback loop that
provides an opportunity for continual
change and improvement. This
collaboration positions Boardwalk
to be leaders in housing by striving to
meet the needs of our stakeholders.
By providing homes that are newly
renovated, amenity rich, and with a
larger footprint while still focusing on
affordability, Boardwalk has gained
share in all of our markets. In addition to
achieving good returns, the longer-lasting
materials we are using in our current
renovation specification are providing
for cost savings through both longevity
and energy efficiency. Boardwalk has
introduced an improved Resident
Member portal that offers maximum
self-service, improving and responding to
the needs of our Resident Members.
Table of Contents
Operations Review 2 — Letter to Unitholders 4 — Team Boardwalk 8 — Financial Review 13 —
Managements Discussion and Analysis 14 — Management’s Report 82 — Independent Auditor’s Report 83 —
Financial Statements 85 — Notes to the Consolidated Financial Statements 89 — Corporate Information 144
2019 ESG Report AT END
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OPERATIONS PORTFOLIO
1 Edmonton/St. Albert/Spruce Grove
13,030 UNITS | 39.2% OF PORTFOLIO
7 Québec City
1,319 UNITS | 4.0% OF PORTFOLIO
2 Calgary/Airdrie/Banff
5,956 UNITS | 17.9% OF PORTFOLIO
8 Red Deer
939 UNITS | 2.8% OF PORTFOLIO
3 Montréal
9 Grande Prairie
4,681 UNITS | 14.1% OF PORTFOLIO
645 UNITS | 1.9% OF PORTFOLIO
4 London/Kitchener
10 Fort McMurray
2,585 UNITS | 7.8% OF PORTFOLIO
352 UNITS | 1.1% OF PORTFOLIO
5 Regina
2,046 UNITS | 6.1% OF PORTFOLIO
6 Saskatoon
1,710 UNITS | 5.1% OF PORTFOLIO
11 Greater Toronto Area
835 UNITS UNDER DEVELOPMENT
(50% JV OWNERSHIP)
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BOARDWALK REIT 2019 ANNUAL REPORT
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RESIDENTIAL UNITS
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BOARDWALK REIT 2019 ANNUAL REPORT S
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Dear Unitholders,
Boardwalk celebrated its 25th year as a
public company, and is proud to share and
report on the progress and results our team
has delivered in 2019 re-establishing our
track record for growth by providing both our
communities and Resident Members with the
best product quality, service and experience.
BOARDWALK REIT 2019 ANNUAL REPORT
This focus positioned Boardwalk to rise and deliver significant
growth to our Unitholders through our enhanced platform
which leverages our three brands and provides Boardwalk’s
Resident Members choice in housing ranging from affordable
living to affordable luxury. By providing a wide range of
housing options, Boardwalk is able to provide homes to a
broader set of Canadians, while always remaining focused
on affordability. Our continual drive to improve the way we
operate ensures we deliver the best product quality, service
and experience to our Resident Members.
2019 PERFORMANCE, DELIVERING ON
OUR STRATEGY
Our strategy for growth provides goals and targets for our
team to achieve and remain disciplined in our approach
towards delivering value for our Unitholders. In 2019,
Boardwalk produced sector-best Funds from Operation
per unit growth, which resulted in a solid total return to
our Unitholders.
Our continued focus on organic growth through sustainable
rental rate adjustments and decreasing controllable
expenses, resulted in same-property net operating income
(NOI) growth of 8.2%. Our team increased focus on
controllable expenses which additionally resulted in a same-
property NOI margin improvement of over 200 basis points.
Boardwalk’s brand and product diversification program
has allowed Boardwalk to gain market share. In 2019, we
upgraded 16% of our common areas (24% cumulatively
since beginning in 2017) focusing on generating solid returns
with each of these investments. We continue to identify
new and innovative ways to decrease the cost of these
investments. Additionally, Boardwalk upgraded over
1,300 suites with a focus on lower-cost suite renovations
ranging from $10,000 to $15,000 per suite.
Throughout 2019, Boardwalk continued to work toward our
goal of long-term geographic expansion and high-grading
of our portfolio. During 2019, we sold 278 non-core units
in Saskatoon, Saskatchewan and redeployed those funds
to acquire 124 newly constructed units in Edmonton.
Additionally, the Trust entered into its second joint venture
agreement with RioCan Real Estate Investment Trust to
develop a mixed-use project consisting of two towers,
totaling 470 residential units and 12,000 square feet of
retail space in Mississauga, Ontario.
A core principal of Boardwalk’s strategy is our solid financial
foundation. Approximately 99% of Boardwalk debt is
backed by the Government of Canada through the Canadian
Sam Kolias
GOALS
2019 PERFORMANCE
Organic
Growth
Brand &
Product
Diversification
High-grading
& Geographic
Expansion
Solid Financial
Foundation
Produced total revenue
growth of 4.8%
Achieved same property NOI
growth of 8.2%
Achieved SPNOI margin
improvement of over 200 bps
Repositioned/renovated 16%
of common areas
Renovated more than
1,300 apartment units
Repositioned a new Lifestyle
asset in Edmonton
Sold 278 non-core units
in Saskatoon
Acquired 124 newly
constructed units in Edmonton
Acquired 50% interest
in Mississauga, Ontario
development
99% of mortgages secured
under CMHC debt
47% Asset debt (net of cash)
Interest coverage at 2.76x
UNITHOLDER
VALUE
16.3% FFO/Trust Unit growth
24.1% total return
$63.72 NAV per Trust Unit
BOARDWALK REIT
2019 ANNUAL REPORT
5
Mortgage and Housing Corporation (CMHC) thereby
reducing re-financing risk, while also providing low-cost
access to capital.
By executing on Boardwalk’s strategy, our team completed
2019 with Funds From Operations of $2.57 per Trust Unit, a
16.3% increase from our results in 2018, exceeding the high
end of our guidance range. Our Trust Units yielded a return
of over 24% compared to the 17% return generated by the
TSX Capped REIT Index, while our net asset value per unit
increased to $63.72 per Trust Unit.
Revenue, Incentives & Vacancy Loss ($000’s)
Incentives
Vacancy Loss
Rental Revenue
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$111,169
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$109,781
$111,906
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Q4-2018
Q1-2019
Q2-2019
Q3-2019
Q4-2019
CREATING VALUE IN BOTH COMPETITIVE AND SUPPLY-CONSTRAINED MARKETS
Boardwalk’s portfolio of 33,000 apartment units spans four
provinces and ten cities across Canada. Our evolved brand
and operating platform has provided homes with the best
product quality, service and experience to our Resident
Members while rewarding our stakeholders with strong
operating performance.
Our markets are in varying stages of the rental market cycle,
with our two largest cities of Edmonton and Calgary nearing a
level of balance and reflecting market vacancy rates of 4.9%
and 3.9%, respectively, as published by CMHC in its 2019
market rental report. Boardwalk averaged 4.8% and 3.2%
vacancy in these markets in 2019. Our next two largest cities
of Montreal and London are experiencing constraint in housing
supply with a CMHC estimated market vacancy of 1.5% and
1.8%, respectively. Despite these varying conditions, Boardwalk
delivered strong operating results in all of our regions in 2019.
The Trust continually strives to gain market share through
its diversified product mix and superior customer service
standards as demonstrated by its 2019 Net Promoter Score
(NPS) of 65, an internal record reflecting the high-level of
service we provide. In rent-controlled environments, the
Trust uses its brand diversification and value-added capital
investments as an opportunity to provide better product
quality, service and experience that results in higher
rental revenues.
Boardwalk looks forward to introducing our brand to a
new market, the Greater Toronto Area, with two new
developments that are continuing to progress well. The
Trust’s first joint venture GTA development in Brampton,
Ontario is expected to be completed in 2022, for Tower 1,
and 2023, for Tower 2. The second joint venture development
in Mississauga, Ontario is currently in for zoning approval.
OUR FUTURE IS BRIGHT
We are so proud of the efforts and accomplishments our
team has had to date as we have re-engineered the way
Boardwalk is providing homes to our Resident Members. As
we enter 2020, our focus on sustainable, Resident-friendly
rental rate adjustments, coupled with continued innovation in
the way we are providing the best product and service to our
Resident Members, will pave the way for continued long-
term value and growth to all our stakeholders.
Boardwalk is already working on new initiatives for 2020
which will have lasting positive impacts, including an
increased focus on leveraging technology to better improve
our service levels, creating new partnerships that will
provide mutual benefits for our Residents and Stakeholders,
and increasing our investment towards environment and
sustainability initiatives.
Our approach and commitment to our Resident Members to
provide the best quality communities and superior customer
service has remained unchanged. Boardwalk continues to
offer Resident Member friendly programs such as an internal
subsidy program (offering rental increase forgiveness to
Residents who can prove financial hardship as a result of
a rental increase), a self-imposed rent protection program
(limiting the amount of a rental increase in any given year), as
well as Community engagement and experience opportunities
(family movie nights, wine and cheese events and many
others). A family friendly, community, member-experience
focused approach to our operational strategy makes Boardwalk
a premier housing option, which, when coupled with strategic
initiatives of brand diversification, suite renovations, new
partnership/development opportunities and NAV creation
focused portfolio growth, creates value for our Stakeholders.
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BOARDWALK REIT 2019 ANNUAL REPORT Left to right: Van Kolias, Roberto Geremia, William Wong, Jeffrey Klaus, Leonora Davids, Lisa Smandych, Helen Mix, Dean Burns,
Melissa Kolias, Lisa Russell, Sam Kolias, Samantha Kolias-Gunn, Eric Bowers, Bhavnesh Jaraim, James Ha
COVID-19 RESPONSE AND IN CLOSING
At time of writing, March 20, 2020, our world, our
country, our provinces, and our communities are facing an
unprecedented challenge.
The safety and well-being of our Resident Members and
Associates, our family, remains our top priority. Our teams
continue to monitor and assess this rapidly evolving situation
and act accordingly in the best interest of our Resident
Members, Associates, and our Stakeholders while
continuing to provide our essential service of providing
a safe place to call home.
Some of the proactive and precautionary steps we have
taken are:
• Increased our already high-standard of cleaning and
maintenance with more frequent cleaning and sanitization
of common areas, and frequently touched objects.
• The temporary closure of our pools, fitness facilities,
saunas, coffee stations, and community rooms.
• Encouragement of social distancing in our Communities.
• Increasing self-service options for Resident’s through our
online Resident Member portal.
• Provided social distancing options for our Associates.
• Increased procurement, stock, and use of Personal
Protective Equipment for our Team.
• Continue with our Resident-friendly approach on a case by
case basis, working on mutual resolves.
Boardwalk is committed to delivering essential housing to
all of our Resident Members, while keeping everyone safe
and healthy. Our team’s dedication to ensuring cleanliness,
safety, and support for our Resident Members through this
time of crisis has been nothing short of heroic.
Thank you to our team of Associates for their dedication and
commitment for delivering the best communities, and the
best service and experience to our Resident Members.
Thank you to Unitholders, financial, and operating partners
for their continued support.
A special thanks to CMHC, Boardwalk’s largest financial
partner, which continues to provide mortgage insurance
products that maintain low interest rates and mitigate
renewal risks, all of which allow Boardwalk to continue
providing the best value in rental housing for Canadians.
A further thanks to our Board of Trustees for their discipline,
guidance and continued focus on excellence in governance
and corporate strategy.
Lastly, thank you to our Resident Members for their
continued loyalty, trust, and for calling Boardwalk home.
Over our 35-year history, we have continued to succeed in
creating value, and we are positioned to continue enhancing
value and growth for all our Stakeholders.
Respectfully,
Sam Kolias
CHAIRMAN AND CEO
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BOARDWALK REIT 2019 ANNUAL REPORT K
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Through the continued guidance and
leadership of the Trust’s experienced
management team, Boardwalk continues
to rise as an industry leader.
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BOARDWALK REIT
2019 ANNUAL REPORT
Design
Finance, Investor Relations & Legal
Devon Queen, Jeff Brown, Melissa Kolias,
Arvinder Dhol, Kanav Saini & Carla Cornejo
Front: Florence Lum & Lynn Hunt
Back: James Ha, Dean Burns & Andrew Wiebe
Purchasing
Recovery & Defaults
Marcie Friesen, Emilio Loria, Josie Ann Osborne,
Michelle Poulin & Vanessa Ambrose
Front: Christina Ho, Shirley Xu,
Marie Ma & Nada Mansour
Back: Harry Giannakopoulos,
Carla Livingstone & Nathan Carver
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BOARDWALK REIT 2019 ANNUAL REPORT Accounting & Insurance
Acquisitions & Development
Accounting: Lisa Smandych, Sheila Odie &
Elsa Yuen (Missing William Wong)
Insurance: Dean Reiman (far right)
(Missing: Theresa Black)
Front: Jeffrey Klaus, Alana To, Lisa Russell,
Nathan Palin & Matthew Wu
Back: Eric Bowers & Bryce MacKenzie
Preventative Maintenance
Offshore Manufacturing
Ben Gourlay, Seema Lawrence & Norm Dietterle
(Missing: James Dudley)
Marie Ma & Dean Burns
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BOARDWALK REIT 2019 ANNUAL REPORT Marketing & Customer Service
Alberta Operations Directors
Eva Kanovich, Megan Quast, Kristy Anderson,
Michael Coles & Paul Lewis
Front: Haroon Khan, Leonora Davids,
Boyd Belisle, Darlene Dove & Tanya Szumlas
Back: Andrew Christopher, Razvan Costin, Dwayne
Harper, Matthew Gabruch, Paul Manley & Gagandeep Bal
Human Resources
IT
Gillian Calderon Dominguez,
Helen Mix & Sharon Hamilton
Left to Right: Jeff Cooper, Johnny Fong, Suzanne St. Jean,
Anthony Arcuri, Kevin Perry, Melanie Virtue, Patrick Nebeling,
Jim Ross, Jody Derkach & Bhavnesh Jaraim
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BOARDWALK REIT 2019 ANNUAL REPORT BRIO, Calgary, AB; Coming April 1, 2020
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BOARDWALK REIT 2019 ANNUAL REPORT FINANCIAL REVIEW CONTENTS
Management’s Discussion and Analysis
Financial Statements
Forward-looking Statements
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MANAGEMENT’S REPORT
INDEPENDENT AUDITOR’S REPORT
FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
Supplemental Information
MARKET AND UNITHOLDER INFORMATION
CORPORATE INFORMATION
EXECUTIVE SUMMARY
Business Overview
Environmental, Social and Governance (ESG) Overview
MD&A Overview
Outlook
Declaration of Trust
Values, Vision and Objectives
Presentation of Financial Information
and Non-GAAP Measures
Investment Philosophy
Performance Review of 2019
CONSOLIDATED OPERATIONS AND
EARNINGS REVIEW
Overall Review
Segmented Operational Review
Operational Sensitivities
Stabilized Property Results
Financing Costs
Administration
Depreciation
Other Income and Expenses
FINANCIAL CONDITION
Review of Consolidated Statements of Cash Flows
Capital Structure and Liquidity
RISKS AND RISK MANAGEMENT
General Risks
Specific Risks
Certain Tax Risks
Risks Associated with Disclosure Controls and Procedures
& Internal Control over Financial Reporting
ACCOUNTING AND CONTROL MATTERS
Critical Accounting Policies
Application of New and Revised IFRSs and
Future Accounting Policies
International Financial Reporting Standards
Disclosure Controls and Procedures & Internal
Control over Financial Reporting
2019 FINANCIAL OUTLOOK AND
MARKET GUIDANCE
Selected Consolidated Financial Information
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BOARDWALK REIT 2019 ANNUAL REPORT
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the Years Ended, December 31, 2019 and 2018
Forward-looking Statements
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 12 months ended
December 31, 2019 and 2018. 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 27, 2020 unless
otherwise stated, and should be read in conjunction with Boardwalk’s audited annual consolidated financial statements for the years ended
December 31, 2019 and 2018, 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, circumstances, 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
estimates and assumptions, which are subject to risks and uncertainties, including those described in Boardwalk REIT’s 2019 Annual
Information Form (“AIF”) dated February 27, 2020 under the heading “Challenges and Risks”, which could cause actual events or results to
differ materially from the forward-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”) provided all 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 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
a result of new information, future events, or otherwise.
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BOARDWALK REIT 2019 ANNUAL REPORT EXECUTIVE SUMMARY
Business Overview
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 15, 2019 (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, 2019, 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 2019, Boardwalk REIT’s property portfolio was
concentrated in the provinces of Alberta, Saskatchewan, Ontario and Quebec.
At December 31, 2019 and 2018, the fair value of Boardwalk’s Investment Property assets was approximately $6.1 billion and
$5.9 billion, respectively, which generated a profit of $120.9 million and $100.9 million for the years ended December 31, 2019
and 2018 (before fair value (losses) gains, loss on sale of assets, and income taxes), respectively. For the years ended
December 31, 2019 and 2018 , the Trust earned $131.0 million and $112.1 million, respectively, of Funds From Operations
(“FFO”), or $2.57 and $2.21 per Unit on a diluted basis. Adjusted Funds From Operations (“AFFO”) for the years ended
December 31, 2019 and 2018 were $106.9 million and $89.0 million, respectively, or $2.10 and $1.75 per Unit on a diluted basis.
Environmental, Social and Governance (ESG) Overview
The Trust is, and continues to be, committed to environmental, social and governance (“ESG”) objectives and initiatives.
As part of its 2019 Annual Report, the Trust has included a separate ESG Report.
MD&A Overview
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 2019 Annual Report, the audited consolidated financial statements for the years ended December 31, 2019
and 2018, and the Annual Information Form (“AIF”) dated February 27, 2020, along with all other publicly posted information on
the Corporation and Boardwalk REIT. It is not our intent to reproduce information that is in these other reported documents,
but rather to highlight some of the key points and refer you to these documents for more detailed information.
Outlook
The Bank of Canada, in its January 2020 Monetary Policy Report, increased Canada’s real Gross Domestic Product (“GDP”)
growth projection to 1.6% for 2019, from 1.5% previously reported in its October Report, as a result of revisions to business and
government investment. The Bank of Canada estimates that growth in the fourth quarter of 2019 slowed but is forecasted to
rebound in the first quarter of 2020; however, growth still remains moderate at 1.3%. The Bank still sees challenges in the oil and
gas sector and the difficult global environment continues to weigh on business investment and exports; however, there are early
indications that the level of investment in the oil and gas sector is stabilizing. The Bank’s sentiment is that overall the labour
market continues to be healthy and job gains were strong through 2019. These new jobs were concentrated in the service sector
and were largely full-time. The Bank anticipates that economic activities will improve through 2020 and grow just above the rate
of potential in 2021. The Bank has estimated GDP growth of 1.6% and 2.0% for 2020 and 2021, respectively.
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BOARDWALK REIT 2019 ANNUAL REPORT Royal Bank of Canada, in its December 2019 provincial outlook report, projected all provincial economies to grow in 2020,
something that has not happened since 2010-2011. Royal Bank believes that most provinces will see modest gains, with Western
Canada recording some of the stronger advances. The Royal Bank expects Alberta’s 2019 GDP growth to be 0.6%; however, is
forecasting 1.7% for 2020 and up to 2.3% for 2021. The Royal Bank believes there are good reasons to feel cautiously optimistic
about Alberta growth prospects in 2020, including the gradual lifting of mandated oil production cuts, which will set the stage for
significant energy outputs, gains in existing pipeline efficiency, the entry into operation of the Canadian section of Enbridge’s
Line 3 Pipeline, and increasing crude-by-rail capacity. Additionally, corporate tax cuts by the provincial government will also create
a more favourable investment environment in the province. The Royal Bank expects employment growth to nearly double to
1.1% in 2020 (from 0.6% in 2019). For Saskatchewan, the Royal Bank has predicted GDP growth of 0.6% for 2019, but this is
expected to increase to 1.2% in 2020 and 1.9% in 2021. Royal Bank expects eastern provinces to see a moderation in growth
in 2020, as both Ontario and Quebec are in the mature (or maturing) stages of their business cycle.
In 2019, Boardwalk continued to offer short-term incentives to its new and existing Resident Members to increase and
maintain overall occupancy. Maintaining higher occupancy levels by offering select incentives and focusing on excellence in
customer service remains Boardwalk’s key performance strategy. Boardwalk is taking a measured approach to reducing
incentives on a property-by-property basis, subject to occupancy levels and availability. Canada Mortgage and Housing
Corporation (“CMHC”) is currently projecting vacancy levels for Calgary and Edmonton to decline and rental rates to rise as
the demand for affordable housing continues to increase as a result of more stringent National mortgage qualification rules,
continued positive net migration into Alberta, and measured delivery of new housing supply. In 2019, the federal government
introduced the First Time Homebuyer Incentive, which commenced November 1, 2019. This incentive reduces the monthly
mortgage payments for first time homebuyers and, as it is in its infancy, it is difficult to determine at this point the impact of
this program on the Canadian residential rental market.
Boardwalk continues to move forward with its development opportunities. During the third quarter of 2019, and subject to zoning
approvals, the Trust finalized a joint venture mixed-use project with RioCan REIT (“RioCan”) to build a 25-storey tower and
a 16-storey tower, consisting of 470 residential units totaling approximately 418,000 buildable square feet and approximately
12,000 square feet of retail space. The project is located on a discrete portion of land at RioCan’s Sandalwood Shopping Centre
in Mississauga, Ontario. The project proposes three levels of underground parking and will provide premium rental housing in a
transit-oriented location along Hurontario Street near Square One Shopping Centre, and easy access onto the 401, 403 and
407 highways. In December of 2018, Boardwalk finalized a 50:50 joint venture agreement with a private real estate company to
build two concrete residential towers, totaling 365 units plus approximately 10,700 square feet of retail space, in Brampton,
Ontario directly adjacent to the Brampton GO Transit Station. Excavation and shoring began in January 2019, was completed in the
summer, and forming is now underway. Construction of Phase-3 of Pines Edge in Regina, Saskatchewan, which was started in
2017 and consisted of 71 units, was completed in mid-2018 and has reached stabilized occupancy. 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, substantially completed at the end of January 2020, is a 12-storey
tower with approximately 130,000 square feet of residential, consisting of 162 units, and 10,000 square feet of retail space. The
development provides premium rental housing at a desirable location that is along the Calgary Light Rail Transit Line, and in close
proximity to the University of Calgary, Foothills Hospital, and McMahon Stadium. The Trust closed on the 50% land purchase
from RioCan in November of 2017 and construction of the project was substantially completed on schedule and on budget.
Boardwalk’s development opportunities include additional projects to be built on the Trust’s excess land density. These
developments are in various stages of market analysis, planning and approval, and will further add newly-constructed assets
to the Trust’s portfolio.
In December of 2018, the Trust received a negative Alberta Court decision relating to Boardwalk’s Axxess Community in
Edmonton and its inclusion in a condominium corporation with a neighboring property. All costs assessed have been paid.
The Trust continues to evaluate its options as it relates to this asset, and is working with the condominium corporation.
During 2019, the Trust renewed approximately $520 million of 2019 mortgage maturities, with an average term of eight years
at a weighted average interest rate of 3.00%, a slight increase from the average maturing rate on these completed mortgages.
In addition, the Trust obtained close to $111 million of additional mortgage funds. For the year ended December 31, 2019,
principal repayment totaled $68.2 million. As of February 2020, CMHC-insured five- and 10-year mortgage rates were
estimated to be 2.30% and 2.40%, respectively. In 2020, the Trust has a total of $317.6 million of mortgages maturing.
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BOARDWALK REIT 2019 ANNUAL REPORT To date, the Trust has renewed or forward locked the interest rate on $41.4 million, or 13% of these mortgage maturities at an
average interest rate of 2.35%, while extending the term of these mortgages by an average of eight years.
The Trust takes 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 low interest rates, and,
third, ensure sufficient liquidity for the Trust’s strategic initiatives.
BOARDWALK’S LONG-TERM STRATEGIC PLAN
Boardwalk’s long-term strategic plan focuses on continuing to create value for all its stakeholders. In addition to continued
investment in its core markets by acquiring newly-built or well located and well maintained legacy rental products, developing
new rental units and reinvesting back into the Trust’s existing portfolio, Boardwalk will also be strategically diversifying
geographically into new high-growth, but economically stable, rental markets. Strategic diversification will provide Boardwalk
stability and continued growth during future economic volatility, which will result in Net Operating Income (“NOI”) growth and
capital appreciation for its stakeholders.
Strategic diversification is a long-term project the Trust will accomplish over the next 10 years. Boardwalk’s long-term strategic
goal is to have a portfolio that is approximately 50% in the high growth markets of Alberta and Saskatchewan (“ABSK”) and
50% in other secularly high growth and undersupplied markets including, but not limited to, the Greater Toronto Area and
Vancouver. To accomplish this, the Trust intends to strategically partner, acquire and/or develop, 10,000 to 15,000 apartment
units in these secularly high growth, undersupplied markets, while also divesting a small portion of its non-core assets in
ABSK. The Trust’s portfolio growth will primarily focus on value creation in major urban markets.
Since initiating its long-term strategic plan, Boardwalk has entered into new rental markets through its development
partnerships in Brampton and Mississauga, both in Ontario, has high-graded its Western Canadian portfolio through
dispositions of non-core Saskatchewan assets and capital redeployment into superior Alberta assets and has invested value
added capital of $99.2 million in fiscal 2019 and $102.8 million in fiscal 2018 into its existing portfolio.
The funding for this Strategic Plan will be consistent with its balanced approach of using debt and equity. This equity capital
can come from a number of sources and may include, as the Trust has in the past, the sale of selective non-core assets at
prices near or above reported fair values and deploying this freed-up equity back into the strategic process. In addition to this,
as will be discussed later in this document, Boardwalk has an adequate level of liquidity. Although the Trust distributes
monthly distributions to its Unitholders at least equal to its taxable income, the Trust believes that, in the long-term, the
continued reinvestment of free cash flow back into its repositioning and expansion plan is in the best interest of the Trust.
BRAND DIVERSIFICATION
It is the goal of the Trust to not only diversify geographically, but also to diversify through its brand.
The spectrum of rental housing in Canada has expanded over the last few years, with rental demand seen across the price
spectrum from affordability to affordable high-end luxury. As a result, the ability to offer a more diverse product offering will allow
Boardwalk to attract a larger demographic to the Boardwalk brand. Currently, Boardwalk offers three brands as highlighted below:
Boardwalk Lifestyle – Affordable Luxury
Boardwalk Lifestyle features luxury living with modern amenities,
designer suites, and a contemporary style for those who value life
experiences and prefer the freedom to enjoy them.
Boardwalk Communities – Enhanced Value
Boardwalk Communities feature modernized suites and choice
amenities for those who value flexibility with all the comforts that
come with the perfect place to call home.
Boardwalk Living – Affordable Value
Boardwalk Living features classic suites for our Residents who
appreciate flexibility, reliability, and value that comes with a quality home.
52% Living
43% Communities
5%
Lifestyle
Boardwalk brand diversification, once fully completed, will have about 5% Lifestyle, 43% Communities and 52% Living suites.
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BOARDWALK REIT 2019 ANNUAL REPORT BOARDWALK’S BRANDING INITIATIVE AND SUITE UPGRADING PROGRAM
Boardwalk has invested value added capital of $99.2 million in 2019 ($102.8 million in 2018, $180.2 million in 2017), focusing
capital allocation on upgrading common areas, building improvements and suite renovations. Each of the three brands being
created have different renovation specifications depending on needs and anticipated returns. Reported market rents are
adjusted upward based on an expected rate of return on the strategic investment. Boardwalk believes these renovations and
upgrades will continue to achieve future upward excess market rent adjustments as well as cost savings on turnovers.
‘Boardwalk Lifestyle’, which will exemplify upgraded, luxury suites, will receive the highest level of overall renovations,
including significant upgrades to suites and common areas. Additional amenities such as upgraded fitness facilities, wi-fi bars
and added concierge services may be added when appropriate. ‘Boardwalk Communities’, the Trust’s core brand, which will
convey enhanced value and will receive major suite upgrades based on need as well as upgrades to existing common areas.
Boardwalk’s most affordable brand, ‘Boardwalk Living’, will receive suite enhancements on an as needed basis, with the focus
being on providing affordable units to this demographic segment. In determining a brand that a particular rental community
will represent, the Trust looks at a number of criteria, including the building’s location, proximity to existing amenities, suite
size and suite layout. Once renovations are completed, Boardwalk adjusts the rents on these individual suites with the goal of
achieving an 8% return on investment. Boardwalk is achieving its targeted rate of return on an overall basis.
The Trust believes these investments will enhance long-term value, however, recognizes the short-term effects of this
program, with higher vacancies and incentives. Rebranding and repositioning communities will take time and, as such,
construction causes disruption to existing Resident Members and, depending on the level of investment, may result in higher
turnover. Boardwalk continues to reduce the vacancy loss associated with suites being renovated by reducing the time to
completion while still lowering the cost of the renovations.
Declaration of Trust
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 properties; 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, 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. The
Board of Trustees reviews the distributions on a quarterly basis and takes into consideration distribution sustainability and
whether there are more attractive alternatives to the Trust’s current capital allocation strategy, such as its value-added renovation
program, brand diversification initiative, and new construction of multi-family communities in supply-constrained markets.
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BOARDWALK REIT 2019 ANNUAL REPORT COMPLIANCE WITH DOT
At December 31, 2019, 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, 2019, 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 2.76 (December 31, 2018 – 2.68).
Values, Vision and Objectives
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.
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.
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BOARDWALK REIT 2019 ANNUAL REPORT 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’.
• 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, reinvesting 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 risks; and,
• Optimize the use of NHA insurance, which is administered by CMHC, to access more cost-effective debt capital.
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BOARDWALK REIT 2019 ANNUAL REPORT Presentation of Financial Information and Non-GAAP Measures
PRESENTATION OF FINANCIAL INFORMATION
Financial results, including related historical comparatives, contained in this MD&A are based on the Trust’s Consolidated
Financial Statements, unless otherwise specified. The Trust’s Consolidated Financial Statements are prepared in accordance
with International Financial Reporting Standards (“IFRS”).
Effective January 1, 2019, the Trust adopted IFRS 16 -Leases (“IFRS 16”). The Trust leases several assets including land,
warehouse space and office space, whereby the rental payments were previously recognized as an operating expense. With
the adoption of IFRS 16, such leases are accounted for as lease liabilities on the consolidated statement of financial position
and the respective rental payments are split between principal repayments and financing costs. This change resulted in an
improvement to Net Operating Income as operating expenses are decreased with the removal of the operating lease
payments. IFRS 16 was adopted using the modified retrospective approach and therefore the comparative information has not
been restated. As a result, where appropriate, the Trust prepared reconciliations to ensure appropriate comparison between
2019 and 2018 financial information.
NON-GAAP FINANCIAL MEASURES
Boardwalk REIT prepares its financial statements in accordance with International Financial Reporting Standards and with the
recommendations of REALpac, Canada’s senior national industry association for owners and managers of investment real
estate. REALpac has adopted measurements called Net Operating Income (“NOI”), Funds From Operations (“FFO”) and
Adjusted Funds From Operations (“AFFO”) to supplement operating income and profits (or earnings) as measures of operating
performance, as well as a cash flow metric called Adjusted Cash Flow From Operations (“ACFO”). These measurements are
considered to be meaningful and useful measures of real estate operating performance, however, are not measures defined
by IFRS. As they do not have standardized meanings prescribed by IFRS, they therefore may not be comparable to similar
measurements presented by other entities and should not be construed as an alternative to IFRS defined measures.
The discussion below outlines the non-GAAP financial measures used by the Trust:
Net Operating Income (“NOI”)
NOI is defined as rental revenue less rental expenses. As it relates to the Trust, NOI can be found as a subtotal on the Trust’s
Consolidated Statement of Comprehensive Income. However, it is typically considered a non-GAAP measure for real estate
entities and, therefore, is included here. As noted above, where applicable, the Trust has provided both financial information as
reported and revised 2018 financial information to reflect the impact of IFRS 16 if applied retroactively. As it relates to NOI, the
adjustment involves removing the previously recorded operating lease payment from 2018 operating expenses, resulting in an
increased 2018 NOI (relative to what was previously reported). This allows for a direct comparison between 2019 and 2018.
Funds From Operation (“FFO”)
The IFRS measurement most comparable to FFO is Profit. We define FFO 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, but after deducting the principal portion of lease liabilities. The adoption of IFRS 16
for the current period, therefore, does not materially change the amount of FFO compared to the amount calculated before
the adoption of the accounting standard. The reconciliation from Profit under IFRS to FFO can be found below, under the
section titled “Performance Measures”. Boardwalk REIT considers FFO to be an appropriate measurement 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 should be considered in conjunction with profit as presented
in the consolidated financial statements.
Adjusted Funds From Operation (“AFFO”)
Similar to FFO, the IFRS measurement most comparable to AFFO is Profit. 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 definition, are accounted for as capital in that the
21
BOARDWALK REIT 2019 ANNUAL REPORT expenditure itself has a useful life in excess of the current financial year and also adds or maintains the value of the related
assets. A more detailed discussion of this topic will be provided in the “Maintenance of Productive Capacity” section later in
this document. The reconciliation of AFFO can be found below, under the section titled “Performance Measures”.
Adjusted Cash Flows From Operations (“ACFO”)
The IFRS measurement most comparable to ACFO is Cash Flow From Operating Activities. ACFO is a non-GAAP financial
measure of sustainable economic cash flow available for distributions. ACFO should not be construed as an alternative to cash
flow from operations as determined under IFRS. A reconciliation of ACFO 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.
Boardwalk REIT’s presentation of FFO, AFFO and ACFO 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, AFFO and ACFO do not represent earnings or cash flow
from operations as defined by IFRS. FFO and AFFO should not be 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, AFFO and ACFO may differ from that of other real estate companies and trusts.
Distributions as a Percentage of FFO, AFFO and ACFO
Distributions as a percentage of FFO, AFFO and ACFO are supplementary non-GAAP measure of a REIT’s ability to pay
distributions. These ratios are computed by dividing Unitholder distributions paid (including distributions on the Class LP B
Units) by FFO, AFFO and ACFO, respectively. The Trust’s method of calculating these ratios may differ from other real estate
entities, and accordingly, may not be comparable to other issuers.
Operating Margins
Operating margins are a supplementary non-GAAP measure of the Trust’s operating performance. This ratio is calculated by
dividing NOI by rental revenue allowing management to assess the percentage of rental revenue which generated profit.
Stabilized Revenue Growth, Stabilized Operating Expense Growth and Stabilized NOI Growth
Stabilized revenue growth, stabilized operating expense growth and stabilized NOI growth are supplementary non-GAAP
financial measures used by the Trust to assess period over period performance of those properties which Boardwalk has
owned and operated for over 24 months. These ratios are calculated by determining the percentage change in stabilized
revenue, stabilized operating expenses and stabilized NOI from one period to the next. Stabilized property performance is a
meaningful measure of operating performance as it allows management to assess rent growth and expense changes of its
portfolio on a stabilized property basis.
In calculating stabilized operating expense growth, as a result of IFRS 16, previously recorded operating lease payments
were removed from the 2018 operating expenses, resulting in decreased 2018 stabilized operating expenses (relative to
what was previously reported). Similarly, with stabilized NOI growth, previously recorded operating lease payments were
removed from the 2018 operating expenses, resulting in an increased 2018 stabilized NOI (relative to what was previously
recorded). Lastly, stabilized operating expenses and stabilized net operating income were adjusted from the reported values
for wage allocations between operating expenses and administration. All adjustments are done to allow for direct comparison
between 2019 and 2018.
Enterprise Value
Enterprise Value is a non-GAAP measure calculated as the sum of Trust’s total debt and Trust Unit market capitalization.
This non-GAAP measure is used by management and the industry as a measure of total value of the REIT based on debt
and market price of equity instead of IFRS total assets.
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BOARDWALK REIT 2019 ANNUAL REPORT Investment Philosophy
Throughout Boardwalk REIT’s history, the Trust is always looking for opportunities to create value for its Unitholders. This is
achieved by investing managerial resources and capital in activities that increase FFO per unit, AFFO per unit and ACFO per
unit on a sustaining basis and Net Asset Value (“NAV”) per unit. Boardwalk includes the development of new apartments on
existing land as well as the potential acquisition of new land for future development projects as initiatives to create additional
value. The Trust has adopted a long-term strategic plan, which includes expanding its investments outside of Alberta and
Saskatchewan and into high-growth markets, including, but not limited to, the Greater Toronto Area and Vancouver, to allow
the Trust to geographically diversify its brand of housing into new, undersupplied markets. Built into this strategic plan is
Boardwalk’s brand diversification initiative, which includes common area upgrades, building Improvements and suite
renovations, to create the best long-term value for the Trust’s Unitholders.
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, distributing its taxable income (and any capital gain) 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
optimal return to its Unitholders.
COST OF CAPITAL
The Trust’s cost of capital is generally defined as its weighted average cost of raising incremental capital. Investment
opportunities are evaluated by, amongst other considerations, comparing their internal rates of return against the Trust’s cost
of capital. As with most real estate entities, the cost of capital calculation is the combination of leverage target, the marginal
cost of debt, and the marginal cost of equity. As discussed later, the Trust currently has access to a lower cost of debt through
its access to the National Housing Act (“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 2020, estimated CMHC-insured five- and
10-year mortgage rates were estimated to be 2.30% and 2.40% 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 2019, the Trust reported AFFO per Unit of $2.10 on a fully
diluted basis. When compared to the Trust Unit’s market price of $45.93 as at December 31, 2019, this equates to
approximately 4.57% as its cost of equity. Further details of the Trust’s cost of capital can be found in NOTE 30 to the
consolidated financial statements for the year ended December 31, 2019.
Performance Review of 2019
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 12-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 2019, the Trust sold 138 units in Saskatoon, Saskatchewan for a purchase price of
$20.7 million, resulting in a total loss on asset sales of $0.4 million due mainly to transaction costs. During the second quarter of
2019, the Trust sold 140 units in Saskatoon, Saskatchewan for a purchase price of $20.7 million, resulting in transaction costs and a
loss on asset sales of $0.3 million. During the fourth quarter of 2018, the Trust sold 140 units in Regina Saskatchewan, resulting in a
loss on asset sales of less than $0.1 million for the year based on a purchase price of $15.9 million. As Investment Properties are
carried at fair value, a loss on sale arises primarily from the transaction costs related to the sale.
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BOARDWALK REIT 2019 ANNUAL REPORT Boardwalk REIT does not include any gains or losses 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. Excluding gains or losses in the calculation of FFO is consistent with the REALpac definition of FFO.
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. For 2019, the Board has
decided to maintain a distribution $0.0834 per Trust Unit on a monthly basis (or $1.00 on an annualized basis) and continue
redeploying its capital towards long-term value creation, including its suite renovation program, brand diversification initiative,
and development of new multi-family units in supply-constrained markets.
For the year ended December 31, 2019, the Trust declared regular distributions of $50.9 million (inclusive of distributions paid
to the LP Class B Unitholders), representing approximately 38.9% of FFO. 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. On an
overall basis, the Trust aims to maintain a consistent and sustainable payout ratio while optimizing its capital allocation
strategy, and reviews this with its Board of Trustees.
For the three months ended December 31, 2019, the Trust declared regular distributions of $12.7 million representing
approximately 39.6% of FFO. The reader should note the overall operating performance of the first and fourth quarters tends
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 should not, therefore,
simply annualize the reported results of a particular quarter.
HOW DID WE DO?
At the beginning of the 2019 fiscal year, certain selective performance targets were set out for fiscal 2019. 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 2019.
Description
2019 Actual
Q3 2019
Revised Objectives
Q2 2019
Revised Objectives
2019 Original
Objectives
Stabilized Building NOI Growth
8.2%
6%-8%
4%-9%
4%-9%
FFO Per Unit
AFFO Per Unit*
$2.57
$2.10
$2.50-$2.55
$2.45-$2.52
$2.35-$2.50
$2.03-$2.08
$1.98-$2.05
$1.88-$2.03
* AFFO Per Unit utilizes a maintenance CAPEX estimate of $721/suite/year.
Both actual FFO and AFFO for fiscal 2019 exceeded the revised guidance reported as part of the Trust’s disclosure for the third
quarter of 2019. Higher rental revenue due to higher occupancy, coupled with lower on-site wages and salaries, repairs and
maintenance, advertising and utilities costs were the primary drivers of the Trust’s financial results exceeding the Trust’s Q3
2019 revised objectives.
FFO RECONCILIATION FROM 2018 TO 2019
The table on the following page shows a reconciliation of changes in FFO from December 31, 2018 to December 31, 2019. 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.
24
BOARDWALK REIT 2019 ANNUAL REPORT FFO Reconciliation
FFO Opening – Dec. 31, 2018
Net Operating Income ("NOI") from Stabilized Properties
NOI from Unstabilized Properties
FFO Loss from Sold Properties
Administration, financing and other
FFO Closing – Dec. 31, 2019
FFO AND AFFO RECONCILIATIONS
3 Months
12 Months
$
0.54
$
2.21
0.13
0.02
(0.01)
(0.05)
$
$
0.09
0.63
$
$
0.38
0.07
(0.02)
(0.07)
0.36
2.57
In the following table, Boardwalk REIT provides a reconciliation of FFO (a non-GAAP measure) to profit for the period, its
closely related financial statement measurement for the three months and years ended December 31, 2019 and 2018.
Adjustments are explained in the notes below, as appropriate.
FFO Reconciliation
(In $000’s, except per Unit amounts)
Profit for the period
Adjustments
Loss on sale of assets
Fair value losses (gains) (1)
3 Months
Dec. 31, 2019
3 Months
Dec. 31, 2018
% Change
12 Months
Dec. 31, 2019
12 Months
Dec. 31, 2018
% Change
$ (108,636) $
34,100
$
34,781 $ 193,200
-
27
137,955
(9,893)
714
27
86,132
(92,371)
Add back distributions to LP Class B Units
recorded as financing charges (2)
Deferred income tax (recovery) expense
Depreciation expense on Property
Plant & Equipment
Principal portion of lease obligations
1,120
(125)
2,341
(499)
1,120
52
1,952
-
4,479
(754)
8,809
(3,194)
4,479
23
6,754
-
Funds from operations
$
32,156 $
27,358
17.5% $ 130,967 $ 112,112
Funds from operations – per Unit
$
0.63 $
0.54
16.7% $
2.57 $
2.21
16.8%
16.3%
(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 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 IFRS 9 – Financial Instruments (“IFRS 9”). 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 $32.2 million for the fourth quarter of 2019 compare to $27.4 million for the same
period in 2018. FFO, on a per Unit fully diluted basis, for the quarter ended December 31, 2019, increased approximately
16.7% compared to the same quarter in the prior year from $0.54 to $0.63. Additionally, the Trust earned FFO of $131.0 million
for fiscal 2019 compared to $112.1 million for the same period in 2018. FFO, on a per Unit fully diluted basis, for the year
ended December 31, 2019, increased approximately 16.3% compared to the prior year from $2.21 to $2.57. The increase was
primarily driven by higher rental revenue coupled with lower on-site wages and salaries and repairs and maintenance, partially
offset by increased property taxes, financing costs and administrative costs.
25
BOARDWALK REIT 2019 ANNUAL REPORT
The following table provides a reconciliation of FFO to AFFO:
(000’s)
Funds From Operations (FFO)
Maintenance Capital Expenditures (1)
Adjusted Funds From Operations (AFFO)
FFO per Unit (Trust and LP B Units)
AFFO per Unit (Trust and LP B Units)
3 Months
Dec. 31, 2019
3 Months
Dec. 31, 2018
12 Month
Dec. 31, 2019
12 Months
Dec. 31, 2018
$
32,156 $
27,358 $ 130,967 $ 112,112
6,096
5,805
24,060
23,112
$
26,060 $
21,553 $ 106,907 $
89,000
$
$
0.63 $
0.54 $
2.57 $
0.51 $
0.42 $
2.10 $
2.21
1.75
Unitholder Distributions-Regular (Trust Units and LP B Units)
$
12,744 $
12,723 $
50,941 $
50,876
Distribution as a % of FFO
Distribution as a % of AFFO
39.6%
48.9%
46.5%
59.0%
38.9%
47.6%
45.4%
57.2%
(1) Details of the calculation of Maintenance Capital Expenditures can be found in the section titled “Maintenance of Productive Capacity.”
LIQUIDITY
The access to liquidity is an important element of the Trust as it allows the Trust to implement its overall strategy. The
continued low interest rate environment has allowed Boardwalk to renew its existing maturing mortgages at favourable
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 will, however,
become more limited as interest rates have started 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 $35.2 million at December 31, 2019, compared to
$38.1 million reported on December 31, 2018. As at December 31, 2019, the Trust also had $199.7 million of unused credit
facility (December 31, 2018 – $199.7 million) and committed secured upfinancings of $22.8 million (December 31, 2018 –
$15.3 million), bringing total liquidity to $257.8 million (December 31, 2018 – $253.1 million).
NEW PROPERTY ACQUISITIONS AND DISPOSITIONS
On April 1, 2019, the Trust closed on the purchase of a property in Edmonton, Alberta. The property is comprised of 124 units
and had a purchase price of $36.8 million (including transaction costs).
For the year ended December 31, 2018, the Trust closed on the purchase of four properties located in Calgary, Alberta.
The properties totaled 299 units and had a purchase price of $66.8 million (including transaction costs).
On September 16, 2019, the Trust sold Chancellor Gate (which is comprised of 138 units) in Saskatoon, Saskatchewan for
total proceeds (excluding selling costs) of $20.7 million. On May 28, 2019, the Trust sold St. James Place (which is comprised
of 140 units) in Saskatoon, Saskatchewan for total proceeds (excluding selling costs) of $20.7 million.
In the fourth quarter of 2018, the Trust sold 140 units in Regina, Saskatchewan for $15.9 million before selling costs.
DEVELOPMENT
In July of 2018, the Trust completed construction of the third phase of Pines Edge, consisting of 71 rental units. Construction
cost was approximately $13.2 million and will provide a stabilized unlevered yield in the range of 6.00% to 6.50%. The entire
development consists of a total of five (5) phases and will add 364 apartment units to Boardwalk’s Regina, Saskatchewan
property portfolio when all phases have been completed.
We continue to explore other development opportunities and each of these opportunities will be evaluated separately to
determine the viability of these projects.
26
BOARDWALK REIT 2019 ANNUAL REPORT
JOINT VENTURE AGREEMENTS
Calgary, Alberta Development
In the fourth quarter of 2016, 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 a
12-storey residential tower with approximately 130,000 square feet of residential space, totaling approximately 162 apartment
units at RioCan’s Brentwood Village Shopping Centre in Calgary, Alberta. Construction, which began in Q4 of 2017, was
substantially completed, and the Occupancy Permit received, at the end of January 2020. The project includes two (2) levels of
underground parking, provides premium rental housing units minutes from downtown Calgary along the Northwest Light Rail
Transit line, and is in 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 was 100% owned by RioCan. Pursuant to a purchase and sale agreement dated October 19, 2016, between
Boardwalk and RioCan, Boardwalk purchased a 50% interest in the parcel of land on November 23, 2017. The land value was
based on the total buildable area and, as such, Boardwalk paid $3.2 million for its 50% interest. For the year ended December 31,
2019, Boardwalk incurred $16.8 million for its 50% interest. For the year ended December 31, 2018, Boardwalk incurred
$9.9 million for its 50% interest. Total construction cost for the project was estimated to be between $75 million to $80 million
($37.5 million to $40 million per partner); the project was substantially completed on schedule and on budget.
Brampton, Ontario Development
In the fourth quarter of 2018, Boardwalk entered into a 50:50 joint venture partnership agreement to develop a 365-unit
multi-residential, purpose-built rental complex, located near downtown Brampton, Ontario. It is estimated that total cost
for the project to be approximately $200 to $215 million. The proposed project is a rental complex with approximately
10,700 square feet of retail space, above and underground parking and 380,000 square feet of residential space over
two concrete high-rise towers. Excavation and shoring beginning in January 2019. For the year ended December 31, 2019,
the Trust contributed $15.9 million of capital to the limited partnership. For the year ended December 31, 2018, the Trust
contributed $9.9 million of capital to the limited partnership.
Mississauga, Ontario Development
In the third quarter of 2019, and subject to zoning approvals, Boardwalk and RioCan entered into a joint venture agreement
to develop a mixed-use project consisting of two towers: one 25-storey and the other a 16-storey tower, consisting of
470 residential units totaling approximately 418,000 buildable square feet and approximately 12,000 square feet of retail
space. The project is located on a discrete portion of land at RioCan’s Sandalwood Shopping Centre in Mississauga, Ontario.
The project proposes three levels of underground parking and to provide premium rental housing in a transit-oriented location
along Hurontario Street near Square One Shopping Centre, and easy access onto the 401, 403 and 407 highways. The joint
venture involves an equal 50% interest, in which, each partner will provide best-in-class retail and residential expertise to
develop and operate the asset.
The land was 100% owned by RioCan. Subject to zoning approval and confirmation of total buildable area, the total purchase
price has yet to be finalized. To date, the Trust has paid $11.6 million (including transaction costs) for its 50% interest in the
land. Zoning approvals are anticipated in early 2020.
27
BOARDWALK REIT 2019 ANNUAL REPORT Financial Performance Summary
At a Glance
(In $000’s, except per Unit amounts)
Total Assets
Total Rental Revenue
Profit
Total Funds From Operations
Profit Per Unit
Funds from Operations Per Unit (fully diluted)
2019
6,276,384
455,313
34,781
130,967
0.75
2.57
$
$
$
$
$
$
2018
% Change
$
$
$
$
$
$
6,109,091
434,616
193,200
112,112
4.17
2.21
2.7%
4.8%
(82.0)%
16.8%
(82.0)%
16.3%
Total Assets increased from the amounts reported in the prior year, mainly due to an increase in investment properties from
the acquisition of 124 units in Edmonton, Alberta coupled with the Trust’s development initiatives. Total Rental Revenue
increased by 4.8%, the result of higher occupancy in Western Canada. Profit decreased by 82.0% compared to the prior year,
due primarily to a significant fair value loss of $86.1 million recognized on its investment properties and financial liabilities in
2019 compared to a $92.4 million gain in 2018. The change in fair value of the Trust’s investment properties was largely driven
by increases in expenses in the Trust’s calculation of stabilized NOI.
CONSOLIDATED OPERATIONS
AND EARNINGS REVIEW
Overall Review
CONSOLIDATED STATEMENTS OF COMPREHENSIVE 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 gains. 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
(In $000’s, except number of suites)
Gross rental revenue, before vacancy
losses and incentives
Vacancy loss
Incentives
3 Months
Dec. 31, 2019
3 Months
Dec. 31, 2018
% Change
12 Month
Dec. 31, 2019
12 Months
Dec. 31, 2018
% Change
$ 115,378 $ 110,393
4.5% $ 455,313 $ 434,616
4.8%
26,250
12,275
12,103
29,694
12,568
11,675
(11.6)%
(2.3)%
3.7%
101,108
47,883
47,529
113,615
47,628
45,966
$
50,628 $
53,937
(6.1)% $ 196,520 $ 207,209
$
64,750 $
56,456
14.7% $ 258,793 $ 227,407
56.1%
33,263
51.1%
33,417
56.8%
33,263
52.3%
33,417
(11.0)%
0.5%
3.4%
(5.2)%
13.8%
3 Months
Dec. 31, 2019
3 Months
Dec. 31, 2018
% Change
12 Month
Dec. 31, 2019
12 Months
Dec. 31, 2018
% Change
$ 129,849 $ 126,388
2.7% $ 514,742 $ 498,569
(4,894)
(5,027)
(2.6)%
(17,974)
(9,577
(10,968
(12.7)%
(41,455)
(18,048)
(45,905)
3.2%
(0.4)%
(9.7)%
4.8%
Total rental revenue
$ 115,378 $ 110,393
4.5% $ 455,313 $ 434,616
28
BOARDWALK REIT 2019 ANNUAL REPORT
RENTAL OPERATIONS 2018 ADJUSTED FOR IFRS 16 – LEASES
(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
3 Months
Dec. 31, 2019
3 Months
Dec. 31, 2018
% Change
12 Month
Dec. 31, 2019
12 Months
Dec. 31, 2018
% Change
$ 115,378 $ 110,393
4.5% $ 455,313 $ 434,616
4.8%
26,250
12,275
12,103
28,380
12,568
11,675
(7.5)%
(2.3)%
3.7%
101,108
108,346
47,883
47,529
47,628
45,966
$
50,628 $
52,623
(3.8)% $ 196,520 $ 201,940
$
64,750 $
57,770
12.1% $ 258,793 $ 232,676
56.1%
33,263
52.3%
33,417
56.8%
33,263
53.5%
33,417
(6.7)%
0.5%
3.4%
(2.7)%
11.2%
Overall, Boardwalk REIT’s rental operations for the three months and year ended December 31, 2019, reported higher results
compared to the same periods in the prior year, with total rental revenue increasing 4.5% and 4.8%, respectively, driven by
lower vacancy losses and incentives, mainly in its Western Canada portfolio. As outlined in the second table, the Trust
decreased its vacancy losses by 0.4% for the year ended December 31, 2019 as markets stabilized in Western Canada,
coupled by a decrease in incentives of 9.7%. The Trust will continue to offer selective incentives in certain communities to
maintain occupancy levels, but the overall goal is to decrease incentives over the next two to three years.
Total rental expenses decreased 5.2% for the 12 months ended December 31, 2019, compared to 2018, due primarily to lower
wages and salaries, suite and building maintenance costs, advertising costs, and operating lease payments as a result of the
adoption of IFRS 16. In fiscal 2019, the Trust implemented an asset management model whereby sites are overseen by asset
managers. This has resulted in an increase in administration expense, offset by a decrease in operating expenses through wages
and salaries of $0.8 million and $4.3 million, respectively for the fourth quarter and 12 months of 2019. Lower overall operating
expenses were partially offset by increases in utilities and property taxes. In the table above, the Trust adjusted operating
expenses in 2018 to remove previously recorded operating lease payments. Once adjusted, rental expenses, on an “apples-to-
apples” basis declined 2.7% for the year ended December 31, 2019 compared to the same period in the prior year.
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.
For the three months ended December 31, 2019, operating expenses decreased 11.6% due to decreased wages and salaries
and operating lease payments. Once adjusted to retroactively reflect the decrease in operating lease payments for 2018,
operating expenses decreased 7.5% for the three months ended December 31, 2019 compared to the same period in the
prior year. For the twelve months ended December 31, 2019, operating expenses decreased by 11.0% as compared to the
prior year, due to decreased wages and salaries, advertising costs and operating lease payments. Once adjusted to
retroactively reflect the decrease in operating lease payments for 2018, operating expenses decreased 6.7% for the
12 months ended December 31, 2019 compared to the same period in the prior year.
Utility costs decreased by 2.3% for the three months ended December 31, 2019, due to savings in Alberta carbon tax compared
to the fourth quarter of 2018. Utility costs increased by 0.5% for the year ended December 31, 2019. The increase is attributable
to higher electricity costs and an increase in natural gas costs. Fixed price physical commodity contracts have 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 29 to the consolidated financial statements for the year ended December 31, 2019.
The reported increase in property taxes 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
29
BOARDWALK REIT 2019 ANNUAL REPORT
only reported when they are received. Additionally, property taxes have increased due to acquisitions completed in the fourth
quarter of 2018 and in 2019.
Overall, operating margins increased from the same period in 2018 from 51.1% to 56.1% for the three months ended December 31,
2019. After adjusting 2018 to reflect the decrease in operating lease payments, the operating margin increased from the same
period in 2018, from 52.3% to 56.1% for the three months ended December 31, 2019. Lastly, had the Trust not adopted the
asset manager model for the three months ended September 30, 2019, the operating margin would have been 55.4%.
Similarly, operating margin increased from 52.3% in fiscal 2018 to 56.8% for the 12 months ended December 31, 2019. After
adjusting 2018 to reflect the decrease in operating lease payments, the operating margin increased from the same period in
2018, from 53.5% to 56.8% for the 12 months ended December 31, 2019. Lastly, had the Trust not adopted the asset
manager model for the year ended December 31, 2019, the operating margin would have been 55.9%.
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.
Segmented Operational Review
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
3 Months
Dec. 31, 2019
3 Months
Dec. 31, 2018
% Change
12 Month
Dec. 31, 2019
12 Months
Dec. 31, 2018
% Change
$
74,998 $
70,778
6.0% $ 295,218 $ 278,066
6.2%
16,933
20,056
(15.6)%
7,426
7,968
7,457
7,527
(0.4)%
5.9%
65,571
28,952
30,739
73,109
28,414
29,200
$
32,327 $
35,040
(7.7)% $ 125,262 $ 130,723
$
42,671 $
35,738
19.4% $ 169,956 $ 147,343
56.9%
20,922
50.5%
20,798
57.6%
20,922
53.0%
20,798
(10.3)%
1.9%
5.3%
(4.2)%
15.3%
ALBERTA RENTAL OPERATIONS 2018 ADJUSTED FOR IFRS 16 – LEASES
(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 September 30
3 Months
Dec. 31, 2019
3 Months
Dec. 31, 2018
% Change
12 Month
Dec. 31, 2019
12 Months
Dec. 31, 2018
% Change
$
74,998 $
70,778
6.0% $ 295,218 $ 278,066
6.2%
16,933
19,758
(14.3)%
7,426
7,968
7,457
7,527
(0.4)%
5.9%
65,571
28,952
30,739
71,919
28,414
29,200
$
32,327 $
34,742
(7.0)% $ 125,262 $ 129,533
$
42,671 $
36,036
18.4% $ 169,956 $ 148,533
56.9%
20,922
50.9%
20,798
57.6%
20,922
53.4%
20,798
(8.8)%
1.9%
5.3%
(3.3)%
14.4%
Alberta is Boardwalk’s largest operating segment, representing 65.7% of total reported net operating income for the year
ended December 31, 2019. In addition, Alberta represents 62.9% of total apartment units. Boardwalk REIT’s Alberta
operations for the three months and year ended December 31, 2019, reported a 6.0% and 6.2% increase, respectively, in total
rental revenue, when compared to the same periods reported in 2018. The reported rental revenue change is the combined
effect of higher in-place rents lower incentives compared to the prior year. For the year ended December 31, 2019, total rental
expenses have decreased by 4.2% compared to the prior year due to savings in wages and salaries, building maintenance
expense, advertising costs and operating lease payments being partially offset by an increase in utilities and property taxes.
After adjusting 2018 to remove previously recorded operating lease payments, rental expenses decreased 3.3% for the year
ended December 31, 2019.
30
BOARDWALK REIT 2019 ANNUAL REPORT
Operating expenses decreased by 15.6% and 10.3% for the three and 12 months ended December 31, 2019, respectively,
due to decreased wages and salaries, building maintenance costs, advertising costs and operating lease payments. After
adjusting 2018 to remove previously recorded operating lease payments, operating expenses decreased 14.3% and 8.8%,
respectively. As previously mentioned, the Trust adopted an asset manager model, which resulted in an increase in
administration expenses, offset by a decrease in operating expenses, through wages and salaries, of $0.7 million and
$3.2 million for Alberta for the three and 12 months ended December 31, 2019, respectively.
Reported utilities for the year ended December 31, 2019 were up 1.9% compared to the prior year. The reported increase is
mainly the result of higher electricity expense and 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 four outstanding natural gas contracts to hedge the price of its natural gas usage.
More details can be found in NOTE 29 to the consolidated financial statements.
Property taxes increased compared to the prior year as a result of increased property tax assessments.
Net operating income for Alberta increased $22.6 million, or 15.3% for the 12 months ended December 31, 2019. Alberta’s
operating margin for the year ended December 31, 2019 was 57.6% compared to 53.0% for the same period in 2018. After adjusting
2018 to remove previously recorded operating lease payments, Alberta’s operating margin for the 12 months ended December 31,
2019 was 57.6% compared to 53.4% for the 12 months ended December 31, 2018. Lastly, had the Trust not applied the asset
manager model in the 12 months ended December 31, 2019, the operating margin would have been 56.5%.
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
3 Months
Dec. 31, 2019
3 Months
Dec. 31, 2018
% Change
12 Month
Dec. 31, 2019
12 Months
Dec. 31, 2018
% Change
$
12,659 $
13,062
(3.1)% $
51,198 $
51,804
(1.2)%
2,444
1,868
1,207
2,899
2,186
1,281
(15.7)%
(14.5)%
(5.8)%
9,651
7,844
4,921
11,017
8,356
5,044
5,519 $
6,366
(13.3)% $
22,416 $
24,417
7,140 $
6,696
6.6% $
28,782 $
27,387
$
$
(12.4)%
(6.1)%
(2.4)%
(8.2)%
5.1%
56.4%
3,756
51.3%
4,034
56.2%
3,756
52.9%
4,034
SASKATCHEWAN RENTAL OPERATIONS, EXCLUDING REGINA ASSETS SOLD IN 2018
(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
3 Months
Dec. 31, 2019
3 Months
Dec. 31, 2018
% Change
12 Month
Dec. 31, 2019
12 Months
Dec. 31, 2018
% Change
$
12,659 $
12,778
(0.9)% $
51,198 $
50,451
1.5%
2,444
1,868
1,207
2,813
2,127
1,251
(13.1)%
(12.2)%
(3.5)%
9,651
7,844
4,921
8,108
4,903
10,728
(10.0)%
$
$
5,519 $
6,191
(10.9)% $
22,416 $
23,739
7,140 $
6,587
8.4% $
28,782 $
26,712
56.4%
3,756
51.5%
4,034
56.2%
3,756
52.9%
4,034
(3.3)%
0.4%
(5.6)%
7.7%
31
BOARDWALK REIT 2019 ANNUAL REPORT
For the three month and year ended December 31, 2019, Saskatchewan total rental revenue, when excluding a sold 140-unit
Regina portfolio in 2018, decreased by 0.9% and increased by 1.5% compared to the same periods in the prior year. The lower
revenue for the fourth quarter is due to the two projects sold in 2019. The revenue increase for the year is mainly due to higher
occupancy in both Regina and Saskatoon. Rental expenses, when excluding a sold 140-unit Regina portfolio in 2018,
decreased by 10.9% and 5.6%, respectively, for the three months and year ended December 31, 2019, compared to the same
periods in the prior year, primarily due to savings in on-site wages and salaries, suite maintenance costs and utilities being
partially offset by an increase in property taxes.
Operating expenses for the year ended December 31, 2019 decreased due to savings in on-site wages and salaries and suite
maintenance costs. As previously mentioned, the Trust adopted an asset manager model, which resulted in an increase of
administration expenses, offset by a decrease in operating expenses, through wages and salaries, of $1.0 million for
Saskatchewan for the 12 months ended December 31, 2019.
Utility costs for the year decreased from the same periods in the previous year due to natural gas cost savings and a slight
decline in water and sewer costs. The Trust also has two outstanding contracts to hedge its natural gas price for its
Saskatchewan natural gas usage. Details of the hedging contracts can be found in NOTE 29 to the consolidated financial
statements for the current period.
Property taxes increased by 0.4% for the year ended December 31, 2019 due to higher property tax assessments.
Reported operating margins for the year ended December 31, 2019 increased to 56.2% compared to 52.9% reported for the
prior year. To note, had the Trust not adopted the asset manager model for the 12 months ended December 31, 2019, the
operating margin would have been 54.2% for Saskatchewan.
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
3 Months
Dec. 31, 2019
3 Months
Dec. 31, 2018
% Change
12 Month
Dec. 31, 2019
12 Months
Dec. 31, 2018
% Change
$
7,642 $
7,185
6.4% $
29,815 $
28,388
5.0%
1,292
963
817
1,270
829
823
1.7%
16.2%
(0.7)%
5,151
3,708
3,302
4,927
3,561
3,298
$
$
3,072 $
2,922
5.1% $
12,161 $
11,786
4,570 $
4,263
7.2% $
17,654 $
16,602
59.8%
2,585
59.3%
2,585
59.2%
2,585
58.5%
2,585
4.5%
4.1%
0.1%
3.2%
6.3%
Boardwalk REIT’s Ontario operations reported an increase in total rental revenue of 6.4% and 5.0%, respectively, for the three
months and year ended December 31, 2019, compared to the same periods in the prior year, due to higher occupied rents and
occupancy levels. Total rental expenses increased by 3.2% for the 12 months ended December 31, 2019 compared to the
prior year, due primarily to increased repairs and maintenance and utility costs.
Operating expenses increased for the three months ended December 31, 2019 as compared to the same period of the prior
year, due to higher repairs and maintenance costs. Operating expenses increased by 4.5% for the year ended December 31,
2019 as compared to the prior year, due to increased building maintenance and pest control costs.
Utility costs were higher for the three and 12 months primarily due to increased costs with electricity, water and sewer and
higher carbon levy costs. The Trust has one outstanding fixed price natural gas contract hedging 75% of its Ontario natural gas
usage. Details of the contract can be found in NOTE 29 to the consolidated financial statements.
Property taxes were flat for the year ended December 31, 2019, as compared to the prior year.
Net operating income increased by 6.3% for the year ended December 31, 2019, as compared to the prior year. Reported
operating margins for the year ended December 31, 2019 were 59.2% as compared to 58.5% for the prior year.
32
BOARDWALK REIT 2019 ANNUAL REPORT
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
3 Months
Dec. 31, 2019
3 Months
Dec. 31, 2018
% Change
12 Month
Dec. 31, 2019
12 Months
Dec. 31, 2018
% Change
$
19,987 $
19,287
3.6% $
78,778 $
76,101
3.5%
3,878
1,928
2,075
4,585
2,007
2,021
(15.4)%
(3.9)%
2.7%
14,739
7,007
8,399
6,968
8,243
18,464
(20.2)%
$
7,881 $
8,613
(8.5)% $
30,145 $
33,675
$
12,106 $
10,674
13.4% $
48,633 $
42,426
60.6%
6,000
55.3%
6,000
61.7%
6,000
55.7%
6,000
0.6%
1.9%
(10.5)%
14.6%
QUEBEC RENTAL OPERATIONS 2018 ADJUSTED FOR IFRS 16 – LEASES
(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 September 30
3 Months
Dec. 31, 2019
3 Months
Dec. 31, 2018
% Change
12 Month
Dec. 31, 2019
12 Months
Dec. 31, 2018
% Change
$
19,987 $
19,287
3.6% $
78,778 $
76,101
3.5%
3,878
1,928
2,075
3,569
2,007
2,021
8.7%
(3.9)%
2.7%
14,739
7,007
8,399
14,385
6,968
8,243
$
7,881 $
7,597
3.7% $
30,145 $
29,596
$
12,106 $
11,690
3.6% $
48,633 $
46,505
60.6%
6,000
60.6%
6,000
61.7%
6,000
61.1%
6,000
2.5%
0.6%
1.9%
1.9%
4.6%
Boardwalk REIT’s Quebec operations reported a total rental revenue increase of 3.6% and 3.5% for the three months and
year ended December 31, 2019, respectively, compared to the same periods in the prior year.
Total rental expenses for the period decreased by 8.5% and 10.5% for the three and 12 months ended December 31, 2019,
respectively, when compared to 2018, mainly due to operating lease payments being recorded as a liability under IFRS. After
adjusting 2018 to remove previously recorded operating lease payments, rental expenses for the three and 12 months ended
December 31, 2019 increased by 3.7% and 1.9% due to higher utilities and property taxes.
For the three and 12 months ended December 31, 2019, operating expenses decreased by 15.4% and 20.2%, respectively,
when compared to 2018 due to a decrease in operating lease payments. After adjusting 2018 to remove previously recorded
operating lease payments, operating expenses increased 8.7% and 2.5% for the three and 12 months ended December 31,
2019, respectively, due to savings increases in building maintenance costs and insurance.
The reported increase of 0.6% in utilities for the 12 months ended December 31, 2019, was due to higher natural gas costs. In
addition, the Trust had one outstanding fixed price natural gas contract to hedge 75% of its Quebec natural gas usage. The details
of the natural gas contracts are reported in NOTE 29 of the Trust’s consolidated financial statements for the current period.
Property taxes increased 1.9% for the year ended December 31, 2019 , compared to the prior year due to higher property
tax assessments.
Reported operating margins for the 12 months ended December 31, 2019, increased from 55.7% to 61.7%. After adjusting
2018 to remove previously recorded operating lease payments, operating margins were 61.1% for the 12 months of 2018
compared to 61.7% for the current period.
33
BOARDWALK REIT 2019 ANNUAL REPORT
Operational Sensitivities
NET OPERATING INCOME OPTIMIZATION
Boardwalk continues to focus on optimizing its Net Operating Income. This focus requires us to manage not only revenues but
also related operating costs, and takes both into consideration when determining a service and pricing model. Lowering
overall turnover while maintaining competitive 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, which Boardwalk is starting to see in some regions, 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 the lease prior to 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 Resident Member not moving in until the following year. Although the suite is rented, it will not generate
revenue until the Resident Member 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 of newly built assets, portfolio occupancy is on a same-store basis.
The Trust believes that when the Net Operating Income Optimization Strategy is combined with our new strategic investment
program, the outcome will be a more diverse product offering for our Resident Members and greater overall value creation for
the Trust. The Trust also understands that the implementation and completion of these strategies will have some short-term
consequences, as the timing of these enhancements and extensive renovations are resulting in longer periods of time that
suites are not available to be rented, including short-term increases in vacancy losses. It is the Trust’s belief, however, that a
focus on the longer-term value creation is in the best interest of all stakeholders.
Boardwalk constantly reviews its existing programs, measuring them against resident demand, viability and expected return.
Where appropriate, the Trust will make any necessary changes to optimally fine tune them.
BOARDWALK REIT’S PORTFOLIO OCCUPANCY (SAME-PROPERTY):
City
Calgary
Edmonton
Fort McMurray
Grande Prairie
Kitchener
London
Montreal
Quebec City
Red Deer
Regina
Saskatoon
Verdun
Total
34
2019
96.77%
95.25%
92.34%
95.72%
98.66%
98.37%
98.67%
97.86%
95.66%
95.32%
96.43%
99.60%
96.50%
2018
Q4 2019
Q4 2018
95.76%
95.26%
93.13%
95.34%
98.40%
98.18%
96.51%
96.33%
94.63%
95.00%
95.69%
99.42%
96.05%
96.06%
94.72%
93.65%
94.74%
98.68%
98.26%
98.99%
98.39%
93.45%
95.36%
97.43%
99.66%
96.19%
95.23%
94.84%
88.76%
94.53%
98.58%
97.91%
97.85%
96.67%
93.57%
94.70%
95.95%
99.61%
95.77%
BOARDWALK REIT 2019 ANNUAL REPORT In fiscal 2019, the Trust reported a year-over-year increase of 45 basis points in its overall same-property occupancy rate, an
increase from 96.05% to 96.50%. Improvements in the Western Canadian markets and strong occupancy levels in Ontario
and Quebec contributed to the overall occupancy rate increase. As a strategy, the Trust is constantly adjusting market rents
and incentives based on property-specific demand and supply. Year-over-year, Calgary and Edmonton saw occupancy levels
increase by 101 and decrease by 1 basis points, respectively, to 96.77% and 95.25%, respectively. Note that Calgary does not
include the 299-unit portfolio acquisition completed in November 2018 and Edmonton does not include the 124-unit acquisition
completed in April of 2019. Similarly, Regina saw occupancy levels increase to 95.32% in 2019 compared to 95.00% for 2018.
Note that Regina does not include the non-stabilized 71-unit Phase 3 building substantially completed at the beginning of July
2018. Including Phase 3 in the current quarter would result in an occupancy rate of 95.25% for Regina. Saskatoon saw
occupancy levels increase to 96.43% in 2019 compared to 95.69% in 2018. As markets stabilize, we expect some up and
down movements in occupancy as the Trust aims to maintain occupancy at approximately 97%.
SUPPLY VERSUS DEMAND & IMPACT ON REPORTED OCCUPANCY (SAME-PROPERTY):
Supply & Demand
MOVE OUTS
RENTALS
OCCUPANCY
1,400
1,200
1,000
800
600
400
200
0
99.0%
98.0%
97.0%
96.0%
95.0%
94.0%
93.0%
92.0%
91.0%
8
1
-
N
A
J
8
1
-
B
E
F
8
1
-
R
A
M
8
1
-
R
P
A
8
1
-
Y
A
M
8
1
-
N
U
J
8
1
-
L
U
J
8
1
-
G
U
A
8
1
-
P
E
S
8
1
-
T
C
O
8
1
-
V
O
N
8
1
-
C
E
D
9
1
-
N
A
J
9
1
-
B
E
F
9
1
-
R
A
M
9
1
-
R
P
A
9
1
-
Y
A
M
9
1
-
N
U
J
9
1
-
L
U
J
9
1
-
G
U
A
9
1
-
P
E
S
9
1
-
T
C
O
9
1
-
V
O
N
9
1
-
C
E
D
0
2
-
N
A
J
The issue of demand and supply, as with any industry, is an important performance indicator for multi-family real estate. The
above 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.
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 $4.6 million, or $0.09 per Trust unit on a diluted basis.
Stabilized Property Results
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 98.5% of its total rental unit portfolio as at
December 31, 2019, or a total of 32,769 units. The tables on the following page provide a regional breakdown on these
properties for the fourth quarter of 2019, as compared to the fourth quarter of 2018 and fiscal 2019, as compared to
fiscal 2018.
35
BOARDWALK REIT 2019 ANNUAL REPORT Dec. 31 2019 – 3 M
Edmonton
Calgary
Red Deer
Grande Prairie
Fort McMurray
Alberta
Quebec
Saskatchewan
Ontario
Dec. 31 2019 – 12 M
Edmonton
Calgary
Red Deer
Grande Prairie
Fort McMurray
Alberta
Quebec
Saskatchewan
Ontario
# of Units
12,906
5,657
939
645
352
20,499
6,000
3,685
2,585
32,769
# of Units
12,906
5,657
939
645
352
20,499
6,000
3,685
2,585
32,769
% Revenue
Growth
% Operating
Expense Growth
% Net Operating
Income Growth
% of NOI
3.5%
5.3%
7.4%
9.1%
0.6%
4.3%
3.6%
4.2%
6.4%
4.3%
(10.1)%
2.7%
3.6%
(10.5)%
(13.8)%
(7.2)%
4.0%
(2.8)%
5.1%
(4.0)%
19.7%
7.0%
11.1%
31.9%
15.2%
15.5%
3.4%
10.6%
7.2%
11.6%
36.9%
21.5%
2.4%
1.8%
1.1%
63.7%
18.7%
10.5%
7.1%
100.0%
% Revenue
Growth
% Operating
Expense Growth
% Net Operating
Income Growth
% of NOI
3.5%
5.6%
10.1%
11.5%
(2.8)%
4.4%
3.5%
2.5%
5.0%
4.1%
(3.4)%
0.9%
(1.4)%
(5.6)%
(7.6)%
(2.4)%
1.9%
1.8%
3.2%
(0.9)%
10.3%
8.6%
22.2%
30.5%
1.7%
10.4%
4.5%
3.1%
6.4%
8.2%
37.2%
21.5%
2.4%
1.7%
1.1%
63.9%
19.0%
10.2%
6.9%
100.0%
Stabilized revenue increased by 4.1% for the year ended December 31, 2019, compared to the prior year. Operating expenses
reported for the year decreased by 0.9% from 2018, resulting in a NOI increase of 8.2% compared to the prior year. The
increase in reported stabilized revenue was driven by higher in-place occupied rents and lower incentives in Alberta and
Saskatchewan, which accounts for approximately 74% of the Trust’s reported stabilized Net Operating Income. Operating
expenses decreased primarily as a result of lower wages and salaries and repairs and maintenance expenses. Operating lease
payments were eliminated for the comparative 2018 operating expenses to ensure stabilized property results were evaluated
on an “apples-to-apples” basis. Stabilized operating expenses and stabilized net operating income were also adjusted from
the reported values for wage allocations between operating expenses and administration.
Stabilized Revenue Growth
Edmonton
Calgary
Red Deer
Grande Prairie
Fort McMurray
Quebec
Saskatchewan
Ontario
# of Units
12,906
5,657
939
645
352
6,000
3,685
2,585
32,769
Q4 2019 vs
Q3 2019
Q4 2019 vs
Q2 2019
Q4 2019 vs
Q1 2019
Q4 2019 vs
Q4 2018
0.3%
0.6%
(0.6)%
1.9%
(0.7)%
1.3%
1.8%
1.9%
0.8%
1.6%
1.6%
(0.4)%
4.4%
0.7%
2.3%
3.0%
3.2%
1.9%
3.4%
3.0%
1.8%
6.7%
1.3%
2.4%
3.8%
5.1%
3.3%
3.5%
5.3%
7.4%
9.1%
0.6%
3.6%
4.2%
6.4%
4.3%
On a sequential basis, stabilized revenues reported in the fourth quarter of 2019 increased by 0.8% over Q3 2019, increased by
1.9% compared to Q2 2019, increased by 3.3% compared to Q1 2019 and increased 4.3% compared to Q4 2018. The increase
over each quarter is a signal that the market is 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.
36
BOARDWALK REIT 2019 ANNUAL REPORT
ESTIMATED LOSS-TO-LEASE CALCULATION
Boardwalk REIT’s projected loss-to-lease, representing the difference between estimated market rents and actual occupied
rents in December 2019, and adjusted for current occupancy levels, totaled approximately $24.9 million on an annualized
basis, representing $0.49 per Unit (Trust & LP B Units). For the most part, Boardwalk REIT’s rental lease agreements last no
longer than 12 months. 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.
Dec. 2019
Market Rent (1)
Dec. 2019
Market Rent,
including
incentives (1)
Dec. 2019
Occupied
Rent (1)
Mark to
Market Per
Month
Annualized Mark
to Market Adjusted
for Current
Occupancy levels
($000’s)
Weighted
Average
Apartment
Units
% of
Portfolio
$
1,306 $
1,198 $
1,201 $
(3)
$
1,535
1,196
1,132
1,518
1,387
1,047
1,105
1,315
1,339
1,088
1,085
1,290
48
(41)
20
25
(1,116)
3,023
(510)
137
87
12,906
5,657
939
645
352
$
1,362 $
1,242 $
1,232 $
10
$
1,621
20,499
$
1,234 $
1,232 $
1,108 $
124
$
1,315
1,460
1,154
1,460
1,148
1,001
6
459
$
1,341 $
1,248 $
1,182 $
66
$
8,910
189
14,201
24,921
6,000
3,685
2,585
32,769
39%
17%
3%
2%
1%
62%
19%
11%
8%
100%
Same-property
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.
(2) Saskatchewan market rent includes an increase for cable and internet service.
The decrease in the loss-to-lease for our portfolio, from $26.5 million at September 2019 to $24.9 million at December 2019,
was due primarily to an increase in occupied rents in many of Boardwalk’s rental markets for the month of December, using a
weighted average mark-to-market of $66 per suite per month. Excluded from the loss-to-lease calculation of $24.9 million is
approximately $93 per suite per month of incentives, resulting in additional revenue of over $36 million per annum.
In fiscal 2019, 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 occupancy level targets, as well as suite-selective incentives, when warranted.
VACANCY LOSS AND INCENTIVES
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 below details rental incentives offered 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 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.
37
BOARDWALK REIT 2019 ANNUAL REPORT
Revenue, Incentives, Vacancy Loss ($000s)
NET RENTAL REVENUE
INCENTIVES
VACANCY LOSS
$135,000
$125,000
$115,000
$105,000
$95,000
$85,000
$75,000
2015
2016
2017
2018
2019
As was previously mentioned, given a lower-than-expected recovery of the rental markets, particularly in Alberta and, to a
lesser extent, Saskatchewan, and the 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.
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.
Financing Costs
Interest expense on the Trust’s secured mortgages and lease obligations for the year ended December 31, 2019, increased
from the same period in the prior year, from $80.6 million to $88.2 million, primarily due to interest being recorded on the
Trust’s lease liabilities along with increased mortgage interest as a result of upfinancings. At December 31, 2019, the reported
weighted average interest rate of 2.74% was up from the weighted average interest rate of 2.65% at December 31, 2018.
Boardwalk REIT has continued to take advantage of low interest rates to refinance and renew certain mortgages. The average
term to maturity of the Trust’s mortgage portfolio is approximately 4.4 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, 2019, approximately 99% of Boardwalk REIT’s mortgages were backed by this NHA insurance, with a
weighted average amortization period of approximately 30 years.
38
BOARDWALK REIT 2019 ANNUAL REPORT 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 Income. As a result of the Trust’s LP Class B Units being classified as financial
liabilities in accordance with IFRS, 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, 2019, which have been recorded as financing charges, was $4.5 million ($4.5 million for the
year ended December 31, 2018). 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, 2019 was $1.3 million, compared to
$2.2 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 13 of the consolidated
financial statements.
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 amortization estimates on an ongoing basis and, if warranted, will adjust these estimates on a
prospective basis.
The total amortization of deferred financing costs for the year ended December 31, 2019, was $6.1 million compared to
$6.5 million recorded for the same period in the prior year. Amortization of deferred financing costs is now included in
financing costs.
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
2020, the Trust anticipates having approximately $317.6 million of secured mortgages maturing with a weighted average rate
of 2.52%. If we were to renew these mortgages today with a five-year term, the Trust estimates, based upon interactions
with possible lenders, the new rate would be approximately 2.30% (as of February 2020).
To date, the Trust has renewed, or forward locked the interest rate on $41.1 million or 13% of its 2020 mortgage maturities at
an average interest rate of 2.35%, while extending the term of these mortgages by eight years.
Administration
Included in administration expenses are costs associated with Boardwalk REIT’s centralized administrative functions. The
amount reported for the year ended December 31, 2019, which relates to corporate administration from continuing operations
(excluding deferred unit-based compensation), was $38.6 million, compared to $37.1 million for the same period in the prior
year, an increase of approximately 4.0% for the year. The increase was due to increased administrative wages as a result of
increased bonuses and profit-sharing based on performance.
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, corporate and deferred unit-based compensation, were $60.8 million for the year ended December 31, 2019,
compared to $67.9 million for the same period in the prior year. The decrease in total administration costs of approximately
39
BOARDWALK REIT 2019 ANNUAL REPORT $7.1 million, or approximately 10.5%, was due primarily to a decrease in operating expenses as lease payments are recorded
on the consolidated statement of financial position under IFRS 16. Additionally, wages and salaries have decreased as the Trust
balances its staff requirements.
Depreciation
Depreciation recorded on the Consolidated Statements of Comprehensive Income is made up of the 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.
Boardwalk reviews its key depreciation estimates on an ongoing basis and, if warranted, will adjust these estimates on a
prospective basis.
The total amount reported as depreciation for the year ended December 31, 2019, was $8.8 million compared to $6.8 million
recorded for the same period in the prior year. The increase is due to the depreciation of the right-of-use assets under IFRS 16.
Other Income and Expenses
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
2018 and 2019 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, 2019, the Trust used a price of $45.93 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, 2019, was $205.5 million, and a
corresponding fair value loss of $36.3 million (year ended December 31, 2018 – fair value gain of $23.6 million) was recorded
on the Consolidated Statements of Comprehensive Income for the year ended December 31, 2019.
The deferred unit-based compensation plan had a fair value of $4.4 million, and a corresponding fair value loss of $1.2 million
(year ended December 31, 2018 – fair value gain of $0.4 million) was recorded on the Consolidated Statements of
Comprehensive Income for the year ended December 31, 2019.
40
BOARDWALK REIT 2019 ANNUAL REPORT FINANCIAL CONDITION
Review of Consolidated Statements of Cash Flows
OPERATING ACTIVITIES
Cash Flow from Operations
For the three months ended December 31, 2019, cash flow from operating activities increased by 64.3% from $23.5 million to
$38.6 million, as compared to the three months ended December 31, 2018. Cash flow from operating activities increased
from $107.3 million for the year ended December 31, 2018 to $160.7 million for the year ended December 31, 2019. This
increase is due to improved operating performance.
A reconciliation of ACFO to cash flow from operating activities as shown in the Consolidated Statements of Cash Flow
prepared in accordance with IFRS is highlighted below.
ACFO Reconciliation
(In $000’s, except per Unit amounts)
3 Months
Dec. 31, 2019
3 Months
Dec. 31, 2018
% Change
12 Month
Dec. 31, 2019
12 Months
Dec. 31, 2018
% Change
Cash flow from operating activities
$
38,576 $
23,479
$ 160,743 $ 107,304
Adjustments
Operating working capital
Deferred unit-based compensation
Government grant earned
Add back distributions to LP Class B Units
recorded as financing charges (1)
Interest paid
Financing costs
Principal portion of lease liabilities
Maintenance capital expenditures (2)
Adjusted Cash Flow From Operations (ACFO)
(4,760)
(565)
94
1,120
20,465
4,971
(573)
94
1,120
18,639
(22,646)
(2,268)
378
4,479
81,673
8,304
(2,095)
378
4,479
74,328
(22,275)
(20,372)
(88,198)
(80,586)
(499)
32,156
(6,096)
26,060
-
27,358
(5,805)
21,553
(3,194)
130,967
(24,060)
106,907
-
112,112
(23,112)
89,000
20.9%
ACFO – per Unit
$
0.51 $
0.42
21.4% $
2.10 $
1.75
20.1%
20.0%
(1) Under IFRS, the LP Class B Units are considered financial instruments in accordance with IFRS 9. 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 ACFO, consistent with the treatment of
distributions paid to all other Unitholders.
(2) Details of the calculation of Maintenance Capital Expenditures can be found in the section titled, “Maintenance of Productive Capacity”.
The reader is cautioned that Boardwalk REIT’s calculation of ACFO 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, 2019, Boardwalk REIT
reported total ACFO of $106.9 million, or $2.10 per fully diluted Trust Unit. This represented an increase of approximately
20.1%, compared to $89.0 million, or $1.75 per fully diluted Trust Unit, reported for the same 12 months in 2018. The increase
for the year 2019 is primarily due to higher rental revenue resulting from higher occupancy and lower incentives. Additionally,
the Trust is benefiting from its focus on decreasing controllable costs such as onsite wages and salaries, repairs and
maintenance and advertising.
For the current quarter, the Trust is paying out an estimated 39.6% of reported FFO and 48.9% of ACFO, compared to 46.5%
and 59.0%, respectively, for the same period in the previous year. For the year ended December 31, 2019, the Trust is
currently paying out an estimated 38.9% of FFO and 47.6% of ACFO, compared to 45.4% and 57.2%, respectively, for the
same period in 2018. ACFO, in the longer term, is indicative of the Trust’s ability to pay distributions to its Unitholders. As
regular distributions are funded by the Trust’s liquidity, cash flow from operations and mortgage upfinancings tied to
investment property capital appreciation, these distributions are reviewed on a quarterly basis by the Board of Trustees to
assess whether they are sustainable. As a result of the review, the Board has approved distributions of $1.00 per unit on an
annualized basis.
41
BOARDWALK REIT 2019 ANNUAL REPORT
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, 2019, the Trust paid regular distributions of $50.9 million
to its Trust and LP Class B Unitholders, compared to $50.9 million for the same period in 2018. Regular distributions declared
for the 12 months ended December 31, 2019 represented an FFO payout ratio of 38.9%, compared to 45.4% for the prior
year. Regular distributions (Trust and LP Class B Units) declared in 2019 represented approximately 31.7% of cash flow from
operating activities compared to 47.4% for 2018.
Financing of Revenue Producing Properties
During the 12 months ended December 31, 2019, the financing and refinancing of existing properties totaled approximately
$144.5 million. During the financing and refinancing process, Boardwalk REIT increased the weighted average interest rate on
its mortgage portfolio from 2.65% at December 31, 2018 to 2.74% at December 31, 2019.
Acquisitions
On April 1, 2019, the Trust closed on the purchase of a property located in Edmonton, Alberta. The property totaled
124 residential units and had a purchase price of $36.8 million (including transaction costs).
On November 27, 2018, the Trust closed on the purchase of four properties located in Calgary, Alberta. The properties
totaled 299 residential units and had a purchase price of $66.8 million (including transaction costs).
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 2018 and 2019 and, therefore,
no adjustment for fiscal 2018 or 2019 was made.
Capital Improvements
Boardwalk has a continuous capital improvement program with respect to its investment properties and brand diversification
strategy. 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.
A select few of the Trust’s communities will be selected to fall under the ‘Boardwalk Lifestyle’ brand; although there are a
number of criteria used to select these properties, in general, these communities are located in extremely attractive locations
and desirable neighborhoods. Rebranding is the highest level of investment the Trust will place in this community. Investment
here will be holistic in nature and include significant enhancement to the exterior. Common areas may not only be refreshed
but may also be modernized to include community areas with Wi-Fi bars, barbeque areas and other in demand amenities. The
suites in these buildings will be significantly modernized and may include the removal of existing walls and substantial
upgrades including all new appliances, upgraded kitchens and extensive flooring, electrical and plumbing upgrades. These
communities will be targeted to the more discriminating renter and commonly referred to as a ‘renter by choice’.
A number of the Trust’s communities will be selected to be repositioned to the ‘Boardwalk Communities’ category. These
communities will also be targeted based on location and will focus in on a modernization program. These communities tend to
be located in mature areas near schools, parks, downtown core, shopping and other desirable amenities. Investment in these
communities will enhance the already large suite size and will significantly upgrade most aspects of the suite, including new
upgraded flooring, all new appliances with modernized kitchens, modern electrical, plumbing and hardware fixtures.
Modernization of existing common areas such as hallways and lobbies will also be considered.
The majority of Boardwalk’s existing portfolio falls into the ‘Boardwalk Living’ category. Resident Members in this area are
looking for value but tend to be more price sensitive. Again, many of these Boardwalk communities are located in established
communities with extensive local amenities. Although Boardwalk’s investment in this area will be less significant than in its
42
BOARDWALK REIT 2019 ANNUAL REPORT re-positioned and rebranded communities, it is value-focused and thoughtfully targeted with those items that these price
sensitive renters appreciate most, such as upgraded flooring, and more modern electrical, plumbing and hardware fixtures.
In 2019, Boardwalk REIT invested approximately $123.2 million (comprised of $117.6 million on its stabilized investment
properties and $5.6 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 $125.9 million
($117.9 million on its stabilized investment properties and $8.0 million property, plant and equipment) invested in 2018.
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 the Trust.
The Trust recognizes that there are certain efficiencies and
economies of scale available from having Boardwalk
Associates perform 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 $32.5 million of on-site wages and salaries
that have been incurred towards these projects for 2019,
compared to $28.8 million for 2018.
MAINTENANCE OF PRODUCTIVE CAPACITY
2019 12 M Capital Investment
19%
Building Improvements
1%
Elevators
7%
Other
(incl. equipment)
7%
Boilers/Mech
5%
Appliances
26%
Internal Capital Program
6%
Hallway Improvements
29%
Suite Improvements
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 ‘value enhancing capital expenditures’.
Maintenance capital expenditures over the longer term 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, although capital in nature are
not considered betterments, and relate more to maintaining the existing earnings capacity of our property portfolio. In
contrast, 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.
The following table provides management’s estimate of these expenditure categories:
(In $000’s, except for
per suite amounts)
Maintenance Capital
Expenditures (1)
Value Enhancing Capital
3 Months
3 Months
Dec. 31, 2019 Per Suite
Dec. 31, 2018 Per Suite
12 Months
Dec. 31, 2019 Per Suite
12 Months
Dec. 31, 2018 Per Suite
$
6,096 $
183 $
5,805 $
174 $
24,060 $
721 $
23,112 $
695
(including Suite Upgrades)
29,921
897
29,437
881
99,215
2,973
102,810
3,092
$
36,017 $ 1,080 $
35,242 $ 1,055 $ 123,275 $ 3,694 $ 125,922 $ 3,787
(1) Details of the calculation of Maintenance Capital Expenditures can be found on the following page.
43
BOARDWALK REIT 2019 ANNUAL REPORT
Items reported as capital are determined as investments in assets that have a useful economic life longer than one year.
Management has estimated that for fiscal 2019 and 2018, the amount allocated to maintenance capital was approximately
$24.1 million, or $721 per apartment unit, and $23.1 million, or $695 per apartment unit, respectively, with investment in
value-enhancing expenditures to its stabilized investment properties totaling $99.2 million and $102.8 million, respectively,
or $2,973 and $3,092 per apartment unit.
MAINTENANCE CAPITAL EXPENDITURES (“MAINTENANCE CAPEX”)
Maintenance CAPEX is defined as capital expenditures related to maintaining the existing space of a property. This contrasts
with expenditures related to development or revenue-enhancing activities in nature. Boardwalk’s determination of
Maintenance CAPEX is based on an estimated reserve amount per apartment unit rather than on actual amounts and utilizes
a three-year rolling average. Boardwalk’s viewpoint is that the categorization of expenditures between maintenance and
value-enhancing will be subject to wide variations in professional judgment, especially as it relates to the multi-family real
estate asset class. As a result, Boardwalk has determined that a reserve amount based on a three-year rolling average and
calculated using an annual $605 per apartment unit for 2019, $620 per apartment unit for 2018 and $939 per apartment unit for
2017, is appropriate. Capital budget amounts for 2019, revised if necessary, based on actual expenditures for the year, are
initially used to calculate Maintenance CAPEX for the three-year rolling average. For each of the fiscal periods, the first-year
amortization of major capital expenditure categories is taken as a reliable metric of Maintenance CAPEX for the year, since
such an amount would have been expended in the first year in any event in lieu of repair and maintenance expenses. The
economic useful lives of capital expenditures after the first year are, therefore, deemed to be value-enhancing as these will
inevitably benefit higher revenue generation in future years.
For 2019, the amount of $605 per apartment unit was determined by taking the Trust’s 2019 actual capital expenditure,
excluding development, and estimating the economic useful life of each major capital expenditure category. The first year of
amortization for each category is then classified as Maintenance CAPEX. The total Maintenance CAPEX is then divided by the
number of apartment units in Boardwalk’s property portfolio to derive a per unit Maintenance CAPEX amount. For 2019,
Boardwalk’s estimate of Maintenance CAPEX was $24.1 million, or $721 per apartment unit, for the year based on a three-
year rolling average of 2017, 2018 and 2019 actual expenditures. The Trust’s calculation of standardized maintenance capital
expenditures per suite is outlined on the following page:
44
BOARDWALK REIT 2019 ANNUAL REPORT Category
Building Exterior, Grounds & Parking
Hallways & Lobbies
Elevators
Mechanical & Electrical
Other – Information Technology
Site Equipment & Vehicles
Total Common Area
Paint & General
Flooring
Cabinets & Counters
Appliances
Suite Mechanical
Furniture, Fixtures & Equipment
Total Suites
Internal Capital Program
Subtotal
Corporate Capital Expenditures
Total Budget Capital Expenditures
2019 Cash Flow from Investing Activities
Improvements to Investment Properties
Additions to Property, Plant & Equipment
Apartment Units
Three-year Rolling Average
2017
2018
2019
Maintenance CAPEX Per Unit
2019 Capital
Expenditures
($000’s)
Economic
Useful Life
(Years)
Maintenance
Capital
Allocation
Value-added
Capital
Allocation
2019
Maintenance
Capital
Expenditures
($000’s, except
per Unit amount)
$
$
$
$
$
$
$
$
$
$
$
$
$
$
23,943
6,964
1,951
6,564
6,483
1,553
47,458
13,037
12,394
8,850
5,596
1,718
784
42,379
$
32,476
$ 122,313
$
961
$ 123,274
$
117,644
5,630
$ 123,274
33,263
15.0
10.0
10.0
10.0
5.0
5.0
4.0
8.0
8.0
8.0
4.0
4.0
4.0
7%
10%
10%
10%
20%
20%
25%
13%
13%
13%
25%
25%
93%
90%
90%
90%
80%
80%
75%
88%
88%
88%
75%
75%
$
$
$
$
$
$
$
$
$
$
$
$
1,597
696
195
656
1,297
311
3,259
1,549
1,106
700
430
196
25%
75%
$
8,119
$
20,111
$
$
$
$
$
605
939
620
605
721
45
BOARDWALK REIT 2019 ANNUAL REPORT
A similar calculation for 2018 and 2017 maintenance capital expenditures, reconciled to Boardwalk’s 2018 and 2017 actual cash
flow from investing activities, are also provided below for comparison. In 2018, Boardwalk estimated Maintenance CAPEX to
be $620 per apartment unit for the year, and in 2017 the Trust estimated $939 per apartment unit per year, based on actual
capital expenditures.
Category
Building Exterior, Grounds & Parking
Hallways & Lobbies
Elevators
Mechanical & Electrical
Other – Information Technology
Site Equipment & Vehicles
Total Common Area
Paint & General
Flooring
Cabinets & Counters
Appliances
Suite Mechanical
Furniture, Fixtures & Equipment
Total Suites
Internal Capital Program
Subtotal
Corporate Capital Expenditures
Total Capital Expenditures
2018 Capital
Expenditures
($000’s)
Economic
Useful Life
(Years)
Maintenance
Capital
Allocation
Value-added
Capital
Allocation
2018
Maintenance
Capital
Expenditures
($000’s, except
per Unit amount)
$
$
$
$
$
$
$
$
$
$
$
$
$
$
25,390
3,213
1,262
5,331
6,509
2,103
43,808
16,159
15,917
9,886
6,305
2,909
961
52,137
$
28,841
$ 124,786
$
1,136
$ 125,922
15.0
10.0
10.0
10.0
5.0
5.0
4.0
8.0
8.0
8.0
4.0
4.0
4.0
7%
10%
10%
10%
20%
20%
25%
13%
13%
13%
25%
25%
93%
90%
90%
90%
80%
80%
75%
88%
88%
88%
75%
75%
$
$
$
$
$
$
$
$
$
$
$
$
1,694
321
126
533
1,302
421
4,040
1,990
1,236
788
727
240
25%
75%
$
7,210
$
20,628
2018 Cash Flow from Investing Activities
$
117,914
Improvements to Investment Properties
8,008
Additions to Property, Plant & Equipment
$ 125,922
Apartment Units
33,424
Standardized Maintenance CAPEX Per Unit
$
$
620
620
46
BOARDWALK REIT 2019 ANNUAL REPORT
Category
Building Exterior, Grounds & Parking
Hallways & Lobbies
Elevators
Mechanical & Electrical
Other – Information Technology
Site Equipment & Vehicles
Total Common Area
Paint & General
Flooring
Cabinets & Counters
Appliances
Suite Mechanical
Furniture, Fixtures & Equipment
Total Suites
Internal Capital Program
Subtotal
Corporate Capital Expenditures
Total Capital Expenditures
2017 Cash Flow from Investing Activities
Improvements to Investment Properties
Additions to Property, Plant & Equipment
Apartment Units
Standardized Maintenance CAPEX Per Unit
2017 Capital
Expenditures
($000’s)
Economic
Useful Life
(Years)
Maintenance
Capital
Allocation
Value-added
Capital
Allocation
2017
Maintenance
Capital
Expenditures
($000’s, except
per Unit amount)
$
$
$
$
$
$
$
$
$
$
$
$
$
$
34,936
6,756
6,129
7,495
7,384
4,651
67,351
31,749
37,961
21,032
9,943
5,379
981
107,045
$
24,889
$ 199,285
$
2,646
$ 201,931
$ 190,203
11,728
$ 201,931
33,187
15.0
10.0
10.0
10.0
5.0
5.0
4.0
8.0
8.0
8.0
4.0
4.0
4.0
7%
10%
10%
10%
20%
20%
25%
13%
13%
13%
25%
25%
93%
90%
90%
90%
80%
80%
75%
88%
88%
88%
75%
75%
$
$
$
$
$
$
$
$
$
$
$
$
2,330
676
613
750
1,477
930
7,937
4,745
2,629
1,243
1,345
245
25%
75%
$
6,222
$
31,142
$
$
939
939
47
BOARDWALK REIT 2019 ANNUAL REPORT
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 follows:
Date
December 31, 2019
September 30, 2019
June 30, 2019
March 31, 2019
December 31, 2018
September 30, 2018
June 30, 2018
March 31, 2018
Number
of Properties
Aggregate
Fair Value
Percentage of
Portfolio as of that Date
4
4
4
4
5
4
4
4
$
$
$
$
$
$
$
$
610,594
118,379
65,183
185,378
563,150
80,800
135,882
109,606
10.2%
2.0%
1.1%
3.1%
8.5%
1.4%
2.3%
1.9%
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
Dec. 31, 2019
Dec. 31, 2018
Calgary
Edmonton
Other Alberta
Kitchener
London
Montreal
Quebec City
Regina
Saskatoon
Land Lease
Capitalization Rate
Minimum
Maximum
Forecasted Total
Standardized Net
Operating Income
Capitalization Rate
Minimum
Maximum
Forecasted Total
Standardized Net
Operating Income
4.50%
4.78%
5.75%
4.50%
4.50%
4.75%
5.25%
5.65%
5.75%
4.50%
4.50%
7.14%
$
69,080
5.75%
7.50%
4.50%
4.75%
5.75%
5.75%
6.00%
6.00%
122,396
19,162
3,069
18,360
5,852
10,975
19,178
16,007
7.50%
25.54%
$
$
284,079
31,825
4.50%
5.00%
5.75%
4.75%
4.75%
4.75%
5.25%
5.65%
5.75%
4.50%
4.50%
6.00%
$
69,104
6.49%
7.25%
4.75%
5.00%
5.75%
5.75%
6.11%
6.00%
123,324
19,842
2,509
15,169
5,828
10,468
19,087
18,201
7.25%
22.77%
$
$
283,532
29,197
Overall portfolio weighted average capitalization rate was 5.27% as at December 31, 2019 and 5.28% as at December 31, 2018.
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 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
48
BOARDWALK REIT 2019 ANNUAL REPORT
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, 2019 and December 31, 2018:
As at December 31, 2019
Net Operating Income
Capitalization Rate
-0.25%
Cap Rate As Reported
+0.25%
-3%
-1% As Forecasted
+1%
+3%
$ 306,427
$ 312,745
$ 315,904
$ 319,063
$ 325,381
5.02%
$ 109,607
$ 235,423
$ 298,331
$ 361,239
$ 487,055
5.27%
5.52%
(179,774)
(442,951)
(59,925)
5,992,479
59,925
(328,528)
(271,316)
(214,105)
179,774
(99,681)
As at December 31, 2018
Net Operating Income
Capitalization Rate
-0.25%
Cap Rate As Reported
+0.25%
-3%
-1% As Forecasted
+1%
+3%
$ 303,347
$ 309,602
$ 312,729
$ 315,857
$
322,111
5.03%
$ 108,102
$ 232,525
$ 294,736
$ 356,948
$ 481,371
5.28%
5.53%
(177,792)
(437,823)
(59,264)
5,926,412
(324,656)
(268,072)
59,264
(211,489)
177,792
(98,322)
Investment properties with a fair value of $615.2 million as at December 31, 2019 ($569.3 million – December 31, 2018), are
situated on land held under ground (or land) leases.
Investment properties with a fair value of $895.5 million as at December 31, 2019 (December 31, 2018 – $937.0 million),
are pledged as security against the Trust’s committed revolving credit facility. In addition, investment properties with a fair
value of $5.8 billion as at December 31, 2019 (December 31, 2018 – $5.7 billion), are pledged as security against the Trust’s
mortgages payable.
For the year ended December 31, 2019, the Trust capitalized $117.6 million in building improvements (and $30.1 million in
development expenditures) and recorded a fair value loss of $48.9 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 12 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 much closer to market rents. For the year ended December 31,
2019 $378,000 was recognized in profit under rental revenue for this grant (December 31, 2018 – $378,000).
49
BOARDWALK REIT 2019 ANNUAL REPORT
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. The Trust commenced construction of Phase 2 of
Pines Edge in 2016, an identical 79 unit, four-storey wood frame building with construction being substantially completed at
the end of June 2017, both on time and on budget. Pines Edge 3, consisting of 71 units, began construction in June of 2017
and was completed in July 2018, also on time and on budget. Construction costs was $13.2 million and will provide a
stabilized unlevered yield in the range of 6.00% to 6.50%.
In the fourth quarter of 2016, Boardwalk and 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 a 12-storey residential tower with
approximately 130,000 square feet of residential space, totaling approximately 162 apartment units at RioCan’s Brentwood
Village Shopping Centre in Calgary, Alberta. The development was substantially completed and received Occupancy Permit at
the end of January 2020. It includes two (2) levels of underground parking and provides premium rental housing units minutes
from downtown Calgary along the Northwest Light Rail Transit line and in 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 was 100% owned by RioCan. Pursuant to a purchase and
sale agreement dated October 19, 2016 between Boardwalk and RioCan, Boardwalk purchased a 50% interest in the parcel of
land on November 23, 2017. The land value was based on the total buildable area and, as such, Boardwalk paid $3.2 million for
its 50% interest. Construction of the project began in Q4 of 2017. For the year ended December 31, 2019, the Trust incurred
$16.8 million in development for its 50% interest. For the year ended December 31, 2018, Boardwalk incurred $9.9 million in
development costs for its 50% interest. In fiscal 2017, Boardwalk incurred $2.3 million in development costs. It was estimated
that the total construction for the project will be between $75 million to $80 million ($37.5 million to $40 million per partner).
The project was substantially completed on schedule and on budget.
In the fourth quarter of 2018, Boardwalk and entered into a 50:50 joint venture partnership to develop a mixed-used complex
in Brampton, Ontario. For the year ended December 31, 2019, the Trust incurred $15.9 million for its interest in the project as
capital contributions into the limited partnership. For the year ended December 31, 2018, Boardwalk incurred $9.9 million for
its interest in the project as capital contribution into the limited partnership.
In the third quarter of 2019, the Trust entered into a second joint venture arrangement with RioCan. Subject to zoning
approvals, the partnership will develop two towers, one 25-storey and the other a 16-storey, in a mixed-use project consisting
of 470 residential units totaling approximately 418,000 buildable square feet and approximately 12,000 square feet of retail
space. The project is located on a discrete portion of land at RioCan’s Sandalwood Shopping Centre in Mississauga, Ontario.
The project proposes three levels of underground parking and to provide premium rental housing in a transit-oriented location
along Hurontario Street near Square One Shopping Centre, and easy access onto the 401, 403 and 407 highways. The joint
venture involves an equal 50% interest, in which, each partner will provide best-in-class retail and residential expertise to
develop and operate the asset. The land was 100% owned by RioCan. Subject to zoning approval and confirmation of total
buildable area, the total purchase price has yet to be finalized. To date, the Trust has paid $11.6 million (including transaction
costs) for its 50% interest in the land. Zoning approvals are anticipated in early 2020.
It is our intention to continue to investigate further development opportunities; 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.
For the year ended December 31, 2019, the Trust expended $30.1 million on total development costs compared to
$18.9 million for the prior year. Interest costs of $1.4 million were capitalized for the year ended December 31, 2019.
(December 31, 2018 – $0.6 million).
50
BOARDWALK REIT 2019 ANNUAL REPORT Capital Structure and Liquidity
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 ACFO, a non-GAAP cash flow
metric as defined above. However, in common with the majority of real estate entities, the Trust relies 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, 2019 remains stable as the following table highlights:
($000)
Cash position December 31, 2019
Subsequent Committed Financing
Committed Revolving Credit Facility Available
Total Available Liquidity
$
35,166
22,838
199,750
$
257,754
In addition to this, the Trust currently has 1,333 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 $139.3 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 $317.6 million of secured mortgages coming due in 2020 (as shown in the table on
the next page), all have NHA insurance, and represent in aggregate approximately 41% of current estimated “underwriting”
values on those individual secured assets. Interest rates on five and 10-year NHA-insured mortgages as of February 2020 were
2.30% and 2.40%, respectively. 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 portion of this risk, the Trust has forward locked or renewed $41.1million, or 13%, of its $317.6 million of 2020 mortgage
maturities. The weighted average contracted interest rate on these renewals is 2.35%, for an average term of eight years.
MORTGAGE 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, 2019, were $2.7 billion, compared to
$2.7 billion reported on December 31, 2018.
Boardwalk REIT’s overall weighted average interest rate on its long-term debt has increased from the prior year. The weighted
average interest rate on December 31, 2019, was 2.74% compared to 2.65% on December 31, 2018. 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.
51
BOARDWALK REIT 2019 ANNUAL REPORT
Year of Maturity
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
Total Principal Outstanding
Unamortized Deferred Financing Costs
Per Financial Statements
CONSTRUCTION LOAN PAYABLE
Principal Outstanding
as at Dec. 31, 2019
Weighted Average
Interest Rate
By Maturity
$
317,649
377,971
441,142
354,885
260,887
304,419
143,852
347,889
110,481
181,601
2,840,776
(99,128)
$
2,741,648
2.52%
2.41%
2.73%
2.93%
2.89%
2.63%
2.45%
3.18%
3.27%
2.56%
2.74%
% of Total
11.2%
13.3%
15.5%
12.5%
9.2%
10.7%
5.1%
12.2%
3.9%
6.4%
100.0%
During 2019, the Trust entered into a $50 million revolving construction facility loan along with one of its joint venture partners.
To date, $29.4 million has been drawn on this loan, of which Boardwalk’s 50% portion is $14.7 million. The facility is interest
payable only and has a maturity date of January 31, 2021. The facility bears interest at prime plus 0.05%, a Bankers’
Acceptance interest rate of 1.97%, a Bankers’ Acceptance stamping fee of 1.05% and a standby fee of 0.21%.
INTEREST COVERAGE
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.
The following table sets out the Trust’s interest coverage ratio calculation as at December 31, 2019, and December 31, 2018,
based on the most recently completed four fiscal quarters.
As at
Net operating income
Administration expenses (including deferred unit-based compensation)
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, 2019
Dec. 31, 2018
$
258,793
$
227,407
(40,913)
217,880
79,032
2.76
1.50
(39,188)
188,219
70,179
2.68
1.50
For the year ended December 31, 2019, Boardwalk REIT’s overall interest coverage ratio of consolidated EBITDA (i.e. Earnings
Before Interest, Taxes, Depreciation and Amortization) to interest expense, excluding distributions on LP B Units and fair value
adjustments, was 2.76, compared to 2.68 for the year ended December 31, 2018. The reader should note that under IFRS, the
distributions made to the LP Class B Unitholders are 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.
52
BOARDWALK REIT 2019 ANNUAL REPORT
UNITHOLDERS’ EQUITY
The following table discloses the changes in REIT Trust Units issued and outstanding:
Summary of Unitholders’ Capital Contributions
December 31, 2017
Units issued for vested deferred units
December 31, 2018
Units issued for vested deferred units
December 31, 2019
Units
46,338,036
53,950
46,391,986
69,307
46,461,293
Boardwalk REIT has one class of publicly traded voting securities known as “REIT Units”. As at December 31, 2019, there were
46,461,293 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 50,936,293. 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.
During 2018 and 2019, the Trust did not purchase and cancel any Trust Units.
EQUITY
Boardwalk has an equity market capitalization of approximately $2.3 billion based on the Trust Unit closing price of $45.93 on
the Toronto Stock Exchange on December 31, 2019.
ENTERPRISE VALUE
With a total enterprise value of approximately $5.0 billion (consisting of total debt of $2.7 billion and market capitalization of
$2.3 billion) as at December 31, 2019, Boardwalk’s total debt is approximately 54% 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 27, 2020, where additional risks and their related
management are also noted.
General Risks
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. Because
real estate, like many other types of long-term investment, experiences significant fluctuations and cycles in value, specific
market conditions may result in occasional or permanent reductions in value of the Boardwalk REIT’s portfolio. Furthermore,
the Trust may buy and/or sell properties at less than optimal times. As interest rates fluctuate in the lending market, in general,
so do capitalization rates, which affect the underlying value of real estate. As such, when interest rates rise, generally
capitalization rates should be expected to rise. Over the period of investment, capital gains and losses at the time of
disposition can occur due to the increase or decrease of these capitalization rates.
53
BOARDWALK REIT 2019 ANNUAL REPORT Currently, we operate in Canada, in the provinces of Alberta, Saskatchewan, Ontario and Quebec. Neither of Alberta nor
Saskatchewan is subject to rent control legislation; however, under Alberta legislation, a landlord is only entitled to increase
rents once every 12 months. A more detailed discussion on rent controls will follow in a later section. Boardwalk REIT is not
widely diversified either by asset class or geographic location. By focusing on the multi-residential sector and having a majority
of its apartment units concentrated in Western Canada, Boardwalk is exposed to adverse effects on that segment of the real
estate market and/or for that geographic region and does not benefit from a diversification of its portfolio by property type
and/or geographic location. The marketability and value of the Trust’s portfolio as well as the REIT’s revenues will depend on
many factors beyond the control of Boardwalk REIT.
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. The majority of operating leases signed are for a period
of 12 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.
Regulation and Changes in Applicable Laws: Boardwalk REIT is subject to laws and regulations governing the ownership
and leasing of real property, zoning, building standards, landlord/tenant relationships, employment standards, environmental
matters, taxes and other matters. It is possible that future changes in applicable federal, provincial, municipal or common laws
or regulations or changes in their enforcement or regulatory interpretation could result in changes in the legal requirements
affecting Boardwalk (including with retroactive effect). Any changes in the laws to which Boardwalk REIT is subject could
materially affect the Trust’s rights and title to its assets. It is not possible to predict whether there will be any further changes
in the regulatory regimes to which Boardwalk REIT is subject or the effect of any such changes on its investments. Lower
revenue growth or significant unanticipated expenditures may result from Boardwalk’s need to comply with changes in
applicable laws or the enactment of new laws, including: (i) laws imposing environmental remedial requirements and the
potential liability for environmental conditions existing on properties or the restrictions on discharges or other conditions;
(ii) rent control or rent stabilization laws or other residential landlord/tenant laws; or (iii) other governmental rules and
regulations or enforcement policies affecting the development, use and operation of the REIT’s properties, including changes
to building codes and fire and life-safety codes. Further, residential landlord/tenant laws in certain provinces may provide
tenants with the right to bring certain claims to the applicable judicial or administrative body seeking an order to, among other
things, compel landlords to comply with health, safety, housing and maintenance standards. As a result, Boardwalk may, in
the future, incur capital expenditures, which may not be fully recoverable from tenants.
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 knowledgeable third-party consultants.
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
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BOARDWALK REIT 2019 ANNUAL REPORT 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.
Climate-related Risks: As outlined by the Task Force on Climate-related Financial Disclosures (“TCFD”), climate related risks
can be divided into two major categories: (i) risks related to the transition to a lower-carbon economy and (ii) risks related to
the physical impacts of climate change. As it relates to the Trust and transition risks, the Trusts focuses on implementing
policies which promote the adaptation to climate-change and includes elements such as implementing ways to reduce
greenhouse gas emissions, adopting energy efficient solutions, encouraging greater water efficiency, etc., however each of
these policies have a financial impact. As it relates to physical risks resulting from climate change it can be event driven (acute)
or longer-term shifts (chronic) in climate patterns. Physical risks may have financial implications such as direct damage to
assets or indirect impacts. The Trust is aware of these risks and working towards safeguarding its assets from these risks.
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 these properties in its portfolio, that 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 were phased in on a property-by-property basis through to 2018 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.
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BOARDWALK REIT 2019 ANNUAL REPORT 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 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.
Liquidity Risk: An investment in real estate is relatively illiquid, with the degree of liquidity generally fluctuating in relation to
demand for and the perceived desirability of such investments. Such illiquidity will tend to limit Boardwalk’s ability to vary its
portfolio of properties promptly in response to changing economic, investment or other conditions. If Boardwalk was to be
required to quickly liquidate its real property investments, the proceeds to the Trust might be significantly less than the
aggregate carrying or net asset value of its properties or less than what would be expected to be received under normal
circumstances, which could have an adverse effect on Boardwalk’s financial condition and financial performance and decrease
the amount of cash available for distribution. Illiquidity may result from the absence of an established market for real property
investments, as well as from legal or contractual restrictions on their resale. In addition, in recessionary times, it may be
difficult to dispose of certain types of real estate. The costs of holding real estate are considerable and, during an economic
recession, Boardwalk REIT may be faced with ongoing expenditures with a declining prospect of incoming receipts. In such
circumstances, it may be necessary for Boardwalk REIT to dispose of properties at lower prices in order to generate sufficient
cash for operations and making distributions. There can be no assurance that the fair market value of any properties held by
the REIT will not decrease in the future.
Access to Capital Risk: The real estate industry is highly capital intensive. Boardwalk REIT will require access to capital to
maintain its properties, as well as to fund its growth strategy and certain capital expenditures from time to time. There can be no
assurances that Boardwalk REIT will have access to sufficient capital or access to capital on terms favourable to the Trust for
future property acquisitions, financing or refinancing of properties, funding operating expenses or other purposes. Furthermore,
in certain circumstances, Boardwalk REIT may not be able to borrow funds due to the limitations set forth in its Declaration of
Trust and/or other loan agreements. Market conditions and unexpected volatility or illiquidity in financial markets may inhibit
Boardwalk REIT’s access to long-term financing in the capital markets. As a result, it is possible that financing, which the Trust
may require in order to grow and expand its operations, upon the expiry of the term of financing, upon refinancing any particular
property owned by Boardwalk REIT or otherwise, may not be available or, if it is available, may not be available on favourable
terms to the Trust. Failure by Boardwalk to access required capital could have a material adverse effect on the Trust’s business,
cash flows, financial condition and financial performance and ability to make distributions to Unitholders.
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.
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BOARDWALK REIT 2019 ANNUAL REPORT 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.
Specific Risks
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 33,263 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 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.
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BOARDWALK REIT 2019 ANNUAL REPORT 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 Members’ 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.
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.
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BOARDWALK REIT 2019 ANNUAL REPORT PROPERTY REDEVELOPMENT, RE-POSITIONING AND RENOVATIONS
Property redevelopment, re-positioning or major renovation work are subject to a number of risks, including: (i) the potential
that Boardwalk REIT may fail to recover expenses already incurred if it abandons redevelopment/re-positioning/ renovation
opportunities after commencing to explore them; (ii) the potential that Boardwalk REIT may expend funds on and devote
management time to projects, which it does not complete; (iii) construction or redevelopment costs of a project may exceed
original estimates, possibly making the project less profitable than originally estimated, or unprofitable; (iv) the time required
to complete the construction, redevelopment or renovation of a project or to lease up the completed project may be greater
than originally anticipated, thereby adversely affecting Boardwalk REIT’s cash flow and liquidity; (v) the cost and timely
completion of construction or renovations (including risks beyond Boardwalk REIT’s control, such as weather, labour conditions
or material shortages); (vi) contractor and subcontractor disputes, strikes, labour disputes or supply disruptions; (vii) the failure
to achieve expected occupancy and/or rent levels within the projected time frame, if at all; (viii) delays with respect to
obtaining, or the inability to obtain, necessary zoning, occupancy, land use and other governmental permits, and changes in
zoning and land use laws; (ix) occupancy rates and rents of a completed project or renovation may not be sufficient to make
the project or initiative profitable; (x) Boardwalk REIT’s ability to dispose of properties redeveloped or renovated with the intent
to sell could be impacted by the ability of prospective buyers to obtain financing given the current state of the credit markets;
and (xi) the availability and pricing of financing to fund Boardwalk REIT’s development or renovation activities on favourable
terms or at all. The above risks could result in substantial unanticipated delays or expenses and, under certain circumstances,
could prevent the initiation of redevelopment or renovation activities or the completion of redevelopment or renovation
activities once undertaken. In addition, redevelopment and renovation projects entail risks that investments may not perform
in accordance with expectations and can carry an increased risk of litigation (and its attendant risks) with contractors,
subcontractors, suppliers, partners and others. Any of these risks could have an adverse effect on Boardwalk REIT’s financial
condition, financial performance, cash flow, per unit trading price of its Trust Units, distributions to Unitholders and ability to
satisfy Boardwalk’s REIT’s principal and interest obligations. Also, it is anticipated that the Trust would be required to execute a
guarantee in connection with construction financing for redevelopments, which would subject Boardwalk REIT to recourse for
construction completion risks and repayment of the construction indebtedness.
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.
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BOARDWALK REIT 2019 ANNUAL REPORT Rent Control Risk is the risk of the implementation or amendment of new or existing legislative rent controls in the
markets Boardwalk REIT operates, 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 12 months by no more than the “guideline amount” established by regulation. For the calendar
years 2018 and 2019, the guideline amounts have been established at 1.8% and 1.8%, respectively, and for 2020
the guideline amount has been set at 2.2%. Further details on Ontario’s Annual Rental Increase Guidelines can be found at
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. In April 2017, the Ontario
Government introduced legislation that would expand rent control to all rental units. Previously, rent control in Ontario applied
only to rental units constructed before November 1, 1991. The new legislation will not have a material impact on Boardwalk, as
all of its Ontario properties were built prior to November 1, 1991. 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. In November 2018, the Ontario
Government removed such rent control for new residential units that were not previously occupied before November 15, 2018.
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 regulation. Rent increases also take into account a return on capital expenditures (for 2019 this return is 2.7%
compared to 2.4% for 2018, compared to 2.4% for 2017 and compared to 2.5% for 2016), 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 1, 2019,
and before April 2, 2020, before any consideration for increases to municipal and school taxes as well as capital expenditures,
are: -1.5% for electricity heated dwellings, -1.4% for gas heated dwellings, and 17.9% for oil heated dwellings, plus 4.0% to
cover the cost of maintenance, service and management contracts. Tools to calculate the Quebec rent increase can be found
at www.rdl.gouv.qc.ca/en/calculation-for-the-fixing-of-rent.
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 1, 2017, an additional $1.12 per gigajoule (“GJ”) consumed was charged.
The rate has increased to $1.65/GJ for 2018. With a new provincial government elected in 2019, the Alberta Carbon Tax was
eliminated in 2019. Beginning in 2020, Alberta will participate in the federal carbon levy at a price of $1.05/GJ. Any significant
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BOARDWALK REIT 2019 ANNUAL REPORT 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; and
• 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.
Certain Tax Risks
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 2018 and 2019, 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).
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.
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BOARDWALK REIT 2019 ANNUAL REPORT 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 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 27, 2020. 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.
Risks Associated with Disclosure Controls and Procedures & Internal
Control over Financial Reporting
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.
62
BOARDWALK REIT 2019 ANNUAL REPORT ACCOUNTING AND CONTROL MATTERS
Critical Accounting Policies
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, 2019.
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(i)) 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 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. The fair value of
an investment property held by a lessee as a right-of-use asset reflects expected cash flows (including variable lease
payments that are expected to become payable). Accordingly, if the valuation obtained for an investment property is net of all
payments expected to be made, it will be necessary to add back any recognized lease liability, to arrive at the carrying amount
of the investment property using the fair value model.
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(j)).
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
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BOARDWALK REIT 2019 ANNUAL REPORT 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 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(f)) and IFRS 5 (see NOTE 2(j)).
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(k)).
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 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.
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BOARDWALK REIT 2019 ANNUAL REPORT PP&E Class
PP&E Category (NOTE 5)
Useful Life / Depreciation Rate
Depreciation Method Used
Administrative building
Administrative building
Site equipment
Automobiles
Site equipment and other
Site equipment and other
Warehouse assets
Site equipment and other
Corporate assets
Site equipment and other
Computer hardware
Corporate technology
Computer software*
Corporate technology
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 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 (“IAS 39”), or IAS 37 – Provisions, Contingent Liabilities
and Contingent Assets (“IAS 37”), as appropriate, with the corresponding gain or loss being recognized in profit or loss in the
consolidated statement of comprehensive income.
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BOARDWALK REIT 2019 ANNUAL REPORT 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 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,
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.
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BOARDWALK REIT 2019 ANNUAL REPORT Where the carrying amount of an asset exceeds the recoverable amount determined, an impairment loss is recognized in the
consolidated statement of comprehensive 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) LEASES
As outlined in NOTE 3(a), the Trust adopted IFRS 16 – Leases (“IFRS 16) on January 1, 2019. As a result of adopting IFRS 16,
the Trust’s accounting policy for leases is described below.
The Trust as a Lessee
The Trust assesses whether a contract is, or contains, a lease at inception of the contract. The Trust recognizes a right-of-use
asset and a corresponding lease liability with respect to all lease arrangements in which it is the lessee, except for short-term
leases (defined as leases with a lease term of 12 months or less) and leases of low value assets. For these leases, the Trust
recognizes the lease payments as an operating expense on a straight-line basis over the term of the lease unless another
systematic basis is more representative of the time pattern in which economic benefits from the leased assets are consumed.
The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement
date, discounted by using the rate implicit in the lease. If this rate cannot be readily determined, the Trust uses its incremental
borrowing rate. The incremental borrowing rate is defined as the rate of interest that the lessee would have to pay to borrow
over a similar term and with a similar security, the funds necessary to obtain an asset of a similar value to the right-of-use
asset in a similar economic environment.
Lease payments included in the measure of the lease liability comprise:
• Fixed payments (including in-substance fixed payments), less any lease incentives;
• Variable lease payments that depend on an index or rate, initially measured using the index or rate at the commencement date;
• The amount expected to be payable by the lessee under residual value guarantees;
• The exercise price of purchase options, if the lessee is reasonably certain to exercise the options; and
• Payments of penalties for terminating the lease, if the lease term reflects the exercise of an option to terminate the lease.
The lease liability is subsequently measured by increasing the carrying amount to reflect interest on the lease liability (using
the effective interest method) and by reducing the carrying amount to reflect the lease payments made (see NOTE 2(s) for
definition of effective interest method).
The Trust remeasures the lease liability (and makes a corresponding adjustment to the related right-of-use asset) whenever:
• The lease term has changed or there is a change in the assessment of exercise of a purchase option, in which case the
lease liability is remeasured by discounting the revised lease payments using a revised discount rate;
• The lease payments change due to changes in an index or rate or a change in expected payment under a guaranteed
residual value, in which cases the lease liability is remeasured by discounting the revised lease payments using the initial
discount rate; or
• A lease contract is modified and the lease modification is not accounted for as a separate lease, in which case the lease
liability is remeasured by discounting the revised lease payments using a revised discount rate.
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BOARDWALK REIT 2019 ANNUAL REPORT The right-of-use assets comprise the initial measurement of the corresponding lease liability, lease payments made at or
before the commencement day and any initial direct costs. They are subsequently measured either at fair value (in the case of
right-of-use assets which are considered part of investment properties) or at cost less accumulated depreciation and
impairment losses (for right-of-use assets which are considered property, plant and equipment). Right-of-use assets are
depreciated over the shorter period of the lease term and the useful life of the underlying asset. The depreciation starts at the
commencement date of the lease. The Trust applied IAS 36 to determine whether a right-of-use asset is impaired.
Variable rents that do not depend on an index or rate are not included in the measurement of the lease liability and the
right-of-use asset. The related payments are recognized as an expense in the period in which the event or condition that
triggers those payments and are included in operating expenses in the consolidated statement of comprehensive income.
As a practical expedient, IFRS 16 permits a lessee not to separate non-lease components, and instead account for any lease
and associated non-lease components as a single arrangement. The Trust has used this practical expedient on those contracts
(warehouse space and office space) which contain both lease and non-lease components.
The Trust as a Lessor
The Trust enters into lease agreements as a lessor with respect to its investment properties. Leases for which the Trust is a
lessor are classified as finance or operating leases. Whenever the terms of the lease transfer substantially all the risks and
rewards of ownership to the lessee, the contract is classified as a finance lease. All other leases are classified as operating
leases. As the Trust has retained substantially all of the risks and benefits of ownership of its investment properties, it
accounts for leases with its tenants as operating leases. As operating leases, lease payments are recognized as revenue
when the tenant has a right to use the leased asset. The leased asset is recognized in the consolidated statement of financial
position according to the nature of the underlying asset.
(I)
TAXATION
For fiscal 2018 and 2019, 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 33 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 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.
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.
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BOARDWALK REIT 2019 ANNUAL REPORT (J) PROVISIONS
In accordance with IAS 37 – Provisions, Contingent Liabilities and Contingent Assets, 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.
(K) 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 IFRS 9 – Financial Instruments (“IFRS 9”), 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 income. Fair value of the deferred units is calculated based on the
observable market price of Boardwalk REIT’s Trust Units.
(L) 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 (“IAS 20”), 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.
(M) 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
12 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.
Lease revenue earned directly from leasing the asset is recognized and measured in accordance with IFRS 16. In
addition to revenue generated directly from the operating lease, rental revenue includes non-lease revenue earned from
the tenant, which is recognized and measured under IFRS 15 – Revenue from Contracts with Customers (“IFRS 15”).
Non-lease revenue includes parking revenue, other service revenue and fees, recovery of certain operating costs,
including retirement services, cable (internet and television). These revenues are recognized when earned.
IFRS 15 requires revenue recognized from customer contracts (non-lease components) to be disclosed separately from
its other sources of revenue (NOTE 23 and NOTE 36).
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.
69
BOARDWALK REIT 2019 ANNUAL REPORT 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 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.
v) Development Management Fees
Boardwalk has interests in investment properties through joint operations whereby the Trust provides development
management services to the co-owners. As the services are provided over a period of time, income is recognized on a
straight-line basis, unless there is evidence that some other method would better reflect the pattern of performance.
(N) FINANCIAL INSTRUMENTS AND DERIVATIVES
Financial instruments and derivatives are accounted for, presented, and disclosed in accordance with IFRS 7 – Financial
Instruments: Disclosures (“IFRS 7”), IFRS 9 and IAS 32. 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 and measured on the basis of the Trust’s business model for managing the financial assets and
the contractual cash flow characteristics of the financial assets. As such, after initial recognition, financial assets are classified
and measured based on three categories: (i) amortized cost, (ii) fair value through other comprehensive income (FVTOCI) or
(iii) fair value through profit and loss (FVTPL). 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:
70
BOARDWALK REIT 2019 ANNUAL REPORT Classification
Definition
Measurement
Amortized cost
FVTOCI
FVTPL
Debt instrument is held within a business model whose objective
is to hold financial assets in order to collect contractual cash
flows and the contractual terms of the financial asset give rise on
specified dates to cash flows that are solely payments of principal
and interest on the principal amount outstanding.
Measured at amortized cost using
the effective interest rate method
less any expected credit loss. (1) (2)
Debt instrument is held within a business model whose objective
is achieved by both collecting contractual cash flows and selling the
financial assets; and the contractual terms of the financial asset
give rise on specified dates to cash flows that are solely payments
of principal and interest on the principal amount outstanding.
Stated at fair value, with
gains or losses arising on
measurement recognized in
other comprehensive income.
Financial assets that do not meet the criteria for being measured
at amortized cost of FVTOCI are measured at FVTPL. Specifically,
investments in equity instruments or debt instruments which do
not meet the amortized cost or FVTOCI definitions.
Measured at fair value, with
gains or losses recognized in
profit or loss.
(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 required to use an expected credit loss impairment model. The expected credit loss model requires the Trust
to account for expected credit losses and changes in those expected credit losses at each reporting date to reflect changes in the credit risk since initial
recognition of the financial asset. It results in an allowance for credit losses being recorded on financial assets regardless of whether there has been an actual
loss event.
Boardwalk REIT’s financial assets are as follows:
Financial Asset
Classification and Measurement
Investment in Private Technology Venture Fund
Mortgage Receivable
Trade and Other Receivables
Segregated Tenants’ Security Deposits
Cash and Cash Equivalents
FVTPL
FVTPL
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 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.
71
BOARDWALK REIT 2019 ANNUAL REPORT Financial liabilities are classified and measured as either amortized costs or FVTPL. 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.
Amortized Cost
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
Mortgages Payable
LP Class B Units
Deferred Unit-based Compensation
Refundable Tenants’ Security Deposits
Trade and Other Payables
Classification and Measurement
Amortized cost
FVTPL
FVTPL
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.
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. 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, 2019 and
2018, the Trust had no embedded derivatives requiring separate recognition.
72
BOARDWALK REIT 2019 ANNUAL REPORT (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(v)), 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(r)(i). The Trust makes judgments in
determining whether certain leases, in particular tenant leases, are considered leases under IFRS, and whether such
leases are considered operating leases. In applying IFRS 16, the Trust has applied judgement in assessing whether an
arrangement is, or contains, a lease, and in determining the lease term by considering the probability of an option being
exercised to extend the term. Judgement was applied in determining the incremental borrowing rate and discount rates
applied to the lease liabilities and right-of-use asset.
iii)
Investment Property and Internal Capital Program
The Trust’s accounting policy relating to investment property is described in NOTE 2(f). 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(s). Critical judgments inherent
in these policies related to applying the criteria set out in IFRS 9 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) Interest in Joint Operations, Associates and Joint Ventures
When determining the appropriate basis of accounting for the Trust’s investees, the Trust makes judgement about the
degree of influence that Boardwalk REIT exerts directly or through an arrangement over the investee’s relevant activities.
This may include the ability to elect investee directors, appoint management or influence key decisions. Judgement is
also required in determining whether or not an arrangement is a joint operation or joint venture.
vii) 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.
73
BOARDWALK REIT 2019 ANNUAL REPORT (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 market
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 forecasts 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. Elements included under the internal capital program are
capitalized to investment properties.
iv) Utility Accrual
The 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 20.
Application of New and Revised IFRSs and Future Accounting Policies
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
IFRS 16 – Leases (“IFRS 16”)
Effective January 1, 2019, the Trust has applied IFRS 16. IFRS 16 introduces new or amended requirements with respect to
lease accounting. It introduces significant changes to the lessee accounting by removing distinction between operating and
finance leases and requiring the recognition of a right-of-use asset and a lease liability at the commencement of all leases,
except for short-term leases and leases of low value assets. In contrast to lessee accounting, the requirements for lessor
accounting have remained largely unchanged. The impact of the adoption of IFRS 16 on the Trust’s consolidated financial
statements is described below. The Trust has applied IFRS 16 using the modified retrospective approach and, therefore, the
comparative information has not been restated.
74
BOARDWALK REIT 2019 ANNUAL REPORT Impact from the New Definition of a Lease
The change in the definition of a lease mainly relates to the concept of control. IFRS 16 determines whether a contract
contains a lease on the basis of whether the customer has the right to control the use of an identified asset for a period of
time in exchange for consideration. The Trust assessed all contracts in place on January 1, 2019 to determine if they were, or
were not, a lease.
Impact on Lessee Accounting – Former Operating Leases
IFRS 16 changes how the Trust accounts for leases previously classified as operating leases under IAS 17 – Leases (“IAS 17”),
which were off-balance-sheet. At transition, lease liabilities, arising from previously recorded operating leases, were measured
at the present value of the remaining lease payments, discounted at the Trust’s incremental borrowing rate as at January 1,
2019. Right-of-use assets were measured at an amount equal to the lease liability.
The Trust used the following practical expedients when applying IFRS 16 to leases previously classified as operating leases
under IAS 17:
• Applied the exemption not to recognize right-of-use assets and liabilities for leases with less than 12 months of lease term
or for leases of low-value assets.
• Excluded initial direct costs from measuring the right-of-use asset at the date of initial application.
• Used hindsight when determining the lease term if the contract contains options to extend or terminate the lease.
On transition to IFRS 16, the Trust also elected to apply the practical expedient to grandfather the assessment of which
transactions are leases. It applied IFRS 16 only to contracts that were previously identified as leases. Contracts that were not
identified as leases under IAS 17 and International Financial Reporting Interpretations Committee IFRIC 4 – Determining
whether an Arrangement contains a Lease, were not reassessed for whether there is a lease. Therefore, the definition of a
lease under IFRS 16 was only applied to contracts entered into or changed on or after January 1, 2019.
Applying IFRS 16, for all leases (except noted below), the Trust:
i)
ii)
iii)
iv)
Recognized right-of-use assets (NOTE 4 and NOTE 5) and lease liabilities (NOTE 16) in the consolidated statement
of financial position, measured at the present value of future lease payments at the date of adoption.
Recognized depreciation of the right-of-use assets carried as property, plant and equipment in the consolidated
statement of comprehensive income under depreciation.
Recognized interest expense on lease liabilities (NOTE 25) in the consolidated statement of comprehensive
income under financing costs.
Separated the total amount of cash paid into a principal portion (presented within financing activities) and interest
(presented within operating activities) in the consolidated statement of cash flows.
Under IFRS 16, right-of-use assets are depreciated over the shorter period of the lease term and useful life of the underlying
asset. The right-of-use asset is tested for impairment in accordance with IAS 36 Impairment of Assets.
For short-term leases (lease term of 12 months or less) and leases of low-value assets, the Trust has opted to recognize a
lease expense on a straight-line basis as permitted by IFRS 16. This expense is presented within operating expenses in the
consolidated statement of comprehensive income.
75
BOARDWALK REIT 2019 ANNUAL REPORT Impact on Consolidated Financial Statements
On transition to IFRS 16, the Trust recognized $116.7 million of right-of-use assets ($109.2 million in investment properties and
$7.6 million in property, plant and equipment) and $116.7 million of lease liabilities.
When measuring lease obligations, the Trust discounted lease payments using its incremental borrowing rate at January 1,
2019. The weighted average interest rate applied was 3.25%.
The following reconciliation presents the revised January 1, 2019 balances for investment properties and property plant and
equipment after adopting IFRS 16:
Investment properties, ending balance, December 31, 2018
Recognition of right-of-use asset, January 1, 2019
Investment properties, opening balance, after the adoption of IFRS 16
Property, plant and equipment, ending balance, December 31, 2018
Recognition of right-of-use asset, January 1, 2019
Property, plant and equipment, opening balance, after the adoption of IFRS 16
Jan. 1, 2019
$
5,943,969
109,166
$
6,053,135
Jan. 1, 2019
$
$
31,463
7,580
39,043
The following reconciliation includes the Trust’s operating lease commitments at December 31, 2018, compared to the Trust’s
lease liabilities as at the date of transition January 1, 2019:
Operating lease commitment at December 31, 2018 as disclosed in NOTE 28 of the Trust’s consolidated financial statements
$
208,596
Jan. 1, 2019
Discounted using incremental borrowing rate at January 1, 2019
Adjustments
Extension option reasonably certain to be exercised
Total
115,944
803
$
116,747
The following table shows the impact of adopting IFRS 16 on the Trust’s consolidated statement of comprehensive income:
Reduced operating expenses
Increased financing costs
Decreased administration
Increased depreciation on right-of-use asset included in property, plant and equipment
Net decrease in expenses with adopting IFRS 16
Year Ended
Dec. 31, 2019
(5,266)
3,737
(1,664)
1,800
$
(1,393)
76
BOARDWALK REIT 2019 ANNUAL REPORT
In addition to the adoption of IFRS 16, 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
Amendments to
IFRS 9 – Financial Instruments
(“IFRS 9”), Prepayment Features
with Negative Compensation
Amendments to IAS 28 Long-term
Interests in Associates and Joint
Ventures
The amendments to IFRS 9 clarified the purpose of assessing
whether a prepayment feature meets the ‘solely payments of
principal and interest’ (SPPI) condition, the party exercising the
option may pay or receive reasonable compensation for the
prepayment irrespective of the reason for prepayment. In other
words, financial assets with prepayment features with negative
compensation do not automatically fail SPPI.
The amendment clarified that IFRS 9, including its impairment
requirements, applies to long-term interests. Furthermore in
applying IFRS 9 to a long-term interests, an entity does not take
into account adjustments to their carrying amount required by
IAS 28 (i.e. adjustments to the carrying amount of long-term
interest arising from the allocation of losses of the investee or
assessment of impairment in accordance with IAS 28).
This amendment was applied
prospectively on January 1, 2019
and there was no impact on its
consolidated financial statements.
This amendment was applied
prospectively on January 1, 2019
and there was no impact on its
consolidated financial statements.
2015-2017 Cycle
IAS 12 – Income Taxes
IAS 23 – Borrowing Costs
The amendments clarified that an entity should recognize the
income tax consequences of dividends in profit or loss, other
comprehensive income or equity according to where the
entity originally recognized the transaction that generated the
distributable profits.
This amendment did not have a
material impact on its consolidated
financial statements.
The amendments clarified that if any specific borrowing
remains outstanding after the related asset is ready for its
intended use or sale, that borrowing becomes part of the
funds that an entity borrows generally when calculating the
capitalization rate on general borrowings.
This amendment did not have a
material impact on its consolidated
financial statements.
IFRS 3 – Business Combinations
The amendments to IFRS 3 clarified that when an entity
obtains control of a business that is a joint operation, the entity
applies the requirements for a business combination achieved
in stages, including remeasuring its previously held interest in
the joint operation at fair value.
This amendment did not have a
material impact on its consolidated
financial statements.
IFRS 11 – Joint Arrangements
The amendments to IFRS 11 clarified that when a party that
participates in, but does not have joint control of, a joint
operation that is a business obtains joint control of such a joint
operation, the entity does not remeasure its previously held
interest in the joint operation.
This amendment did not have a
material impact on its consolidated
financial statements.
77
BOARDWALK REIT 2019 ANNUAL REPORT (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
Summary of Requirements
Amendments to IFRS 10 and
IAS 28 – Sale or Contribution of
Assets between an Investor and its
Associate or Joint Venture
Amendments to IFRS 3 Definition
of a Business
Amendments to IAS 1 and IAS 8
Definition of Material
The amendments deal with situations where there is a sale or
contribution of assets between an investor and its associate
or joint venture. Specifically, the amendments state that gains
or losses resulting from the loss of control of a subsidiary that
does not contain a business in a transaction with an associate
or a 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 investor’s interests in that associate or
joint venture. The effective date of the amendments has yet to
be set, however, earlier application is permitted.
The amendment clarify that while businesses usually have
outputs, outputs are not required for an integrated set of
activities and assets to qualify as a business. To be considered
a business an acquired set of activities and assets must
include, at a minimum, an input and a substantive process that
together significantly contribute to the ability to create outputs.
The amendments apply prospectively to all business
combinations and asset acquisitions for which the acquisition
date is on or after the first reporting period beginning on or
after January 1, 2020, with early application permitted.
The amendments are intended to make the definition of
material in IAS 1 easier to understand and are not intended
to alter the underlying concept of materiality. The concept of
‘obscuring’ material information with immaterial information
has been included as part of the definition. The threshold for
materiality influencing users has been changed from ‘could
influence’ to ‘could reasonably be expected to influence’.
The definition of material in IAS 8 has been replaced by a
reference to the definition of material in IAS 1.
The amendments are applied prospectively for annual
periods beginning on or after January 1, 2020 with earlier
application permitted.
Possible Impact on Consolidated
Financial Statements
The Trust is assessing the potential
impact but does not expect any
significant impact.
The Trust is assessing the potential
impact but does not expect any
significant impact.
The Trust does not expect this
amendment to have a material
impact on its consolidated
financial statements.
In addition to those referenced, the following amendments are not expected to have any impact on the Trust’s consolidated
financial statements:
• IFRS 17 – Insurance Contracts; and
• Amendments to References to the Conceptual Framework in IFRS Standards.
78
BOARDWALK REIT 2019 ANNUAL REPORT International Financial Reporting Standards
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”).
Disclosure Controls and Procedures & Internal Control Over
Financial Reporting
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 2019, 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, 2019. 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, 2019. 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, 2019, Boardwalk REIT can confirm the effectiveness of both the design and the operation of its 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, 2019, that have
materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.
79
BOARDWALK REIT 2019 ANNUAL REPORT 2020 FINANCIAL OUTLOOK AND
MARKET GUIDANCE
As previously noted, the Trust is providing its outlook and financial guidance for the upcoming 2020 fiscal year as part of its
year end results. As such, the Trust’s 2020 objectives are as follows:
Description
2020 Objectives
2019 Actual
Stabilized Building NOI Growth
4%-7%
FFO Per Unit
AFFO Per Unit
$2.65-$2.80
$2.25-$2.40 utilizing a Maintenance
CAPEX of $613/suite/year
$2.10 utilizing a Maintenance
CAPEX of $721/suite/year
8.2%
$2.57
In deriving these forecasts, the Trust has 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).
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 on a going-forward basis.
In addition to the above financial guidance for 2020, the Trust’s Board of Trustee’s has approved the 2020 Capital Budget as follows:
Capital Budget ($000's)
Maintenance Capital
Value Added Capital (including suite upgrades
and property, plant & equipment)
Total Operational Capital
Total Operational Capital
Development/Development JV
Acquisitions
2020 Budget
Low End
Per Suite
2020 Budget
High End
Per Suite
2019 Actual
Per Suite
$
20,390 $
613 $
20,390 $
613 $
24,060 $
721
95,036
2,857
113,795
3,421
99,215
2,973
$ 115,426 $
3,470 $ 134,185 $
4,034 $ 123,275 $
3,694
$ 115,426
$ 134,185
$ 123,275
59,814
-
59,814
-
45,980
36,842
Total Capital Investment
$ 175,240
$ 193,999
$ 206,097
In total, the Trust expects to invest between $115.4 million (or $3,470 per apartment unit) and $134.2 million (or $4,034 per
apartment unit) on operational capital in 2020 as compared to $123.3 million (or $3,694 per apartment unit) actually spent in
2019. The Trust has estimated its Maintenance Capital for 2020 at $613 per apartment unit per year, compared to $721 per
apartment unit per year in 2019, using a three-year rolling average. Additionally, for 2020, Boardwalk is estimating $59.8 million
to be spent on development.
Value Added capital is subject to constant review and will only be invested if the Trust can earn a significant return on
this investment.
Selected Consolidated Financial Information
The following selected financial information should be read in conjunction with ‘‘Management’s Discussion and Analysis’’, the
audited consolidated financial statements and accompanying notes for the years ended December 31, 2019 and 2018, and the
unaudited condensed consolidated interim financial statements of Boardwalk REIT and accompanying notes, both
incorporated herein by reference.
80
BOARDWALK REIT 2019 ANNUAL REPORT
The statements of comprehensive income and financial position information set forth in the following tables has been derived
from the audited consolidated financial statements referred to above and the unaudited condensed consolidated interim
financial statements of the Trust for various quarterly interim periods.
Annual Comparative
(Cdn$ Thousands, except per unit amount)
Total rental revenue
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, 2019
Dec. 31, 2018
$
455,313
$
434,616
34,781
130,967
193,200
112,112
$
$
$
$
0.75
0.75
2.82
2.57
$
$
$
$
2,741,648
6,276,384
33,263
28,674
4.17
3.43
2.42
2.21
2,719,195
6,109,091
33,417
28,793
Quarterly Comparative
(Cdn$ Thousands, except per unit amount)
Dec. 31,
Sep. 30,
2019
2019
Jun. 30,
2019
Mar. 31,
Dec. 31,
Sep. 30,
2019
2018
2018
Jun. 30,
2018
Mar. 31,
2018
Total rental revenue
$ 115,378 $ 114,660 $ 113,383 $ 111,892 $ 110,393 $ 108,774 $ 108,388 $ 107,061
Three Months Ended
(Loss) profit
Funds from operations
Profit (loss) per unit
– Basic
– Diluted
Funds from operations per unit
– Basic
– Diluted
ADDITIONAL INFORMATION
(108,636)
32,156
79,560
35,775
71,601
34,788
(7,744)
28,249
34,100
27,358
33,078
29,802
56,772
30,646
69,250
24,306
$
(2.34) $
1.71 $
1.54 $
(0.17) $
0.74 $
0.71 $
1.22 $
$
(2.34) $
1.71 $
1.35 $
(0.17) $
(0.40) $
0.71 $
1.22 $
$
$
0.69 $
0.77 $
0.75 $
0.61 $
0.59 $
0.64 $
0.66 $
0.63 $
0.70 $
0.68 $
0.56 $
0.54 $
0.59 $
0.60 $
1.49
1.49
0.52
0.48
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,
[signed]
[signed]
Roberto A. Geremia
PRESIDENT
William Wong
CHIEF FINANCIAL OFFICER
February 27, 2020
81
BOARDWALK REIT 2019 ANNUAL REPORT
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.
[signed]
[signed]
[signed]
Sam Kolias
CHIEF EXECUTIVE OFFICER
February 27, 2020
Roberto A. Geremia
PRESIDENT
William Wong
CHIEF FINANCIAL OFFICER
82
BOARDWALK REIT 2019 ANNUAL REPORT INDEPENDENT AUDITOR’S REPORT
To the Unitholders and the Board of Directors of Boardwalk Real Estate Investment Trust
Opinion
We have audited the consolidated financial statements of Boardwalk Real Estate Investment Trust (the “Trust”), which
comprise the consolidated statements of financial position as at December 31, 2019 and 2018, and the consolidated
statements of comprehensive income, changes in unitholder’s equity and cash flows for the years then ended, and notes to
the consolidated financial statements, including a summary of significant accounting policies (collectively referred to as the
“financial statements”).
In our opinion, the accompanying financial statements present fairly, in all material respects, the financial position of the Trust
as at December 31, 2019 and 2018, and its financial performance and its cash flows for the years then ended in accordance
with International Financial Reporting Standards (“IFRS”).
Basis for Opinion
We conducted our audit in accordance with Canadian generally accepted auditing standards (“Canadian GAAS”). Our
responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial
Statements section of our report. We are independent of the Trust in accordance with the ethical requirements that are relevant to
our audit of the financial statements in Canada, and we have fulfilled our other ethical responsibilities in accordance with these
requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Other Information
Management is responsible for the other information. The other information comprises:
• Management’s Discussion and Analysis
• The information, other than the financial statements and our auditor’s report thereon, in the Annual Report.
Our opinion on the financial statements does not cover the other information and we do not and will not express any form of
assurance conclusion thereon. In connection with our audit of the financial statements, our responsibility is to read the other
information identified above and, in doing so, consider whether the other information is materially inconsistent with the
financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated.
We obtained Management’s Discussion and Analysis prior to the date of this auditor’s report. If, based on the work we have
performed on this other information, we conclude that there is a material misstatement of this other information, we are
required to report that fact in this auditor’s report. We have nothing to report in this regard.
The Annual Report is expected to be made available to us after the date of the auditor’s report. If, based on the work we will
perform on this other information, we conclude that there is a material misstatement of this other information, we are
required to report that fact to those charged with governance.
Responsibilities of Management and Those Charged with Governance
for the Financial Statements
Management is responsible for the preparation and fair presentation of the financial statements in accordance with IFRS, and
for such internal control as management determines is necessary to enable the preparation of financial statements that are
free from material misstatement, whether due to fraud or error.
In preparing the financial statements, management is responsible for assessing the Trust’s ability to continue as a going
concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless
management either intends to liquidate the Trust or to cease operations, or has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Trust’s financial reporting process.
83
BOARDWALK REIT 2019 ANNUAL REPORT Auditor’s Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance
is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Canadian GAAS will always
detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if,
individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the
basis of these financial statements.
As part of an audit in accordance with Canadian GAAS, we exercise professional judgment and maintain professional
skepticism throughout the audit. We also:
• Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error,
design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate
to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for
one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override
of internal control.
• Obtain an understanding of internal control relevant to the audit 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 Trust’s internal control.
• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related
disclosures made by management.
• Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit
evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on
the Trust’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw
attention in our auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate,
to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report.
However, future events or conditions may cause the Trust to cease to continue as a going concern.
• Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether
the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities
within the Trust to express an opinion on the financial statements. We are responsible for the direction, supervision and
performance of the group audit. We remain solely responsible for our audit opinion.
We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the
audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant ethical requirements
regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to
bear on our independence, and where applicable, related safeguards.
The engagement partner on the audit resulting in this independent auditor’s report is Nicole Torgrimson.
/s/ Deloitte LLP
Chartered Professional Accountants
Calgary, Alberta
February 26, 2020
84
BOARDWALK REIT 2019 ANNUAL REPORT CONSOLIDATED STATEMENTS OF
FINANCIAL POSITION
(CDN $ THOUSANDS)
As at
ASSETS
Non-current assets
Investment properties
Property, plant and equipment
Equity accounted investments
Investment in private technology venture fund
Mortgage receivable
Deferred tax assets
Current assets
Inventories
Prepaid assets
Mortgage receivable
Trade and other receivables
Segregated tenants’ security deposits
Cash and cash equivalents
Total Assets
LIABILITIES
Non-current liabilities
Mortgages payable
LP Class B Units
Lease liabilities
Construction loan payable
Deferred unit-based compensation
Deferred tax liabilities
Deferred government grant
Current liabilities
Mortgages payable
Lease liabilities
Deferred unit-based compensation
Deferred government grant
Refundable tenants’ security deposits
Trade and other payables
Total Liabilities
Equity
Unitholders’ equity
Total Equity
Total Liabilities and Equity
See accompanying notes to these consolidated financial statements
On behalf of the Trust:
[signed]
Sam Kolias
TRUSTEE
[signed]
Gary Goodman
TRUSTEE
Note
Dec. 31, 2019
Dec. 31, 2018
4
$
6,147,482
$
5,943,969
5
6
7
8
20
9
10
8
11
12
13
36,289
25,751
1,454
2,708
751
31,463
19,724
652
6,877
64
6,214,435
6,002,749
8,263
6,127
-
4,370
8,023
35,166
61,949
9,994
9,163
31,596
8,213
9,290
38,086
106,342
$
6,276,384
$
6,109,091
14
$
2,366,974
$
2,130,590
15
16
17
18
20
21
14
16
18
21
19
22
205,537
110,367
14,720
2,825
-
4,885
169,200
-
-
2,419
68
5,263
2,705,308
2,307,540
374,674
3,659
1,584
378
10,855
61,871
453,021
3,158,329
3,118,055
3,118,055
588,605
-
1,586
378
12,030
72,267
674,866
2,982,406
3,126,685
3,126,685
$
6,276,384
$
6,109,091
85
BOARDWALK REIT 2019 ANNUAL REPORT
CONSOLIDATED STATEMENTS OF
COMPREHENSIVE INCOME
(CDN $ THOUSANDS)
Rental revenue
Ancillary rental income
Total rental revenue
Rental expenses
Operating expenses
Utilities
Property taxes
Net operating income
Financing costs
Administration
Deferred unit-based compensation
Depreciation
Profit before the undernoted
Loss on sale of assets
Fair value (losses) gains
Profit before income tax
Income tax recovery (expense)
Profit for the year
Other comprehensive income
Total comprehensive income
See accompanying notes to these consolidated financial statements
Note
Year Ended
Dec. 31, 2019
Year Ended
Dec. 31, 2018
23
$
448,598
$
427,998
24
25
18
26
27
28
20
6,715
455,313
101,108
47,883
47,529
258,793
88,198
38,645
2,268
8,809
120,873
(714)
(86,132)
34,027
754
34,781
-
6,618
434,616
113,615
47,628
45,966
227,407
80,586
37,093
2,095
6,754
100,879
(27)
92,371
193,223
(23)
193,200
-
$
34,781
$
193,200
86
BOARDWALK REIT 2019 ANNUAL REPORT
CONSOLIDATED STATEMENTS OF CHANGES
IN UNITHOLDERS’ EQUITY
(CDN $ THOUSANDS)
Trust Units
Cumulative
Profit
Cumulative
Distributions
to Unitholders
Retained
Earnings
Total
Unitholders’
Equity
Balance, December 31, 2017
$ 194,942
$ 4,124,778
$ (1,342,113)
$ 2,782,665
$ 2,977,607
Units issued
Profit for the year
Total comprehensive income for the year
Distributions declared to Unitholders
2,275
-
-
-
-
193,200
193,200
-
-
-
-
(46,397)
-
193,200
193,200
(46,397)
2,275
193,200
193,200
(46,397)
Balance, December 31, 2018
$
197,217
$ 4,317,978
$ (1,388,510)
$ 2,929,468
$ 3,126,685
Units issued
Profit for the year
Total comprehensive income for the year
Distributions declared to Unitholders
3,051
-
-
-
-
34,781
34,781
-
-
-
-
(46,462)
-
34,781
34,781
(46,462)
3,051
34,781
34,781
(46,462)
Balance, December 31, 2019
$ 200,268
$ 4,352,759
$ (1,434,972)
$ 2,917,787
$ 3,118,055
See accompanying notes to these consolidated financial statements
87
BOARDWALK REIT 2019 ANNUAL REPORT
CONSOLIDATED STATEMENTS OF CASH FLOWS
(CDN $ THOUSANDS)
Operating activities
Profit for the year
Loss on sale of assets
Financing costs
Interest paid
Deferred unit-based compensation
Fair value losses (gains)
Income tax (recovery) expense
Income tax paid
Government grant amortization
Depreciation
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
Capital contribution in equity accounted investments
Capital contribution in private technology venture fund
Net change in investing working capital
Financing activities
Distributions paid
Proceeds from mortgage financings
Mortgage payments upon refinancing
Scheduled mortgage principal repayments
Proceeds from construction loan financing
Repayment of mortgage receivable
Deferred financing costs incurred
Principal repayments on lease liabilities
Net change in financing working capital
Net decrease in cash
Cash and cash equivalents, beginning of year
Cash and cash equivalents, end of year
See accompanying notes to these consolidated financial statements
88
NOTE
Year Ended
Dec. 31, 2019
Year Ended
Dec. 31, 2018
$
34,781
$
193,200
27
25
18
28
20
21
26
35
4
4
4
5
27
6
7
35
35
17
8
35
714
88,198
(81,673)
2,268
86,132
(754)
-
(378)
8,809
138,097
22,646
160,743
(36,842)
(117,645)
(30,091)
(5,630)
22,495
(15,889)
(802)
(14,483)
(198,887)
(46,456)
144,478
(36,732)
(68,203)
14,720
36,015
(4,999)
(3,194)
(405)
35,224
(2,920)
38,086
13
$
35,166
$
27
80,586
(74,328)
2,095
(92,371)
23
-
(378)
6,754
115,608
(8,304)
107,304
(66,767)
(117,914)
(18,884)
(8,008)
15,863
(9,862)
(652)
(1,102)
(207,326)
(51,216)
221,265
(29,271)
(63,726)
-
-
(9,573)
-
(205)
67,274
(32,748)
70,834
38,086
BOARDWALK REIT 2019 ANNUAL REPORT
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
For the Years Ended, December 31, 2019 and 2018
(Tabular amounts in Cdn $ thousands, except number of units and per unit amounts UNLESS OTHERWISE STATED)
Note 1: Organization of the Trust
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 15, 2019, 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 acquisition 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.
Note 2: Significant Accounting Policies
(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 33),
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.
89
BOARDWALK REIT 2019 ANNUAL REPORT (D)
INTEREST IN JOINT OPERATIONS
In accordance with IFRS 11 – Joint Arrangements (“IFRS 11”), a joint operation is a joint arrangement whereby the parties that
have joint control of the arrangement have rights to the assets, and obligations for the liabilities, relating to the arrangement.
Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the
relevant activities require unanimous consent of the parties sharing control. The Trust records only its share of the assets,
liabilities and share of the revenue and expenses of the joint operation. The assets, liabilities, revenue and expenses of joint
operations are included within the respective line items of the consolidated statement of financial position and consolidated
statement of comprehensive income.
(E)
INTEREST IN ASSOCIATES AND JOINT VENTURES
In accordance with International Accounting Standard (“IAS”) 28 – Investments in associates and joint ventures (“IAS 28”), an
associate is defined as an entity over which the investor has significant influence, however the investor does not have control
or joint control. Significant influence arises when an entity holds, directly or indirectly, 20% or more of the voting power of the
investee. Significant influence is usually evidenced by representation on the board of directors or equivalent of the investee,
participation in policy-making processes, material transactions between the entity and its investee, interchange of managerial
personnel or provision of essential technical information.
In accordance with IFRS 11, a joint venture is a joint arrangement whereby the parties that have joint control of the
arrangement have rights to the net assets of the joint venture.
Investments in associates and joint ventures are accounted for using the equity method. Under the equity method, the
investment is initially recorded at cost, and the carrying amount is increased or decreased to recognize the investor’s share of
profit or loss of the investee after the date of acquisition. The Trust’s share of the investee’s profit or loss is recognized in the
Trust’s profit or loss. Distributions received from an investee reduce the carrying amount of the investment.
(F)
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(i)) 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 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. The fair value of
an investment property held by a lessee as a right-of-use asset reflects expected cash flows (including variable lease
payments that are expected to become payable). Accordingly, if the valuation obtained for an investment property is net of all
payments expected to be made, it will be necessary to add back any recognized lease liability, to arrive at the carrying amount
of the investment property using the fair value model.
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(j)).
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
90
BOARDWALK REIT 2019 ANNUAL REPORT 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.
(G) 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 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.
(H) 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(f)) and IFRS 5 (see NOTE 2(j)).
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(k)).
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 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
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BOARDWALK REIT 2019 ANNUAL REPORT 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
Site equipment and other
Site equipment and other
Warehouse assets
Site equipment and other
Corporate assets
Site equipment and other
Computer hardware
Corporate technology
Computer software*
Corporate technology
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.
(I) 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 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.
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BOARDWALK REIT 2019 ANNUAL REPORT 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 (“IAS 39”), or IAS 37 – Provisions, Contingent Liabilities
and Contingent Assets (“IAS 37”), as appropriate, with the corresponding gain or loss being recognized in profit or loss in the
consolidated statement of comprehensive 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.
(J) 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 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,
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.
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BOARDWALK REIT 2019 ANNUAL REPORT (K)
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 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.
(L)
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.
(M) LEASES
As outlined in NOTE 3(a), the Trust adopted IFRS 16 – Leases (“IFRS 16) on January 1, 2019. As a result of adopting IFRS 16,
the Trust’s accounting policy for leases is described below.
The Trust as a Lessee
The Trust assesses whether a contract is, or contains, a lease at inception of the contract. The Trust recognizes a right-of-use
asset and a corresponding lease liability with respect to all lease arrangements in which it is the lessee, except for short-term
leases (defined as leases with a lease term of 12 months or less) and leases of low value assets. For these leases, the Trust
recognizes the lease payments as an operating expense on a straight-line basis over the term of the lease unless another
systematic basis is more representative of the time pattern in which economic benefits from the leased assets are consumed.
The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement
date, discounted by using the rate implicit in the lease. If this rate cannot be readily determined, the Trust uses its incremental
borrowing rate. The incremental borrowing rate is defined as the rate of interest that the lessee would have to pay to borrow
over a similar term and with a similar security, the funds necessary to obtain an asset of a similar value to the right-of-use
asset in a similar economic environment.
Lease payments included in the measure of the lease liability comprise:
• Fixed payments (including in-substance fixed payments), less any lease incentives;
• Variable lease payments that depend on an index or rate, initially measured using the index or rate at the commencement date;
• The amount expected to be payable by the lessee under residual value guarantees;
• The exercise price of purchase options, if the lessee is reasonably certain to exercise the options; and
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BOARDWALK REIT 2019 ANNUAL REPORT • Payments of penalties for terminating the lease, if the lease term reflects the exercise of an option to terminate the lease.
The lease liability is subsequently measured by increasing the carrying amount to reflect interest on the lease liability (using
the effective interest method) and by reducing the carrying amount to reflect the lease payments made (see NOTE 2(s) for
definition of effective interest method).
The Trust remeasures the lease liability (and makes a corresponding adjustment to the related right-of-use asset) whenever:
• The lease term has changed or there is a change in the assessment of exercise of a purchase option, in which case the
lease liability is remeasured by discounting the revised lease payments using a revised discount rate;
• The lease payments change due to changes in an index or rate or a change in expected payment under a guaranteed
residual value, in which cases the lease liability is remeasured by discounting the revised lease payments using the initial
discount rate; or
• A lease contract is modified and the lease modification is not accounted for as a separate lease, in which case the lease
liability is remeasured by discounting the revised lease payments using a revised discount rate.
The right-of-use assets comprise the initial measurement of the corresponding lease liability, lease payments made at or
before the commencement day and any initial direct costs. They are subsequently measured either at fair value (in the case of
right-of-use assets which are considered part of investment properties) or at cost less accumulated depreciation and
impairment losses (for right-of-use assets which are considered property, plant and equipment). Right-of-use assets are
depreciated over the shorter period of the lease term and the useful life of the underlying asset. The depreciation starts at the
commencement date of the lease. The Trust applied IAS 36 to determine whether a right-of-use asset is impaired.
Variable rents that do not depend on an index or rate are not included in the measurement of the lease liability and the
right-of-use asset. The related payments are recognized as an expense in the period in which the event or condition that
triggers those payments and are included in operating expenses in the consolidated statement of comprehensive income.
As a practical expedient, IFRS 16 permits a lessee not to separate non-lease components, and instead account for any lease
and associated non-lease components as a single arrangement. The Trust has used this practical expedient on those contracts
(warehouse space and office space) which contain both lease and non-lease components.
The Trust as a Lessor
The Trust enters into lease agreements as a lessor with respect to its investment properties. Leases for which the Trust is a
lessor are classified as finance or operating leases. Whenever the terms of the lease transfer substantially all the risks and
rewards of ownership to the lessee, the contract is classified as a finance lease. All other leases are classified as operating
leases. As the Trust has retained substantially all of the risks and benefits of ownership of its investment properties, it
accounts for leases with its tenants as operating leases. As operating leases, lease payments are recognized as revenue
when the tenant has a right to use the leased asset. The leased asset is recognized in the consolidated statement of financial
position according to the nature of the underlying asset.
(N) TAXATION
For fiscal 2018 and 2019, 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 33 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 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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BOARDWALK REIT 2019 ANNUAL REPORT 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.
(O) PROVISIONS
In accordance with IAS 37 – Provisions, Contingent Liabilities and Contingent Assets, 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.
(P) 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 IFRS 9 – Financial Instruments (“IFRS 9”), 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 income. Fair value of the deferred units is calculated based on the
observable market price of Boardwalk REIT’s Trust Units.
(Q) 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 (“IAS 20”), 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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BOARDWALK REIT 2019 ANNUAL REPORT (R) 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
12 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.
Lease revenue earned directly from leasing the asset is recognized and measured in accordance with IFRS 16. In
addition to revenue generated directly from the operating lease, rental revenue includes non-lease revenue earned from
the tenant, which is recognized and measured under IFRS 15 – Revenue from Contracts with Customers (“IFRS 15”).
Non-lease revenue includes parking revenue, other service revenue and fees, recovery of certain operating costs,
including retirement services, cable (internet and television). These revenues are recognized when earned.
IFRS 15 requires revenue recognized from customer contracts (non-lease components) to be disclosed separately from
its other sources of revenue (NOTE 23 and NOTE 36).
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 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.
v) Development Management Fees
Boardwalk has interests in investment properties through joint operations whereby the Trust provides development
management services to the co-owners. As the services are provided over a period of time, income is recognized on a
straight-line basis, unless there is evidence that some other method would better reflect the pattern of performance.
(S) FINANCIAL INSTRUMENTS AND DERIVATIVES
Financial instruments and derivatives are accounted for, presented, and disclosed in accordance with IFRS 7 – Financial
Instruments: Disclosures (“IFRS 7”), IFRS 9 and IAS 32. 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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BOARDWALK REIT 2019 ANNUAL REPORT Financial Assets
Financial assets are classified and measured on the basis of the Trust’s business model for managing the financial assets and
the contractual cash flow characteristics of the financial assets. As such, after initial recognition, financial assets are classified
and measured based on three categories: (i) amortized cost, (ii) fair value through other comprehensive income (FVTOCI) or
(iii) fair value through profit and loss (FVTPL). 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
Amortized Cost
FVTOCI
FVTPL
Debt instrument is held within a business model whose objective
is to hold financial assets in order to collect contractual cash
flows and the contractual terms of the financial asset give rise on
specified dates to cash flows that are solely payments of principal
and interest on the principal amount outstanding.
Measured at amortized cost using
the effective interest rate method
less any expected credit loss. (1) (2)
Debt instrument is held within a business model whose objective
is achieved by both collecting contractual cash flows and selling the
financial assets; and the contractual terms of the financial asset
give rise on specified dates to cash flows that are solely payments
of principal and interest on the principal amount outstanding.
Stated at fair value, with
gains or losses arising on
measurement recognized in
other comprehensive income.
Financial assets that do not meet the criteria for being measured
at amortized cost of FVTOCI are measured at FVTPL. Specifically,
investments in equity instruments or debt instruments which do
not meet the amortized cost or FVTOCI definitions
Measured at fair value, with
gains or losses recognized in
profit or loss.
(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 required to use an expected credit loss impairment model. The expected credit loss model requires the Trust
to account for expected credit losses and changes in those expected credit losses at each reporting date to reflect changes in the credit risk since initial
recognition of the financial asset. It results in an allowance for credit losses being recorded on financial assets regardless of whether there has been an actual
loss event.
Boardwalk REIT’s financial assets are as follows:
Financial Asset
Classification and Measurement
Investment in Private Technology Venture Fund
Mortgage Receivable
Trade and Other Receivables
Segregated Tenants’ Security Deposits
Cash and Cash Equivalents
FVTPL
FVTPL
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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BOARDWALK REIT 2019 ANNUAL REPORT 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 and measured as either amortized costs or FVTPL. 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.
Amortized Cost
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
Mortgages Payable
LP Class B Units
Deferred Unit-based Compensation
Refundable Tenants’ Security Deposits
Trade and Other Payables
Classification and Measurement
Amortized cost
FVTPL
FVTPL
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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BOARDWALK REIT 2019 ANNUAL REPORT 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. 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, 2019 and
2018, the Trust had no embedded derivatives requiring separate recognition.
(T) CASH AND CASH EQUIVALENTS
Cash is comprised of bank balances, interest-earning bank accounts and term deposits with maturities of 90 days or less.
(U) CRITICAL JUDGMENT IN APPLYING ACCOUNTING POLICIES
The following are the critical judgments, apart from those involving estimations (see NOTE 2(v) 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(r)(i). The Trust makes judgments in
determining whether certain leases, in particular tenant leases, are considered leases under IFRS, and whether such
leases are considered operating leases. In applying IFRS 16, the Trust has applied judgement in assessing whether an
arrangement is, or contains, a lease, and in determining the lease term by considering the probability of an option being
exercised to extend the term. Judgement was applied in determining the incremental borrowing rate and discount rates
applied to the lease liabilities and right-of-use asset.
iii)
Investment Property and Internal Capital Program
The Trust’s accounting policy relating to investment property is described in NOTE 2(f) 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(s). Critical judgments inherent
in these policies related to applying the criteria set out in IFRS 9 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.
100
BOARDWALK REIT 2019 ANNUAL REPORT 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)
Interest in Joint Operations, Associates and Joint Ventures
When determining the appropriate basis of accounting for the Trust’s investees, the Trust makes judgement about the
degree of influence that Boardwalk REIT exerts directly or through an arrangement over the investee’s relevant activities.
This may include the ability to elect investee directors, appoint management or influence key decisions. Judgement is
also required in determining whether or not an arrangement is a joint operation or joint venture.
vii) 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.
(V) 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 market
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 forecasts 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. Elements included under the internal capital program are
capitalized to investment properties.
iv) Utility Accrual
The 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 20.
101
BOARDWALK REIT 2019 ANNUAL REPORT Note 3: Application of New and Revised IFRSs and Future Accounting Policies
(A) APPLICATION OF NEW AND REVISED IFRSS
IFRS 16 – Leases (“IFRS 16”)
Effective January 1, 2019, the Trust has applied IFRS 16. IFRS 16 introduces new or amended requirements with respect to
lease accounting. It introduces significant changes to the lessee accounting by removing distinction between operating and
finance leases and requiring the recognition of a right-of-use asset and a lease liability at the commencement of all leases,
except for short-term leases and leases of low value assets. In contrast to lessee accounting, the requirements for lessor
accounting have remained largely unchanged. The impact of the adoption of IFRS 16 on the Trust’s consolidated financial
statements is described below. The Trust has applied IFRS 16 using the modified retrospective approach and, therefore, the
comparative information has not been restated.
Impact From the New Definition of a Lease
The change in the definition of a lease mainly relates to the concept of control. IFRS 16 determines whether a contract
contains a lease on the basis of whether the customer has the right to control the use of an identified asset for a period of
time in exchange for consideration. The Trust assessed all contracts in place on January 1, 2019 to determine if they were, or
were not, a lease.
Impact on Lessee Accounting – Former Operating Leases
IFRS 16 changes how the Trust accounts for leases previously classified as operating leases under IAS 17 – Leases (“IAS 17”),
which were off-balance-sheet. At transition, lease liabilities, arising from previously recorded operating leases, were measured
at the present value of the remaining lease payments, discounted at the Trust’s incremental borrowing rate as at January 1,
2019. Right-of-use assets were measured at an amount equal to the lease liability.
The Trust used the following practical expedients when applying IFRS 16 to leases previously classified as operating leases
under IAS 17:
• Applied the exemption not to recognize right-of-use assets and liabilities for leases with less than 12 months of lease term
or for leases of low-value assets.
• Excluded initial direct costs from measuring the right-of-use asset at the date of initial application.
• Used hindsight when determining the lease term if the contract contains options to extend or terminate the lease.
On transition to IFRS 16, the Trust also elected to apply the practical expedient to grandfather the assessment of which
transactions are leases. It applied IFRS 16 only to contracts that were previously identified as leases. Contracts that were not
identified as leases under IAS 17 and International Financial Reporting Interpretations Committee IFRIC 4 – Determining
whether an Arrangement contains a Lease, were not reassessed for whether there is a lease. Therefore, the definition of a
lease under IFRS 16 was only applied to contracts entered into or changed on or after January 1, 2019.
Applying IFRS 16, for all leases (except noted below), the Trust:
i)
ii)
iii)
iv)
Recognized right-of-use assets (NOTE 4 and NOTE 5) and lease liabilities (NOTE 16) in the consolidated statement
of financial position, measured at the present value of future lease payments at the date of adoption.
Recognized depreciation of the right-of-use assets carried as property, plant and equipment in the consolidated
statement of comprehensive income under depreciation.
Recognized interest expense on lease liabilities (NOTE 25) in the consolidated statement of comprehensive
income under financing costs.
Separated the total amount of cash paid into a principal portion (presented within financing activities) and interest
(presented within operating activities) in the consolidated statement of cash flows.
102
BOARDWALK REIT 2019 ANNUAL REPORT Under IFRS 16, right-of-use assets are depreciated over the shorter period of the lease term and useful life of the underlying
asset. The right-of-use asset is tested for impairment in accordance with IAS 36 Impairment of Assets.
For short-term leases (lease term of 12 months or less) and leases of low-value assets, the Trust has opted to recognize a
lease expense on a straight-line basis as permitted by IFRS 16. This expense is presented within operating expenses in the
consolidated statement of comprehensive income.
Impact on Consolidated Financial Statements
On transition to IFRS 16, the Trust recognized $116.7 million of right-of-use assets ($109.2 million in investment properties and
$7.6 million in property, plant and equipment) and $116.7 million of lease liabilities.
When measuring lease obligations, the Trust discounted lease payments using its incremental borrowing rate at January 1,
2019. The weighted average interest rate applied was 3.25%.
The following reconciliation presents the revised January 1, 2019 balances for investment properties and property plant and
equipment after adopting IFRS 16:
Investment properties, ending balance, December 31, 2018
Recognition of right-of-use asset, January 1, 2019
Investment properties, opening balance, after the adoption of IFRS 16
Property, plant and equipment, ending balance, December 31, 2018
Recognition of right-of-use asset, January 1, 2019
Property, plant and equipment, opening balance, after the adoption of IFRS 16
Jan. 1, 2019
$
5,943,969
109,166
$
6,053,135
Jan. 1, 2019
$
$
31,463
7,580
39,043
The following reconciliation includes the Trust’s operating lease commitments at December 31, 2018, compared to the Trust’s
lease liabilities as at the date of transition January 1, 2019:
Operating lease commitment at December 31, 2018 as disclosed in NOTE 28 of the Trust’s consolidated financial statements
$
208,596
Jan. 1, 2019
Discounted using incremental borrowing rate at January 1, 2019
Adjustments
Extension option reasonably certain to be exercised
Total
115,944
803
$
116,747
The following table shows the impact of adopting IFRS 16 on the Trust’s consolidated statement of comprehensive income:
Reduced operating expenses
Increased financing costs
Decreased administration
Increased depreciation on right-of-use asset included in property, plant and equipment
Net decrease in expenses with adopting IFRS 16
Year Ended
Dec. 31, 2019
(5,266)
3,737
(1,664)
1,800
$
(1,393)
103
BOARDWALK REIT 2019 ANNUAL REPORT
In addition to the adoption of IFRS 16, 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
Amendments to
IFRS 9 – Financial Instruments
(“IFRS 9”), Prepayment Features
with Negative Compensation
Amendments to IAS 28 Long-term
Interests in Associates and Joint
Ventures
The amendments to IFRS 9 clarified the purpose of assessing
whether a prepayment feature meets the ‘solely payments of
principal and interest’ (SPPI) condition, the party exercising the
option may pay or receive reasonable compensation for the
prepayment irrespective of the reason for prepayment. In other
words, financial assets with prepayment features with negative
compensation do not automatically fail SPPI.
The amendment clarified that IFRS 9, including its impairment
requirements, applies to long-term interests. Furthermore in
applying IFRS 9 to a long-term interests, an entity does not take
into account adjustments to their carrying amount required by
IAS 28 (i.e. adjustments to the carrying amount of long-term
interest arising from the allocation of losses of the investee or
assessment of impairment in accordance with IAS 28).
This amendment was applied
prospectively on January 1, 2019
and there was no impact on its
consolidated financial statements.
This amendment was applied
prospectively on January 1, 2019
and there was no impact on its
consolidated financial statements.
2015-2017 Cycle
IAS 12 – Income Taxes
IAS 23 – Borrowing Costs
The amendments clarified that an entity should recognize the
income tax consequences of dividends in profit or loss, other
comprehensive income or equity according to where the
entity originally recognized the transaction that generated the
distributable profits.
This amendment did not have a
material impact on its consolidated
financial statements.
The amendments clarified that if any specific borrowing
remains outstanding after the related asset is ready for its
intended use or sale, that borrowing becomes part of the
funds that an entity borrows generally when calculating the
capitalization rate on general borrowings.
This amendment did not have a
material impact on its consolidated
financial statements.
IFRS 3 – Business Combinations
The amendments to IFRS 3 clarified that when an entity
obtains control of a business that is a joint operation, the entity
applies the requirements for a business combination achieved
in stages, including remeasuring its previously held interest in
the joint operation at fair value.
This amendment did not have a
material impact on its consolidated
financial statements.
IFRS 11 – Joint Arrangements
The amendments to IFRS 11 clarified that when a party that
participates in, but does not have joint control of, a joint
operation that is a business obtains joint control of such a joint
operation, the entity does not remeasure its previously held
interest in the joint operation.
This amendment did not have a
material impact on its consolidated
financial statements.
104
BOARDWALK REIT 2019 ANNUAL REPORT (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
Summary of Requirements
Amendments to IFRS 10 and
IAS 28 – Sale or Contribution of
Assets between an Investor and its
Associate or Joint Venture
Amendments to IFRS 3 Definition
of a Business
Amendments to IAS 1 and IAS 8
Definition of Material
The amendments deal with situations where there is a sale or
contribution of assets between an investor and its associate
or joint venture. Specifically, the amendments state that gains
or losses resulting from the loss of control of a subsidiary that
does not contain a business in a transaction with an associate
or a 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 investor’s interests in that associate or
joint venture. The effective date of the amendments has yet to
be set, however, earlier application is permitted.
The amendment clarify that while businesses usually have
outputs, outputs are not required for an integrated set of
activities and assets to qualify as a business. To be considered
a business an acquired set of activities and assets must
include, at a minimum, an input and a substantive process that
together significantly contribute to the ability to create outputs.
The amendments apply prospectively to all business
combinations and asset acquisitions for which the acquisition
date is on or after the first reporting period beginning on or
after January 1, 2020, with early application permitted.
The amendments are intended to make the definition of
material in IAS 1 easier to understand and are not intended
to alter the underlying concept of materiality. The concept of
‘obscuring’ material information with immaterial information
has been included as part of the definition. The threshold for
materiality influencing users has been changed from ‘could
influence’ to ‘could reasonably be expected to influence’.
The definition of material in IAS 8 has been replaced by a
reference to the definition of material in IAS 1.
The amendments are applied prospectively for annual
periods beginning on or after January 1, 2020 with earlier
application permitted.
Possible Impact on Consolidated
Financial Statements
The Trust is assessing the potential
impact but does not expect any
significant impact.
The Trust is assessing the potential
impact but does not expect any
significant impact.
The Trust does not expect this
amendment to have a material
impact on its consolidated
financial statements.
In addition to those referenced, the following amendments are not expected to have any impact on the Trust’s consolidated
financial statements:
• IFRS 17 – Insurance Contracts; and
• Amendments to References to the Conceptual Framework in IFRS Standards.
105
BOARDWALK REIT 2019 ANNUAL REPORT Note 4: Investment Properties
As at
Balance, beginning of year
Impact of adoption of IFRS 16 (NOTE 3(a))
Restated balance, beginning of year
Additions
Building acquisitions
Building improvements (incl. internal capital program)
Development of investment properties
Dispositions
Fair value (losses) gains, unrealized
Balance, end of year
As at
Fair value of investment properties, before right-of-use asset and development
Fair value, right-of-use asset (IFRS 16)
Revenue producing properties
Properties under development (1)
Total
Year Ended
Dec. 31, 2019
Year Ended
Dec. 31, 2018
$
5,943,969
109,166
$
6,053,135
$
5,688,125
36,842
117,645
30,091
(41,371)
(48,860)
66,767
117,914
18,884
(15,878)
68,157
$
6,147,482
$
5,943,969
Dec. 31, 2019
Dec. 31, 2018
$
5,992,479
$
5,926,412
107,355
-
$
6,099,834
5,926,412
47,648
17,557
$
6,147,482
$
5,943,969
(1) On July 30, 2018, a 71-unit development project in Regina, Saskatchewan, with costs totaling $12.7 million was transferred from development to revenue
producing properties.
On April 1, 2019, the Trust closed on the purchase of a property in Edmonton, Alberta totaling 124 units with a purchase price
of $35.8 million. The acquisition was funded with cash on hand.
On November 27, 2018, the Trust closed on the purchase of four properties in Calgary, Alberta, totaling 299 units with a
purchase price of $66.5 million. The acquisition was funded with cash on hand.
Acquisitions
Purchase price
Transaction costs
Total cash paid
Allocation of fair value to investment properties
Multi-family units acquired
Year Ended
Dec. 31, 2019
Year Ended
Dec. 31, 2018
$
$
$
35,813
$
66,500
1,029
36,842
36,842
124
$
$
267
66,767
66,767
299
Please refer to NOTE 27 for details on the Trust’s dispositions in fiscal 2019 and 2018.
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,
2019, there has been no change to the valuation techniques.
106
BOARDWALK REIT 2019 ANNUAL REPORT
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, 2019
Balance,
Beginning
of Year
Impact of
Adoption
of IFRS 16
(NOTE 3(a))
Restated
Balance,
Beginning
Building
of Year
Acquisitions
Building
Improvements
(incl. Internal
Capital
Program)
Development
of Investment
Properties Dispositions
Fair Value
(Losses)
Gains
Balance,
End of Year
Recurring
measurements
Investment
properties
Calgary
Edmonton
Other Alberta
Brampton
Kitchener
London
Mississauga
Montreal
Quebec City
Regina
Saskatoon
Land leases
Total
Recurring
measurements
Investment
properties
Calgary
Edmonton
Other Alberta
Brampton
Kitchener
London
Montreal
Quebec City
Regina
Saskatoon
Land leases
Total
$ 1,419,191 $
- $
18,363 $
17,709 $
- $ (41,602) $ 1,413,661
2,337,898
36,842
$ 1,419,191 $
2,337,898
311,180
253
52,828
318,767
-
115,367
192,470
320,789
305,889
-
-
-
-
-
-
-
-
-
-
-
311,180
253
52,828
318,767
-
115,367
192,470
320,789
305,889
569,337
109,166
678,503
45,629
7,492
-
1,621
7,978
-
1,250
4,151
9,488
9,514
12,159
(7)
-
725
-
-
11,631
-
-
-
-
-
-
-
-
-
(106,010)
2,314,352
(20,879)
297,793
-
978
13,751
80,573
68,200
407,318
-
11,631
(266)
116,351
5,179
201,800
33
(41,371)
(6,870)
282,069
-
-
-
-
(4,676)
310,727
31,940
722,602
-
-
-
-
-
-
-
-
-
-
$ 5,943,969 $ 109,166 $ 6,053,135 $ 36,842 $
117,645 $
30,091 $ (41,371) $ (48,860) $ 6,147,482
Balance,
Beginning
of Year
Building
Acquisitions
Year Ended December 31, 2018
Building
Improvements
(incl. Internal
Capital
Development
of Investment
Program)
Properties
Dispositions
Fair Value
Gains
(Losses)
Balance,
End of Year
$ 1,278,638
$
66,767
$
27,711
$
10,229
$
2,287,574
286,761
-
48,843
299,484
113,995
188,404
324,515
308,829
551,082
-
-
-
-
-
-
-
-
-
-
42,465
8,029
-
740
9,237
2,672
4,033
7,488
5,073
10,466
12
-
253
-
-
-
-
8,390
(15,878)
-
-
-
-
-
-
-
-
-
-
-
-
$
35,846
$ 1,419,191
7,847
16,390
-
3,245
10,046
(1,300)
33
(3,726)
(8,013)
2,337,898
311,180
253
52,828
318,767
115,367
192,470
320,789
305,889
7,789
569,337
$ 5,688,125
$
66,767
$
117,914
$
18,884
$
(15,878)
$
68,157
$ 5,943,969
107
BOARDWALK REIT 2019 ANNUAL REPORT
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
circumstances that caused the transfer. As at December 31, 2019, 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,
2019 and December 31, 2018.
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, 2019
September 30, 2019
June 30, 2019
March 31, 2019
December 31, 2018
September 30, 2018
June 30, 2018
March 31, 2018
Number of
Properties
Aggregate
Fair Value
Percentage of
Portfolio as of That Date
4
4
4
4
5
4
4
4
$
$
$
$
$
$
$
$
610,594
118,379
65,183
185,378
563,150
80,800
135,882
109,606
10.2%
2.0%
1.1%
3.1%
8.5%
1.4%
2.3%
1.9%
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 corroborate 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 determining 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 a forecasted stabilized net operating income (“NOI”) for each individual property be
divided by a Capitalization Rate (“Cap Rate”) to determine a property’s 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. Fair value also considers any forecasted capital expenditures within the
year to maintain the property in good condition. 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 all costs and
expenses associated with the building and improvements, including taxes, utilities, insurance, maintenance, repairs and
108
BOARDWALK REIT 2019 ANNUAL REPORT
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:
As at
Dec. 31, 2019
Dec. 31, 2018
Calgary
Edmonton
Other Alberta
Kitchener
London
Montreal
Quebec City
Regina
Saskatoon
Land Lease
Capitalization Rate
Minimum
Maximum
Forecasted Total
Standardized Net
Operating Income
Capitalization Rate
Minimum
Maximum
Forecasted Total
Standardized Net
Operating Income
4.50%
4.78%
5.75%
4.50%
4.50%
4.75%
5.25%
5.65%
5.75%
4.50%
4.50%
7.14%
$
69,080
5.75%
7.50%
4.50%
4.75%
5.75%
5.75%
6.00%
6.00%
122,396
19,162
3,069
18,360
5,852
10,975
19,178
16,007
7.50%
25.54%
$
$
284,079
31,825
4.50%
5.00%
5.75%
4.75%
4.75%
4.75%
5.25%
5.65%
5.75%
4.50%
4.50%
6.00%
$
69,104
6.49%
7.25%
4.75%
5.00%
5.75%
5.75%
6.11%
6.00%
123,324
19,842
2,509
15,169
5,828
10,468
19,087
18,201
7.25%
22.77%
$
$
283,532
29,197
The overall weighted average Capitalization Rates for fair valuing the Trust’s investment properties at December 31, 2019 and
2018 were 5.27% and 5.28%, respectively.
The Overall Capitalization Rate method requires that a forecasted stabilized NOI be divided by a Cap Rate to determine a fair
value. 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 right-of-use assets and development):
As at December 31, 2019
Net Operating Income
Capitalization Rate
-0.25%
Cap Rate As Reported
+0.25%
-3%
-1% As Forecasted
+1%
+3%
$ 306,427
$ 312,745
$ 315,904
$ 319,063
$ 325,381
5.02%
$ 109,607
$ 235,423
$ 298,331
$ 361,239
$ 487,055
5.27%
5.52%
(179,774)
(442,951)
(59,925)
5,992,479
59,925
(328,528)
(271,316)
(214,105)
179,774
(99,681)
As at December 31, 2018
Net Operating Income
Capitalization Rate
-0.25%
Cap Rate As Reported
+0.25%
-3%
-1% As Forecasted
+1%
+3%
$ 303,347
$ 309,602
$ 312,729
$ 315,857
$
322,111
5.03%
$ 108,102
$ 232,525
$ 294,736
$ 356,948
$ 481,371
5.28%
5.53%
(177,792)
(437,823)
(59,264)
5,926,412
(324,656)
(268,072)
59,264
(211,489)
177,792
(98,322)
109
BOARDWALK REIT 2019 ANNUAL REPORT
Investment properties with a fair value of $615.2 million (December 31, 2018 – $569.3 million) are situated on land held under
land leases.
Investment properties with a fair value of $895.5 million (December 31, 2018 – $937.0 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 on a structured loan. In addition, investment properties with a fair value of $5.8 billion (December 31, 2018 –
$5.7 billion) are pledged as security against the Trust’s mortgages payable. As at December 31, 2019, 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 (amenities building) in Regina,
Saskatchewan, the joint venture project to develop a mixed-use tower in Calgary, Alberta and the joint venture project to
develop two mixed-use towers in Brampton, Ontario (NOTE 6).
For the years ended December 31, 2019 and 2018, investment properties earned rental revenue (excluding ancillary rental
income) of $448.6 million and $428.0 million, respectively. Direct operating expenses in relation to investment properties
were $196.5 million and $207.2 million for the years ended December 31, 2019 and 2018, respectively.
Note 5: Property, Plant and Equipment
The carrying amounts of PP&E were as follows:
As at
Dec. 31, 2019
Dec. 31, 2018
Accumulated
Depreciation
Cost
Carrying
Amount
Accumulated
Depreciation
Cost
Carrying
Amount
Administration building
$
6,686
$
(3,813)
Site equipment and other
Corporate technology assets
62,422
42,723
(37,209)
(34,520)
Total
$ 111,831
$
(75,542)
$
$
$
$
2,873
$
6,537
$
(3,572)
$
2,965
25,213
8,203
52,501
39,238
(32,204)
(31,037)
20,297
8,201
36,289
$
98,276
$
(66,813)
$
31,463
The following table outlines a reconciliation of the carrying amount of PP&E as at December 31, 2019
Balance,
Beginning
of Year
Impact of
Adoption of
IFRS 16
(NOTE 3(a))
Restated
Balance,
Beginning
of Year
Additions Disposals Depreciation
Balance,
End of
Year
Administration building
$
2,965
$
-
$
2,965 $
149 $
-
$
(241) $ 2,873
Site equipment and other
Corporate technology assets (1)
20,297
8,201
7,580
-
27,877
8,201
2,465
3,489
(47)
(1)
(5,082)
(3,486)
25,213
8,203
Total
$
31,463
$
7,580
$
39,043 $ 6,103 $
(48) $
(8,809) $ 36,289
(1) Included in computer software for the year ended December 31, 2019 was $1.0 million 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, 2018:
Administration building
Site equipment and other
Corporate technology assets (1)
Total
Balance,
Beginning
of Year
Additions
Disposals
Depreciation
Balance,
End of Year
$
3,055
$
155
$
20,834
6,332
2,900
4,953
-
(11)
(1)
$
(245)
$
2,965
(3,426)
(3,083)
20,297
8,201
$
30,221
$
8,008
$
(12)
$
(6,754)
$
31,463
(1) Included in computer software for the year ended December 31, 2018 was $1.2 million of capitalized programmers’ salaries related to the internally developed
software applications used by the Trust in the normal course of its operations.
110
BOARDWALK REIT 2019 ANNUAL REPORT
Note 6: Equity Accounted Investments
On December 19, 2018, the Trust contributed $9.9 million into a limited partnership (with a general partner operating as
“Redwalk Brampton Inc.”). Additionally, on December 19, 2018, the Trust committed to contribute an additional $9.9 million,
which was callable by the general partner at any time. For the year ended December 31, 2019, the Trust has contributed
$15.9 million, including the payment of the $9.9 million described above, resulting in a total investment of $25.8 million as at
December 31, 2019. As a result the Trust has a 50% interest in the partnership and the partnership is a joint operation. The
principal activity of the partnership is to development and operate a mixed-use property in Brampton, Ontario. As at
December 31, 2019 and 2018, the partnership had the following assets and liabilities:
As at
Non-current assets
Current assets (1)
Current liabilities
Dec. 31, 2019
Dec. 31, 2018
$
51,685
$
1,519
1,702
34,075
19,838
14,465
(1) Included in current assets is cash of $0.2 million (December 31, 2018 – $9.9 million).
Note 7: Investment in Private Technology Venture Fund
In fiscal 2019, the Trust contributed $0.8 million into a private real estate technology venture fund, for a total investment of
$1.5 million. The Trust has committed to contribute an additional USD $0.9 million. As a financial asset, this investment is
being carried at fair value through profit and loss. As a December 31, 2019 and 2018, the fair value was equivalent to the
contributed capital.
Note 8: Mortgage Receivable
As part of the disposition in 2017, the Trust issued a vendor take back mortgage to the purchaser in the amount of
$38.8 million. The mortgage receivable requires monthly interest payments and has a maturity date of May 1, 2022.
The principal amount of the mortgage was reduced to $2.7 million in October 2019 and the remainder is due and payable
at maturity. The vendor take back mortgage is carried at fair value through profit and loss.
As at
Dec. 31, 2019
Dec. 31 2018
Weighted
Average Interest
Receivable
Balance
Weighted
Average Interest
Receivable
Balance
Mortgage receivable
Fixed rate
Total
Current
Non-current
Note 9: Inventories
2.19%
$
$
$
$
2,708
2,708
-
2,708
2,708
2.19%
$
$
$
$
38,473
38,473
31,596
6,877
38,473
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, linoleum and other
Dec. 31, 2019
Dec. 31, 2018
$
8,263
$
9,994
111
BOARDWALK REIT 2019 ANNUAL REPORT
Note 10: Prepaid Assets
The major components of prepaid assets are as follows:
As at
Prepaid property taxes
Prepaid land leases
Prepaid expenses and other
Dec. 31, 2019
Dec. 31, 2018
$
765
$
2,856
2,506
$
6,127
$
874
2,938
5,351
9,163
Note 11: Trade and Other Receivables
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 $4.4 million at December 31, 2019
(December 31, 2018 – $8.2 million).
As at
Trade and other receivables
Mortgage holdbacks and refundable mortgage fees
Dec. 31, 2019
Dec. 31, 2018
$
$
4,370
$
8,213
-
-
4,370
$
8,213
Refer to NOTE 32(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.
Note 12: Segregated Tenants’ Security Deposits
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 $8.0 million at December 31, 2019 and
$9.3 million at December 31, 2018.
Note 13: Cash and Cash Equivalents
Cash and cash equivalents include cash of $10.2 million and term deposits with maturities of 90 days or less of $25.0 million
(December 31, 2018 – bank indebtedness of $1.9 million and term deposits of $40.0 million).
Dec. 31, 2018
Weighted
Debt Balance
Average Interest
Debt Balance
$
$
$
2,741,648
2,741,648
374,674
2,366,974
$
2,741,648
2.65%
$
$
$
2,719,195
2,719,195
588,605
2,130,590
$
2,719,195
Note 14: Mortgages Payable
As at
Dec. 31, 2019
Weighted
Average Interest
2.74%
Mortgages payable
Fixed rate
Total
Current
Non-current
112
BOARDWALK REIT 2019 ANNUAL REPORT
Estimated future principal payments required to meet mortgage obligations as at December 31, 2019 are as follows:
12 months ending December 31, 2020
12 months ending December 31, 2021
12 months ending December 31, 2022
12 months ending December 31, 2023
12 months ending December 31, 2024
Subsequent
Unamortized deferred financing costs
Secured By
Investment Properties
$
374,674
415,109
454,838
359,845
259,591
976,719
2,840,776
(99,128)
$
2,741,648
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 $250,000 under a Letter of Credit issued in favor of CMHC.
During the years ended December 31, 2019 and 2018, 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 available limit of
$200 million as at December 31, 2019 (December 31, 2018 – $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, 2024. 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.
There was no amount outstanding at December 31, 2019 (December 31, 2018 – $nil) under this facility, except for Letters
of Credit (“LCs”) issued and outstanding. The LCs totaled $0.3 million as at December 31, 2019 (December 31, 2018 –
$0.3 million). As such, approximately $199.7 million was unused and available from this facility on December 31, 2019
(December 31, 2018 – $199.7 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 32(d).
Note 15: LP Class B Units
The LP Class B Units, as defined in NOTE 22, representing an aggregate fair value of $205.5 million at December 31, 2019
(December 31, 2018 – $169.2 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 is 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 IFRS 9. Gains or losses
resulting from changes in the fair value at each reporting date are recorded in the consolidated statement of comprehensive
income and are included in NOTE 28.
As at December 31, 2019 and December 31, 2018 , there were 4,475,000 LP Class B Units issued and outstanding.
113
BOARDWALK REIT 2019 ANNUAL REPORT
Note 16: Lease Liabilities
As lessee, the Trust leases several assets which are secured by the lessor’s title to the leased assets for such leases.
The following represents the major type of leases the Trust maintains as lessee:
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 five to 76 years as at
December 31, 2019. 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 are for one to five years.
As at
Lease liabilities
Fixed rate
Total
Current
Non-current
Dec. 31, 2019
Weighted
Dec. 31, 2018
Weighted
Average Interest
Lease Balance
Average Interest
Lease Balance
3.25%
$
$
$
$
114,026
114,026
3,659
110,367
114,026
-
$
$
$
$
-
-
-
-
-
Estimated future principal payments required to meet lease liabilities as at December 31, 2019 are as follows:
12 months ending December 31, 2020
12 months ending December 31, 2021
12 months ending December 31, 2022
12 months ending December 31, 2023
12 months ending December 31, 2024
Subsequent
$
$
Amount
3,659
3,831
3,850
2,676
2,137
97,873
114,026
Under one of its land leases the Trust makes variable payments not linked to an index and as such these variable payments are
excluded from lease liabilities and included in operating expense. For the year ended December 31, 2019, variable lease
payments included under operating expenses totaled $0.3 million.
In addition, the Trust has short-term leases (defined as leases with a lease term of 12 months or less) and leases of low
value assets. For these leases, the Trust recognizes the lease payments as an operating expense or applied against ancillary
revenue. For the year ended December 31, 2019, lease payments on short-term leases or leases of low value assets totaled
$2.1 million.
114
BOARDWALK REIT 2019 ANNUAL REPORT
Note 17: Construction Loan Payable
During 2019, the Trust, in conjunction with its joint venture partner, entered into a $50 million revolving construction facility
loan with a third-party financial institution. To date, $29.4 million has been drawn on this loan, of which Boardwalk’s portion
is $14.7 million. The facility is interest payable only and has a maturity date of January 31, 2021. The facility bears interest
at prime plus 0.05%, a Bankers’ Acceptance interest rate of 1.97%, a Bankers’ Acceptance stamping fee of 1.05% and a
standby fee of 0.21%.
The revolving construction facility loan contains two financial covenants. These covenants are consistent with those found in
the credit facility outlined in NOTE 32(d). The applicable covenants are those discussed in NOTE 32(d)(i) and NOTE 32(d)(iii).
As at December 31, 2019, the Trust was in compliance with these covenants.
Note 18: Deferred Unit-based Compensation
Deferred unit-based compensation is comprised of the following:
As at
Current
Non-current
Dec. 31, 2019
Dec. 31, 2018
$
$
1,584
$
2,825
4,409
$
1,586
2,419
4,005
The total of $4.4 million represents the fair value of the underlying deferred units at December 31, 2019 (December 31,
2018 – $4.0 million). These units have been classified as “FVTPL” financial liabilities in accordance with IFRS 9. Gains or
losses resulting from changes in the fair value at each reporting date are recorded in the consolidated statement of
comprehensive income and are included in NOTE 28.
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, 2019 and 2018, the deferred units outstanding, in whole or in part, were granted as follows:
Deferred Units
Granted in
Number
Grant Date
Fair Value at
Grant Date
Vesting Date
Deferred Units
Outstanding
2014
2015
2016
2017
2018
2019
Additional Deferred
Units Earned
on Units
55,098
February, June & December 2014
$
3,409
February, June & December 2019
55,236
February, June & December 2015
3,094
February, June & December 2020
63,697
February, June & December 2016
3,065
February, June & December 2021
34,858
41,238
51,692
June & December 2017
June & December 2018
March, June & December 2019
1,614
1,771
2,188
June & December 2022
June & December 2023
March, June & December 2024
-
$
15,141
1,322
9,291
22,053
24,310
32,703
46,581
136,260
7,628
143,888
115
BOARDWALK REIT 2019 ANNUAL REPORT
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 immediately 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.
The status of the outstanding deferred units was as follows:
Balance, December 31, 2017
Deferred units granted
Additional deferred units earned on units
Deferred units converted to Trust Units or cash
Balance, December 31, 2018
Deferred units granted
Additional deferred units earned on units
Deferred units converted to Trust Units or cash
Balance, December 31, 2019
# of Units Outstanding
# of Units Vested
166,600
41,238
4,009
(53,950)
157,897
51,692
3,606
(69,307)
143,888
-
45,112
8,838
(53,950)
-
69,689
7,296
(69,307)
7,678
For the year ended December 31, 2019, total costs of $2.3 million (December 31, 2018 – $2.1 million) were recorded in
expenses related to executive bonuses and trustee fees under the deferred unit plan.
Note 19: Trade and Other Payables
The components of the Trust’s accounts payable and accrued liabilities are as follows:
As at
Trade payables and accrued liabilities
Distribution payable
Provisions
Dec. 31, 2019
Dec. 31, 2018
$
52,505
$
63,217
4,248
5,118
4,242
4,808
$
61,871
$
72,267
As at December 31, 2019 and 2018, 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, 2019 and 2018, the Trust does not have any material contingent liabilities.
Note 20: Income Taxes
CURRENT INCOME TAX
For the year ended December 31, 2019 and 2018, none of the Trust’s corporate entities had current tax expense. As such,
none of current income tax expense was recorded for the Trust’s corporate entities for the year ended December 31, 2019
(December 31, 2018 – $nil). 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.
116
BOARDWALK REIT 2019 ANNUAL REPORT
DEFERRED INCOME TAX
For fiscal 2018 and 2019, 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”) is 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.
The sources of deferred tax balances and movements were as follows:
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)
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, 2018
in Profit
Dec. 31, 2019
Recognized
$
$
$
$
64
$
687
$
751
-
(68)
(4)
64
(68)
$
$
-
68
755
687
68
$
$
(4)
$
755
$
-
-
751
751
-
751
Dec. 31, 2017
in Profit
Dec. 31, 2018
Recognized
$
$
$
$
74
$
(10)
$
-
(55)
19
74
(55)
$
$
-
(13)
(23)
(10)
(13)
$
$
19
$
(23)
$
64
-
(68)
(4)
64
(68)
(4)
No current income taxes or deferred income taxes were recognized in equity, other than through profit or OCI, for the years
ended December 31, 2019 and 2018.
As at December 31, 2019, wholly-owned Canadian corporate subsidiaries have deferred tax assets of $0.8 million
(December 31, 2018 – $0.1 million) related to operating losses, which expire over the next 13 to 18 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 (recovery) expense
Total income tax expense
Year Ended
Dec. 31, 2019
Year Ended
Dec. 31, 2018
$
$
-
$
(754)
(754)
$
-
23
23
117
BOARDWALK REIT 2019 ANNUAL REPORT
The income tax expense for the year can be reconciled to the accounting profit as follows:
Profit before income tax expense
Remove loss (profit) from non-taxable entities
Accounting profit subject to tax
Deduct management fee charged to corporate entities
Taxable (loss) profit
Weighted average substantively enacted tax rate
Calculated income tax expense
Changes to other deferred tax liabilities
Total income tax expense
Year Ended
Dec. 31, 2019
Year Ended
Dec. 31, 2018
$
34,027
$
193,223
11,492
45,519
(46,434)
(915)
26.60%
(243)
(511)
$
(754)
$
(150,828)
42,395
(41,984)
411
26.80%
110
(87)
23
Note 21: Deferred Government Grant
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, 2019, $378,000 was recognized in profit under rental revenue
for this grant (December 31, 2018 – $378,000).
Note 22: Unitholders’ Equity
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 and are discussed in NOTE 15.
118
BOARDWALK REIT 2019 ANNUAL REPORT
(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.
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)
ii)
90% of the “market price” of the REIT Units on the principal market on which the REIT Units are quoted for trading
during the 20-day period ending on the trading day prior to the day on which the REIT Units were surrendered to
Boardwalk REIT for redemption; and,
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
REIT Units outstanding, end of year
Dec. 31, 2019
Dec. 31, 2018
46,391,986
46,338,036
69,307
53,950
46,461,293
46,391,986
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
specified 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.
For the years ended December 31, 2019 and December 31, 2018, Boardwalk REIT did not purchase and cancel any Trust Units.
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.
(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
46,461,293
4,475,000
$0.0834/unit
N/A
46,391,986
4,475,000
$0.0834/unit
N/A
Units Outstanding
Units Outstanding
Dec. 31, 2019 Monthly Distribution
Dec. 31, 2018
Monthly Distribution
119
BOARDWALK REIT 2019 ANNUAL REPORT
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, 2020 (paid on February 17, 2020) totaled $3.9 million ($0.0834 per unit)
and have not been included as a liability in the consolidated statement of financial position as at December 31, 2019.
(C) EARNINGS PER UNIT
Numerator – basic
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
Earnings per unit
– basic
– diluted
Year Ended
Dec. 31, 2019
Year Ended
Dec. 31, 2018
$
34,781
$
193,200
-
-
4,479
(23,628)
$
34,781
$
174,051
46,422,020
-
46,422,020
46,334,199
4,475,000
50,809,199
$
$
0.75
0.75
$
$
4.17
3.43
All dilutive elements were included in the calculation of diluted per unit amounts. For the year ended December 31, 2019,
all items were anti-dilutive as the conversion of the LP Class B units and the exercise of deferred units would have increased
earnings per unit. As such, they were excluded in the calculation of diluted earnings per unit. For the year ended December 31,
2018, all items were dilutive and were included in the calculation of diluted earnings per unit.
Note 23: Rental Revenue
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 $448.6 million for the year ended December 31, 2019 (December 31, 2018 – $428.0 million).
Rental revenue is comprised of the following:
Lease revenue
Parking revenue
Recoveries
Other (fees)
Total
Year Ended
Dec. 31, 2019
Year Ended
Dec. 31, 2018
$
432,546
$
413,883
7,163
5,115
3,774
7,019
5,315
1,781
$
448,598
$
427,998
As at December 31, 2019, under its non-cancellable operating leases, Boardwalk REIT was entitled to the following minimum
future payments:
Operating leases
120
Within 12 months
2 to 5 years
Over 5 years
$
233,099
$
14,940
$
703
BOARDWALK REIT 2019 ANNUAL REPORT
Note 24: Ancillary Rental Income
Ancillary rental income was comprised of the following:
Revenue from coin laundry machines
Revenue from telephone and cable providers
Total
Note 25: Financing Costs
Year Ended
Dec. 31, 2019
Year Ended
Dec. 31, 2018
$
$
4,589
$
2,126
6,715
$
4,406
2,212
6,618
Financing costs are comprised of interest on mortgages payable, distributions paid to the LP Class B Unitholders, other
interest charges, interest on lease obligations under IFRS 16 and the amortization of deferred financing costs. Financing costs
are net of interest income earned. Financing costs total $88.2 million for the year ended December 31, 2019 (December 31,
2018 – $80.6 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 on lease obligations
Interest income
Amortization of deferred financing costs
Total
Year Ended
Dec. 31, 2019
Year Ended
Dec. 31, 2018
$
75,159
$
71,088
(1,433)
4,479
1,478
3,737
(1,342)
6,120
(590)
4,479
1,303
-
(2,213)
6,519
$
88,198
$
80,586
For the year ended December 31, 2019, interest was capitalized to properties under development at a weighted average
effective interest rate of 2.97% (December 31, 2018 – 3.02%).
Note 26: Depreciation
The components of depreciation were as follows:
Depreciation of property, plant and equipment
Total
Year Ended
Dec. 31, 2019
Year Ended
Dec. 31, 2018
$
$
8,809
8,809
$
$
6,754
6,754
121
BOARDWALK REIT 2019 ANNUAL REPORT
Note 27: Loss on Sale of Assets and Net Cash Proceeds
On September 16, 2019, the Trust closed on the sale of 138 units in Saskatoon, Saskatchewan. Additionally, on May 28, 2019,
the Trust closed on the sale of 140 units in Saskatoon, Saskatchewan. Both projects form part of the Saskatchewan
geographical segment and were sold for a combined sales price of $41.4 million. The loss on sale of assets and net cash
proceeds is outlined below.
On December 14, 2018, the Trust closed on the sale of 140 units in Regina, Saskatchewan, which forms part of the
Saskatchewan geographical segment for the sale price of $15.9 million. The loss on sale of assets and net cash proceeds
is outlined below:
Sales price
Costs of disposition
Net proceeds
Net book value (1)
Loss on sale of assets
Sales price
Mortgage discharged on sale
Costs of disposition (cash only)
Net cash proceeds
Year Ended
Dec. 31, 2019
Year Ended
Dec. 31, 2018
$
$
$
$
41,420
$
15,890
(714)
40,706
$
41,420
(27)
15,863
15,890
(714)
$
(27)
41,420
$
15,890
(18,211)
(714)
-
(27)
$
22,495
$
15,863
(1) Net book value is comprised of both investment properties and PP&E. For the transaction on September 16, 2019, investment properties totaled
$20.680 million and PP&E totaled $0.019 million. For the transaction on May 28, 2019, investment properties totaled $20.691 million and PP&E $0.029 million.
For the transaction on December 14, 2018, investments properties totaled $15.878 million and PP&E $0.012 million.
Note 28: Fair Value (Losses) Gains
The components of fair value (losses) gains were as follows:
Investment properties (NOTE 4)
Financial liabilities designated as FVTPL
Mortgage receivable
Financial liabilities designated as FVTPL
Deferred unit-based compensation
LP Class B Units
Total fair value (losses) gains
Year Ended
Dec. 31, 2019
Year Ended
Dec. 31, 2018
$
(48,860)
$
68,157
250
193
(1,185)
(36,337)
$
(86,132)
$
393
23,628
92,371
Note 29: Guarantees, Contingencies, Commitments and Other
As discussed in NOTE 16, 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.
122
BOARDWALK REIT 2019 ANNUAL REPORT
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
Alberta
Saskatchewan
Saskatchewan
Saskatchewan
Quebec
Quebec
Ontario
Electrical:
Area
Southern Alberta
Northern Alberta
Estimated Usage Coverage
Term
Cost
25%
25%
25%
25%
25%
61%
40%
60%
100%
75%
75%
November 1, 2016 to October 31, 2018
$3.08/Gigajoule ("GJ")
November 1, 2016 to October 31, 2019
November 1, 2017 to October 31, 2020
November 1, 2018 to October 31, 2023
November 1, 2019 to October 31, 2024
November 1, 2016 to October 31, 2018
November 1, 2017 to October 31, 2020
November 1, 2018 to October 31, 2022
May 1, 2018 to October 31, 2018
November 1, 2018 to October 31, 2021
November 1, 2018 to October 31, 2021
$3.17/GJ
$2.75/GJ
$2.08/GJ
$2.21/GJ
$3.19/GJ
$2.84/GJ
$2.56/GJ
$3.14/GJ
$3.40/GJ
$3.45/GJ
Estimated Usage Coverage
Term
Cost
100%
100%
October 1, 2017 to September 30, 2022
$0.05/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, 2019 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
definition of a contingent liability in accordance with IFRS. With the property sale in Saskatoon on September 16, 2019, a
mortgage totaling $12.5 million was assumed by the purchaser. As at December 31, 2019, this mortgage had a balance of
$12.3 million. The mortgage, with a term maturity of April 1, 2023, has an indirect guarantee provided to the lender by the Trust
until this mortgage is renewed or refinanced by the purchaser, whichever occurs sooner. With the sale of properties in Regina
in 2017, mortgages totaling $24.4 million were assumed by the purchaser. As at December 31, 2019 these mortgages have a
balance of $22.9 million. The mortgages, with a term maturity of May 1, 2022, have an indirect guarantee provided to the
lender by the Trust until these mortgages are renewed or refinanced by the purchaser, whichever occurs sooner. 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 $20.7 million as at
December 31, 2019, 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. With all guarantees, 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, 2019 is approximately $55.9 million (December 31,
2018 – $44.8 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
most likely exceed, the maximum potential liability associated with the amount being guaranteed. Therefore, at December 31,
2019 and 2018, no amounts have been recorded in the consolidated financial statements with respect to the above noted
indirect guarantees.
123
BOARDWALK REIT 2019 ANNUAL REPORT Note 30: Capital Management and Liquidity
The Trust defines capital resources as the aggregate of Unitholders’ equity at market value, debt (both secured and
unsecured), 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 reviewed 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 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 (including deferred unit-based compensation)
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, 2019
Dec. 31, 2018
$
258,793
$
227,407
(40,913)
217,880
79,032
2.76
1.50
(39,188)
188,219
70,179
2.68
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 initiatives and
consistent monitoring of the balance between debt and equity financing. As at December 31, 2019, the Trust’s weighted
average cost of capital was calculated to be 3.58%.
The following schedule details the components of the Trust’s capital and the related costs thereof:
As at
Dec. 31, 2019
Dec. 31, 2018
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
2.74%
$
2,766,101
2.65%
$
2,712,834
4.57%
4.57%
4.57%
3.58%
$
205,537
4,409
2,133,967
5,110,014
4.63%
4.63%
4.63%
3.47%
$
169,200
4,005
1,754,081
4,640,120
(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.
124
BOARDWALK REIT 2019 ANNUAL REPORT
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, 2019 is insured under the National Housing Act (“NHA”) and
administered by Canada Mortgage and Housing Corporation (“CMHC”). These financings can be structured on a loan to
CMHC appraised value basis of between 75-80%. The Trust currently has a level of indebtedness of approximately 45% 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 IFRS 9. Gains or losses resulting from
changes in the fair value at each reporting date are recorded in the consolidated statement of comprehensive income.
As outlined in NOTE 32(d), Boardwalk REIT’s committed revolving credit facility agreements contain financial covenants.
Available liquidity as at December 31, 2019 included cash and cash equivalents on hand of $35.2 million (December 31,
2018 – $38.1 million) as well as an unused committed revolving credit facility of $199.7 million (December 31, 2018 –
$199.7 million). The Trust monitors its ratios and as at December 31, 2019 and December 31, 2018, the Trust was in
compliance with all covenants in both its DOT and all existing debt facilities.
Note 31: Fair Value Measurement
(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)
ii)
iii)
iii)
the carrying amounts of trade and other receivables, segregated tenants’ security deposits, cash and cash
equivalents, refundable tenants’ security deposits and trade and other payables approximate their fair values due
to their short-term nature.
the fair value of the Trust’s investment in private technology fund is based on information provided from the
organization managing the investments.
the fair values of the Trust’s mortgage receivable and 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.
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.
125
BOARDWALK REIT 2019 ANNUAL REPORT 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, 2019 and December 31, 2018 are as follows:
As at
Dec. 31, 2019
Dec. 31, 2018
Carrying Value
Fair Value
Carrying Value
Fair Value
Financial assets carried at amortized cost
Mortgages receivable
Financial assets carried at FVTPL
$
2,708
$
2,708
$
38,473
$
38,473
Investment in private technology venture fund
1,454
1,454
652
652
Financial liabilities carried at amortized cost
Mortgages payable
Financial liabilities carried at FVTPL
LP Class B Units
Deferred unit-based compensation
2,741,648
2,766,101
2,719,195
2,712,834
205,537
4,409
205,537
4,409
169,200
4,005
169,200
4,005
The fair value of the Trust’s mortgages payable was higher than the recorded value by approximately $24.5 million at
December 31, 2019 (December 31, 2018 – lower by $6.4 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, 2019 and December 31, 2018,
respectively; 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, 2019 and December 31, 2018, 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 32.
(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
Investment properties
Mortgage receivable
Investment in private technology
venture fund
Liabilities
LP Class B Units
Deferred unit-based compensation
Dec. 31, 2019
Dec. 31, 2018
Level 1
Level 2
Level 3
Level 1
Level 2
Level 3
$
-
$
-
$ 6,147,482
$
-
-
205,537
4,409
-
-
-
-
2,708
1,454
-
-
169,200
4,005
-
-
-
$
66,500
$ 5,877,469
-
-
-
-
38,473
652
-
-
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, 2019 and December 31, 2018, there
were no transfers between Level 1, Level 2 and Level 3 assets and liabilities. As at December 31, 2018, those investment
properties classified as Level 2 uses inputs which are directly observable for the assets, as the fair value is based on a
purchase and sale agreement between two willing market participants.
126
BOARDWALK REIT 2019 ANNUAL REPORT
Note 32: Risk Management
(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
minimized 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, 2019, the Trust had no amount outstanding on its committed revolving credit facility and its mortgages
payable are fixed-rate debt. However, the Trust had $14.7 million extended on its construction loan payable, which is carried at
variable-rate interest. As such, for the year ended December 31, 2019 , all else being equal, the increase or decrease in net
earnings for each 1% change in market interest rates would be $0.2 million (December 31, 2018 – $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
holdbacks and refundable mortgage fees, accounts receivable from significant customers and insurers and tenant receivables.
As at December 31, 2019 and December 31, 2018, 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 agreement
(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 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 considered to be past due by
127
BOARDWALK REIT 2019 ANNUAL REPORT the Trust. For the 12 months ended December 31, 2019, bad debt expense totaled $5.4 million (12 months ended December 31,
2018 – $4.8 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 maintains
what it believes to be conservatively leveraged assets and can finance any future growth through one or a combination 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 financings 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 12 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
2020
2021
2022
2023
2024
Subsequent
Unamortized
deferred
financing
costs
Weighted
Average
Interest
Rate
Mortgage
Principal
Outstanding
Mortgage
Interest (1)
Lease
Liabilities
Principal
Construction
Loan
Outstanding
Payable
Tenants’
Security
Deposits
Distribution
Payable
Trades
and Other
Payables
Total
2.52% $ 317,649 $ 73,401 $
3,659 $
-
$ 10,855 $
4,248 $ 57,623 $ 467,435
2.41%
2.73%
2.93%
2.89%
2.84%
2.74%
377,971
441,142
354,885
260,887
1,088,242
63,253
52,496
41,080
30,307
66,608
2,840,776
327,145
3,831
3,850
2,676
2,137
97,873
114,026
14,720
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
459,775
497,488
398,641
293,331
1,252,723
14,720
10,855
4,248
57,623
3,369,393
(99,128)
-
-
-
-
-
-
(99,128)
$ 2,741,648 $ 327,145 $ 114,026 $
14,720 $ 10,855 $
4,248 $ 57,623 $ 3,270,265
(1) Based on current in-place interest rates for the remaining term to maturity.
128
BOARDWALK REIT 2019 ANNUAL REPORT
(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 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 $250,000 under a Letter of Credit issued in favor of CMHC.
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, 2019 of approximately $895.5 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 $199.7 million as at December 31, 2019 (December 31, 2018 – $199.7 million).
The revolving facility requires monthly interest payments, is for a five-year term maturing on July 27, 2024, 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)
ii)
iii)
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, 2019, this ratio was 1.45 (December 31, 2018 – 1.41).
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, 2019, this ratio was 1.42 (December 31, 2018 – 1.40).
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, 2019, this ratio was 44.8%
(December 31, 2018 – 44.2%).
As at December 31, 2019 and December 31, 2018, 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 29,
the Trust has commitments to certain utility contracts to reduce the risk of exposure to adverse changes in commodity prices.
129
BOARDWALK REIT 2019 ANNUAL REPORT Note 33: Subsidiaries
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
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
BRIO Holdings Ltd.
Corporation
50% Owned by BGP
Redwalk Brampton Limited Partnership
Partnership
49.99% owned by BGP
0.01% owned by Redwalk Brampton Inc.
Redwalk Brampton Inc.
Partnership
49.99% owned by BGP
Riowalk Sandalwood Inc.
Corporation
50% Owned by BGP
130
BOARDWALK REIT 2019 ANNUAL REPORT BPCL represents the only entity which is included in the Trust’s consolidated financial statements by meeting the principle
of control and not based on the Trust’s ownership percentage. BPCL (formerly called Boardwalk Equities Inc.) was created
to accomplish a narrow and well-defined objective, which was to transfer the beneficial 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 equivalent 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.
Note 34: Related Party Disclosures
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 33), 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, 2019 and up to the date of this report were:
Andrea Goertz (elected May 15, 2019)
Gary Goodman
Arthur L. Havener, Jr.
Sam Kolias
Samantha Kolias
Scott Morrison
Brian Robinson
Andrea Stephen (retired May 15, 2019)
The remuneration of the Trust’s Trustees was as follows:
Deferred unit-based compensation – Trustee fees
Year Ended
Dec. 31, 2019
Year Ended
Dec. 31, 2018
$
$
849
849
$
$
789
789
131
BOARDWALK REIT 2019 ANNUAL REPORT
(B) KEY MANAGEMENT PERSONNEL
Key management personnel of the Trust during the year ended December 31, 2019 and up to the date of this report were:
P. Dean Burns, General Counsel & Corporate Secretary
Roberto Geremia, President
Sam Kolias, Chief Executive Officer
Van Kolias, Senior VP, Quality Control
Lisa Russell, Senior VP, Corporate Development
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, 2019
Year Ended
Dec. 31, 2018
$
1,184
$
1,031
56
4
890
$
2,134
$
56
4
1,052
2,143
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 liabilities
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, 2019 , distributions on the
LP Class B Units totaled $4.5 million (December 31, 2018 – $4.5 million). Distributions on the LP Class B Units are made on
terms equal to distributions made on Boardwalk REIT Units.
As at December 31, 2019, there was $373,000 owed to related parties (December 31, 2018 – $373,000) based
on the LP Class B Units distribution outlined above.
During 2019, the Trust entered into an agreement with a related party for IT services. The largest shareholder of the company
providing the IT services is an individual associated with one of the Trust’s key personnel. The member of the Trust’s key
personnel has no ownership interest in the company providing the IT services. The agreement will provide for services over
a three-year term with a total cost of $1.1 million. For the year ended December 31, 2019, payments to this provider totaled
$0.5 million. As at December 31, 2019, there was no balance owed to this related party.
132
BOARDWALK REIT 2019 ANNUAL REPORT
Note 35: Other Information
(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 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, 2019
Year Ended
Dec. 31, 2018
$
1,731
$
3,036
3,843
92
13,944
22,646
$
4,876
(1,339)
(2,995)
23
(8,869)
(8,304)
(14,483)
$
(1,102)
(405)
$
(205)
$
$
$
$
(46,462)
$
(46,397)
(3,869)
3,875
(8,688)
3,869
$
(46,456)
$
(51,216)
(B)
Included in administration costs was $2.9 million relating to Registered Retirement Savings Plan (“RRSP”) matching for
the year ended December 31, 2019 (December 31, 2018 – $2.9 million).
Note 36: Segmented Information
Boardwalk REIT specializes in multi-family residential housing and operates within one business segment in four provinces
located wholly in Canada along with a corporate segment. Each provincial segment operates with a high degree of autonomy.
Management monitors the operating results on a province by province 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.
133
BOARDWALK REIT 2019 ANNUAL REPORT
Details of segmented information are as follows:
As at
Assets
Liabilities
As at
Assets
Liabilities
Rental revenue (a)
Ancillary rental income
Total rental revenue
Rental expenses
Operating expenses
Utilities
Property taxes
Net operating income (loss)
Financing costs (b)
Administration
Deferred unit-based compensation
Depreciation (c)
December 31, 2019
Alberta Saskatchewan
Ontario
Quebec
Corporate
Total
$ 4,079,947
$ 594,195
$ 476,113
$ 967,099
$ 159,030
$ 6,276,384
1,908,395
282,888
140,771
552,116
274,159
3,158,329
December 31, 2018
Alberta
Saskatchewan
Ontario
Quebec
Corporate
Total
$ 4,115,913
$ 628,429
$ 372,098
$ 828,859
$ 163,792
$ 6,109,091
1,871,961
278,063
137,091
469,288
226,003
2,982,406
Alberta Saskatchewan
Year Ended December 31, 2019
Quebec
Ontario
Corporate
Total
$ 290,469
$
50,870
$
29,235
$
77,719
$
305
$ 448,598
4,749
295,218
65,571
28,952
30,739
169,956
56,652
4,771
-
890
328
51,198
9,651
7,844
4,921
28,782
9,220
1,141
-
196
18,225
(714)
(11,546)
5,965
-
580
29,815
5,151
3,708
3,302
17,654
4,291
33
-
40
1,059
78,778
14,739
7,007
8,399
48,633
14,676
203
-
167
(1)
304
5,996
372
168
(6,232)
3,359
32,497
2,268
7,516
6,715
455,313
101,108
47,883
47,529
258,793
88,198
38,645
2,268
8,809
13,290
33,587
(51,872)
120,873
-
94,323
107,613
-
-
40,574
74,161
-
-
(37,272)
(89,144)
754
(714)
(86,132)
34,027
754
Profit (loss) before the undernoted
107,643
Loss on sale of assets
Fair value (losses) gains
(Loss) profit before income tax
Income tax recovery (d)
-
(172,211)
(64,568)
-
(Loss) profit for the year
$
(64,568)
$
5,965
$
107,613
$
74,161
$
(88,390)
$
34,781
Other comprehensive income
-
-
-
-
-
-
Total comprehensive (loss) income
$
(64,568)
Additions to non-current assets (e)
$ 110,415
$
$
5,965
19,242
$
$
107,613
9,729
$
$
74,161
13,752
$
$
(88,390)
$
34,781
37,070
$ 190,208
134
BOARDWALK REIT 2019 ANNUAL REPORT
Year Ended December 31, 2018
Alberta
Saskatchewan
Ontario
Quebec
Corporate
Total
$ 273,321
$
51,470
$
27,822
$
75,125
$
260
$ 427,998
Rental revenue (a)
Ancillary rental income
Total rental revenue
Rental expenses
Operating expenses
Utilities
Property taxes
Net operating income (loss)
Financing costs (b)
Administration
Deferred unit-based compensation
Depreciation (c)
4,745
278,066
73,109
28,414
29,200
147,343
53,880
1,349
-
905
Profit (loss) before the undernoted
91,209
Loss on sale of assets
Fair value (losses) gains
(Loss) profit before income tax
Income tax expense (d)
-
61,609
152,818
-
334
51,804
11,017
8,356
5,044
27,387
8,230
(21)
-
198
18,980
(27)
(11,739)
7,214
-
566
28,388
4,927
3,561
3,298
16,602
3,397
11
-
29
13,165
-
13,291
26,456
-
976
76,101
18,464
6,968
8,243
42,426
11,988
153
-
179
(3)
257
6,098
329
181
(6,351)
3,091
35,601
2,095
5,443
6,618
434,616
113,615
47,628
45,966
227,407
80,586
37,093
2,095
6,754
30,106
(52,581)
100,879
-
4,995
35,101
-
-
24,215
(28,366)
(23)
(27)
92,371
193,223
(23)
(Loss) profit for the year
$ 152,818
$
7,214
$
26,456
$
35,101
$
(28,389)
$ 193,200
Other comprehensive income
-
-
-
-
-
-
Total comprehensive (loss) income
$ 152,818
Additions to non-current assets (e)
$ 146,773
$
$
7,214
21,060
$
$
26,456
10,053
$
$
35,101
14,706
$
$
(28,389)
$ 193,200
18,981
$ 211,573
(A) RENTAL REVENUE
Rental revenue was as follows:
Lease revenue
Parking revenue
Recoveries
Other (fees)
Total
Lease revenue
Parking revenue
Recoveries
Other (fees)
Total
Year Ended December 31, 2019
Alberta Saskatchewan
Ontario
Quebec
Corporate
Total
$ 280,580
$
47,544
$
29,249
$
75,000
$
173
$ 432,546
4,587
2,121
3,181
490
2,329
507
90
-
(104)
1,995
533
191
1
132
(1)
7,163
5,115
3,774
$ 290,469
$
50,870
$
29,235
$
77,719
$
305
$ 448,598
Year ended December 31, 2018
Alberta
Saskatchewan
Ontario
Quebec
Corporate
Total
$ 265,103
$
48,274
$
27,862
$
72,494
$
150
$ 413,883
4,601
2,211
1,406
425
2,433
338
85
-
(125)
1,908
562
161
-
109
1
7,019
5,315
1,781
$ 273,321
$
51,470
$
27,822
$
75,125
$
260
$ 427,998
135
BOARDWALK REIT 2019 ANNUAL REPORT
(B) FINANCING COSTS
Financing costs were as follows:
Interest on secured debt
(mortgages payable)
Interest capitalized to properties
under development
LP Class B unit distribution
Other interest charges
Interest on lease obligations
Interest income
Amortization of deferred
financing costs
Alberta Saskatchewan
Ontario
Quebec
Corporate
Total
Year ended December 31, 2019
$
51,683
$
8,532
$
3,916
$
11,027
$
1
$
75,159
-
-
60
909
(7)
-
-
(3)
-
(1)
-
-
43
-
-
4,007
692
332
-
-
15
2,545
-
1,089
(1,433)
(1,433)
4,479
1,363
283
4,479
1,478
3,737
(1,334)
(1,342)
-
6,120
Total
$
56,652
$
9,220
$
4,291
$
14,676
$
3,359
$
88,198
Interest on secured debt
(mortgages payable)
Interest capitalized to properties
under development
LP Class B unit distribution
Other interest charges
Interest on lease obligations
Interest income
Amortization of deferred
financing costs
Alberta
Saskatchewan
Ontario
Quebec
Corporate
Total
Year Ended December 31, 2018
$
49,775
$
7,860
$
3,102
$
10,350
$
1
$
71,088
-
-
127
-
-
3,978
(276)
-
6
-
(32)
672
-
-
45
-
-
-
-
20
-
-
(314)
4,479
1,105
-
(2,181)
(590)
4,479
1,303
-
(2,213)
250
1,618
1
6,519
Total
$
53,880
$
8,230
$
3,397
$
11,988
$
3,091
$
80,586
(C) DEPRECIATION
This represents depreciation on items carried at cost and primarily includes corporate assets, technology assets, site
equipment and other assets. These figures exclude any impairment charges.
(D)
INCOME TAX RECOVERY (EXPENSE)
This relates to any current and deferred taxes.
(E)
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.
Note 37: Approval of Consolidated Financial Statements
The consolidated financial statements were approved by the Board of Trustees and authorized on February 26, 2020.
136
BOARDWALK REIT 2019 ANNUAL REPORT
FIVE YEAR SUMMARY
($000’s except per unit and per square foot)
2015 (IFRS)
2016 (IFRS)
2017 (IFRS)
2018 (IFRS)
2019 (IFRS)
Assets
Investment properties
Other assets
Total assets
Mortgages payable
Other liabilities
Deferred income taxes
Unitholders' equity
$ 5,540,299
$ 5,612,568
$ 5,688,125
$ 5,943,969
$ 6,147,482
293,543
156,045
176,950
165,122
128,902
$ 5,833,842
$ 5,768,613
$ 5,865,075
$ 6,109,091
$ 6,276,384
$ 2,272,447
$ 2,435,666
$ 2,593,980
$ 2,719,195
$ 2,741,648
350,640
311,624
293,433
263,143
416,681
$ 2,623,087
$ 2,747,290
$ 2,887,413
$ 2,982,338
$ 3,158,329
17
4
55
68
-
3,210,738
3,021,319
2,977,607
3,126,685
3,118,055
Total liabilities and unitholders’ equity
$ 5,833,842
$ 5,768,613
$ 5,865,075
$ 6,109,091
$ 6,276,384
Trust unit outstanding (000) (including LP B Units)
51,322
50,739
50,813
50,867
50,936
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
$
47.45
$
48.65
$
43.09
$
37.81
$
45.93
2,435.2
32,947
168
69
2,468.4
33,773
166
72
2,189.5
33,187
171
78
1,923.3
33,417
178
81
2,339.5
33,263
185
82
28,199
28,924
28,539
28,793
28,674
196
81
856
194
84
856
199
91
860
206
94
862
214
96
862
L/T debt weighted average interest rate
3.01%
2.78%
2.61%
2.65%
2.74%
137
BOARDWALK REIT 2019 ANNUAL REPORT
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
Deferred unit-based compensation
Depreciation
Profit from continuing operations
before the undernoted
Proceeds on insurance settlement
Loss on sale of assets
Fair value gains (losses)
Profit (loss) before income taxes
Income tax (expense) recovery
Profit (loss) for the year
Other comprehensive income
Total comprehensive income (loss)
Earnings (loss) per unit – diluted
2015 (IFRS)
2016 (IFRS)
2017 (IFRS)
2018 (IFRS)
2019 (IFRS)
$ 469,209
$ 432,140
$ 416,504
$ 427,998
$ 448,598
6,939
6,706
6,422
6,618
6,715
476,148
438,846
422,926
434,616
455,313
94,172
46,200
41,074
97,620
44,711
43,416
113,986
47,967
44,890
294,702
253,099
216,083
62%
85,370
33,407
-
9,649
58%
84,634
33,947
-
5,219
166,276
129,299
-
(6,855)
-
-
(130,361)
(186,681)
29,060
(212)
28,848
1,014
(57,382)
(58)
(57,440)
51%
85,763
33,402
-
5,586
91,332
3,162
(1,678)
(35,418)
57,398
(140)
57,258
113,615
47,628
45,966
227,407
52%
80,586
37,093
2,095
6,754
101,108
47,883
47,529
258,793
57%
88,198
38,645
2,268
8,809
100,879
120,873
-
(27)
92,371
193,223
(23)
193,200
-
(714)
(86,132)
34,027
754
34,781
Funds from operations
$ 184,852
$ 144,468
$ 106,987
Funds from operations per unit – fully diluted
$
3.56
$
2.84
$
2.11
112,112
$ 130,967
2.21
$
Interest Coverage Ratio
3.64
3.14
2.60
2.68
2.57
2.76
$
$
$
-
-
-
-
$
$
29,862
(0.40)
$
$
(57,440)
(1.24)
$
$
57,258
$ 193,200
0.84
3.43
$
$
34,781
0.75
Fiscal year ended December 31, 2016 has been restated to present deferred financing cost amortizatoin consistent with fiscal year ended December 31, 2017.
Fiscal year ended December 31, 2018 has been restated to present deferred unit-based compensation consistent with December 31, 2019.
Years prior to December 31, 2018 did have deferred unit-based compensation but were not restated.
138
BOARDWALK REIT 2019 ANNUAL REPORT
2019 QUARTERLY RESULTS
Rental revenue
Ancillary rental income
Total rental revenue
Rental expenses
Operating expenses
Utilities
Property taxes
Net operating income
Financing costs
Administration
Deferred unit-based compensation
Depreciation and amortization
Profit before the undernoted
Loss on sale of assets
Fair value (losses) gains
(Loss) profit before income tax
Income tax recovery
(Loss) profit for the period
Other comprehensive income
Total comprehensive (loss) income
(Loss) earnings per unit – diluted
Funds from operations
Funds from operations per unit – fully diluted
Q1
Q2
Q3
Q4
Dec. 31 2019
$
110,142
$
111,432
$ 113,253
$ 113,771
$ 448,598
1,750
111,892
1,951
113,383
1,407
114,660
1,607
115,378
6,715
455,313
101,108
47,883
47,529
258,793
88,198
38,645
2,268
8,809
(714)
(86,132)
34,027
754
34,781
25,592
14,773
11,582
59,945
21,874
9,689
358
2,048
25,976
-
(34,154)
(8,178)
434
(7,744)
24,791
10,799
11,590
66,203
22,141
8,482
1,013
2,157
32,410
(277)
39,366
71,499
102
71,601
24,475
10,036
12,254
67,895
21,908
10,097
332
2,263
33,295
(437)
46,611
79,469
91
26,250
12,275
12,103
64,750
22,275
10,377
565
2,341
-
(137,955)
(108,763)
127
29,192
120,873
79,560
(108,636)
-
(7,744)
(0.17)
28,249
0.56
$
$
$
$
-
71,601
1.35
34,788
0.68
$
$
$
$
-
79,560
1.71
35,775
0.70
$
$
$
$
-
-
$
$
$
$
(108,636)
(2.34)
$
$
34,781
0.75
32,156
$ 130,967
0.63
$
2.57
139
BOARDWALK REIT 2019 ANNUAL REPORT
2018 QUARTERLY RESULTS
Rental revenue
Ancillary rental income
Total rental revenue
Rental expenses
Operating expenses
Utilities
Property taxes
Net operating income
Financing costs
Administration
Deferred unit-based compensation
Depreciation and amortization
Profit before the undernoted
Loss on sale of assets
Fair value gains
Profit before income tax
Income tax recovery (expense)
Profit for the period
Other comprehensive income
Total comprehensive income
Earnings (loss) per unit – diluted
Funds from operations
Funds from operations per unit – fully diluted
Q1
Q2
Q3
Q4
Dec. 31 2018
$ 105,341
$ 106,721
$
107,244
$ 108,692
$ 427,998
1,720
107,061
1,667
108,388
1,530
108,774
1,701
6,618
110,393
434,616
28,627
14,509
11,154
52,771
19,810
9,458
317
1,468
21,718
27,176
10,549
11,286
59,377
20,165
8,744
942
1,609
27,917
-
-
47,502
69,220
30
69,250
-
69,250
1.49
24,306
0.48
28,895
56,812
(40)
56,772
-
56,772
1.22
30,646
0.60
$
$
$
$
$
$
$
$
28,118
10,002
11,851
58,803
20,239
9,618
263
1,725
29,694
12,568
11,675
56,456
20,372
9,273
573
1,952
113,615
47,628
45,966
227,407
80,586
37,093
2,095
6,754
26,958
24,286
100,879
-
6,081
33,039
39
(27)
9,893
34,152
(52)
(27)
92,371
193,223
(23)
33,078
34,100
193,200
-
33,078
0.71
29,802
0.59
$
$
$
$
-
-
$
$
$
$
34,100
$ 193,200
(0.40)
$
3.43
27,358
$ 112,112
0.54
$
2.21
140
BOARDWALK REIT 2019 ANNUAL REPORT
MARKET AND UNITHOLDER INFORMATION
Solicitors
Gowling WLG (Canada) LLP
1600, 421 – 7th Avenue SW
Calgary, Alberta T2P 4K9
First West Law LLP
100, 1501 – 1st Street SW
Calgary, Alberta T2R 0W1
Bankers
TD Commercial Banking
1100, 421 – 7th Avenue SW
Calgary, Alberta T2P 4K9
Auditors
Deloitte LLP
700, 850 – 2nd Street SW
Calgary, Alberta T2P 0R8
Registrar and 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 – 8th Avenue SW
Calgary, Alberta T2P 3S8
Telephone: 403-267-6800
Investor Relations
Unitholders seeking financial and operating information
may contact:
James Ha
Vice-President, Finance and Investor Relations
Telephone: 403-531-9255
Toll Free: 855-626-6739
Facsimile: 403-531-9565
Web: www.bwalk.com/investors
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.bwalk.com/investors.
Annual and General Meeting
The Annual and Special Meeting of the Unitholders of
Boardwalk REIT will be held on May 14, 2020 at 3:00pm
mountain time.
Unitholders are encouraged to complete the Form of Proxy
and participate via webcast. Webcast information available on
www.bwalk.com/investors.
Exchange Listings
The Toronto Stock Exchange
Symbol: BEI.UN
Trading Profile
TSX: January 1, 2019 to December 31, 2019
High: $49.14
Low: $36.47
Year-end Closing Price: $45.93
MONTHLY DISTRIBUTIONS
Month Per Unit
Annualized Record Date
Jan-19
$0.0834 $
Feb-19
$0.0834 $
Mar-19
$0.0834 $
Apr-19
$0.0834 $
May-19 $0.0834 $
Jun-19
$0.0834 $
Jul-19
$0.0834 $
Aug-19
$0.0834 $
Sep-19
$0.0834 $
Oct-19
$0.0834 $
Nov-19
$0.0834 $
Dec-19
$0.0834 $
Jan-20
$0.0834 $
Feb-20
$0.0834 $
Mar-20
$0.0834 $
Apr-20
$0.0834 $
1.00
1.00
1.00
1.00
1.00
1.00
1.00
1.00
1.00
1.00
1.00
1.00
1.00
1.00
1.00
1.00
31-Jan-19
28-Feb-19
29-Mar-19
30-Apr-19
31-May-19
28-Jun-19
31-Jul-19
30-Aug-19
30-Sep-19
31-Oct-19
29-Nov-19
31-Dec-19
31-Jan-20
28-Feb-20
31-Mar-20
30-Apr-20
Distribution
Date
15-Feb-19
15-Mar-19
15-Apr-19
15-May-19
17-Jun-19
15-Jul-19
15-Aug-19
16-Sep-19
15-Oct-19
15-Nov-19
16-Dec-19
15-Jan-20
17-Feb-20
16-Mar-20
15-Apr-20
15-May-20
141
BOARDWALK REIT 2019 ANNUAL REPORT
NOTES
142
BOARDWALK REIT 2019 ANNUAL REPORT NOTES
143
BOARDWALK REIT 2019 ANNUAL REPORT CORPORATE INFORMATION
Executive Office
Senior Management
First West Professional Building
Dean Burns
General Counsel and Corporate Secretary
Leonora Davids
Vice President,
Operations, Western Canada Operations
Roberto Geremia
President
James Ha
Vice President,
Finance and Investor Relations
Bhavnesh Jairam
CIO, Vice President,
Technology
Jeff Klaus
Vice President,
Development and Acquisitions
Sam Kolias
Chief Executive Officer
Van Kolias
Senior Vice President,
Quality Control
Helen Mix
Vice President,
Human Resources
Lisa Russell
Senior Vice President,
Corporate Development
Lisa Smandych
Chief Accounting Officer
William Wong
Chief Financial Officer
200, 1501 – 1st Street SW
Calgary, Alberta T2R 0W1
Phone: 403-531-9255
Board of Trustees
Sam Kolias
Chairman of the Board
Calgary, Alberta
Andrea Goertz (2)(3)
Calgary, Alberta
Gary Goodman (2)
Toronto, Ontario
Arthur Havener (1)(3)
St. Louis, MO
Samantha Kolias-Gunn
Calgary, Alberta
Scott Morrison (2)(3)
Toronto, Ontario
Brian Robinson (3)
Calgary, Alberta
(1) Lead Trustee
(2) Member of the Audit &
Risk Management Committee
(3) Member of the Compensation,
Governance & Nominations Committee
144
BOARDWALK REIT 2019 ANNUAL REPORT 2019 ENVIRONMENTAL, SOCIAL
AND GOVERNANCE REPORT
Y
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Boardwalk REIT strives to provide
Canada’s friendliest communities and
currently owns and operates more
than 200 communities with over
33,000 residential units totaling over
28 million net rentable square feet.
BOARDWALK REIT 2019 ESG REPORT
Boardwalk’s principal objectives are to provide its
Residents with the best quality communities and
superior customer service, provide Unitholders
with enhanced returns, and increase the value of the
Trust Units through selective acquisitions, dispositions,
development and effective management of its residential
multi-family communities.
Boardwalk REIT is traded on the Toronto Stock Exchange
under the trading symbol ‘BEI.UN’ and has properties
located in Alberta, Saskatchewan, Ontario and Quebec.
Table of Contents
2 CEO’S Message
4
Boardwalk
Sustainability
8 Our Environment
18 Social
30 Governance
2019 CUMULATIVE HIGHLIGHTS
33,263
APARTMENT UNITS
24.1%
28.7 MILLION
2019 TOTAL RETURN
NET RENTAL SQUARE FEET
8.2%
SAME-PROPERTY
NOI GROWTH
$2.57
FFO PER
TRUST UNIT
$63.72
NET ASSET VALUE
PER TRUST UNIT
65
NET PROMOTER
SCORE
OPERATIONS OVERVIEW
Less than 1,000 units
Grande Prairie
Red Deer
Fort McMurray
Kitchener
1,000 to 5,000 units
Saskatoon
Regina
London
Montréal
Québec City
Greater than 5,000 units
Calgary
Edmonton
1
BOARDWALK REIT 2019 ESG REPORT CEO’S
MESSAGE
We are pleased to present Boardwalk REIT’s first Environmental, Social and Governance
(“ESG”) report which will provide an overview of our many environmental, social and
governance accomplishments and initiatives from 2019. As our inaugural report, some of the
elements included in this report have been in place since we first began in 1984 on a
foundation of always aiming to do what is right.
We will work together with our Resident Members
on environmental initiatives for the benefit of our
environment, our communities and our stakeholders.
We see an opportunity to continue to work with our
Associates, to attract, retain, promote and encourage
employment satisfaction. We will continue to be an
equal opportunity employer who does not discriminate,
but who recognizes Associates for hard work and
strong engagement. Our Boardwalk Team recognizes
the importance of ESG and want to play a role in
making a difference.
We will continue to not only serve the communities
in which we are located but also the broader cities
in which we operate. We strive to provide affordable
housing to all, while maintaining our superior standards
in customer service, product quality, and experience.
Our Board of Trustees will continue to provide
the highest level of governance and oversight.
They will be involved in evaluating our climate
change-related risk and opportunities along with
developing ESG objectives.
We see the future as an opportunity to continue
to do the right thing and maximize value for all of
our Stakeholders. Furthermore, we look forward to
sharing this and future ESG updates as we continue to
operate and grow under our Golden Foundation: “Treat
others as we would like to be treated, be good, love
community, and have fun!”
On behalf of our entire team,
Sam Kolias
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
Sam Kolias
Many of the business decisions we have made to
date, align closely with modern-day ESG targets. Our
approach and strategy will remain consistent as we aim
to build the best culture and brand. Boardwalk strives
to attract and retain caring, peak performers while
ensuring all our Resident Members live in a Boardwalk
community they are proud to call home. Our impact
with ESG involvement includes the ability to reduce
our greenhouse gas (“GHG”) emissions, to empower
our Associates, to foster satisfied Resident Members,
and to create value for all our stakeholders through
disciplined governance.
Recognizing the role which Real Estate has in climate
conservation, we see an opportunity to decrease our
carbon footprint while simultaneously decreasing our
operating costs. Moving forward, we will focus our
efforts on our communities with the highest GHG
intensity ranking along with our continued attention
on water conservation and waste minimization.
2
BOARDWALK REIT 2019 ESG REPORT Broadway Centre Resident Member Lounge; Calgary, AB
THE FINANCIAL BENEFITS OF DOING THE RIGHT THING
Increased Profitability
Focusing on ESG initiatives benefits our environment, our
Associates, our Resident Members and our stakeholders,
leading to increased revenue and decreased operating expenses.
Focusing on ESG initiatives should decrease operational and
reputational risk.
Reduced Risks
Increased Opportunities
Focusing on ESG initiatives should help attract and retain
Associates, encourage Resident Members to live with us and
foster relationships with community groups and government
agencies, while encouraging investment participation.
3
BOARDWALK REIT 2019 ESG REPORT Y
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Boardwalk is focused on creating
value by committing to ESG practices
that have a positive impact on the
communities in which we operate,
the Resident Members who choose
to call Boardwalk ‘home’ and our
Associates. Boardwalk strives to
lower its carbon impact.
BOARDWALK REIT 2019 ESG REPORT
ENVIRONMENT
SOCIAL
GOVERNANCE
1.9%
DECREASE IN ITS GREENHOUSE
GAS EMISSIONS INTENSITY
YEAR OVER YEAR
2.9%
DECREASE
IN WATER
CONSUMPTION
~4 MILLION kgs
OF CARBON SAVED THROUGH ITS
CLOTHING DONATION PROGRAM
WITH DIABETES CANADA
100+
DIFFERENT LANGUAGES
ARE SPOKEN BY
BOARDWALK ASSOCIATES
60,000+
TOTAL NUMBER OF
RESIDENT MEMBERS
AT BOARDWALK
~6 YEARS
AVERAGE LENGTH OF SERVICE
FOR BOARDWALK ASSOCIATES
RANKED 1ST
OUT OF 24 S&P/TSX LISTED
REAL ESTATE ISSUERS IN THE
GLOBE AND MAIN BOARD GAMES
100%
OF MEETINGS
ATTENDED BY
ALL TRUSTEES
RANKED 29TH
OUT OF 224 S&P/TSX LISTED
ISSUERS IN THE GLOBE
AND MAIL BOARD GAMES
5
BOARDWALK REIT 2019 ESG REPORT OUR ESG STRATEGY
AND APPROACH
Boardwalk includes sustainability as part of its strategy development and includes
sustainability goals that provide accountability towards its targets. Moving into 2020,
Boardwalk strives to further enhance its ESG strategy with Board of Trustee approved
ESG policies and targets.
In preparing its ESG report, Boardwalk referred to
recommendations of the Global Reporting Initiatives
Standards (“GRI”) and the Sustainability Accounting
Standards Board, however the Trust does not claim
that this report has been prepared in accordance with
GRI Standards. Going forward, the Trust aims to
produce a report which will be prepared in accordance
with GRI Standards. Additionally, the Trust referred to
the disclosure elements used by the Global Real Estate
Sustainability Benchmark (“GRESB”). In 2020, the
Trust expects to have its ESG disclosure included as
part of the GRESB assessment and strives to complete
a full ESG materiality assessment where it considers
the amount of influence the ESG consideration has on
stakeholder’s assessments and decisions, along with
the degree of significance of the economic,
environmental and social impacts.
STAKEHOLDER ENGAGEMENT
Boardwalk recognizes the importance of identifying
and including, all its stakeholders when devising its
strategy for ESG along with assessing materiality.
Below is a list of the Trust’s stakeholders along
with the current means by which it engages its
stakeholders. Going forward, the Trust will continue to
ensure all stakeholders are identified and engage with
all pertinent stakeholders.
A public transportation bicycle sits outside a Boardwalk Community
6
BOARDWALK REIT 2019 ESG REPORT STAKEHOLDERS
MEANS OF ENGAGEMENT
• Annual General Meeting
• Quarterly conference calls, including question
Investors
and answer period
• Press releases
• Corporate website
• One-on-one meetings
• Building tours with investors
• Resident Member portal
• Social media
• Community events
• Newsletters
• Resident Member surveys
Resident
Members
• Participation on various REALPac committees
• Attendance at speaking engagements at
industry functions
Environment
& Industry
• Municipality offered benchmarking programs
• Environmental assessments
• Municipality meetings
• Social media
• Corporate website
• Volunteer work
• Sponsorship events
Community
• Continuous feedback loop
• Peak performance culture
• Benchmarking to beat personal bests
• Annual TEAM meetings
• Annual performance review
• Unanimous surveys
• Social events
• Boardwalk Connect
Associates
7
BOARDWALK REIT 2019 ESG REPORT T
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Boardwalk is committed to responsible
energy, gas and water management,
as part of an overall environmental
sustainability strategy while
maintaining operational goals and
providing exceptional working and
living environments for our Associates
and Resident Members.
BOARDWALK REIT 2019 ESG REPORT
Park Place Tower; Edmonton, AB
INVESTING IN ENERGY AND WATER CONSERVATION INITIATIVES
Boardwalk’s commitment to energy conservation is founded on investing in initiatives to decrease its emissions.
Initiatives include, but are not limited to, building envelope improvements, high efficiency boiler upgrades, attic and roof
insulation upgrades, furnace replacement and upgrades, LED light fixtures and bulbs and Energy Star appliances.
As it relates to water consumption, Boardwalk installs low flow faucets, showerheads and toilets, and focuses on
utilizing irrigation systems and rain-water recycling programs, where possible, to meet its landscaping needs.
ENGAGING WITH RESIDENT MEMBERS
ENVIRONMENTAL GOVERNANCE
Boardwalk’s Resident Members have expressed their
desire to play a role in decreasing their carbon
emissions. Boardwalk aims to engage with its Resident
Members regarding environmental initiatives through
its blog, Resident Member portal and face-to-face
communications. Boardwalk works to provide its
Resident Members with more options for energy usage
and waste removal such as sub-metering, compost and
recycling programs and donation programs.
Boardwalk has established a “Green Initiative
Committee” which works to consider environmentally
friendly practices as well as products and services
for reducing carbon emissions, optimizing existing
technologies and creating a better future. Boardwalk’s
environmental policy involves benchmarking buildings
within our portfolio to determine emission intensities and
evaluating capital spend at those sites with the highest
intensity with the goal of reducing our carbon emissions.
Setting the Benchmark
In 2019, twenty-three Boardwalk communities were enrolled in the City of Edmonton Energy
Benchmarking program, which supports building owners and operators to reduce energy consumption
and help them transition to the mandatory building energy labelling initiative announced by the Federal
Government in the Pan Canadian Framework on Clean Growth and Climate Change.
The program is voluntary and aims to collect accurate, annual information on whole building energy
performance. The information will be used to benchmark building energy performance across
Edmonton’s largest buildings and direct energy efficiency improvements in buildings through the creation
of an information-action feedback loop with program participants.
9
BOARDWALK REIT 2019 ESG REPORT OUR APPROACH TO
THE ENVIRONMENT
The World Commission on Environment and Development defines Sustainable Development as
“development which meets the needs of the present without compromising the ability of future
generations to meet their own needs.”
Boardwalk strives to provide its Resident Members
with a place to call home, while aiming to minimize
our environmental impact for future generations to
come. Boardwalk is committed to responsible energy,
gas and water management as part of an overall
environmental sustainability strategy, while maintaining
operational goals and providing exceptional working and
living environments for our Associates and Resident
Members. In doing so, Boardwalk aims to decrease
operating costs while increasing overall resident
satisfaction and Unitholder value. Through efficient
management of energy utilization, Boardwalk aims to
minimize energy, gas, water use and costs, and the
environmental impact of harmful emissions. Boardwalk
is fully committed to achieving best practice benchmark
standards in energy efficiency compared to our peers.
QUOTES PROVIDED BY MEMBERS OF
BOARDWALK’S GREEN INITIATIVE COMMITTEE:
We believe in a sustainable community through
continuous environmental improvement.”
Helen Mix, Vice President, Human Resources
Focusing on sustainability contributes to community
and environmental wellbeing, while also bringing
value. It is simply the right thing to do.”
James Dudley, Director Preventative Maintenance
and Capital Projects
We actively aim to create cleaner and safer
communities in which we live, by working
together with our members to improve our
local environmental quality.”
Razvan Costin, Community Director, Northern Alberta
10
Boardwalk’s Green
Initiative Committee
Boardwalk has established a “Green
Initiative Committee” which works
to consider environmentally friendly
practices as well as products
and services for reducing carbon
emissions, optimizing existing
technologies and creating a better
future. The Committee is comprised of
Associates from different departments
across the country, including mid to
senior operations leaders, all working
together to consider Boardwalk’s
environmental impact first. This
Committee manages a dedicated
capital budget specific to emissions
reducing capital initiatives, above
and beyond standard environmental
initiatives already being completed by
the Trust. It evaluates allocating this
budget by considering both emissions
savings and the return on investment.
Boardwalk’s environmental policy
involves benchmarking buildings within
our portfolio to determine emission
intensities and evaluating capital
spend at those sites with the highest
intensity in a goal to reduce our
carbon emissions.
BOARDWALK REIT 2019 ESG REPORT In order to capture its environmental impact, Boardwalk uses in-house designed software whereby all energy
consumption data is tracked. Though this program provides data regarding overall consumption, it does not adjust for
seasonality (i.e. a particularly hot or cold season) and does not adjust for property level vacancy nor does it guarantee
data completeness. In 2020, Boardwalk will look to improve upon its environmental management systems including
the consideration and evaluation of third-party products which can provide superior data tracking and the ability to
normalize data.
CLIMATE CHANGE-RELATED OPPORTUNITIES AND RISKS
The Trust considers the recommendations outlined by
the Task Force on Climate-Related Financial
Disclosures (“TCFD”) to evaluate its climate change-
related opportunities and risks. Throughout 2020, the
Trust intends to formalize its policies surrounding the
core elements of recommended climate-related
financial disclosures being Governance, Strategy,
Risk Management, and Metrics and Targets.
Additionally, the Trust will continue to monitor the
trends and best practices surrounding climate change
and climate change disclosures. Boardwalk
is committed to better understanding its climate
change-related risks and opportunities.
Risks
The TCFD divided climate-related risks into two major
categories (1) risks related to the transition to a lower-
carbon economy, and (2) risks related to the physical
impacts of climate change. As it relates to the Trust,
Boardwalk believes its transitional risks include being
slower in adopting policies, allocating capital and
adopting new technologies to lower its carbon
emissions. Physical risks resulting from climate change
can be event driven (acute) or longer-term shifts
(chronic) in climate patterns. In the past, the Trust has
experienced the impact of these acute events such as
the fires in Fort McMurray and the floods in Calgary.
The Trust recognizes that it is exposed to both acute and
chronic risks and will address its response to these risks
in the opportunities section below and in its long-term
strategy moving forward.
Opportunities
The Trust continuously attempts to mitigate and adapt
to the climate change-related risks identified above,
which produces opportunities such as resource
efficiencies and cost savings. Currently with all
replacement, renovation or development, the Trust
utilizes products with lower emissions, including, but
not limited to LED fixtures and lightbulbs, low flow
toilets/showerheads/faucets, Energy Star appliances,
higher efficiency boilers, variable frequency drive
pumps and improved windowpanes. By upgrading
to these products, the Trust is reducing its carbon
emissions, decreasing its operating costs and
increasing its Resident Members satisfaction.
As it relates to acute and physical risks, the Trust
has undertaken the appropriate steps to attempt to
mitigate this risk. To begin with, every site has an
evacuation plan to ensure the safety of our Residents
and Associates in the event of an emergency. In order
to avoid a significant financial loss, the Trust carries
adequate insurance. Working with our insurance
providers, the Trust has identified that within its
portfolio two projects (a high-rise in Calgary, AB and
Nun’s Island Portfolio in Montreal, QC) are located
on a 100-year flood path. For the Calgary project, the
Trust invested approximately $1.5 million to mitigate
damages arising from a flood. The work performed
included relocating the main electrical service from
the basement to the main floor (which is above the
flood plain) and included the installation of a transfer
switch system to allow additional generators to be
attached during an emergency situation. The existing
sump pumps are on emergency power systems while
two additional high-volume pumps and a high capacity
sump pit were added to the parkade. The Trust
installed permanent flood walls around the perimeter
of the building in addition to having temporary water
containment walls which can be set up in the event of
an emergency. As it relates to Nuns' Island, given its
location on the St. Laurent river, physical barriers are
more difficult, therefore the Trust ensured the portfolio
has adequate emergency generators installed.
11
BOARDWALK REIT 2019 ESG REPORT Flood resiliency at Elbow Towers; Calgary, AB
REDUCING GREENHOUSE GAS (“GHG”) EMISSIONS AND ENERGY USAGE
1.1%
TOTAL REDUCTION IN
GHG EMISSIONS IN 2019
Boardwalk continuously invests in energy efficiencies,
which typically also result in cost savings. Over the
last year, Boardwalk has seen a decrease of 1.9%
and 1.1% in its GHG intensity (as measured as CO2e
per square foot) and its total emissions (in CO2e)
respectively. Representing 62% of the Trust’s total
portfolio, Alberta saw a 3.2% decrease in GHG
intensity and a 2.5% decrease in total emissions,
respectively, from 2018 to 2019. All data used in the
graphs below is on a vacancy adjusted same property
basis. Boardwalk defines same property as a project
which Boardwalk has owned and operated for over
24 months. Data is internally prepared and has not
been subject to any third-party review or audit.
Years are defined as October 1 to September 30.
12
Greenhouse Gas Emissions per Square Foot
2018
2019
4
3
.
1
2
3
.
1
8
0
.
1
5
0
.
1
Alberta
(62% of portfolio)
Total
Portfolio
Emissions in Metric Tonnes
2018
2019
6
3
0
,
4
5
1
8
8
2
,
2
5
1
8
9
8
,
9
1
1
7
3
9
,
6
1
1
Alberta
(62% of portfolio)
Total
Portfolio
BOARDWALK REIT 2019 ESG REPORT
ELECTRICITY AND NATURAL GAS
60 BASIS POINTS
REDUCTION IN ELECTRICITY
CONSUMPTION FROM 2018 TO 2019
50 BASIS POINTS
REDUCTION IN NATURAL GAS
CONSUMPTION FROM 2018 TO 2019
When comparing 2018 to 2019, Boardwalk has seen a
decrease in total electricity consumption (as measured
in kilowatt hours (“kWh”)) of 0.6% and a decrease in
total natural gas consumption of 0.5% (as measured
in gigajoules (“GJ”)). Alberta saw a decrease of 2.4%
for electricity consumption from 2018 to 2019 and a
2.5% decrease in gas consumption from 2018 to
2019. All data used in the graphs to the right is on a
same property basis. Data is internally prepared and
has not been subject to any third-party review or audit.
Years are defined as October 1 to September 30.
Total Natural Gas Consumption (GJ)
s
d
n
a
s
u
o
h
t
2,200
2,000
1,800
1,600
1,400
1,200
1,000
2018
2019
1
4
0
2
,
9
2
0
2
,
8
3
4
1
,
2
0
4
1
,
Alberta
(62% of portfolio)
Total
Portfolio
Total Electricity Consumption (kWh)
s
n
o
i
l
l
i
m
120
100
80
60
40
20
0
2018
2019
7
.
4
0
1
1
.
4
0
1
9
.
4
5
6
.
3
5
Alberta
(62% of portfolio)
Total
Portfolio
ENERGY CONSERVATION INITIATIVES
• Building envelope improvements (can include
air barriers, exterior insulation, windows/doors)
• High efficiency boiler upgrades
• Improved heating system pumps, including
the use of variable frequency drives
Natural
Gas
• Attic and roof insulation upgrades
• Furnace replacements and upgrades
• Thermostatic values to limit hot water temperature
Electricity
• LED light fixtures
and bulbs
• Motion sensored
LED light fixtures
in common areas
• Energy Star appliances
• Timers and photocells
for outdoor lighting
13
BOARDWALK REIT 2019 ESG REPORT WATER
WASTE
2.9%
396,601 lbs
REDUCTION IN SAME-PROPERTY WATER
CONSUMPTION FROM 2018 TO 2019
OF CLOTHING DIVERTED FROM
CANADIAN LANDFILLS IN 2019
As a provider of multi-family homes, our properties
use in excess of 3 million cubic meters of water per
year. As the majority of the water is used in-suite by
our Resident Members, with replacement, renovation
or development, the Trust aims to install low flow
faucets, showerheads and toilets. As it relates to
common area water consumption, Boardwalk focuses
on utilizing water efficient irrigation systems and rain-
water recycling programs, where possible, to meet
landscaping needs.
Reducing the water footprint is a major priority in
Boardwalk’s Communities, resulting in a partnership
with Alert Labs, a Canadian company that developed a
cutting edge technology, based on sensors using a cellular
connection to provide real-time monitoring and 24/7 alerts
with powerful analytics to reduce utility bills, property
damage and repair costs for residential and commercial
properties. Additionally, Boardwalk implemented a series
of water monitoring devices in 30 of its Communities with
the goal of optimizing water usage, while also utilizing
several flood detection devices for boiler rooms which
have proven to be beneficial. Going forward, the Trust
hopes to work with its laundry services provider to analyze
the water efficiency of its laundry machines.
From 2018 to 2019, the Trust saw a 2.9% decrease in
same-property water consumption as outlined in the
graph below.
Working with its Resident Members and Associates,
the Trust tries to minimize the amount of waste it
sends to local landfills. Boardwalk has initiated a
partnership with Diabetes Canada, whereby in 2019,
Boardwalk diverted 396,601 pounds of clothing
from Canadian landfills and helped to convert those
donations into charitable funds for Diabetes Canada.
396,601 pounds of donated clothing is equivalent to
approximately 4,020,541 kg of carbon saved. Since
partnering with Diabetes Canada, Boardwalk has
become one of Canada’s top diversion partner under
its Declutter program (www.declutter.diabetes.ca).
Other initiatives in place to decrease waste include:
• Compost recycling programs (including offering
complimentary household bins to Resident Members)
• Ensuring all compostable landscaping products
(i.e. grass and leaves) is taken to landfill separately
to be composted
• Mixed use recycling bins provided on site for
cardboard, paper, plastic, scrap metal, glass
and computer/printer parts
In 2020, Boardwalk will continue to focus on measures
to decrease waste, including expanding compost
recycling, making mixed recycling easier and more
accessible, and developing other partnerships such as
the one with Diabetes Canada to determine if other
products can be donated to charities.
Total Water Consumption (M3)
2018
2019
6
6
2
,
4
2
7
,
3
0
4
1
,
6
1
6
,
3
6
7
3
,
0
6
7
,
2
0
3
0
7,
5
6
2
,
Alberta
(62% of portfolio)
Total
Portfolio
14
BOARDWALK REIT 2019 ESG REPORT
CASE STUDY
A CLOSER LOOK AT ENVIRONMENTAL INITIATIVES PER SUITE
With each suite upgrade, Boardwalk aims to decrease its environmental impact.
Below are Boardwalk’s standard specifications which are used in every suite
renovation with the goal to decrease operating costs and our carbon footprint.
Toilets
Paint
• Low flow 4.8 Liters per flush/1.28 Gallons
• LEED compliant
• US EPA Watersense Certified (could save the
average family 13,000 gallons of water per year)
Kitchen Faucet
• Flow rate of 1.5 gallons per minute (GPM)
• Traditional average flow rate 2.2 GPM
• US EPA WaterSense Certified
Vanity Faucet
• Flow rate of 1.2 GPM
• Traditional average flow of 2.2 GPM
• US EPSA WaterSense Certified
• Zero VOC (volatile organic compound) (VOCs are found
in many building materials and are partially responsible
for that new paint smell. Unfortunately, these unstable
chemicals let off gasses that are very harmful to people
and the environment).
• Green Guard Gold Certified – Product Certified for
Low Chemical Emissions
• LEED Compliant
Luxury Vinyl Plank Laminate Flooring
• Contains a natural cork backing that is environmentally
self-sustainable and is mold resistant and waterproof.
Increased lifespan with warranty period of 25 years
allowing for reduced waste.
Appliances
Showerhead
• All appliances purchased are Energy Star certified.
• Flow rate of 2.5 GPM
• Traditional average flow of 2.5 to 3.0 GPM
• US ESPA WaterSense Certified
LED Fixtures
• LED lightbulbs are 85% more efficient than
incandescent lightbulbs.
15
BOARDWALK REIT 2019 ESG REPORT Our Saskatchewan team helping Resident Members go green!
RESIDENT ENGAGEMENT
We all recognize that the best way to decrease our carbon footprint is through awareness and as a result the
Trust continually reaches out to its Resident Members to determine areas where we can improve but to also
provide insight on how Resident Members can play a role in energy conservation. Boardwalk encourages ongoing
communication with its Residents through its Resident Member portal, which will also decrease the use of paper,
and recently provided a new year’s resolution article on energy conservation.
Where possible, economical electrical sub-metering devices are being installed, which passes on the
responsibility for electricity charges to the Resident Member. By providing sub-metering the Resident Member
is more aware of his or her consumption and more likely to be conscience of his/her energy usage.
16
BOARDWALK REIT 2019 ESG REPORT 10 Green Resolutions for 2020
1
2
3
4
5
6
7
8
9
Control heat usage in your home. Try putting on a
sweater or extra layers rather than turning up the
heat in your apartment or townhome.
Another resolution may be to take advantages of the
services offered through our municipalities where
we can separate our garbage into compost, recycling
and garbage in order to have as little as possible go
to our landfills.
Recycle or reuse old gift-wrapping paper, boxes and
bags when wrapping gifts.
Prepare coffee at home and use a reusable mug instead
of buying coffee in a disposable cup every morning.
You can subscribe to pay all your bills online instead
of receiving the paper version at home.
Upgrade your current lightbulbs to high efficiency
LED bulbs.
Another switch could be as simple as turning your
water off while brushing your teeth or shaving.
Repair leaky faucets and toilets. Water scarcity is one
of the biggest challenges in global sustainability, and
toilets are generally the biggest source of water
consumption in a typical office environment.
Avoid fast fashion. We all love a bargain, but our appetite
for cheap clothing that we only wear for one season
results in a large carbon footprint should those items
end up in our landfills. Consider long-term clothing
purchases or donating to programs such as declutter
by Diabetes Canada.
10
Shopping with reusable bags is a simple way to
reduce ocean pollution, reduce consumption, prevent
deforestation and reduce dependency on fossil fuels.
17
BOARDWALK REIT 2019 ESG REPORT I
L
A
C
O
S
18
Boardwalk is committed to providing
a loving environment and, in doing
so, continues to build our rich family
culture that is every bit as caring,
passionate and vibrant as the
communities we create.
BOARDWALK REIT 2019 ESG REPORT Resident Member outdoor terrace at Varsity Square Apartments; Calgary, AB
FACILITATING COMMUNITY
CORPORATE CULTURE
Our focus on people, genuine relationships, and shared
values have created a truly unique and defining culture
that differentiates a Boardwalk community. We put our
heart and soul into everything we do, and we take pride
in knowing that our communities are a place where
Residents celebrate life’s precious moments. Today, we
continue to draw inspiration from our early days, taking
pride in who we are, what we do, and maintain the
same solid values that have helped us successfully
navigate through decades of growth and change.
Our dedication to supporting the communities we
serve means we are continually exploring innovative
ideas and pioneering new ways to connect with our
Resident Members. We care deeply about our
Residents and Associates and believe the Boardwalk
Community is built on love, where everyone has a
genuine sense of belonging.
INVESTING IN OUR TEAM
A career with Boardwalk means discovering an
environment rich with opportunities for growth and
professional development. We are committed to
investing in our Associates’ growth and promise to
empower them with the freedom and responsibility
to thrive in their careers.
Giving Back
Boardwalk has a long-standing history of building strong and vibrant communities by
giving back to the communities in which we serve. As we are deeply rooted in various
regions across Canada – we have a unique opportunity to commit ourselves to support
numerous charitable organizations. Each year, we continue our involvement with more
than 60 community sponsorships and initiatives across Canada.
19
BOARDWALK REIT 2019 ESG REPORT OUR RESIDENTS
AND COMMUNITIES
Our buildings are more than just a place to live. Every Boardwalk community is a
place where our Resident Members feel a sense of peace and belonging – a place
they can call home.
We are committed to building strong and thriving communities where each Resident Member is proud
to be a part of the Boardwalk family. While building communities is at the core of our business, our commitment
to our Residents extends well beyond that, creating homes where our Resident Members live, work, play and
invest in our communities.
EXCEPTIONAL CUSTOMER SERVICE
CUSTOMER SATISFACTION
Boardwalk is committed to providing exceptional
customer service throughout the entire resident
journey. Whether it is helping a new resident get
settled into their home or a quick response to a
maintenance request, all our actions are rooted
in a commitment to creating the best possible
rental experience.
Our customer service is focused on listening and
responding to our Residents’ feedback and concerns.
As part of this, Boardwalk strives to respond to all
online and offline comments and reviews. We are
always looking for areas to improve, and encourage
continuous resident feedback across our communities
and corporate social media platforms, including
Facebook, Instagram, Twitter and YouTube. We also
offer a 24/7 call center where residents enjoy the
convenience of around-the-clock support.
We have enhanced how our Resident Members
manage their account through our partnership with
Yuhu. The website allows our Residents to
conveniently gain access to information about their
rental account, pay their rent, make maintenance
requests, enter contests and RSVP to Boardwalk
community events and initiatives.
Boardwalk uses a Net Promoter Score (NPS) to
measure resident sentiments. The Net Promoter
Score is an index ranging from 0 to 100 and measures
the willingness of customers to recommend a
company’s products or services to others. Customers
are asked to rate on a 10-point scale the likelihood
of recommending the company or brand to a friend,
family member or colleague. Based on their rating,
customers are then classified in three categories:
detractors, passives and promoters. An NPS of 50 plus
is considered excellent whereas a score above 70 is
considered world class.
For 2019, Boardwalk is proud to have accomplished
an NPS score of 65.
We are extremely proud to have achieved an NPS
score above an external benchmark of other high
performing companies such as Apple, Microsoft and
Google. We continuously request feedback from
future, current and past Residents to identify areas for
improvement. Our surveys aim to understand Resident
needs and identify what makes one community
more desirable than another. Surveys are taken when
new Residents join our communities, throughout
the lease term and following a Resident’s move out.
The feedback is used to identify opportunities for
improvements and directs potential amenity updates
and additions.
20
BOARDWALK REIT 2019 ESG REPORT RESIDENT RETENTION
Engaging with the Local Community
We create unique events that invite Resident Members
to meet their neighbours and feel connected to their
community. From simple summer barbeques and patio
parties to Adult Night at the Bell National Music Centre
and fun at the West Edmonton Mall World Waterpark,
there are events for Residents of all ages and interests.
Boardwalk is committed to supporting local talent and
businesses whenever possible. In past years,
Boardwalk has hosted art exhibits featuring artwork
created by our Residents Members and Associates
and invited local musicians to perform at our events.
Facilitating Community
Boardwalk is committed to providing healthy living
spaces for our Residents. Many of our communities
offer fitness amenities, including gyms, racquetball
courts and indoor and outdoor pools. By providing these
amenities, we encourage our residents to live
healthy lifestyles.
Some of our other amenities include:
• Fitness facilities
• Complimentary coffee stations
• Social rooms
• BBQ patios
• Lounge Area with Wi-Fi Bar
• Playgrounds
Many of our communities are also pet-friendly.
Boardwalk strategically partners with local and national
businesses to offer exclusive discounts and offers to
our Residents. Some of the companies we partner
with include:
• Bed Bath & Beyond
• Zipsure.ca (Except Quebec)
• Rosso Coffee Roasters
• HelloFresh
• TELUS
Door Knocking 2019
In 2019, Boardwalk Associates
conducted door-to-door surveys
and heard first-hand what was most
important to our Resident Members.
Every Associate and leader, in pairs,
knocked on 20 homes. In the end,
7,000 residents were surveyed across
Canada. Here is what we discovered:
• 88% of our Residents’ value safety
and security in their communities.
• Residents were attracted to
Boardwalk’s great locations,
amenities and incentives.
• 70% of our Residents have lived
with us for more than 1 year.
26% have lived with us for
more than 6 years.
What We Have Done to
Enhance Security Based
on These Findings
• Hired additional security guards
• Installed more security cameras
throughout our communities
• Installed doors with security
strips and key fobs
• Installed additional LED lighting
• Preliminary trialing of smart
home technology
• Encourage and cultivate Resident
Member engagement in securing
their communities
21
BOARDWALK REIT 2019 ESG REPORT Supporting Local Business
PET CARE
• Spot Dog Walking
• What-a-Mess
• Jeve’s Pet Care
RETAIL
• River Layne Chocolates
• The Brick
• Apothecare Pharmacy
MOVING SERVICES
SERVICES
• Highland Moving & Storage Ltd.
• Best Moves
• Economy Glass
• Superior Paint & Body
Supporting the Communities We Serve
Giving back to our communities is a contribution we proudly commit to every year. Each engagement opportunity
encourages our Residents Members and Associates to give back to their communities in meaningful ways.
We coordinate numerous opportunities for our Residents and their families to volunteer with organizations that
Boardwalk supports.
Every Boardwalk Associate receives four (4) volunteer hours per year.
Boardwalk is rooted in communities around Canada – which means a unique opportunity to commit ourselves to
give back both locally and beyond. Each year, we continue our involvement with more than 60 community
sponsorships and initiatives across Canada.
SOCIAL SERVICES
HEALTH
• Food Banks
• Coldest Night of the Year
• Diabetes Canada
• Walk for Wellspring
• Calgary Youths Centre Food Program
• Ronald McDonald House Canada
• Mustard Seed
• St. Mary’s Feed the Hungry
• One2Many
• Canadian Cancer Society
• Calgary Women’s Emergency Shelter
• Canadian Mental Health Association
• Hope Mission Meals
• 5 Days for the Homeless
• Salvation Army
• Canadian Red Cross
• Humane Society Canada
• Les Amis de Samuel Christmas Food Hampers
• Russet Court Collaborative
• Missing Children Society of Canada
• United Way
EDUCATION
• The Princess Shop
• Heart & Stroke Foundation
INTERNATIONAL RELIEF
• Operation Christmas Child
• Homes of Hope
• Habitat for Humanity
• Youth with a Mission (San Diego Tijuana)
ARTS
• Bell National Music Centre
• Ice on Whyte
• Sand on Whyte
We also proudly offer rental discounts to our veterans. As of 2019, 275+ Residents use the veteran’s discount
across Canada.
22
BOARDWALK REIT 2019 ESG REPORT 275+
RESIDENTS USE A BOARDWALK
PROVIDED VETERAN’S DISCOUNT
Subsidized Housing
At Boardwalk, we believe everyone deserves a place
to call home. Boardwalk works with various agencies
to provide affordable housing to those in need. The
agencies we partner with include:
• Calgary Housing
• Capital Region Housing
• Wood Buffalo Housing
• Red Deer Housing
• Calgary Alpha House
• Pathways
• Accessible Housing Society
• Jewish Family Services
• John Howard Society
• Grande Spirit Foundation
• London Housing
• Edmonton Mennonite Centre for Newcomers
Affordable Housing Partnerships
As an advocate of social responsibility, a significant
number of units have been committed to address
the need for affordable housing.
Boardwalk continues to offer an internally-mandated,
self-regulated rent assistance program (the “Internal
Subsidy Program”) under which eligible Residents who
are experiencing financial hardship are offered various
methods of rental forgiveness, including reducing or
withholding rental increases and subsidizing.
1,000
Collaboration with
Government Organizations
300
300
200
200
Housing First
Homeward Trust
The New Start program
Fixed Rate Rental
Supplement Program
Partnership with
Yuhu, a new Property
Operations Platform
In 2019, Boardwalk REIT and
Yuhu Inc. entered into a significant
partnership providing Boardwalk's
Associates and Resident Members
with a distinct suite of leading edge
technology solutions. With a host
of self-serve options, Yuhu’s unique
Resident Member Portal will provide
greater conveniences and time
saving features for our Resident
Members. Easy online service
requests and payments, seamless
communication with site Associates
and timely updates on events and
promotions are among a few of the
notable highlights. This technology
will also drive efficiencies at site,
streamlining workflows, digitizing
manual paper processes and thereby
increasing overall customer service
and satisfaction. We are thrilled to
collaborate with Yuhu to develop a
solution of this magnitude capable
of engaging with our entire Resident
Member community.
With Phase One scheduled for
roll-out in March of 2020, the platform
will continue to grow in functionality;
with the next phase empowering an
entirely digital sales, application and
leasing process.
23
BOARDWALK REIT 2019 ESG REPORT OUR TEAM
Our success comes from our 1,600 Associates who bring our purpose and mission to life.
The better we do at meeting their needs and expectations, the better we collectively do as
a company. Boardwalk prides itself in attracting and retaining caring, peak performers.
ASSOCIATE ENGAGEMENT
Building an inclusive and empowering culture requires
an engaged team where Associates are motivated to
do their best work every day. Boardwalk places high
priority on communication to engage our Associates
and drive our business goals. Similar to our process
that includes regular check-ins with our Residents, we
survey our Associates periodically to discover how
they are feeling and what their needs are. By regularly
surveying our Associates throughout the year, we
can gather Associate feedback and continue to make
improvements in the workplace.
was extremely valuable in helping us further
understand how engaged our Associates are with
Boardwalk overall.
In addition to surveying our Associates, Boardwalk
hosts an annual luncheon called “The Executive
Associate Meeting” (TEAM) in every region across
Canada. The meeting provides opportunities for each
Associate to connect with members of senior
management and to receive updates on its
operations and future plans.
METHODS OF ENGAGEMENT
~77%
Annual survey at TEAM
OF ASSOCIATES WOULD RECOMMEND
BOARDWALK AS A PLACE TO WORK
Year-end reviews
Peer-to-peer reviews
Associate Engagement &
Satisfaction Survey
In 2019, we enhanced our internal communication
strategy by incorporating an annual Associate
Engagement and Satisfaction Survey where Associates
were provided an opportunity to share confidential
feedback about working at Boardwalk. This feedback
24
70%
OF ASSOCIATES DO
NOT THINK OF LEAVING
77%
OF ASSOCIATES SAY BOARDWALK
INSPIRES THEM TO DO THEIR BEST WORK
Boardwalk Connect
In 2019, we introduced Boardwalk Connect to our
Associates. The new intranet provides our Associates
with tools to help them do their jobs better as well
as stay informed about what is happening across the
country all in one convenient hub.
BOARDWALK REIT 2019 ESG REPORT Boardwalk Women in Leadership
FOSTERING DIVERSITY, EQUALITY AND INCLUSION
We are continually breaking down social barriers and
creating a collaborative culture that embraces diversity
and inclusion. At Boardwalk, our goal is to cultivate and
sustain an inclusive work environment where diversity
thrives and our Associates voices are heard.
Boardwalk is continually searching for new diversity-
focused initiatives for recruitment, career development
and education. We actively seek diverse candidates
by partnering with various government agencies and
participating in job fairs that support newcomers
in Canada. Our Human Resources team strives to
point our Associates towards the right information
and resources to succeed such as English language
programs and libraries.
8% EUROPE
(EXCLUDING FRENCH,
SPANISH AND PORTUGESE)
48%
ASIA
13%
AFRICA
14%
FRENCH
5% SPANISH
& PORTUGESE
Percentage of Associates who speak a language from each continent.
Please note the same Associate may appear in more than one
population given the number of languages he/she speaks.
~30%
OF OUR ASSOCIATES SPEAK A
DIALECT FROM THE PHILIPPINES
11%+
OF HEAD OFFICE ASSOCIATES
SPEAK FRENCH
~7%
OF OUR ASSOCIATES SPEAK
A DIALECT FROM INDIA
60%+
OF ASSOCIATES SPEAK MORE
THAN ONE LANGUAGE
25
BOARDWALK REIT 2019 ESG REPORT Associates, Lynn Hunt, Diana Beedassy, Abhay Talwar
BOARDWALK ASSOCIATES AT A GLANCE
91%
FULL TIME
62%
OF NEW HIRES
ARE UNDER 40
23%
OF NEW HIRES
ARE UNDER 30
6 YEARS
AVERAGE LENGTH OF
TIME WITH BOARDWALK
55%
OF LEADERS
ARE MALE
69%
OF EXECUTIVES
ARE MALE
45%
45%
OF LEADERS
ARE FEMALE
31%
OF EXECUTIVES
ARE FEMALE
55%
OF SALARIED EMPLOYEES ARE MALE
OF SALARIED EMPLOYEES ARE FEMALE
Associate Years of Service
Associate Age
35%
30%
25%
20%
15%
10%
5%
0%
<1
year
1-3
years
3-5
years
5-10
years
>10
years
<30
years old
30-40
years old
40-50
years old
50-60
years old
>60
years old
30%
25%
20%
15%
10%
5%
0%
26
BOARDWALK REIT 2019 ESG REPORT INVESTING IN OUR ASSOCIATES
Boardwalk is invested in the health and wellness of
our Associates and their families, going the extra mile
to provide resources and programs that will help
everyone achieve their wellbeing goals.
Physical
We want our Associates to make their health a priority.
In addition to offering a comprehensive medical, vision
and dental package to full-time Associates, we offer
fitness reimbursements up to a maximum of $400 each
year. Eligible expenses include memberships,
equipment, fitness classes and more.
100% of eligible full-time Associates took advantage
of Boardwalk’s medical benefits which can include a
health spending account.
515 Associates took advantage of the fitness
reimbursement in 2019.
Career
Learning and development is fundamental to recruiting
and retaining top talent. We expect our leaders and
Associates to have regular check-in meetings and year-
end performance reviews. By fostering a culture of open
communication, we prepare Associates to be successful
in their current position as well as their broader careers.
We also support Associates to keep learning by offering
various training, mentoring and professional development
programs and resources. Associates who wish to
receive additional training or education can spend up
to a maximum of $1,500 per year on tuition and books.
Above and beyond Boardwalk training, 250 Associates
(or approximately 15%) took advantage of the program.
In 2019, two new leadership development assessment
tools were introduced to build and improve Boardwalk’s
leadership capacity. Assessments are conducted
quarterly and performance data is collected and shared
via a comparative customized Dashboard showing each
Leader’s growth as well as the growth of our entire
leadership team. Boardwalk has moved to and is
promoting a continuous improvement feedback loop
which includes open candor with all of its operations
leaders. Each month these leaders are benchmarked to
strive to always beat his/her personal bests and to
achieve a peak performance culture.
Financial
In striving to provide our Associates with a rewarding
place to work, Boardwalk conducts market research to
ensure it offers competitive compensation packages.
Boardwalk offers a group RRSP Employer Match
Program where Boardwalk will match up to 8%
(depending on years of service) contributions made to
our Associate RRSP. This match is allocated to Boardwalk
REIT Trust Units allowing for increased alignment in
achieving and accomplishing our goals and targets.
In 2019, 1,043 Boardwalk Associates participated in
the RRSP program, equating to over 63% participation.
Additionally, Boardwalk offers a Profit Share and a
High-Performance Program that rewards Associates
for meeting and exceeding its financial and customer
service targets.
CHAIRMAN’S SCHOLARSHIP
The Chairman’s Scholarship Program is designed to assist
children of Boardwalk Associates to pursue post-secondary
education. Scholarships are awarded annually to selected
students entering or attending university or college.
44 students received scholarship funding in 2019.
Boardwalk’s CEO and VP of Quality Control forgo
their salaries, so $200,000 can be awarded to
students annually.
Social
Boardwalk encourages cross-department collaboration
by providing opportunities to create voluntary and
employee-led groups. Some of Boardwalk groups and
committees include:
• Social Committees in each region
• Rainbow of Hope in each region
• Joint Health & Safety
• The Sustainability Committee
• Board of Trustees
• The Wellness Committee
• Boardwalk Angels
All leaders also have a discretionary budget for team
building to encourage collaboration amongst their team.
27
BOARDWALK REIT 2019 ESG REPORT EMPLOYEE RECOGNITION
Boardwalk celebrates exceptional service by
celebrating Associates through the Awards of
Excellence – an awards system which recognizes
Associates at all levels in each region. Associates are
invited to attend the award ceremonies every year to
celebrate the Associates who went above and beyond,
living Boardwalk’s mission, vision and values.
In addition, Boardwalk’s Bravo Program recognizes
team members who demonstrate excellence in the
workplace. Associates are nominated by Residents.
Boardwalk values long-term Associates, recognizing
Associates each year who achieved milestones of
three, five, 10 and 20 years with Boardwalk by offering
varying awards including additional vacation days and
travel vouchers.
COMPENSATION AND EMPLOYEE BENEFITS
10%+
OF ASSOCIATES CHOOSE TO LIVE
IN A BOARDWALK COMMUNITY
We appreciate the efforts and dedication our team
provides, and strive to reward with competitive
compensation and benefits. We understand that our
Associates are our most valuable asset and for this
reason, we are excited to offer a generous benefits
package to them.
We offer rental discounts to Associates wishing to
live in a Boardwalk community. As of 2019, over
10% of our Associates choose to live in a Boardwalk
community. Even more, when an Associate retires
from Boardwalk, they are eligible to receive a rental
discount up to 5 years following their retirement.
Boardwalk also provides Associates with the
opportunity to make a difference in the lives of others
by giving to charitable causes that are important to
them. Boardwalk will generously match up to
$1,000 per Associate per year.
Our Human Resources team continues to add to and
evolve our programs to meet our Associates' needs. Our
desirable benefits package includes, but is not limited to:
• Medical, prescription drug, dental and visions plans
• Short-term and long-term disability
• Life insurance
• Critical illness
• Employee and family assistance
• Grace / personal days
• Vacation entitlement above government standards
• Accidental death and dismemberment
• Group RRSP match
• Associate rental discount
• Bereavement leave
• Retiree rental discount
• Military top-up
• Fitness reimbursement
• Charitable matching
• Sick leave & medical leave management program
• Compassionate care leave top-up
• Maternity/paternity leave top-ups
• Training and development
• Boardwalk Angels program
• Paid time off to volunteer
How Boardwalk Supports Families
Boardwalk understands the importance of family.
That’s why we offer an Employee and Family
Assistance Program (EFAP) through our Group
Benefits plan to our Associates and their family
members. Services offered through the EFAP include
counselling and support for stress management,
marital and family problems, addiction, retirement
planning, bereavement and more.
In addition to the EFAP, we also offer maternity and
paternity leave top-up benefit to all full-time Associates.
Eligible Associates receive a payment during the first six
weeks of maternity or paternity leave. Parental leave is
also offered for expecting and adoptive parents
following the birth or placement of a child.
28
BOARDWALK REIT 2019 ESG REPORT Boardwalk Associates Collaborating
HEALTH AND SAFETY
49%
OF SITES HAVE BEEN INJURY
FREE FOR 5+ YEARS
At Boardwalk, we believe all injuries are preventable.
Our goal of zero injuries is based on the idea that
safety in the workplace is the joint responsibility of
every Associate. We create a safe work environment
by regularly educating Associates and enforcing health
and safety procedures (including WHMIS refreshers)
though online training. New Associates are required to
complete health & safety training during orientation.
Regular safety updates and communications are
shared with Associates on a weekly basis. Our on-site
Associates also conduct monthly inspections for health &
safety, as well as annual emergency evacuation drills. In
2019, Boardwalk updated all fire evacuation plans.
Below is a graph which summarizes the percentage of
zero injury days at Boardwalk’s sites. A total of 49% of
our sites have been injury free for in excess of five years.
Zero Injury Days
17%
Less than one year
20%
15%
Greater than one year
but less than three years
Greater than three years
but less than five years
49%
Greater than five years
29
BOARDWALK REIT 2019 ESG REPORT E
C
N
A
N
R
E
V
O
G
30
Boardwalk believes that sound
governance practices are essential to
achieve the best long-term interests of
the Trust and the enhancement of value
for all security holders. Boardwalk
further believes that an important
element of sound governance is the
alignment of interests between the
Trustees and Unitholders of Boardwalk.
BOARDWALK REIT 2019 ESG REPORT Boardroom, co-working space by Boardwalk at O'Neil Towers; Calgary, AB
CORPORATE TRANSPARENCY
TRUSTEE REVIEW
We find our full transparency creates opportunities
for prospective and current Unitholders to adequately
evaluate the Trust’s long-term value propositions,
providing a consistent, sustainable and attractive
investment option. Through the continued guidance
and leadership of the Trust’s experienced
management, Boardwalk continues to be an industry
leader in transparency and financial disclosure and
continues to be one of the only REITs to provide
stakeholders with financial guidance on a quarterly
basis, providing fully transparent, current corporate
information to all stakeholders.
Ongoing assessments of individual Trustees, Board
performance and Board composition is appropriate and
necessary, and renewal of Board membership, as
recommended based on such assessments, is vital.
Boardwalk ensures to regularly assess its Board of Trustees.
ETHICS, INTEGRITY AND EQUALITY
Boardwalk prides itself in having a culture that
provides each Associate and Resident Member with
the foundation to succeed. Everyone is treated with
respect and equality.
Governance Recognition
For the 18th year in a row, Report on Business has rated the work of Canada’s corporate
boards using a rigorous set of governance criteria designed to go far beyond minimum
mandatory rules imposed by regulators. Categories used in the evaluation included Board
Composition, Shareholding and Compensation, Shareholder Rights and Disclosure. As a
result of continued enhancements to our corporate governance practices, Boardwalk
ranked 29th out of 224 companies and trusts, and first among real estate issuers, in the
S&P/TSX Composite Index.
31
BOARDWALK REIT 2019 ESG REPORT GOVERNANCE
OVERVIEW
Boardwalk’s Corporate Governance Policy
sets out the rules, practices and processes
that direct and control the Trust.
Boardwalk prides itself on being honest, accountable
and transparent to all Stakeholders, and this is
evidenced in Boardwalk’s corporate reporting.
Excellence in corporate governance has been a
foundation over the past 35 years, and Boardwalk was
proud to be recognized by The Journal of the Institute
of Corporate Directors for effective communication
regarding its application of International Financial
Reporting Standards (“IFRS”) and as the winner of the
Chartered Professional Accountants of Canada Award
of Excellence in Corporate Reporting over multiple
years for the Real Estate sector.
The Trust strives to provide information to
Stakeholders in a timely manner, following which,
open dialogue with Stakeholders is encouraged to
ensure transparency. 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 principles gives both authority and
autonomy to the Board through the articulation of key
issues, including specific functions of the Board, Board
integrity and independence, 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, Management and Trustees are
expected to uphold.
Boardwalk REIT has been recognized by the Globe
and Mail’s annual ‘Board Games’ as one of Canada’s
corporate boards which provide governance well
beyond the minimum mandatory requirements
imposed by regulators, which once again ranked the
Trust at the top of the Real Estate sector and in the
Top 30 among all industries in Canada in 2019.
Experience Centre; Radisson Village, Calgary, AB
32
BOARDWALK REIT 2019 ESG REPORT ETHICS AND INTEGRITY
Boardwalk is built on four pillars which we call our
Golden Foundation:
GOLDEN FOUNDATION
Golden Rule
“Treat others as you would like to be treated”
Golden Goal
“Be Good”
Golden Vision
“Love Community”
Golden Mission
“Have Fun”
As we continue to grow, we strive to attract others
who share our vision and values. We are committed
to providing a loving environment and, in doing so,
continue building our rich family culture that is every bit
as caring, passionate and vibrant as the communities
we create.
With our guiding mission “To serve and provide our
Resident Members with quality rental communities”,
Boardwalk persists in exploring excellence and
diversity in community, while focusing on the benefits
created for its Associates, Resident Members,
Communities and Unitholders. Regardless of economic
conditions, Boardwalk is committed to abiding by its
Golden Foundation. Our friendly, community-living
and member-experience driven approach reflects that
Boardwalk remains focused on maximizing value for
all its stakeholders.
Code of Conduct
Boardwalk’s Code of Business Conduct outlines
standards and expectations that guide and assist us in
making the right choice. It defines individual and
corporate responsibilities and it is provided to all
Boardwalk Associates, contractors, agents, officers
and Board of Trustees of Boardwalk REIT. Each
individual is responsible for understanding the Code of
Conduct and is accountable for his/her business
conduct. Although the Code outlines many legal and
ethical business situations, there will be circumstances
in which someone would question legal or ethical
compliance. The Code must be used together with
common sense and good judgement.
Whistleblower Policy
The Board of Trustees has ensured that an effective
anonymous “whistle blowing” procedure exists to:
i)
ii)
iii)
protect the integrity, reputation and business
interests of Boardwalk, as well as its relationships
with its Associates, Unitholders, consultants,
contractors, professionals, suppliers, Resident
Members and its greater communities;
permits and encourage stakeholders to
confidentially and anonymously express concerns
regarding accounting or financial matters to an
appropriately independent individual for safe
reporting of any accounting and other financial
irregularities and monitor compliance; and
set out procedures for stakeholders of Boardwalk
and its subsidiaries to file reports on a confidential
and anonymous basis regarding any concerns
about accounting, internal accounting controls
or financial irregularities and to report potential
violations of law, suspected wrongdoing.
As part of its reporting, Boardwalk proudly advises that
there were no critical concerns sent to Whistleblower
in 2019.
33
BOARDWALK REIT 2019 ESG REPORT GOVERNANCE STRUCTURE
The Board of Trustees (the “Board “or the “Trustees”)
is fixed at seven members and is comprised of five
independent members and two non-independent
members. The Board is comprised of 29% female
representatives and 71% male representatives.
Trustee Compositon
29%
Female
71%
Male
Target Trustee Composition
of individuals with real estate, accounting, financial, legal,
capital markets, real estate investment trust and general
business experience.
Role of Board in Setting Purpose,
Values and Strategy
Financial sustainability is attained through the guidance
of Boardwalk’s Board of Trustees, Management team
and stakeholders. Through valued input and guidance
from its Trustees and conservative fiscal management,
Boardwalk continues to maintain a strong balance sheet
and provides consistent, ongoing value to Unitholders,
opportunities to enhance its net asset value, and
to continue the Trust’s mandate of “building better
communities” which in turn provides happy, safe, and
sustainable communities for Boardwalk’s Resident
Members and Associates in which to live and work.
43%
Female
57%
Male
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
concerning 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 executives 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.
Nominating/Selecting Board Members
and Committee Members
Under the Trust’s mandate as set out in the
Declaration of Trust, a Trustee majority must be
independent 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.
The Board has appointed the Compensation, Governance
and Nominations Committee (“CGN Committee”), which
is responsible for (i) reviewing the size and composition of
the Board, (ii) recommending candidates for election to
the Board, (iii) reviewing credentials of nominees for
re-election, and (iv) recommending candidates for filing
vacancies on the Board. The CGN Committee maintains
an active list of potential qualified nominees to the Board.
The CGN Committee aims to ensure an appropriate mix
34
BOARDWALK REIT 2019 ESG REPORT Structure of the Board
The Board is comprised of three committees: 1) Audit and Risk Management, 2) Compensation, Governance
and Nominations, and 3) Corporate Development. Authority is delegated from the Board of Trustees to the
Chief Executive Officer through to Executive Management.
Collective Knowledge of the Board
Name
Title
Andrea
Goertz
Gary
Goodman
Art
Havener
Sam
Kolias
Samantha
Kolias-Gunn
Scott
Morrison
Brian
Robinson
Chair,
ARM
Lead
Chairman/
CEO
Chair,
CGN
Committee
ARM/CGN ARM
CGN
CDC
ARM/CGN CGN/CDC
Trustee Since
2019
2009
2007
Founder
2013
2018
2017
Insider/Independent
Indep.
Indep.
Indep.
Insider
Insider
Indep.
Indep.
n
o
i
t
a
t
n
e
s
e
r
p
e
R
k
a
w
d
r
a
o
B
l
s Gender
c
i
h
p
a
r
g
o
m
e
D
Age
Geographic Location
F
M
M
M
F
M
M
Alberta
Ontario
U.S.A.
Alberta
Alberta
Ontario
Alberta
52
77
53
58
32
49
63
Company Title
CC&SO
CEO/CFO
President/VP
CEO
CFO(1)
CEO
CFO
Other Public Board
Other Board
HR
Real Estate
N
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
N
N
Y
Y
N
N
Y
Y
N
Y
Y
Y
Y
Y
Y
N
Real Estate Type
Other
MF, Other
MF, Other
MF
MF
MF, Other
N/A
Finance/Investment Analysis
CA
Legal
Strategy
Board/Marketing
REIT
Professional/Academic
Designations
r
e
h
t
O
Boardwalk Owned
Trust Units
Boardwalk Granted
Deferred Units
Y
N
N
Y
Y
N
Y
Y
N
Y
Y
Y
Y
N
N
Y
N
Y
Y
N
N
Y
Y
Y
Y
Y
N
Y
Y
Y
Y
N
N
Y
Y
Y
Y
Y
N
Y
Y
N
MBA, DEP
CA, DEP
DEP, MBA
B.Sc. (Civil
Eng.), CPM
CA, DEP
CFA
CA
1,455
27,897
25,160
4,337,500 Nil(1)
8,000
14,966
2,326
13,488
16,244
Nil
3,686
5,618
7,905
CA – Chartered Professional Accountant
MBA – Master of Business Administration
CFA – Certified Financial Analyst
MF – Multi-family
DEP – Director Education Program
(1) Mrs. Kolias-Gunn is the CFO and a director of BPCL, which owns 8,675,000 Trust Units and an additional 4,475,000 LP Class B Units,
which, if exchanged into Units, would give BPCL an aggregate of 13,150,000 Units.
35
e
c
n
e
i
r
e
p
x
E
d
n
a
d
n
u
r
o
g
k
c
a
B
s
s
e
n
i
s
u
B
BOARDWALK REIT 2019 ESG REPORT
Evaluating Board Performance
Each of the Board, its Committees and individual
Trustees are evaluated on their effectiveness on an
annual basis. Each Trustee is provided with a survey
to be completed and returned to the Chair of the CGN
Committee. The survey covers the effectiveness and
contribution of:
• the Board as a whole;
• each of the Committees; and
• individual Trustees.
In particular, the survey ensures the following
important outcomes:
• provides for quantitative ratings in key areas; and
• seeks subjective comment in relevant areas,
including areas for improvement and important
issues relevant to the Board and/or its Committees.
In addition to the survey, the Chairman of the CGN
Committee meets with each Trustee on a one-on-one
basis to assess the effectiveness and contribution
of each individual Trustee. Both the survey and the
Trustee interviews allow Trustees to comment on areas
for improvement to ensure the continued effectiveness
of the Board and its Committees.
Matters raised through the Board, Committee
and individual Trustee evaluations are summarized
and presented to both the CGN Committee and
the full Board.
Conflict of Interest
The Declaration of Trust contains “conflict of interest”
provisions that serve to protect Unitholders without
creating undue limitations on Boardwalk, which:
a)
requires each Trustee to disclose any interest in
a material contract or transaction or proposed
material contract or transaction with Boardwalk or
the fact that such person is a director or officer of
or otherwise has a material interest in any person
who is a party to a material contract or transaction
or proposed material contract or transaction with
Boardwalk; and
b)
enquires into and determines the appropriate
resolution of any conflict of interest in respect
of audit or financial matters.
ROLE OF THE BOARD WITH ESG
The Trust plans to form the appropriate operational
committees to support all its ESG initiatives, risks and
opportunities. As the Trust does so, the Board will
become more involved in identifying and managing
economic, environmental and social impacts while also
evaluating the effectiveness of the Trust’s risk
management processes. The Board will be involved in
reviewing ESG topics, assessing and approving ESG
materiality. The Board will also consider and approve
ESG metrics and targets.
Park Place; Edmonton, AB
36
BOARDWALK REIT 2019 ESG REPORT REMUNERATION
The Board, through its Compensation, Governance
and Nominations Committee, reviews the adequacy
and form of compensation of Trustees and executive
officers annually. The Compensation, Governance
and Nominations Committee considers the time
commitment, risks and responsibilities of Trustees and
executive officers, and takes into account the types of
compensation and the amounts paid to directors, trustees
and executive officers of comparable publicly traded
Canadian companies and income trusts.
Of the three members of the Compensation,
Governance and Nominations Committee, all are
independent Trustees.
Boardwalk compensates Associates on the basis of
performance, experience and work-related criteria.
The Trust is dedicated to equitable and competitive
compensation for all Associates in order to compete
effectively in the labour market.
All compensation changes are initiated by the Trust’s
management, with the process being as follows:
Program &
Philosophy
Review
Market
Compensation
Analysis
Compensation
Recommendation
Decision
Human
Resources
Department
Compensation
Surveys
CGN Committee
Q4 Meeting
Board
Approval
CGN Committee
Q1 Meeting
Recommend
officer incentive
Board
Approval
CEO Recommendations
re: officer compensation
& executive compensation
targets for following year
Concluding
Remarks
Implementing ESG best practices is a continual and evolving effort. Boardwalk is
committed to this journey, recognizing that despite what we have done, there are
more opportunities to continue to do better. We are committed to participate in
benchmarking initiatives to continue to learn the areas where we can improve,
while also reaching out to stakeholders and conducting a full materiality assessment.
We look forward to the journey ahead.
37
BOARDWALK REIT 2019 ESG REPORT B
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First West Professional Building
Suite 200, 1501 – 1st Street SW
Calgary, Alberta T2R 0W1
Tel (403) 531-9255
Fax (403) 531-9565
WWW.BWALK.COM