FINANCIAL REVIEW CONTENTS
Management’s Discussion and Analysis
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
2021 FINANCIAL OUTLOOK AND
MARKET GUIDANCE
Selected Consolidated Financial Information
Financial Statements
MANAGEMENT’S REPORT
INDEPENDENT AUDITOR’S REPORT
FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
Supplemental Information
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73
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MARKET AND UNITHOLDER INFORMATION
CORPORATE INFORMATION
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131
General and Advisories
EXECUTIVE SUMMARY
Business Overview
Environmental, Social and Governance Overview
MD&A Overview
COVID-19 Pandemic
Outlook
Declaration of Trust
Values, Vision and Objectives
Presentation of Financial Information
and Non-GAAP Measures
Investment Philosophy
Performance Review of 2020
Financial Performance Summary
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
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Review of Consolidated Statements of Cash Flows 30
Capital Structure and Liquidity
RISKS AND RISK MANAGEMENT
General Risks
Specific Risks
Certain Tax Risks
Risks Associated with a Global Health Pandemic
Risks Associated with Disclosure Controls and
Procedures & Internal Control over
Financial Reporting
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MANAGEMENT’S DISCUSSION
AND ANALYSIS
For the Years Ended, December 31, 2020 and 2019
General and Advisories
GENERAL
The terms “Boardwalk”, “Boardwalk REIT”, the “REIT”, the “Trust”, “we”, “us” and “our” in the following Management’s Discussion and
Analysis (“MD&A”) refer to Boardwalk Real Estate Investment Trust, its consolidated financial position, and results of operations for the
twelve months ended December 31, 2020 and 2019. Financial data, including related historical comparatives, provided in this MD&A 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 25, 2021 unless otherwise stated, and should be read in conjunction with Boardwalk’s
audited annual consolidated financial statements for the years ended December 31, 2020 and 2019, which have been prepared in
accordance with IFRS, 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 website at www.sedar.com. Historical results and
percentage relationships contained in the audited annual consolidated financial statements and MD&A related thereto, including trends,
which might appear, should not be taken as indicative of future operations.
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 (as defined below). Further discussion of this is contained in this MD&A.
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 and information (collectively “forward-looking statements”)
within the meaning of applicable securities laws. These statements include, but are not limited to, statements made concerning Boardwalk’s
objectives, including, but not limited to, the REIT’s 2021 financial outlook and market guidance, increasing its occupancy rates, joint venture
developments and future acquisition and development opportunities, including its plans for the newly purchased land in Victoria, British
Columbia and its long-term strategic plan of high-grading and geographic expansion, its strategies to achieve those objectives, expected
increases in property taxes and insurance costs, the impact of the novel strain coronavirus (COVID-19) pandemic, as well as statements with
respect to management’s beliefs, plans, estimates, assumptions, 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 at the time such statements are made.
Management’s estimates, beliefs and assumptions are inherently subject to significant business, economic, competitive and other
uncertainties and contingencies regarding future events and as such, are subject to change. All forward-looking statements in this MD&A are
qualified by these cautionary statements.
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 Annual Information
Form for the year ended December 31, 2020 (“AIF”) dated February 25, 2021 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. Of particular note,
during 2020 and continuing into 2021, the world and Canada have been impacted by, and continue to be impacted by, the COVID-19
pandemic. In an attempt to slow down the spread of this virus, the various levels of government in Canada and throughout the world have
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BOARDWALK REIT MD&A AND FINANCIAL REPORT enacted emergency measures. These measures, which include the implementation of travel bans, self-imposed and government-imposed
quarantine periods and social distancing measures, including curfews and stay-at-home orders, have caused material disruption to
businesses globally resulting in an economic slowdown and unprecedented unemployment levels. As of February 25, 2021, the full impact
of the COVID-19 pandemic on the results of the Trust remains uncertain. This is not an exhaustive list of the factors that may affect
Boardwalk’s forward-looking statements. Other risks and uncertainties not presently known to Boardwalk could also cause actual results or
events to differ materially from those expressed in its forward-looking statements. Material factors or assumptions that were applied in
drawing a conclusion or making an estimate set out in the forward-looking statements may include, but are not limited to, the impact of
economic conditions in Canada and globally including as a result of the COVID-19 pandemic, the ability of the Trust to re-open and continue
to leave open its communal spaces as the COVID-19 pandemic continues to impact the jurisdictions in which the Trust operates, the REIT’s
future growth potential, prospects and opportunities, 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, the impact of accounting principles under IFRS, general industry
conditions and trends, changes in laws and regulations including, without limitation, changes in tax laws, mortgage rules and other
temporary legislative changes in light of the COVID-19 pandemic, increased competition, the availability of qualified personnel, fluctuations
in foreign exchange or interest rates, and stock market volatility. Although the forward-looking statements contained in this MD&A are based
upon what management believes are reasonable assumptions, there can be no assurance actual results will be consistent with these
forward-looking statements and no assurances can be given that any of the events anticipated by the forward-looking statements will
transpire or occur at all, or if any of them do so, what benefits that Boardwalk will derive from them. As such, undue reliance should not be
placed on 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.
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.
EXECUTIVE SUMMARY
Business Overview
Boardwalk REIT 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, 2018
(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 trust units (“Trust Units” or “Units”) trade on the Toronto Stock Exchange (“TSX”) under the trading symbol
‘BEI.UN’. Boardwalk REIT’s principal objectives are to provide its holders (“Unitholders”) of Trust Units with stable monthly
cash distributions, partially on a Canadian income tax-deferred basis, and to increase the value of the 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, 2020, 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 2020, Boardwalk REIT’s
property portfolio was concentrated in the provinces of Alberta, Saskatchewan, Ontario, and Quebec.
At December 31, 2020 and 2019, the fair value of Boardwalk’s Investment Property assets was approximately $5.9 billion
and $6.1 billion, respectively, which generated a profit of $130.0 million and $120.9 million for the years ended December 31,
2020 and 2019 (before fair value losses, loss on sale of assets, adjustment to right-of-use asset related to lease receivable,
other income, and income taxes), respectively. For the years ended December 31, 2020 and 2019, the Trust earned
$139.7 million and $131.0 million, respectively, of Funds From Operations (“FFO”), or $2.74 and $2.57 per Unit on a diluted
basis. Adjusted Funds From Operations (“AFFO”) for the years ended December 31, 2020 and 2019 were $119.9 million and
$106.9 million, respectively, or $2.35 and $2.10 per Unit on a diluted basis. Please refer to the section titled “Non-GAAP
Financial Measures” in this MD&A for definitions of Funds From Operations and Adjusted Funds From Operations.
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BOARDWALK REIT MD&A AND FINANCIAL REPORT Environmental, Social and Governance Overview
The Trust is, and continues to be, committed to environmental, social and governance (“ESG”) objectives and initiatives,
including working towards reducing greenhouse gas emissions and electricity and natural gas consumption, water
conservation, waste minimization and a continued focus on governance and oversight. As part of its 2020 Annual Report,
the Trust has included its ESG Report, which will be available at www.bwalk.com/investors.
MD&A Overview
This MD&A focuses on key areas from the audited annual 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, including the COVID-19 pandemic discussed below. Additionally, other elements may or may not
occur, which could affect the organization in the future. Please refer to the section titled “General and Advisories – Forward-
Looking Statement Advisory” in this MD&A. 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 2020 Annual Report, the
audited annual consolidated financial statements for the years ended December 31, 2020 and 2019, and the AIF, each of
which are available under the REIT’s profile on www.sedar.com, 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.
COVID-19 Pandemic
Since its emergence in late 2019 and the declaration by the World Health Organization on March 11, 2020 as a global pandemic,
the COVID-19 pandemic has had a substantial impact on the Canadian and global economy. In an attempt to slow down the
spread of this virus, the various levels of government in Canada and throughout the world have enacted various emergency
measures. These measures, which include the implementation of travel bans, self-imposed and government-imposed
quarantine periods, social distancing measures, including curfews and stay-at-home orders, and restrictions on gatherings and
events have caused material disruption to businesses globally resulting in a significant amount of economic activity being either
shut down or scaled back materially. Global equity and capital markets have also experienced significant volatility and
weakness. This economic contraction has resulted in widespread hardship, significant losses in jobs and business incomes,
resulting in unprecedented unemployment levels. Uncertainty regarding the duration and severity of the pandemic has affected
the spending decisions of both households and businesses. Until the pandemic is contained, a substantial portion of economic
activity will continue to be adversely affected. The governments have reacted with significant monetary and fiscal interventions
designed to stabilize economic conditions. Acting swiftly has often meant that the measures the various levels of government
are putting in place are announced early in their development and continue to evolve and change in order to meet the desired
outcome. As such, it is not entirely known the extent of all the government programs that might be put in place, how long
programs will last, how these programs may change over time, or what their full impact might be.
The COVID-19 pandemic, combined with ongoing tensions between the world’s oil producers, have had a significantly
negative impact on global oil prices in 2020, leading to additional economic uncertainty in some of the major markets in
which the Trust operates. While the energy sector saw crude prices starting to trend higher towards the end of 2020,
organizations are proceeding with caution given the risks that still exist with the COVID-19 pandemic. Uncertain economic
conditions resulting from the COVID-19 pandemic have and may continue to, in the short or long term, materially adversely
impact the Trust’s tenants and/or the debt and equity markets, both of which could materially adversely affect the Trust’s
operations and financial performance. The duration and impact of the COVID-19 pandemic on the Trust is unknown at this
time. As such, it is not possible to reliably estimate the length and severity of COVID-19 related impacts on the financial
results and operations of the Trust.
As a provider of housing, which all levels of government recognize as an essential service, the Trust values the important role
it plays during this pandemic. First and foremost, the Trust has primarily concentrated its efforts on ensuring the safety and
well-being of all of its Resident Members (as defined below) and Associates. For its Resident Members and in its
communities, Boardwalk has increased its already high-standard of cleaning and maintenance with more frequent cleaning
and sanitization of common areas and highly touched objects. Boardwalk will continue to assess and follow its provincial and
municipal government recommendations to ensure the safety of its communities.
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BOARDWALK REIT MD&A AND FINANCIAL REPORT The Trust has enhanced communication through Boardwalk’s online Resident Portal, powered by Yuhu, allowing for
increased self-service, online payments and social-distancing, keeping our community together whilst we are physically
apart. Boardwalk believes in timely, transparent communication and has provided regular updates to both Resident Members
and Associates through various channels including the new portal bwalk.info, which shares public education on current
health recommendations from both federal and provincial governments and timely information about government financial
support programs. We continue to apply our Resident Member-friendly approach on a case-by-case basis, working on
mutually beneficial resolutions in cases of Resident Member financial hardship, touching base personally with Resident
Members. For Associates, the Trust has increased the procurement and use of Personal Protective Equipment and
implemented recommended physical distancing in the workplace. Boardwalk has expedited its virtual showing capabilities,
while ensuring on-going regular communication with its leadership and operational teams to assess and support any needs.
As provinces across Canada continue to implement stronger public health measures to protect the health system and
slow the spread of COVID-19, for regions where business and service restrictions are in effect, the Trust has utilized
work-from-home protocols, leveraging Boardwalk’s technology investments to allow for continued operation as part of its
business continuity plan and have regular updates on best practices as shared by federal and provincial governments.
In addition, for Associates deemed essential workers, and in provinces that have commenced various phases of re-opening
the economy, Boardwalk has allowed for Associates to return to work at its sites with strict guidelines to adhere to
appropriate health and safety measures.
Boardwalk is committed to keeping its stakeholders and financial partners informed. The Trust has increased its
correspondence with stakeholders during this period with additional press releases, as well as COVID-19 pandemic specific
information on its website. The Trust has increased the engagement with its financial partners and stakeholders. Additionally,
the Trust has evaluated its risks relating to a global pandemic, including the COVID-19 pandemic. To that end, please refer to
the section titled “Risks and Risk Management” in this MD&A and “Challenges and Risks” in the AIF.
During the summer months, with the number of COVID-19 cases being lower and more stable, many of the provinces
continued onward with their plans to allow for larger gatherings and for more public spaces to re-open. However, with the
re-opening of schools in September 2020 and the colder fall and winter weather, a second wave of COVID-19 cases have
now drastically increased in Canada and around the world. In addition, to the emergence of a second wave of the COVID-19
pandemic in the fourth quarter of 2020, the emergence of various COVID-19 variant strains has led to the imposition of
further containment measures to varying degrees in many regions within Canada and globally, which are ongoing as of the
date hereof. With the increasing number of cases and the unknown impact new variants may have, the provincial
governments have begun to re-impose more restrictions on gatherings and social distancing measures in an attempt to curb
the rising number of COVID-19 cases. Around the world, governments are once again implementing self-isolation measures,
closing down non-essential businesses and enforcing travel bans. These containment measures continue to impact global
economic activity, including the ability to move towards recovery of the global economy and such measures also contribute
to the decreased demand for products, increased market volatility and continued changes to the macroeconomic
environment. As the impacts of the COVID-19 pandemic continue to materialize, the prolonged effects of the disruption have
had and continue to have adverse impacts on the Trust’s business strategies and initiatives, resulting in ongoing effects to
the Trust’s financial results, including the increase of counterparty, market and operational risks.
Near the end of 2020, several pharmaceutical companies around the world announced the successful development of
vaccines with a high degree of immunization against COVID-19. Several promising vaccines were studied and approved by
government health organizations around the world. Once approvals were obtained, mass production and distribution rollout
plans commenced, with provinces in Canada receiving first shipments of vaccines in December 2020. As expected, demand
for available vaccines is extremely high with all countries around the world wanting supply. Limited production facilities,
supply chain logistics, and countries competing against each other to secure supply, has caused supply chain disruptions for
Canada. It is uncertain at this time how long it will take for enough vaccines to arrive in Canada and to roll out to the majority
of the population in order to immunize enough people to safely limit the spread of COVID-19.
Though the magnitude and length of the pandemic is unknown, the Trust has noted that the majority of Resident Members
have still maintained timely payments on their rents for 2020, which has resulted in a lower impact on its bad debts than
previously anticipated. The government’s Canada Emergency Response Benefit (CERB) was extended to October 3, 2020,
which continued to further provide support to our Resident Members with their essential needs. With the conclusion of the
CERB, the Canadian government introduced the Canada Recovery Benefit, Canada Recovery Sickness Benefit, and the
Canada Recovery Caregiving Benefit, all designed to help financially support individuals who have not been able to work or
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BOARDWALK REIT MD&A AND FINANCIAL REPORT had their income reduced due to COVID-19. Additionally, the Canadian government increased the flexibility of Employment
Insurance benefits as well as extended the Canada Emergency Wage Subsidy until June 2021, which will enable those
employers who have experienced a considerable decline in revenue to continue paying wages to their employees, which will
also support our Resident Members. However, it is not clear how long elevated unemployment rates may last, or the extent
of all the government programs that might be put in place in the future and how these programs may change over time, or
what their full impact might be. As a result, the impact on the Trust’s cash flow from operating activities is still uncertain. In
addition, the Trust’s investment properties are measured at fair value based on assumptions influenced by market conditions.
Given the uncertainty of the longer-term impact of the COVID-19 pandemic and how it will impact valuation assumptions,
measurement uncertainty exists with respect to the Trust’s investment properties.
Furthermore, as a result of the government measures put in place to slow the spread of COVID-19, there may be temporary
or long-term stoppage of development projects, temporary or long-term labour shortages or disruptions, temporary or
long-term impacts on domestic and global supply chains, increased risks to IT systems and networks and risks related to the
Trust’s ability to access capital on acceptable terms or at all. Uncertain economic conditions resulting from the COVID-19
pandemic may, in the short or long term, materially adversely impact operations and the financial performance of the Trust.
Please refer to the section titled “Risks and Risk Management” in this MD&A and “Challenges and Risks” in the AIF.
Outlook
The Bank of Canada, in its January 2021 Monetary Policy Report, continued to focus on the COVID-19 pandemic, assessing the
overall economic impact of the pandemic on Canada and analyzing the factors that could hamper or favour the eventual
recovery. The Bank of Canada forecasts that the timing of recovery will vary across regions and until the virus is under control
and there is no need for physical distancing, the recuperation phase of the economic recovery will likely remain choppy and
uneven. The arrival of vaccines will help, but it will still take time for a full recovery. Its speed will depend heavily on how the
pandemic and the efforts to control it unfold, as well as on developments in global oil markets. Policy stimulus will support the
recovery, however, uncertainty and the scarring effects of the recession on confidence and production capacity could prolong
the recovery. To support the recovery, the Bank of Canada has indicated that it will continue to keep interest rates low.
In 2020, 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 customer
retention through excellence in customer service remains Boardwalk’s key performance strategy. With the COVID-19
pandemic, provincial governments had applied rental rate freezes and evictions for non-payment of rent were temporarily
disallowed. During Q3 2020 these restrictions were lifted. The Trust worked, and is continuing to work, with each Resident
Member, on a case-by-case basis, as it relates to the payment of monthly rent. The federal government has provided
financial supports helping decrease the financial burden for our Resident Members as it relates to the payment of rent.
During Q4 2020, the Trust experienced increased rent collections from its Resident Members with 98.3% of October
revenue being collected in October, 98.0% of November revenue being collected in November, and 98.5% of December
revenue being collected in December, as compared to a historical collection rate of over 98%. 98.4% of January revenue was
collected in January.
Boardwalk continues to move forward with its development opportunities and announced the completion of its first joint
venture development project with RioCan Real Estate Investment Trust (“RioCan”) known as BRIO, located in Calgary, Alberta.
BRIO is an amenity-rich affordable luxury 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 and RioCan are proud of the newest addition to the Lifestyle portfolio. The project was substantially
completed on February 21, 2020 and on budget. As of February 2021, the project was 60% leased.
In 2020, Boardwalk continued with its 50:50 joint venture partnership 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 is 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. For the year
ended December 31, 2020, the Trust contributed $9.2 million of capital to the limited partnership. For the year ended
December 31, 2019, the Trust contributed $15.9 million of capital to the limited partnership. Despite necessary slowdowns
resulting from the impact of the COVID-19 pandemic, tradesmen are still on site and working to progress the project,
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BOARDWALK REIT MD&A AND FINANCIAL REPORT although at reduced staffing levels. Extra precautions for hygiene, cleaning and physical distancing are in place to ensure our
worksite is in full compliance with best practices and requirements. The project is substantially tracking on time and on
budget. The partnership has committed to a construction facility for 60% of the budgeted costs to construct, however,
the facility will not be drawn upon until the 40% required equity has been contributed.
During the third quarter of 2019, and subject to zoning approvals, the Trust finalized a joint venture mixed-use project with
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.
Boardwalk’s development opportunities include additional projects to be built on the Trust’s excess land density, as well as
new land that has been recently acquired in Victoria, British Columbia (please refer to the section titled “Investment Property
Development” in this MD&A). These developments are in various stages of market analysis, planning and approval, and will
further add newly constructed assets to the Trust’s portfolio.
During 2020, the Trust renewed approximately $310 million of 2020 mortgage maturities, with an average term of six years
at a weighted average interest rate of 1.64%, a decrease from the average maturing rate on these completed mortgages.
In addition, the Trust obtained close to $185 million of additional mortgage funds. For the year ended December 31, 2020,
principal repayment totaled $69.7 million. As of February 2021, Canada Mortgage and Housing Corporation (“CMHC”)
insured five and ten-year mortgage rates were estimated to be 1.30% and 2.10%, respectively. In 2021, the Trust has a total
of $384.2 million of mortgages maturing. To date, the Trust has renewed or forward locked the interest rate on $81.4 million,
or 21% of these mortgage maturities at an average interest rate of 1.30%, while extending the term of these mortgages by
an average of six 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. Management of the Trust believes that
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. 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. 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 acquisition of legacy
assets in Southwestern Ontario, development partnerships in Brampton and Mississauga, both in Ontario, land acquisitions
in Victoria, British Columbia, has high-graded its Western Canadian portfolio through dispositions of non-core assets and
capital redeployment into superior assets and has invested value add capital of $88.8 million in fiscal 2020 and $99.2 million
in fiscal 2019 into its existing portfolio.
The funding for this strategic plan will be consistent with the Trust’s 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 MD&A, Boardwalk has an adequate level of liquidity. Although the Trust
distributes monthly distributions to its Unitholders at least equal to its taxable income, management of 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.
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BOARDWALK REIT MD&A AND FINANCIAL REPORT 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 Resident Members
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.
BOARDWALK’S BRANDING INITIATIVE AND SUITE RENOVATION PROGRAM
Boardwalk has invested value add capital of $88.8 million in 2020 ($99.2 million in 2019, $102.8 million in 2018), 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, increased occupancy, as well as cost
savings on turnovers. Historic investment in our assets and brands has resulted in a diversified product mix to match varying
demand while allowing us to gain market share with increasing choice for existing and new Resident Members.
‘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.
Management of 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.
8
BOARDWALK REIT MD&A AND FINANCIAL REPORT Declaration of Trust
The investment guidelines and operating policies of the Trust are outlined in the DOT, a copy of which is available on request
to all Unitholders and is also available under the REIT’s profile on www.sedar.com. A more detailed summary 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 Tax Act.
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 Units on or about each distribution date such percentage of FFO for the calendar
month then ended as the Board of Trustees determines in its discretion. Distributions will not be less than Boardwalk REIT’s
taxable income, unless the Board of Trustees, in its absolute discretion, determines 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 add renovation program, brand
diversification initiative, and new construction of multi-family communities in supply-constrained markets.
COMPLIANCE WITH DOT
At December 31, 2020, the Trust was in material compliance with all investment guidelines and operating policies as
stipulated in the DOT. More details will be provided later in this MD&A with respect to certain detailed calculations.
For the year ended December 31, 2020, 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 Class B Units (as defined herein) and fair value adjustments, was 2.79 (December 31, 2019 – 2.76).
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. Management of
Boardwalk expects to 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.
9
BOARDWALK REIT MD&A AND FINANCIAL REPORT GOLDEN FOUNDATION
Boardwalk REIT and its Associates operate under a ‘Golden Foundation’, which is built on the following objectives:
The Golden Rule: “Treat others as you would like to be treated”
The Golden Goal: “Be Good”
The Golden Vision: “Love Community”
The Golden Mission: “Have Fun”
Our Associates are expected to adhere to the following guiding principles:
WE WILL:
§ Work together in a team environment of mutual respect, trust, and honesty between all Associates and
Resident Members;
§ Serve our Resident Members’ need for an affordable, quality, well-kept home;
§ Maintain building exteriors and landscaping, thereby increasing “curb appeal”, have well-kept common areas, and ensure
our homes are clean and well maintained;
§ Maintain a balance between the needs of our Resident Members, Associates, Unitholders, communities and families;
§ Nurture and promote a learning environment where our Associates’ skills and capabilities grow with the needs of both the
Trust and our Resident Members, and accept that these needs will be consistently evolving and improving the definition of
rental communities; and
§ Provide access to and utilize the latest tools and technology to increase the operating efficiency of the Trust as a whole.
WE VALUE:
§ Integrity
We will be honest, accountable, transparent, respectful, and trusting in our dealings with others, appreciating their views
and differences.
§ Teamwork
We will effectively work as a team, appreciating and benefiting from each other’s unique talents and skills in an open
environment while recognizing that the team’s successes are our successes.
§ Resident Member Service
We will promptly respond to Resident Member concerns and needs with thoughtfulness, compassion and innovation.
We will strive to develop proactive solutions through a support network and a positive service attitude.
§ Social Responsibility
We will contribute to our communities and encourage our Associates to contribute in ways that reflect our Golden
Foundation. We will all practice the Golden Rule of ‘treating others in a way we would wish to be treated’, and balance our
needs with those of others; we will all also model our Golden Goal which is to ‘be good’, our Golden Mission which shows
us how to ‘have fun’, and our Golden Vision which asks each of us to ‘love community’.
§ Our Associates
We will provide a safe and respectful work environment that attracts, supports, develops, and recognizes high-performing
and innovative team members.
Management of 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;
10
BOARDWALK REIT MD&A AND FINANCIAL REPORT § 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-add opportunities.
To support our overall operating strategy, it is necessary to:
§ Ensure ample capital is available at all times for acquisitions and value-add 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 National Housing Act (“NHA”) insurance, which is administered by CMHC, to access more
cost-effective debt capital.
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 audited annual
consolidated financial statements for the years ended December 31, 2020 and 2019, unless otherwise specified.
NON-GAAP FINANCIAL MEASURES
Boardwalk REIT prepares its financial statements in accordance with IFRS 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 NOI, FFO and 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 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 (Loss) Income. However, it is typically considered a non-GAAP measure for real
estate entities and, therefore, is included here.
Funds From Operation
The IFRS measurement most comparable to FFO is Profit (loss). We define FFO as income before fair value adjustments,
distributions on the LP Class B Units (as defined herein), 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 and adding the principal portion of lease receivables. The reconciliation from Profit (loss) under IFRS to FFO can be
11
BOARDWALK REIT MD&A AND FINANCIAL REPORT 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 (loss) as presented in the audited annual consolidated financial statements.
Adjusted Funds From Operation
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
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 MD&A. The reconciliation of AFFO can be found below, under the section titled “Performance Measures”.
Adjusted Cash Flows From Operations
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
Statements of Cash Flows”, along with added commentary on the sustainability of Boardwalk REIT’s Trust Unit distributions.
Boardwalk REIT’s presentation of NOI, 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 (loss)
determined in accordance with IFRS as indicators of Boardwalk REIT’s performance. In addition, Boardwalk REIT’s
calculation methodology for NOI, 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 measures of a REIT’s ability to pay
distributions. These ratios are computed by dividing Unitholder distributions paid (including distributions on the LP Class 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.
Enterprise Value
Enterprise Value is a non-GAAP measure calculated as the sum of the 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.
12
BOARDWALK REIT MD&A AND FINANCIAL 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. The Trust has adopted a long-term strategic plan, which
includes expanding its investments outside of Alberta and Saskatchewan and into high-growth markets, to allow the Trust to
geographically diversify its brand of housing into new, undersupplied markets. 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. 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 Unitholders.
The Trust sells 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 Unitholders, reinvesting in its existing properties to achieve
superior returns, developing new multi-family properties, and/or purchasing Trust Units for cancellation. Management of the
Trust continues to review all available options that it believes will provide the optimal return to 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 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 2021, estimated CMHC-insured five and ten-year
mortgage rates were estimated to be 1.30% and 2.10% 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 2020, the Trust reported AFFO per Unit of $2.35 on a fully
diluted basis. When compared to the Trust Unit’s market price of $33.74 as at December 31, 2020, this equates to
approximately 6.97% as its cost of equity. Further details of the Trust’s cost of capital can be found in NOTE 30 to the
audited annual consolidated financial statements for the years ended December 31, 2020 and 2019 which is available under
the Trust’s profile at www.sedar.com.
Performance Review of 2020
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.
Periodically, 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 capital 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 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 fourth quarter of 2020, the Trust sold a non-core asset, Boardwalk
Manor (which is comprised of 72 units) in Regina, Saskatchewan for a sale price of $7.5 million, resulting in a total loss on
asset sales of $0.5 million due to transaction costs. During the second quarter of 2020, the Trust sold a non-core, land leased
asset, consisting of 158 units in Calgary, Alberta for a sale price of $3.0 million, resulting in a total loss on asset sales of
$0.6 million due to transaction costs. During the third quarter of 2019, the Trust sold 138 units in Saskatoon, Saskatchewan
for a sale price of $20.7 million, resulting in a total loss on asset sales of $0.4 million due to transaction costs. During the
second quarter of 2019, the Trust sold 140 units in Saskatoon, Saskatchewan for a sale price of $20.7 million, resulting in
transaction costs and a loss on asset sales of $0.3 million.
13
BOARDWALK REIT MD&A AND FINANCIAL 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 2020, the Board of
Trustees 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, 2020, the Trust declared regular distributions of $51.0 million (inclusive of distributions paid
to the holders of LP Class B Units), representing approximately 36.5% 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, 2020, the Trust declared regular distributions of $12.8 million representing
approximately 37.3% 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. On a quarterly basis, the Board of Trustees reviews
the current level of distributions and determines if any adjustments to the distributed amount is warranted.
FFO RECONCILIATION FROM 2019 TO 2020
The following table shows a reconciliation of changes in FFO from December 31, 2019 to December 31, 2020. It should be
noted that FFO, as disclosed in the table below, reflects FFO derived from the Trust’s audited annual 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 MD&A.
FFO Reconciliation
FFO Opening – Dec. 31, 2019
NOI from Stabilized Properties
NOI from Unstabilized Properties
FFO Loss from Sold Properties
Administration, financing and other
Other Adjustments
Retirement costs
FFO Closing – Dec. 31, 2020
3 Months
12 Months
$
0.63
$
2.57
-
0.02
-
0.02
0.04
0.67
-
0.67
$
$
$
$
0.19
0.04
(0.01)
0.02
0.24
2.81
(0.07)
2.74
$
$
$
$
During the year ended December 31, 2020, $0.07 per fully diluted Trust Unit was recognized for executive retirements,
mainly in the form of deferred unit-based compensation and severance payments.
FFO AND AFFO RECONCILIATIONS
In the table on the following page, Boardwalk REIT provides a reconciliation of FFO (a non-GAAP measure) to (Loss) profit for
the period, its closely related financial statement measurement for the three months and years ended December 31, 2020
and 2019. Adjustments are explained in the notes below the table, as appropriate.
14
BOARDWALK REIT MD&A AND FINANCIAL REPORT
FFO Reconciliation
(In $000’s, except per Unit amounts)
3 Months
Dec. 31, 2020
3 Months
Dec. 31, 2019
% Change
12 Months
Dec. 31, 2020
12 Months
Dec. 31, 2019
% Change
(Loss) profit for the period
$ (188,435) $ (108,636)
$ (197,279)
34,781
Adjustments
Adjustment to right-of-use asset related
to lease receivable
Loss on sale of assets
Fair value losses (1)
Add back distributions to LP Class B Units
recorded as financing charges (2)
Deferred income tax expense (recovery)
Depreciation expense on Property
Plant & Equipment
Principal portion of lease obligations
Principal portion of lease receivable
-
532
-
-
159
1,136
-
714
219,111
137,955
326,134
86,132
1,120
258
2,259
(732)
155
1,120
(125)
2,341
(499)
-
4,479
(72)
8,195
(3,465)
449
4,479
(754)
8,809
(3,194)
-
Funds from operations
$ 34,268 $
32,156
6.6% $ 139,736 $ 130,967
Funds from operations – per Unit
$
0.67 $
0.63
6.3% $
2.74 $
2.57
6.7%
6.6%
(1) Under IFRS, the Trust has a number of Statement of Financial Position items, which are measured using a fair value model with fluctuations related to these
fair value amounts from period to period flowing through the Statement of Comprehensive (Loss) Income. These fair value adjustments are considered
"non-cash items" and are added back in the calculation of FFO.
(2) Under IFRS, the LP Class B Units are considered financial instruments in accordance with IFRS 9 – Financial Instruments ("IFRS 9"). As a result of this
classification, their corresponding distribution amounts are considered "financing charges" under IFRS. Management of 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 $34.3 million for the fourth quarter of 2020 compared to $32.2 million for the same
period in 2019. FFO, on a per Unit diluted basis, for the quarter ended December 31, 2020, increased approximately 6.3%
compared to the same quarter in the prior year from $0.63 to $0.67. Additionally, the Trust earned FFO of $139.7 million for
fiscal 2020 compared to $131.0 million for fiscal 2019. After adjusting for retirement costs, FFO totaled $143.4 million
representing an increase of 9.5% from the year ended December 31, 2019. FFO, on a per Unit fully diluted basis, for the year
ended December 31, 2020, increased approximately 6.6% compared to the prior year from $2.57 to $2.74. The increase was
primarily driven from higher rental revenue coupled with lower building maintenance costs, advertising costs, and wages and
salaries, being partially offset by increases in bad debt expense, insurance, property taxes, utilities, financing costs and
retirement costs.
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 Class B Units)
AFFO per Unit (Trust and LP Class B Units)
3 Months
Dec. 31, 2020
3 Months
Dec. 31, 2019
12 Months
Dec. 31, 2020
12 Months
Dec. 31, 2019
$ 34,268 $
32,156 $ 139,736 $ 130,967
4,545
6,096
19,862
24,060
$ 29,723 $
26,060 $ 119,874 $ 106,907
$
$
0.67 $
0.63 $
2.74 $
0.58 $
0.51 $
2.35 $
2.57
2.10
Unitholder Distributions-Regular (Trust Units and LP Class B Units)
$
12,766 $
12,744 $
51,049 $
50,941
Distribution as a % of FFO
Distribution as a % of AFFO
37.3%
42.9%
39.6%
48.9%
36.5%
42.6%
38.9%
47.6%
(1) Details of the calculation of Maintenance Capital Expenditures can be found in the section titled “Maintenance of Productive Capacity” in this MD&A.
LIQUIDITY
The access to liquidity is an important element of the Trust as it allows the Trust to implement its overall strategy. With the
current COVID-19 pandemic, the importance of liquidity has been magnified even more due to the uncertainty of when the
pandemic will abate. The further 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
15
BOARDWALK REIT MD&A AND FINANCIAL REPORT
through the continued use of the current NHA insurance program, which provides mortgage financing at attractive rates.
With the COVID-19 pandemic, we have seen declining interest rates which may result in lower interest rates upon renewal
as compared to the existing interest rate, however, potential interest savings may be tempered by an increase in upfinancings
to ensure appropriate liquidity.
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 $53.0 million at December 31, 2020, compared to
$35.2 million reported on December 31, 2019. As at December 31, 2020, the Trust also had $199.7 million of unused credit
facility (December 31, 2019 – $199.7 million) and committed secured upfinancings of $16.5 million (December 31, 2019 –
$22.8 million), bringing total liquidity to $269.2 million (December 31, 2019 – $257.8 million).
NEW PROPERTY ACQUISITIONS AND DISPOSITIONS
On September 28, 2020, the Trust acquired a portfolio of four properties in Southwestern Ontario, located in the markets of
Kitchener, Waterloo, and Cambridge. The portfolio is comprised of 226 units and had a purchase price $64.6 million
(including transaction costs).
On August 27, 2020, the Trust purchased a property in Cambridge, Ontario. The property is comprised of 56 units and had a
purchase price $16.8 million (including transaction costs).
On November 17, 2020, the Trust sold a non-core asset, Boardwalk Manor (comprised of 72 units), in Regina, Saskatchewan
for total proceeds (excluding selling costs) of $7.5 million.
On June 25, 2020, the Trust sold a non-core, land leased asset, Elbow Tower (comprised of 158 units), in Calgary, Alberta for
total proceeds (excluding selling costs) of $3.0 million.
On April 1, 2019, the Trust acquired a property in Edmonton, Alberta. The property is comprised of 124 units and had a
purchase price of $36.8 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.
DEVELOPMENT
On September 1, 2020, the Trust acquired the first parcel of a development site in Victoria, British Columbia, in the
community of Esquimalt, for a purchase price of $3.1 million (including transaction costs). On November 2, 2020, the
Trust purchased the second parcel of adjacent land for a purchase price of $10.1 million (including transaction costs).
The purchases are part of Boardwalk’s long-term strategic plan of high-grading and geographic expansion, with the land
planned for the development of new rental units. Subsequent to December 31, 2020, the Trust acquired a third parcel of
adjacent land for a purchase price of $1.9 million (excluding transaction costs).
On November 23, 2020, the Trust purchased a development site in Victoria, British Columbia, in the community of View
Royal, for a purchase price of $14.5 million (including transaction costs). The Trust plans to redevelop the land which has the
potential for up to 247 new rental units.
We continue to explore other development opportunities and each of these opportunities will be evaluated separately to
determine the viability of these projects.
JOINT VENTURE AGREEMENTS
Calgary, Alberta Development
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. Construction, which began in Q4 of 2017, was substantially completed, and the
Occupancy Permit received, at the end of January 2020, with the building being turned over to the owners on February 21,
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
16
BOARDWALK REIT MD&A AND FINANCIAL REPORT 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 provide best-in-class retail and residential expertise, respectively, to co-develop the asset.
To maximize the value of the development, RioCan manages the retail component and Boardwalk manages 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, 2020, Boardwalk incurred $3.7 million for its 50% interest. For the year ended December 31, 2019, Boardwalk
incurred $16.8 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, BRIO, was 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. For the year ended December 31, 2020, the Trust contributed $9.2 million of capital to the limited
partnership. For the year ended December 31, 2019, the Trust contributed $15.9 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. In 2019, the Trust paid $11.6 million (including transaction costs) for its 50% interest in the land.
Zoning approvals are anticipated in early 2021, with timing of construction to be determined once approvals are in place.
Financial Performance Summary
At a Glance
(In $000’s, except per Unit amounts)
Total Assets
Total Rental Revenue
(Loss) profit
Total Funds From Operations
(Loss) Profit Per Unit
Funds from Operations Per Unit (fully diluted)
2020
2019
% Change
$
$
$
$
$
$
6,107,744
$ 6,276,384
465,572
(197,279)
139,736
(4.24)
2.74
$
$
$
$
$
455,313
34,781
130,967
0.75
2.57
(2.7)%
2.3%
(667.2)%
6.7%
(665.9)%
6.6%
Total Assets decreased from the amounts reported in the prior year, mainly due to a fair value loss on the Trust’s investment
properties in 2020. Total Rental Revenue increased by 2.3%, the result of higher in-place occupied rents in Ontario,
Saskatchewan, and Quebec, and lower incentives in Alberta and Saskatchewan. Profit decreased by 667.2% compared to
the prior year, due primarily to a significant fair value loss of $326.1 million recognized on its investment properties in 2020
compared to a $86.1 million loss in 2019. The change in fair value of the Trust’s investment properties was largely driven by a
decrease in rental revenue in Alberta as market conditions have become increasingly competitive, and an increase in
expenses in the Trust’s calculation of stabilized NOI.
17
BOARDWALK REIT MD&A AND FINANCIAL REPORT
CONSOLIDATED OPERATIONS
AND EARNINGS REVIEW
Overall Review
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Rental Operations
Boardwalk REIT’s NOI 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
3 Months
Dec. 31, 2020
3 Months
Dec. 31, 2019
% Change
12 Months
Dec. 31, 2020
12 Months
Dec. 31, 2019
% Change
$ 116,543 $ 115,378
1.0% $ 465,572 $ 455,313
2.3%
24,320
12,820
13,630
26,250
12,275
12,103
(7.4)%
4.4%
12.6%
96,338
48,938
51,152
101,108
47,883
47,529
$
50,770 $
50,628
0.3% $ 196,428 $ 196,520
$ 65,773 $
64,750
1.6% $ 269,144 $ 258,793
56.4%
33,396
56.1%
33,263
57.8%
33,396
56.8%
33,263
(4.7)%
2.2%
7.6%
(0.0)%
4.0%
(In $000’s, except number of suites)
Gross rental revenue, before vacancy
3 Months
Dec. 31, 2020
3 Months
Dec. 31, 2019
% Change
12 Months
Dec. 31, 2020
12 Months
Dec. 31, 2019
% Change
losses and incentives
$ 132,070 $ 129,849
1.7% $ 524,513 $ 514,742
Vacancy loss
Incentives
(5,740)
(9,787)
(4,894)
(9,577)
17.3%
2.2%
(20,174)
(38,767)
(17,974)
(41,455)
Total rental revenue
$ 116,543 $ 115,378
1.0% $ 465,572 $ 455,313
1.9%
12.2%
(6.5)%
2.3%
Overall, Boardwalk REIT’s rental operations for the three months and year ended December 31, 2020, reported higher results
compared to the same periods in the prior year, with total rental revenue increasing 1.0% and 2.3%, respectively. For the
three months ended December 31, 2020, the increase in total rental revenue was driven by slightly higher rental revenues.
For the year ended December 31, 2020, the increase in total rental revenue was due to a combination of higher rental
revenues and lower incentives offered. As outlined in the second table above, the Trust continued to offer selective
incentives in certain communities to maintain occupancy levels while aiming to limit incentives on lease renewals. The Trust
was able to reduce incentives by 6.5% year-over-year. However, these gains, as well as the addition of new rental suites
from BRIO coming online at the end of February 2020, have contributed to an increase in vacancy losses of 12.2% for the
year ended December 31, 2020. When excluding BRIO, vacancy loss increased 4.4% for the year ended December 31, 2020,
compared to the same period in 2019. The Trust will continue to offer selective incentives in certain communities to maintain
occupancy levels, but the overall goal is to continue to decrease incentives.
Overall, total rental expenses for the twelve months ended December 31, 2020, was consistent with 2019. Cost savings
from lower building maintenance costs, advertising costs, and wages and salaries, were offset by increases in property
taxes, utilities, bad debts, and insurance.
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. This
18
BOARDWALK REIT MD&A AND FINANCIAL REPORT
availability of staff has been a benefit to the Trust during this time of quarantine and social distancing where contractors may
not be so readily available. The Trust has been able to utilize our Associates to maintain quality customer services as well as
to continue normal operations for both our repairs and maintenance as well as capital improvement projects. 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 of the Trust will adjust the amount allocated to more
accurately reflect how many internal resources were directed towards specific capital improvements.
For the three months and year ended December 31, 2020, operating expenses decreased by 7.4% and 4.7%, respectively,
compared to the same periods in the prior year, due to decreased repairs and maintenance, advertising costs, and wages and
salaries, partially offset by an increase in bad debts and building insurance expense.
Utility costs increased by 4.4% and 2.2% for the three months and year ended December 31, 2020, respectively, compared
to the same periods in 2019. The increase for the three months ended December 31, 2020, is mainly due to higher water and
sewer costs, as well as an increase in carbon taxes across all provinces excluding Quebec. The increase for the year ended
December 31, 2020, is due to higher electricity, water and sewer costs, and carbon taxes, partially offset by decreases in
natural gas costs as well as increased electricity refunds for Ontario and Quebec. Fixed price physical commodity contracts
have helped to partially or fully hedge the Trust’s 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 audited annual consolidated
financial statements for the years ended December 31, 2020 and 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 only reported when they are received. Additionally, property taxes have increased due to the addition of the
new BRIO joint venture in February 2020 and the new Ontario acquisitions completed in the third quarter of 2020.
Overall, operating margin increased for the three months ended December 31, 2020, compared to the same period in 2019,
from 56.1% to 56.4%.
Similarly, operating margin increased from 56.8% in fiscal 2019 to 57.8% for the twelve months ended December 31, 2020.
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, 2020
3 Months
Dec. 31, 2019
% Change
12 Months
Dec. 31, 2020
12 Months
Dec. 31, 2019
% Change
$
73,740 $
74,998
(1.7)% $ 300,031 $ 295,218
1.6%
15,454
8,093
9,393
16,933
7,426
7,968
(8.7)%
9.0%
17.9%
62,101
30,825
34,415
65,571
28,952
30,739
$ 32,940 $
32,327
1.9% $ 127,341 $ 125,262
$ 40,800 $
42,671
(4.4)% $ 172,690 $ 169,956
55.3%
20,845
56.9%
20,922
57.6%
20,845
57.6%
20,922
(5.3)%
6.5%
12.0%
1.7%
1.6%
Alberta is Boardwalk’s largest operating segment, representing 64.2% of total reported net operating income for the year
ended December 31, 2020. In addition, Alberta represents 62.4% of total apartment units. Boardwalk REIT’s Alberta
operations for the three months and year ended December 31, 2020, reported a 1.7% decrease and a 1.6% increase,
respectively, in total rental revenue, when compared to the same periods reported in 2019. For the three months ended
December 31, 2020, the decrease in total rental revenue compared to the same period in the prior year was due to market
conditions becoming increasingly competitive given the current economic conditions, resulting in lower occupied rent and
19
BOARDWALK REIT MD&A AND FINANCIAL REPORT
higher vacancy loss, and the disposition of a non-core asset in Calgary during the second quarter of 2020. For the year ended
December 31, 2020, the reported total rental revenue change is the combined effect of higher in-place rents and lower
incentives compared to the same period in the prior year. For the year ended December 31, 2020, total rental expenses have
slightly increased by 1.7% compared to the same period in the prior year due to increases in property taxes and utilities,
partially offset by savings from lower operating expenses.
Operating expenses decreased by 8.7% and 5.3% for the three months and year ended December 31, 2020, respectively,
from the same periods in the prior year due to management of controllable expenses related to building maintenance costs,
advertising costs, and wages and salaries, partially offset by increased bad debts and insurance.
Reported utilities for the three months and year ended December 31, 2020, were up 9.0% and 6.5%, respectively, compared
to the same periods in the prior year. For the three months ended December 31, 2020, the increase in utilities was due to the
federal carbon tax rate that was applied to Alberta effective January 1, 2020, as the previous provincial carbon tax rate that
was applied was repealed at the end of May 2019. For the year ended December 31, 2020, the increase was due to higher
water and sewer costs, carbon tax levies, and electricity. Currently, the Trust has two outstanding electricity contracts with
two utility companies to supply the Trust with its electrical power needs. The Trust also has three outstanding natural gas
contracts to hedge the price of its natural gas usage. More details can be found in NOTE 29 to the audited annual
consolidated financial statements.
Property taxes increased compared to the prior year as a result of increased property tax assessments and the addition of
new buildings in Calgary and Edmonton. In addition, the tax rate in Calgary increased as a larger piece of the tax burden was
shifted to residential assets.
NOI for Alberta increased $2.7 million, or 1.6% for the twelve months ended December 31, 2020, compared to the same
period in 2019. Alberta’s operating margin for the year ended December 31, 2020, was 57.6% compared to 57.6% for the
same period in 2019.
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, 2020
3 Months
Dec. 31, 2019
% Change
12 Months
Dec. 31, 2020
12 Months
Dec. 31, 2019
% Change
$ 12,847 $
12,659
1.5% $ 50,956 $
51,198
(0.5)%
2,451
1,953
1,237
2,444
1,868
1,207
0.3%
4.6%
2.5%
9,581
7,722
4,830
9,651
7,844
4,921
$
$
5,641 $
5,519
2.2% $
22,133 $
22,416
7,206 $
7,140
0.9% $ 28,823 $
28,782
56.1%
3,684
56.4%
3,756
56.6%
3,684
56.2%
3,756
(0.7)%
(1.6)%
(1.8)%
(1.3)%
0.1%
SASKATCHEWAN RENTAL OPERATIONS, EXCLUDING SASKATOON ASSETS SOLD
IN 2019
(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
20
3 Months
Dec. 31, 2020
3 Months
Dec. 31, 2019
% Change
12 Months
Dec. 31, 2020
12 Months
Dec. 31, 2019
% Change
$ 12,847 $
12,668
1.4% $ 50,956 $
49,461
3.0%
2,451
1,953
1,237
2,435
1,863
1,207
0.7%
4.8%
2.5%
9,581
7,722
4,830
9,299
7,494
4,743
$
$
5,641 $
5,505
2.5% $
22,133 $
21,536
7,206 $
7,163
0.6% $ 28,823 $
27,925
56.1%
3,684
56.5%
3,756
56.6%
3,684
56.5%
3,756
3.0%
3.0%
1.8%
2.8%
3.2%
BOARDWALK REIT MD&A AND FINANCIAL REPORT
For the three months and year ended December 31, 2020, Saskatchewan total rental revenue, when excluding the 278 units
sold in Saskatoon in 2019, increased by 1.4% and 3.0%, respectively, compared to the same periods in the prior year. The
revenue increase is mainly due to higher occupied rent in both Regina and Saskatoon, and lower incentives and vacancy.
Rental expenses, when excluding the 278 units sold in Saskatoon in 2019, increased by 2.5% and 2.8%, respectively, for the
three months and year ended December 31, 2020, compared to the same periods in the prior year, due to higher operating
expenses, utilities, and property taxes.
When excluding the Saskatoon assets sold in 2019, operating expenses for the three months and year ended December 31,
2020, increased 0.7% and 3.0%, respectively, compared to the same periods in 2019, due to increases in wages and salaries
and building insurance costs.
Excluding the sold properties in Saskatoon, utility costs for the three months and year ended December 31, 2020, increased
4.8% and 3.0%, respectively, compared to the same periods in the prior year due, to higher water and sewer costs as well
as higher carbon levies. 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 audited annual consolidated financial
statements for the years ended December 31, 2020 and 2019.
Property taxes, when excluding the sold properties in Saskatoon, increased by 2.5% and 1.8% for the three months and year
ended December 31, 2020, respectively, compared to the same periods in 2019 due to higher property tax assessments.
Excluding the sold properties in Saskatoon, reported operating margin for the year ended December 31, 2020, was 56.6%
compared to 56.5% for the same period in 2019.
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, 2020
3 Months
Dec. 31, 2019
% Change
12 Months
Dec. 31, 2020
12 Months
Dec. 31, 2019
% Change
$
9,344 $
7,642
22.3% $ 33,200 $
29,815
11.4%
1,467
1,011
972
1,292
963
817
13.5%
5.0%
19.0%
5,451
4,031
3,491
5,151
3,708
3,302
3,450 $
3,072
12.3% $ 12,973 $
12,161
5.8%
8.7%
5.7%
6.7%
5,894 $
4,570
29.0% $ 20,227 $
17,654
14.6%
$
$
63.1%
2,867
59.8%
2,585
60.9%
2,867
59.2%
2,585
ONTARIO RENTAL OPERATIONS, EXCLUDING NEW ACQUISITIONS
(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, 2020
3 Months
Dec. 31, 2019
% Change
12 Months
Dec. 31, 2020
12 Months
Dec. 31, 2019
% Change
$
8,190 $
7,642
7.2% $
31,925 $
29,815
7.1%
1,315
917
841
1,292
963
817
1.8%
(4.8)%
2.9%
5,291
3,923
3,347
5,151
3,708
3,302
$
$
3,073 $
3,072
0.0% $ 12,561 $
12,161
5,117 $
4,570
12.0% $ 19,364 $
17,654
62.5%
2,585
59.8%
2,585
60.7%
2,585
59.2%
2,585
2.7%
5.8%
1.4%
3.3%
9.7%
Boardwalk REIT’s Ontario operations reported an increase in total rental revenue of 22.3% and 11.4%, respectively, for the
three months and year ended December 31, 2020, compared to the same periods in the prior year, due to higher occupied
rents and occupancy levels, and new acquisitions completed in the third quarter of 2020. Total rental expenses increased by
6.7% for the twelve months ended December 31, 2020, compared to the same period in the prior year, mainly due to the
new acquisitions and increased utility costs and insurance.
21
BOARDWALK REIT MD&A AND FINANCIAL REPORT
Operating expenses, when excluding the new acquisitions, increased by 1.8% and 2.7% for the three months and year ended
December 31, 2020, respectively, compared to the same periods in 2019, mainly due to increased building insurance costs.
Excluding the new acquisitions, utility costs were lower by 4.8% and higher by 5.8% for the three and twelve months ended
December 31, 2020, respectively, compared to the same periods in 2019. For the three months ended December 31, 2020,
the decrease in utility costs was mainly attributable to a higher electricity refund rate in effect compared to the same period
in 2019. For the year ended December 31, 2020, the increase in utility costs was due to an increase in current year electricity
rates and consumption, higher water and sewer costs, and the addition of carbon levy costs since April 2019, partially offset
by savings from an increased electricity refund rate. 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 audited annual consolidated
financial statements for the years ended December 31, 2020 and 2019.
Property taxes, when excluding the new acquisitions, increased 2.9% and 1.4% for the three months and year ended
December 31, 2020, respectively, compared to the same periods in the prior year, due to higher property tax assessments.
Excluding the new acquisitions, net operating income increased by 9.7% for the year ended December 31, 2020, compared
to the prior year. Reported operating margin for the year ended December 31, 2020, was 60.7% compared to 59.2% for the
prior year.
QUEBEC RENTAL OPERATIONS
(In $000’s, except number of suites)
Total rental revenue
Expenses
Operating expenses
Utilities
Property taxes
Net operating income
Operating margin
Number of suites at December 31
3 Months
Dec. 31, 2020
3 Months
Dec. 31, 2019
% Change
12 Months
Dec. 31, 2020
12 Months
Dec. 31, 2019
% Change
$ 20,508 $
19,987
2.6% $ 80,988 $
78,778
2.8%
3,528
1,678
1,970
3,878
1,928
2,075
(9.0)%
(13.0)%
(5.1)%
13,443
6,009
8,252
14,739
7,007
8,399
$
7,176 $
7,881
(8.9)% $
27,704 $
30,145
$ 13,332 $
12,106
10.1% $ 53,284 $
48,633
65.0%
6,000
60.6%
6,000
65.8%
6,000
61.7%
6,000
(8.8)%
(14.2)%
(1.8)%
(8.1)%
9.6%
Boardwalk REIT’s Quebec operations reported a total rental revenue increase of 2.6% and 2.8% for the three months and
year ended December 31, 2020, respectively, compared to the same periods in the prior year, due to higher occupied rents.
Total rental expenses decreased by 8.9% and 8.1% for the three months and year ended December 31, 2020, respectively,
when compared to the same periods in 2019, due to lower operating expenses, utilities, and property taxes.
For the three months and year ended December 31, 2020, operating expenses decreased by 9.0% and 8.8%, respectively,
when compared to the same periods in 2019, due to decreases in wages and salaries, building repairs and maintenance,
advertising, as well as a decrease in our meal service costs at our retirement building in Quebec City, partially offset by an
increase in insurance.
The reported decrease of 14.2% in utilities for the twelve months ended December 31, 2020, compared to the same period
in 2019, was due to the combined effect of lower electricity and gas delivery charges, as well as a large electricity refund
received in the first quarter of 2020 due to the adoption of Bill 34 in Quebec. Bill 34 allows Quebec to take control of the
rates charged for electricity in the province and, as a result of these changes, rebates would also be provided back to
consumers based on their consumption from January 1, 2018, to December 31, 2019, to be paid in January of 2020.
In addition, the Trust has one outstanding fixed price natural gas contract to hedge 75% of its Quebec natural gas usage.
The details of the natural gas contract is reported in NOTE 29 to the audited annual consolidated financial statements for the
years ended December 31, 2020 and 2019.
Property taxes decreased 1.8% for the year ended December 31, 2020, compared to the prior year due to the Government
of Quebec reducing the school tax rate with the objective to give financial flexibility to individuals and businesses in the
context of the COVID-19 pandemic.
Reported operating margins for the twelve months ended December 31, 2020, increased from 61.7% to 65.8%.
22
BOARDWALK REIT MD&A AND FINANCIAL 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, especially during the ongoing COVID-19 pandemic.
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 increase of these incentives, particularly in
Alberta and Saskatchewan, is an attempt by the Trust to keep occupancy levels higher than the overall market. When the
market returns to balance, the Trust will be well-positioned to unwind these incentives and increase market rents. It has been
our experience that this proactive 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.
Management of the Trust believes that when the NOI 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
Portfolio
2020
96.56%
94.84%
95.42%
94.94%
98.73%
98.39%
98.45%
97.01%
95.01%
95.61%
97.10%
99.35%
96.29%
2019
Q4 2020
Q4 2019
96.74%
95.25%
92.34%
95.72%
98.66%
98.37%
98.67%
97.86%
95.66%
95.32%
96.39%
99.60%
96.50%
96.50%
93.58%
96.87%
93.33%
97.87%
98.29%
97.94%
95.81%
94.23%
95.85%
97.90%
99.39%
95.71%
96.06%
94.72%
93.65%
94.74%
98.68%
98.26%
98.99%
98.39%
93.45%
95.12%
97.43%
99.66%
96.18%
23
BOARDWALK REIT MD&A AND FINANCIAL REPORT In fiscal 2020, the Trust reported a year-over-year decrease of 21 basis points in its overall same-property occupancy rate,
a decline from 96.50% to 96.29%. Occupancy continued to remain strong in Ontario and Quebec, and Saskatchewan. In
Saskatchewan, both Regina and Saskatoon experienced an increase in supply of new units entering both markets and the
Trust realized an occupancy increase compared to the prior year. However, these positive gains were offset by a decline in
Alberta, the Trust’s largest portfolio, where most markets experienced a decline from the prior year that contributed to the
overall occupancy rate decrease. As a strategy, the Trust is constantly adjusting market rents and incentives based on
property-specific demand and supply. Year-over-year, Calgary occupancy levels decreased by 18 basis points to 96.56%.
Calgary does not include BRIO which was brought on-line in February 2020. Year-over-year, Edmonton occupancy levels
decreased by 41 basis points to 94.84%. Edmonton does not include the 124-unit acquisition completed in April of 2019.
The decrease in Edmonton’s occupancy year-over-year is attributable to increasingly competitive market conditions given the
current economic conditions. Regina saw occupancy levels increase to 95.61% in 2020 compared to 95.32% for 2019.
Saskatoon saw occupancy levels increase to 97.10% in 2020 compared to 96.39% in 2019. As markets stabilize, we expect
some up and down movements in occupancy as the Trust aims to maintain occupancy at approximately 97%.
RENTALS, MOVE-OUTS & IMPACT ON REPORTED OCCUPANCY (SAME-PROPERTY):
SUPPLY & DEMAND
Move Outs
Rentals
Occupancy
1,400
1,200
1,000
800
600
400
200
0
98%
97%
96%
95%
94%
93%
92%
91%
90%
-
8
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J
Demand and supply, as with any industry, is an essential 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 $4.7 million, or $0.09 per Trust Unit on a diluted basis.
24
BOARDWALK REIT MD&A AND FINANCIAL REPORT 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, 2020, or a total of 32,909 units. The tables below provide a regional breakdown on these properties for the
fourth quarter of 2020, compared to the fourth quarter of 2019 and fiscal 2020, compared to fiscal 2019.
Dec. 31 2020 – 3 M
Edmonton
Calgary
Red Deer
Grande Prairie
Fort McMurray
Alberta
Quebec
Saskatchewan
Ontario
Dec. 31 2020 – 12 M
Edmonton
Calgary
Red Deer
Grande Prairie
Fort McMurray
Alberta
Quebec
Saskatchewan
Ontario
# of Units
12,906
5,798
939
645
352
20,640
6,000
3,684
2,585
32,909
# of Units
12,906
5,798
939
645
352
20,640
6,000
3,684
2,585
32,909
% Revenue
Growth
% Operating
Expense Growth
% Net Operating
Income Growth
% of NOI
(1.9)%
0.1%
(2.1)%
(2.0)%
(2.9)%
(1.3)%
2.6%
2.3%
7.2%
0.3%
0.9%
6.8%
(3.0)%
11.6%
(5.4)%
2.3%
(8.9)%
3.5%
0.1%
0.5%
(4.3)%
(3.7)%
(1.3)%
(12.5)%
(1.2)%
(4.2)%
10.1%
1.5%
11.9%
0.2%
35.0%
21.2%
2.3%
1.5%
1.1%
61.1%
20.2%
10.9%
7.8%
100.0%
% Revenue
Growth
% Operating
Expense Growth
% Net Operating
Income Growth
% of NOI
1.4%
1.9%
(0.1)%
3.1%
(2.0)%
1.5%
2.8%
3.2%
7.1%
2.3%
0.2%
3.9%
4.2%
12.2%
(6.0)%
1.5%
(8.1)%
2.9%
3.3%
0.2%
2.4%
0.8%
(3.7)%
(4.0)%
1.1%
1.4%
9.6%
3.5%
9.7%
3.7%
36.6%
21.4%
2.2%
1.6%
1.0%
62.8%
19.6%
10.5%
7.1%
100.0%
Stabilized revenue increased by 2.3% for the year ended December 31, 2020, compared to the same period in the prior year.
Operating expenses reported for the year increased by 0.2% from 2019, resulting in a NOI increase of 3.7% compared to the
prior year. The increase in reported stabilized revenue was driven by higher in-place occupied rents in Ontario, Saskatchewan, and
Quebec, and lower incentives in Alberta and Saskatchewan, which accounts for approximately 73% of the Trust’s reported
stabilized NOI. Additionally, higher in-place occupied rents were achieved in Ontario as a result of renovations. Overall, stabilized
operating expenses increased slightly with increases in property taxes, utilities, insurance, and bad debts, largely offset by cost
savings from management of controllable costs related to building repairs and maintenance, advertising, and wages and salaries.
Stabilized Revenue Growth
Edmonton
Calgary
Red Deer
Grande Prairie
Fort McMurray
Quebec
Saskatchewan
Ontario
# of Units
12,906
5,798
939
645
352
6,000
3,684
2,585
32,909
Q4 2020 vs
Q3 2020
Q4 2020 vs
Q2 2020
Q4 2020 vs
Q1 2020
Q4 2020 vs
Q4 2019
(2.2)%
(0.4)%
(2.1)%
(1.9)%
0.6%
0.9%
1.1%
2.2%
(0.6)%
(3.4)%
(0.4)%
(3.3)%
(2.6)%
(1.1)%
1.8%
2.3%
3.1%
(0.8)%
(2.5)%
(0.8)%
(1.8)%
(3.2)%
(1.9)%
2.4%
2.8%
5.4%
(0.2)%
(1.9)%
0.1%
(2.1)%
(2.0)%
(2.9)%
2.6%
2.3%
7.2%
0.3%
25
BOARDWALK REIT MD&A AND FINANCIAL REPORT
On a sequential basis, stabilized revenues reported in the fourth quarter of 2020 decreased by 0.6% over Q3 2020,
decreased by 0.8% compared to Q2 2020, decreased by 0.2% compared to Q1 2020, and increased by 0.3% compared to
Q4 2019. The change over each quarter is a reflection of Boardwalk’s strategy, striving toward balancing the optimum level
of market rents, rental incentives, and occupancy rates in order to achieve its net operating income optimization strategy.
For the Alberta markets, the negative sequential revenue growth when comparing Q4 2020 to previous quarters in 2020 was
the result of the lagged impact of rental rate restrictions. As rental restrictions have since been lifted, the Trust’s focus is on
sustainable rental rate increases with a focus on retention. The Trust continues to closely monitor this latest trend and is
well positioned to strive towards balancing during these challenging times.
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 2020, and adjusted for current occupancy levels, totaled approximately $16.4 million on an annualized
basis, representing $0.32 per Unit (Trust Units and LP Class B Units). For the most part, Boardwalk REIT’s rental lease
agreements last no longer than twelve 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.
2020
Market
Rent (1)
Dec. 2020
Occupied
Rent (1)
Mark to
Market
Per
Month
Same-property
Annualized
Mark to
Market
Adjusted
for Current
Occupancy
levels
($000’s)
Dec. 2020
Market
Rent,
including
incentives (1)
Dec.
2020
Occupied
Rent (1)
Mark to
Market
Per
Month
Annualized
Mark to
Market
Adjusted
for Current
Occupancy
levels
($000’s)
Weighted
Average
Apartment
% of
Units
Portfolio
Edmonton
$ 1,300 $ 1,188 $
112 $ 16,032 $
1,185 $ 1,188 $
(3) $
(1,029)
12,906
Calgary
Red Deer
Grande Prairie
Fort McMurray
1,474
1,175
1,140
1,498
1,327
1,050
1,058
1,164
147
125
82
334
9,752
1,311
595
1,381
1,321
1,032
1,072
1,187
1,327
1,050
1,058
1,164
(6)
(18)
14
23
(581)
(239)
91
93
5,798
939
645
352
39%
18%
3%
2%
1%
Alberta Portfolio $ 1,342 $ 1,217 $
125 $ 29,071 $
1,213 $ 1,217 $
(4) $
(1,665)
20,640
63%
Quebec
$ 1,244 $ 1,147 $
97 $ 6,862 $
1,243 $ 1,147 $
96 $ 6,837
Saskatchewan (2)
Ontario
1,317
1,458
1,182
1,077
135
381
5,784
11,782
1,170
1,457
1,182
1,077
(12)
380
(582)
11,782
6,000
3,684
2,585
18%
11%
8%
Total Portfolio
$ 1,330 $ 1,189 $
141 $ 53,499 $
1,233 $ 1,189 $
44 $ 16,372
32,909
100%
(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 $18.3 million at September 2020 to $16.4 million at December 2020,
was due primarily to a decrease in market rents in many of Boardwalk’s Alberta rental markets for the month of December,
using a weighted average mark-to-market of $44 per suite per month. Excluded from the loss-to-lease calculation of
$16.4 million is approximately $97 per suite per month of incentives, resulting in additional revenue of approximately
$37.1 million per annum for a total of $53.5 million.
In fiscal 2020, 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.
26
BOARDWALK REIT MD&A AND FINANCIAL REPORT
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.
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
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2015
2016
2017
2018
2019
2020
As was previously mentioned, given a slower-than-expected recovery of the rental markets, particularly in Alberta and, to a
lesser extent, Saskatchewan, and the uncertainty resulting from lower oil prices and the COVID-19 pandemic, 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 this 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, 2020, increased
from the same period in the prior year, from $88.2 million to $91.6 million, primarily due to increased mortgage interest as a
result of upfinancings and new mortgages. At December 31, 2020, the reported weighted average interest rate of 2.58%
was down from the weighted average interest rate of 2.74% at December 31, 2019. 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 4.2 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 obtain mortgages with lower interest rate spreads on its
property financing 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.
27
BOARDWALK REIT MD&A AND FINANCIAL REPORT 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-stress the importance of this government-backed mortgage insurance program administered by
CMHC, which has proven even more essential during the COVID-19 pandemic. 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, 2020, approximately 99.7% of Boardwalk REIT’s mortgages were backed by this NHA insurance, with a
weighted average amortization period of approximately 30 years.
As was previously noted, the adoption of IFRS has also had an impact on the amount of financing costs reported on the
Trust’s Consolidated Statements of Comprehensive (Loss) 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. Management of 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 holders of LP Class B Units for the year ended December 31, 2020, which have been recorded as
financing charges, was $4.5 million ($4.5 million for the year ended December 31, 2019). 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, 2020 was $0.8 million, compared to
$1.3 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 14 to the audited annual
consolidated financial statements for the years ended December 31, 2020 and 2019.
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, 2020, was $6.2 million compared to
$6.1 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 this 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 2021, the Trust anticipates having approximately $384.2 million of secured mortgages maturing with a weighted
average rate of 2.40%. 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 1.30% (as of February 2021).
To date, the Trust has renewed, or forward locked the interest rate on $81.4 million or 21% of its 2021 mortgage maturities at
an average interest rate of 1.30%, while extending the term of these mortgages by an average of six years.
28
BOARDWALK REIT MD&A AND FINANCIAL REPORT Administration
Included in administration expenses are costs associated with Boardwalk REIT’s centralized administrative functions. The
amount reported for the year ended December 31, 2020, which relates to corporate administration from continuing operations
(excluding deferred unit-based compensation), was $36.1 million, compared to $38.6 million for the same period in the prior
year, a decrease of approximately 6.5% for the year. The decrease was attributable to a decrease in staffing levels.
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 $60.5 million for the year ended December 31, 2020,
compared to $60.8 million for the same period in the prior year. The decrease in total administration costs of approximately
$0.3 million, or approximately 0.5%, was due to a decrease in staffing levels.
Depreciation
Depreciation recorded on the Consolidated Statements of Comprehensive (Loss) Income is made up of the depreciation of
property, plant and equipment.
The Trust has elected to use the cost model under International Accounting Standard 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, 2020, was $8.2 million compared to $8.8 million
recorded for the same period in the prior year.
Other Income and Expenses
INCOME TAX EXPENSE
Boardwalk REIT qualifies as a ‘mutual fund trust’ as defined in the Tax Act. The Tax Act also contains legislation affecting the
tax treatment of publicly traded trusts and the criteria for qualifying for the REIT Exemption, which exempts Boardwalk REIT
from income tax under the SIFT Legislation. For 2019 and 2020 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 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, 2020, the Trust used a price of $33.74 based on the closing price of the Trust Units on
the TSX to determine the fair value of these financial liabilities at that date. The total fair value of these units recorded on the
Consolidated Statement of Financial Position at December 31, 2020, was $151.0 million, and a corresponding fair value gain
of $54.6 million (year ended December 31, 2019 – fair value loss of $36.3 million) was recorded on the Consolidated
Statement of Comprehensive (Loss) Income for the year ended December 31, 2020.
The deferred unit-based compensation plan had a fair value of $3.2 million, and a corresponding fair value gain of $2.2 million
(year ended December 31, 2019 – fair value loss of $1.2 million) was recorded on the Consolidated Statements of
Comprehensive (Loss) Income for the year ended December 31, 2020.
29
BOARDWALK REIT MD&A AND FINANCIAL REPORT FINANCIAL CONDITION
Review of Consolidated Statements of Cash Flows
OPERATING ACTIVITIES
Cash Flow from Operations
For the three months ended December 31, 2020, cash flow from operating activities decreased by 4.8% from $38.6 million
to $36.7 million, as compared to the three months ended December 31, 2019. Cash flow from operating activities decreased
from $160.7 million for the year ended December 31, 2019 to $141.1 million for the year ended December 31, 2020.
A reconciliation of ACFO to cash flow from operating activities as shown in the Consolidated Statements of Cash Flows
prepared in accordance with IFRS is highlighted below:
ACFO Reconciliation
(In $000’s, except per Unit amounts)
3 Months
Dec. 31, 2020
3 Months
Dec. 31, 2019
% Change
12 Months
Dec. 31, 2020
12 Months
Dec. 31, 2019
% Change
Cash flow from operating activities
$ 36,730 $
38,576
$ 141,081 $ 160,743
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
Principal portion of lease receivable
Maintenance capital expenditures (2)
Adjusted Cash Flow From Operations (ACFO)
(1,160)
(507)
94
1,120
21,532
(4,760)
(565)
94
1,120
20,465
(22,964)
(22,275)
(732)
155
34,268
(4,545)
29,723
(499)
-
32,156
(6,096)
26,060
6,243
(3,255)
378
4,479
85,448
(91,622)
(3,465)
449
139,736
(22,646)
(2,268)
378
4,479
81,673
(88,198)
(3,194)
-
130,967
(19,862)
(24,060)
14.1%
119,874
106,907
ACFO – per Unit
$
0.58 $
0.51
13.7% $
2.35 $
2.10
12.1%
11.9%
(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. Management of 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, 2020, Boardwalk REIT
reported total ACFO of $119.9 million, or $2.35 per fully diluted Trust Unit. This represented an increase of approximately
12.1%, compared to $106.9 million, or $2.10 per fully diluted Trust Unit, reported for the same twelve months in 2019.
The increase for 2020 is primarily due to higher rental revenue resulting from higher occupied rent and lower incentives.
Additionally, the Trust is benefiting from its focus on decreasing controllable costs such as on-site wages and salaries, repairs
and maintenance, and advertising.
For the current quarter, the Trust is paying out an estimated 37.3% of reported FFO and 43.0% of ACFO, compared to 39.6%
and 48.9%, respectively, for the same period in the prior year. For the year ended December 31, 2020, the Trust is currently
paying out an estimated 36.5% of FFO and 42.6% of ACFO, compared to 38.9% and 47.6%, respectively, for the same
period in 2019. 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 of Trustees has approved distributions of $1.00 per Unit
on an annualized basis.
30
BOARDWALK REIT MD&A AND FINANCIAL 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, 2020, the Trust paid regular distributions of
$51.0 million to its Unitholders and holders of LP Class B Units, compared to $50.9 million for the same period in 2019.
Regular distributions declared for the twelve months ended December 31, 2020 represented an FFO payout ratio of 36.5%,
compared to 38.9% for the prior year. Regular distributions (Trust and LP Class B Units) declared in 2020 represented
approximately 36.2% of cash flow from operating activities compared to 31.7% for 2019.
Financing of Revenue Producing Properties
During the twelve months ended December 31, 2020, the financing and refinancing of existing properties totaled
approximately $284.4 million. During the financing and refinancing process, Boardwalk REIT decreased the weighted average
interest rate on its mortgage portfolio from 2.74% at December 31, 2019 to 2.58% at December 31, 2020.
Acquisitions
On September 28, 2020, the Trust acquired a portfolio of four properties in Southwestern Ontario, located in the markets of
Kitchener, Waterloo, and Cambridge. The portfolio is comprised of 226 units and had a purchase price of $64.6 million
(including transaction costs).
On August 27, 2020, the Trust purchased a property in Cambridge, Ontario. The property is comprised of 56 units and had a
purchase price $16.8 million (including transaction costs).
On April 1, 2019, the Trust acquired a property in Edmonton, Alberta. The property totaled 124 residential units and had a
purchase price of $36.8 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. During the third quarter of 2020, $16.1 million of mortgages
were assumed on acquisitions. These mortgages had in-place rates above market rates, resulting in market debt adjustments
totaling $459 thousand that was made to the book cost of the corresponding assets.
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 the properties’ 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.
31
BOARDWALK REIT MD&A AND FINANCIAL REPORT 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
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 2020, Boardwalk REIT invested approximately $113.7 million (comprised of $108.7 million on its stabilized investment
properties and $5.0 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 $123.2 million
($117.6 million on its stabilized investment properties and $5.6 million property, plant and equipment) invested in 2019.
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 $33.7 million of on-site wages and salaries
that have been incurred towards these projects for 2020,
compared to $32.5 million for 2019.
2020 12 M CAPITAL INVESTMENT
18%
Building Improvements
28%
Suite Improvements
30%
Internal Capital
Program
Other (incl. Equipment)
6%
6%
Hallway
Improvements
5%
Appliances
7%
Elevators/Boilers/Mech
MAINTENANCE OF PRODUCTIVE CAPACITY
The Trust has two separate areas in which capital is invested back into its residential buildings. These are referred to as
‘maintenance capital expenditures’ and ‘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, AFFO, 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)
3 Months
Dec. 31, 2020
Per
3 Months
Suite
Dec. 31, 2019
Per
Suite
12 Months
Dec. 31, 2020
Per
Suite
12 Months
Dec. 31, 2019
Per
Suite
Maintenance Capital
Expenditures (1)
Value Enhancing Capital (including
Suite Upgrades and Property,
$
4,545 $
136 $
6,096 $
183 $ 19,862 $ 596 $
24,060 $
721
Plant & Equipment)
29,277
876
29,921
897
93,754
2,813
99,215
2,973
$ 33,822 $ 1,012 $
36,017 $ 1,080 $ 113,616 $ 3,409 $ 123,275 $ 3,694
(1) Details of the calculation of Maintenance Capital Expenditures can be found on the following page.
32
BOARDWALK REIT MD&A AND FINANCIAL REPORT
Items reported as capital are determined as investments in assets that have a useful economic life longer than one year.
Management of the Trust has estimated that for fiscal 2020 and 2019, the amount allocated to maintenance capital was
approximately $19.9 million, or $596 per apartment unit, and $24.1 million, or $721 per apartment unit, respectively, with
investment in value-enhancing expenditures to its stabilized investment properties totaling $93.8 million and $99.2 million,
respectively, or $2,813 and $2,973 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 $564 per apartment unit for 2020, $605 per apartment unit for 2019, and $620 per apartment unit
for 2018, is appropriate. Capital budget amounts for 2020, 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 2020, the amount of $564 per apartment unit was determined by taking the Trust’s 2020 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 amount is then
divided by the number of apartment units in Boardwalk’s property portfolio to derive a per unit Maintenance CAPEX amount.
For 2020, Boardwalk’s estimate of Maintenance CAPEX was $19.9 million, or $596 per apartment unit, for the year based on
a three-year rolling average of 2018, 2019, and 2020 actual expenditures. The Trust’s calculation of standardized maintenance
capital expenditures per suite is outlined on the following page:
33
BOARDWALK REIT MD&A AND FINANCIAL 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
2020 Capital
Expenditures
($000’s)
Economic
Useful Life
(Years)
Maintenance
Capital
Allocation
Value-added
Capital
Allocation
2020
Maintenance
Capital
Expenditures
($000’s, except
per Unit amount)
$
$
$
$
$
$
$
$
$
$
$
$
$
$
20,990
6,816
2,653
5,134
4,422
1,412
41,427
10,446
11,959
7,348
5,523
1,738
971
37,985
$
33,658
$ 113,070
546
$ 113,616
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%
$
$
$
$
$
$
$
$
$
$
$
$
1,400
682
265
513
884
282
2,612
1,495
919
690
435
243
25%
75%
$
8,415
$
18,835
2020 Cash Flow from Investing Activities
Improvements to Investment Properties
$ 108,653
4,963
$ 113,616
33,396
Additions to Property, Plant & Equipment
Apartment Units
Three-year Rolling Average
2018
2019
2020
Maintenance CAPEX Per Unit
$
$
$
$
$
564
620
605
564
596
34
BOARDWALK REIT MD&A AND FINANCIAL REPORT
A similar calculation for 2019 and 2018 maintenance capital expenditures, reconciled to Boardwalk’s 2019 and 2018 actual
cash flow from investing activities, are also provided below for comparison. In 2019, Boardwalk estimated Maintenance
CAPEX to be $605 per apartment unit for the year, and in 2018 the Trust estimated $620 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 Budget Capital Expenditures
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
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
2019 Cash Flow from Investing Activities
Improvements to Investment Properties
$
117,644
Additions to Property, Plant & Equipment
Apartment Units
Standardized Maintenance CAPEX Per Unit
5,630
$ 123,274
33,263
$
$
605
605
35
BOARDWALK REIT MD&A AND FINANCIAL 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
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
Improvements to Investment Properties
$
117,914
Additions to Property, Plant & Equipment
Apartment Units
Standardized Maintenance CAPEX Per Unit
8,008
$ 125,922
33,424
$
$
620
620
36
BOARDWALK REIT MD&A AND FINANCIAL 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, 2020
September 30, 2020
June 30, 2020
March 31, 2020
December 31, 2019
September 30, 2019
June 30, 2019
March 31, 2019
Number
of Properties
Aggregate
Fair Value
Percentage of
Portfolio as of that Date
4
4
4
4
4
4
4
4
$
$
$
$
$
$
$
$
615,599
158,394
157,212
130,597
610,594
118,379
65,183
185,378
10.3%
2.6%
2.6%
2.2%
10.2%
2.0%
1.1%
3.1%
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 Appraisers. In addition to performing a valuation on a selection of the 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 (and significant unobservable inputs in Level 3) for the Trust’s investment properties are set out in
the following tables:
As at
Dec. 31, 2020
Dec. 31, 2019
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%
4.76%
5.75%
4.50%
4.50%
4.75%
5.25%
5.65%
5.75%
4.50%
4.50%
7.14%
$
65,745
5.75%
7.50%
4.50%
4.75%
5.75%
5.75%
6.00%
6.00%
114,552
17,981
3,088
18,385
6,093
11,390
17,471
15,687
7.50%
31.78%
$
$
270,392
32,258
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
Overall portfolio weighted average capitalization rate was 5.27% as at December 31, 2020 and 5.27% as at December 31, 2019.
37
BOARDWALK REIT MD&A AND FINANCIAL REPORT
The “Overall Capitalization Rate” method requires a forecasted stabilized 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,
market rental rate potential, 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
cap rate will result in a decrease to the fair value of an investment property. When the cap rate is applied to NOI to calculate
fair value, there is a significant impact whereby the lower the cap rate, the larger the impact. Below are tables that
summarize the sensitivity impact of changes in both cap rates and NOI on the Trust’s fair value of its investment properties
(excluding building acquisitions valued at Level 2 inputs, right-of-use assets related to lease liabilities, and development) as at
December 31, 2020 and December 31, 2019:
As at December 31, 2020
Net Operating Income
Cap Rate
-0.25%
Cap Rate As Reported
+0.25%
-3%
-1% As Forecasted
+1%
+3%
$ 293,571
$ 299,624
$ 302,650
$ 305,677
$ 311,730
5.02%
$ 105,381
$ 226,038
$ 286,366
$ 346,695
$ 467,352
5.27%
5.52%
(172,394)
(424,994)
(57,465)
5,746,471
57,465
(315,273)
(266,484)
(205,551)
172,394
(95,830)
As at December 31, 2019
Net Operating Income
Cap 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
(328,528)
(271,316)
59,925
(214,105)
179,774
(99,681)
Investment properties with a fair value of $622.2 million as at December 31, 2020 ($615.2 million – December 31, 2019), are
situated on land held under ground (or land) leases.
Investment properties with a fair value of $762.5 million as at December 31, 2020 (December 31, 2019 – $895.5 million), are
pledged as security against the Trust’s committed revolving credit facility. In addition, investment properties with a fair value
of $5.7 billion as at December 31, 2020 (December 31, 2019 – $5.8 billion), are pledged as security against the Trust’s
mortgages payable.
For the year ended December 31, 2020, the Trust capitalized $108.7 million in building improvements (and $32.9 million in
development expenditures) and recorded a fair value loss of $383.0 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. See the section titled “Joint Venture Agreements” in this MD&A for a discussion of
the Trust’s multi-family joint venture projects.
On September 1, 2020, the Trust purchased the first parcel of a development site in Victoria, British Columbia, in the
community of Esquimalt, for a purchase price of $3.1 million (including transaction costs). On November 2, 2020, the Trust
acquired the second parcel of adjacent land for a purchase price of $10.1 million (including transaction costs). The purchases
are part of Boardwalk’s long-term strategic plan of high-grading and geographic expansion, with the land planned for the
development of new rental units. Subsequent to December 31, 2020, the Trust acquired a third parcel of adjacent land for a
purchase price of $1.9 million (excluding transaction costs).
38
BOARDWALK REIT MD&A AND FINANCIAL REPORT
On November 23, 2020, the Trust purchased a development site in Victoria, British Columbia, in the community of View
Royal, for a purchase price of $14.5 million (including transaction costs). The Trust plans to redevelop the land which has the
potential for up to 247 new rental units.
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, 2020, the Trust expended $32.9 million on total development costs compared to
$30.1 million for the prior year. Interest costs of $1.4 million were capitalized for the year ended December 31, 2020.
(December 31, 2019 – $1.4 million).
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 99.7% of Boardwalk REIT’s secured mortgages carry NHA insurance. In volatile times, including during
the ongoing COVID-19 pandemic, the ability to access this product is very beneficial to the Trust as a whole.
The Trust’s liquidity position as at December 31, 2020 remains stable as the following table highlights:
($000)
Cash position, December 31, 2020
Subsequent Committed/Funded Financing
Committed Revolving Credit Facility Available
Total Available Liquidity
$
52,960
16,510
199,750
$
269,220
In addition to this, the Trust currently has 1,020 rental apartment units of unencumbered assets, of which 257 units are
pledged against the Trust’s committed revolving credit facility. It is estimated that, under current CMHC underwriting criteria,
the Trust could obtain an additional $113.7 million of new proceeds from the financing of its current unencumbered assets.
Approximately 99.7% of Boardwalk REIT’s secured mortgages carry NHA insurance.
The reader should also be aware that of the $384.2 million of secured mortgages coming due in 2021 (as shown in the table
below), all have NHA insurance, and represent in aggregate approximately 51% of current estimated “underwriting” values on
those individual secured assets. Interest rates on five and 10-year NHA-insured mortgages as of February 2021 were 1.30%
and 2.10%, 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 $81.4 million, or 21%, of its $384.2 million of 2021
mortgage maturities. The weighted average contracted interest rate on these renewals is 1.30%, for an average term of
six 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) as at December 31, 2020, were $2.9 billion, compared to
$2.7 billion as at December 31, 2019.
39
BOARDWALK REIT MD&A AND FINANCIAL REPORT
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, 2020, was 2.58% compared to 2.74% on December 31, 2019. To better
maintain cost effectiveness and flexibility of capital, Boardwalk REIT continuously monitors short and long-term interest
rates. If the environment warrants, the Trust will convert short-term, floating rate debt, if any, to longer term, fixed rate
mortgages to reduce interest rate renewal risk.
Year of Maturity
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
Total Principal Outstanding
Unamortized Deferred Financing Costs
Unamortized Market Debt Adjustment
Per Financial Statements
CONSTRUCTION LOAN PAYABLE
Principal Outstanding
as at Dec. 31, 2020
Weighted Average
Interest Rate
By Maturity
$
384,245
425,275
350,931
314,898
561,108
150,649
381,567
132,042
185,049
118,322
3,004,086
(107,722)
426
$
2,896,790
2.40%
2.72%
2.91%
2.59%
2.15%
2.51%
3.03%
2.98%
2.53%
1.99%
2.58%
% of Total
12.8%
14.2%
11.7%
10.5%
18.7%
5.0%
12.7%
4.4%
6.2%
3.8%
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, $42.4 million has been drawn on this loan, of which Boardwalk’s 50% portion is $21.2 million. The facility
is interest payable only and has a maturity date of July 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, 2020, and December 31, 2019,
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, 2020
Dec. 31, 2019
$
269,144
$
258,793
(39,324)
229,820
82,345
2.79
1.50
(40,913)
217,880
79,032
2.76
1.50
40
BOARDWALK REIT MD&A AND FINANCIAL REPORT
For the year ended December 31, 2020, 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 Class B Units and fair value adjustments, was 2.79, compared to 2.76 for the year ended December 31, 2019. The reader
should note that under IFRS, the distributions made to the holders of LP Class B Units 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.
UNITHOLDERS’ EQUITY
The following table discloses the changes in Trust Units issued and outstanding:
Summary of Unitholders’ Capital Contributions
December 31, 2018
Units issued for vested deferred units
December 31, 2019
Units issued for vested deferred units
December 31, 2020
Units
46,391,986
69,307
46,461,293
87,655
46,548,948
Boardwalk REIT has one class of publicly traded voting securities, being the Trust Units. As at December 31, 2020, there
were 46,548,948 Trust 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 Class B Units”), each of which also has a special voting unit
in the REIT. Each LP Class B Unit is exchangeable for a Trust Unit on a one-for-one basis at the option of the holder. Each
LP Class B Unit, through the special voting unit, entitles the holder to one vote at any meeting of Unitholders. Accordingly, if
all of the LP Class B Units were exchanged for Trust Units, the total issued and outstanding Trust Units would be 51,023,948.
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 as at December 31, 2020 and 2019.
During 2019 and 2020, the Trust did not purchase and cancel any Trust Units.
EQUITY
Boardwalk has an equity market capitalization of approximately $1.7 billion based on the Trust Unit closing price of $33.74 on
the TSX on December 31, 2020.
ENTERPRISE VALUE
With a total enterprise value of approximately $4.7 billion (consisting of total debt of $3.0 billion and market capitalization of
$1.7 billion) as at December 31, 2020, Boardwalk’s total debt is approximately 64% of total enterprise value.
41
BOARDWALK REIT MD&A AND FINANCIAL REPORT 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 AIF, which is available under the Trust’s profile at
www.sedar.com, 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.
Currently, we operate in Canada, in the provinces of Alberta, Saskatchewan, Ontario, and Quebec and we expect to
commence operations in British Columbia. 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 twelve 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 twelve months or less. The Trust is dependent on leasing markets to ensure vacant residential space is leased,
expiring leases are renewed and new tenants are found to fill vacancies. With the drastic drop in oil prices and speculation
that lower oil prices will continue over an extended period of time, as well as the ongoing COVID-19 pandemic, the risk of a
prolonged 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.
42
BOARDWALK REIT MD&A AND FINANCIAL REPORT 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
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, 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: Four of our properties, located in Banff, 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 2024 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
43
BOARDWALK REIT MD&A AND FINANCIAL REPORT 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.
Fluctuations of Cash Distributions: Although Boardwalk REIT intends to continue to make distributions, the actual amount
of distributions in respect of the Trust Units will depend upon numerous factors, including, but not limited to, the amount of
principal repayments, tenant allowances, leasing commissions, capital expenditures and Trust Unit redemptions and other
factors that may be beyond the control of Boardwalk REIT. The distribution policy of Boardwalk REIT is established by the
Board of Trustees and is subject to change at the discretion of the Board of Trustees. The recourse of Unitholders who
disagree with any change in policy is limited and could require such Unitholders to seek to replace the Board of Trustees.
Distributions may exceed 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 Trust 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.
44
BOARDWALK REIT MD&A AND FINANCIAL REPORT 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 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 Resident Members is somewhat dependent on the availability of
well-trained Associates and contractors to service our Resident Members as well as complete required maintenance and
capital upgrades on our buildings. The Trust must also balance requirements to maintain adequate staffing levels while
balancing the overall cost to the Trust.
Within Boardwalk, our most experienced Associates are employed full-time; this full-time force is supplemented by additional
part-time Associates as well as specific contract services needed by the Trust. We are constantly reviewing existing overall
market factors to ensure that our existing compensation program is in-line with existing levels of responsibility and, if
warranted, we adjust the program accordingly. We also encourage Associate feedback in these areas to ensure the existing
programs are meeting their personal needs.
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 33,396 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.
45
BOARDWALK REIT MD&A AND FINANCIAL REPORT 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.
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
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BOARDWALK REIT MD&A AND FINANCIAL REPORT 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.
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 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 participates 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.
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BOARDWALK REIT MD&A AND FINANCIAL REPORT STRUCTURAL SUBORDINATION
Liabilities of a parent entity with assets held by various subsidiaries may result in the structural subordination of the lenders
of the parent entity. The parent entity is entitled only to the residual equity of its subsidiaries after all debt obligations of its
subsidiaries are discharged. In the event of a bankruptcy, liquidation or reorganization of the Trust, holders of indebtedness of
the Trust may become subordinate to lenders to the subsidiaries of the Trust.
Certain subsidiaries of the Trust will provide a form of guarantee pursuant to which the Indenture Trustee will, subject to the
Trust Indenture, be entitled to seek redress from such subsidiaries for the guaranteed indebtedness. These guarantees are
intended to eliminate structural subordination, which arises as a consequence of the Trust’s assets being held in various
subsidiaries. Although all subsidiaries, which own material assets, will provide a guarantee, not all subsidiaries of the Trust
will provide such a guarantee. In addition, there can be no assurance the Indenture Trustee will, or will be able to, effectively
enforce the guarantee.
Rent Control Risk is the risk of the implementation or amendment of new or existing legislative rent controls in the
markets Boardwalk REIT 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 2019 and 2020, the guideline amounts have been established at 1.8% and 2.2%, respectively, and for 2021
the guideline amount has been set at 0.0%. Further details on Ontario’s Annual Rental Increase Guidelines can be found at
http://www.landlordselfhelp.com/RentIncreaseGuideline.htm. This adjustment is meant to take into account the income of the
building, the municipal and school taxes, the insurance bills, the energy costs, maintenance, and service costs. Landlords may
apply to the Ontario Rental Housing Tribunal for an increase above the guideline amounts if annual costs for heat, hydro, water,
or municipal taxes have increased significantly, or if building security costs have increased. 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 2020 this return is
3.1% compared to 2.7% for 2019, compared to 2.4% for 2018 and compared to 2.4% for 2017), 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, 2020, and before April 2, 2021, 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 https://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.
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.
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BOARDWALK REIT MD&A AND FINANCIAL REPORT 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. Beginning in 2020, Alberta began to participate in the federal carbon levy at a price of
$1.05/gigajoule. Any significant increase in these resource costs that Boardwalk REIT cannot pass on to the Resident
Member 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 Resident Member; 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 Tax Act, for fiscal 2019 and 2020, the Trust qualified as a real estate investment trust for income tax
purposes and, as such, was exempted from the specified investment flow-through rules (the SIFT Rules).
A real estate investment trust 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)
(b)
(c)
at each time in the taxation year the total fair market value at that time of all non-portfolio properties that are qualified
real estate investment trust 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;
not less than 90% of the trust’s gross real estate investment trust 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;
not less than 75% of the trust’s gross real estate investment trust 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;
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BOARDWALK REIT MD&A AND FINANCIAL REPORT (d)
at each time in the taxation year an amount, that is equal to 75% or more of the equity value of the trust at that time, is
the amount that is the total fair market value of all properties held by the trust each of which is a real or immovable
property that is a capital property, an eligible resale property, an indebtedness of a Canadian corporation represented by
a bankers’ acceptance, a property described by either paragraph (a) or (b) of the definition “qualified investment” in
section 204, or a deposit with a credit union; and,
(e)
investments in the trust are, at any time in the taxation year, listed or traded on a stock exchange or other public market.
For this purpose, “real or immovable property” includes a security of any trust, corporation or partnership that itself satisfies
the above criteria, but does not include any depreciable property of a prescribed class for which the rate of capital cost
allowance exceeds 5%.
If Boardwalk REIT, or any other trust, does not qualify as a real estate investment trust, it will no longer be able to deduct for
tax purposes its taxable distributions, and, as such, will be required to pay tax on this amount prior to distribution. Any
amount distributed that is determined to be a return of capital would not be subject to this tax.
EXISTING TAX FILING POSITIONS
Although Boardwalk REIT is of the view that all expenses to be claimed by Boardwalk REIT, Top Hat Operating Trust (the
“Operating Trust”) and Boardwalk REIT Limited Partnership (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 assets held by them (the “Contributed Assets”), which were acquired by Boardwalk REIT on May 3, 2004
pursuant to a plan of arrangement under section 193 of the Business Corporations Act (Alberta) (the “Plan of Arrangement”).
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, BPCL Holdings Inc. (formerly called Boardwalk Equities Inc.) (the
“Corporation”) transferred the Contributed Assets to the Partnership and received, as certain consideration therefore.
See “Corporate Structure and Background” in the AIF. 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. 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 “Corporate Structure and Background – Ancillary Agreements in Connection with the Arrangement” in the AIF.
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 distributable income of Boardwalk REIT.
Risks Associated with a Global Health Pandemic
A global health pandemic, including the COVID-19 pandemic, represents a risk which has a significant impact on many of the
Trust’s previously identified risks as follows on the next page:
50
BOARDWALK REIT MD&A AND FINANCIAL REPORT Identified Risk
Global Health Pandemic Impact and Risk Management Response
Multi-family Residential Sector Risk
Upon expiry of any lease, there can be no assurance that the lease will be renewed or the tenant
replaced. To date, turnover appears to have decreased as Resident Members are practicing social
distancing. This has mitigated this risk.
Fluctuations of Cash Distributions
Distributions may exceed cash available to Boardwalk REIT from time to time. To mitigate this
risk, Boardwalk has implemented a minimum distribution policy which provides increased cash
flow certainty. As previously mentioned, for the year ended December 31, 2020, distributions
currently represent 36.5% of FFO or 42.6% of AFFO, representing a low cash flow commitment
and the ability to maintain payments should cash flow decrease.
Access to Capital Risk
The real estate industry is highly capital intensive and accessing capital may be more difficult
during a global health pandemic, including the COVID-19 pandemic. To date, governments have
responded quickly to ensure capital remains available. Through its partnership with CMHC,
Boardwalk still remains able to access capital.
Credit Risk
Market Risk
The risk of loss due to failure of a Resident Member to fulfill its obligation of required payments.
To date, Canada has experienced unprecedented unemployment rates which could hamper a
Resident Member’s ability to pay rent. Governments have implemented support programs which
should mitigate this risk; however, the impact of the risk remains unknown.
The risk that the Trust could be adversely affected due to market changes particularly in supply,
interest rates and regional rent controls. With the COVID-19 pandemic, provincial governments
had, and could once again, apply rental rate freezes, which could adversely impact the Trust’s
cash flows from operating activities. To date, we have seen a decrease in government bond
yields, resulting in a corresponding decrease in mortgage interest rates. This may provide an
opportunity for the Trust to obtain financing at lower interest rates when mortgages mature and
need to be renewed. Lastly, as social distancing practices are maintained, the expected onset
of new supply of rental housing will likely take longer as construction completion times are
extended. This decreases the supply risk to the Trust.
Supply Risk
Please see market risk.
Rent Control Risk
Please see market risk.
Reputation Risk
The risk that a pandemic impacts the reputation of the Trust for actions it did, or did not, take
during a health pandemic.
Joint Ventures and Co-ownerships
A global pandemic, including the COVID-19 pandemic, may adversely impact our joint venture
partners financially, which could have a correspondingly negative impact on the Trust’s cash
flows. To mitigate this risk, the Trust is in constant communication and engagement with our
partners regarding their financial stability.
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 (“DC&P”) or
internal control over financial reporting (“ICFR”).
The design and effectiveness of our DC&P and ICFR may not prevent all errors, misstatements, or misrepresentations. While
management continues to review the design and effectiveness of our DC&P and ICFR, we cannot assure you that our DC&P
or ICFR will be effective in accomplishing all control objectives all of the time. Deficiencies, particularly material weaknesses,
in ICFR 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.
51
BOARDWALK REIT MD&A AND FINANCIAL 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 to the audited annual consolidated financial statements for the years ended
December 31, 2020 and 2019.
The preparation of the audited annual consolidated 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 audited annual consolidated financial statements and the
uncertainties that could affect the reported results.
In addition, beginning in 2020, the COVID-19 pandemic has had a substantial impact on the Canadian economy. As a result of
the uncertainty associated with the unprecedented nature of the COVID-19 pandemic, certain of the Trust’s significant
judgements were impacted. Specifically, significant judgement was required when measuring the Trust’s investment
properties which are carried at fair value using assumptions based on market conditions, which currently have limited
long-term visibility. The full long-term impact of the COVID-19 pandemic on the valuation of investment properties is
unknown. Furthermore, judgement was required in assessing the collectability of any outstanding tenant receivable balances
and the consideration of applying an allowance for estimated credit losses to these balances. In response to the spread of
the virus, provincial governments have limited a landlord’s ability to evict tenants for the non-payment of rent. Additionally,
social (physical) distancing actions have resulted in the temporary closure of many businesses or limited openings and
staffing for other businesses, which has had a significant impact on unemployment rates across Canada and may adversely
impact residents’ ability to pay rent, with the long-term impact unknown.
Due to the occurrence of COVID-19, an amendment was also issued by the IASB regarding Leases – IFRS 16 (“IFRS 16”)
effective June 1, 2020, with earlier application permitted. The impact of the amendment on the Trust’s audited annual
consolidated financial statements are disclosed in NOTE 2 to the audited annual consolidated financial statements.
(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) to the
audited annual consolidated financial statements) 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
52
BOARDWALK REIT MD&A AND FINANCIAL REPORT 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) to the audited annual consolidated
financial statements).
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 de-recognition of the property (calculated as the difference between the net disposal proceeds and the
carrying amount of the asset) is included in profit or loss in the period in which the property is derecognized.
Excess land represents land owned by the Trust located contiguous to land included as investment property. The Trust has
the ability to develop additional multi-family residential buildings on this land or sell it separately from the Investment
Property at a later date. Excess land is held for capital appreciation and, therefore, is treated as Investment Property and
recorded in accordance with IAS 40 as outlined above. When determining the fair value of a project with excess land, the
capitalization rate used in determining the value is adjusted accordingly.
(B) PROPERTIES UNDER DEVELOPMENT
Properties under development include new development on excess land density or acquired land, re-development or
re-positioning of buildings the Trust currently owns that require substantial renovations, and incomplete apartment units
acquired from third parties that will take 12 months or longer to complete. The cost of land, if applicable, and buildings under
development or re-development (consisting of development sites, density or intensification rights and related infrastructure)
are specifically identifiable costs incurred in the period before construction is complete. Capitalized costs include pre-
construction costs essential to the development or re-development of the property, construction costs, borrowing costs
directly attributable to the development, real estate taxes, and other costs incurred during the period of development or
re-development. Additions to investment properties consist of costs of a capital nature and, in the case of properties under
development and/or redevelopment, capitalized interest. Directly attributable borrowing costs are also capitalized on land or
properties acquired specifically for development or redevelopment when activities necessary to prepare the asset for
development or redevelopment are in progress in accordance with IAS 23 – Borrowing Costs (“IAS 23”). Where borrowings
are associated with specific developments, the amount capitalized is the total cost incurred on those borrowings.
The capitalization of borrowing costs commences when the activities necessary to prepare an asset for development or
redevelopment begins, and continues until the date that substantially all of the construction is complete and all necessary
occupancy and related permits have been received, whether or not the space is leased. If the Trust is required, as a condition
of a lease, to construct tenant improvements that enhance the value of the property, then capitalization of costs continues
until such improvements are completed. Capitalization ceases if there is a prolonged period where development activity
is interrupted.
Properties under active development are generally valued at market land values, if applicable, plus costs invested to date.
Where significant leasing and construction is in place and the future income stream is reasonably determinable, the valuation
methodology used is similar to that of revenue-producing properties, less estimates of future capital outlays, construction
and development costs, to determine a net “as-is” market value. Development risks such as planning, zoning, licenses, and
building permits are considered in the valuation process. Properties not under active development, such as land parcels held
for future development, are valued 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.
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BOARDWALK REIT MD&A AND FINANCIAL REPORT (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) to the audited annual consolidated financial
statements) and IFRS 5 (see NOTE 2(j) to the audited annual consolidated financial statements).
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) to the
audited annual consolidated financial statements). 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.
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 assets
Site equipment and other assets
Warehouse assets
Site equipment and other assets
Corporate assets
Site equipment and other assets
Computer hardware
Corporate technology assets
Computer software*
Corporate technology assets
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.
54
BOARDWALK REIT MD&A AND FINANCIAL REPORT 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 re-measured 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 re-measured at subsequent reporting dates in
accordance with IAS 39 – Financial Instruments: Recognition and Measurement, 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 (loss) income.
When a business combination is achieved in stages, the Trust’s previously held equity interest in the acquiree is re-measured
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 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 resell, it is classified
as a non-current asset (or disposal group) held for sale if the disposal is expected to take place within one year of the
acquisition and it is highly likely that the other conditions referred to above will be met within a short period following the
acquisition. Retrospective application is not required; therefore, comparative figures will not be adjusted to reflect
non-current assets held for sale. The gains or losses arising on a sale of assets (or disposal groups) that does not meet the
definition of discontinued operations will be recognized as part of continuing operations, while the gains or losses arising
on a sale of assets (or disposal groups) that meets the definition of discontinued operations will be reported as part of
discontinued operations in the consolidated statement of comprehensive (loss) income.
(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
55
BOARDWALK REIT MD&A AND FINANCIAL REPORT 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 audited annual consolidated financial statements on an after-tax basis in accordance with IFRS 5.
In addition, retrospective application is required; therefore, comparative figures will be changed to reflect discontinued
operations. As an individual building or a group of buildings in a non-core municipal region does not constitute a major
line of business, these sales are not treated as discontinued operations.
(F) IMPAIRMENT OF ASSETS
At the end of each reporting period, assets, other than those identified in the standard as not being applicable to
IAS 36 – Impairment of Assets (“IAS 36”), such as investment properties recorded at fair value, are assessed for any
indication of impairment. Should the indication of impairment exist, the recoverable amount (see below) of the asset is
estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the
recoverable amount of an individual asset, the Trust estimates the recoverable amount of the cash-generating unit to which
the asset belongs. Where a reasonable and consistent basis of allocation can be identified, corporate assets are also
allocated to individual cash-generating units, or otherwise they are allocated to the smallest group of cash-generating units
for which a reasonable and consistent allocation basis can be identified.
Recoverable amount is defined as the higher of an asset’s “fair value less cost to sell” and its “value-in-use”. In assessing
value-in-use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects
current market assessments of the time value of money and the risks specific to the asset for which the estimate of future
cash flows have not been adjusted.
Where the carrying amount of an asset exceeds the recoverable amount determined, an impairment loss is recognized in the
consolidated statement of comprehensive (loss) income. After the recognition of an impairment loss, the depreciation charge
related to that asset is also revised for the adjusted carrying amount on a systematic basis over the remaining useful life of
the asset. Should this impairment loss be determined to have reversed in a future period (with the exception of goodwill), a
reversal of the impairment loss is recorded in profit or loss. However, the reversal of an impairment loss will not increase the
carrying amount that would have been determined (net of amortization) had no impairment loss been recognized.
(G) INVENTORIES
Inventories are measured at the lower of cost and net realizable value. The costs of inventories comprise the purchase price,
import duties and other taxes (other than those subsequently recoverable by the entity from the taxing authorities), and
third-party transport, handling, and other costs directly attributable to the acquisition of goods and materials, less any trade
discounts, rebates and other similar items, using the first-in, first-out method of cost assignment. Net realizable value
represents the estimated selling price for inventories less all estimated costs necessary to make the sale.
(H) LEASES
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.
56
BOARDWALK REIT MD&A AND FINANCIAL REPORT 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) to
the audited annual consolidated financial statements for definition of effective interest method).
The Trust re-measures 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 re-measured 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 re-measured 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 re-measured 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 (loss) 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 2019 and 2020, Boardwalk REIT qualified as a “mutual fund trust” as defined under the Tax Act and as a real estate
investment trust 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 to the audited annual consolidated financial statements summarizes the Trust’s subsidiaries, including
its corporate subsidiaries).
57
BOARDWALK REIT MD&A AND FINANCIAL REPORT 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 statements of comprehensive (loss) income because of items of
income or expense that are taxable or deductible in other years and items that are never taxable or deductible. The Trust’s
liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the end of the
reporting period.
Deferred Tax
Deferred tax is recognized on temporary differences between the carrying amounts of assets and liabilities in the audited
annual 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.
(J) PROVISIONS
In accordance with IAS 37, a provision is a liability of uncertain timing or amount. Provisions are recognized when the entity
has a present legal or constructive obligation as a result of past events and when it is probable that an outflow of resources
will be required to settle the obligation and the amount can be reliably estimated. Provisions are not recognized for future
operating losses. Provisions are measured at the present value of the expenditures expected to be required to settle the
obligation using a discounted rate that reflects current market assessment of the time value of money and the risks and
uncertainties specific to the obligation. Provisions are re-measured at each reporting date using the current discount rate.
The increase in the provision due to the passage of time is recognized as a financing cost.
(K) UNIT-BASED PAYMENTS
Equity-settled unit-based payments to employees and Board of 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 Trust 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 (loss) 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.
58
BOARDWALK REIT MD&A AND FINANCIAL REPORT (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
twelve months. Any suite specific incentives offered or initial direct costs incurred in negotiating and arranging an
operating lease are also amortized over the term of the operating lease. Rental revenue is recorded based on the
amount received or to be received in accordance with the operating lease.
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, and recovery of certain operating costs,
including retirement services and 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 24 and NOTE 36 to the audited annual consolidated financial statements).
(ii) Building Sales
The gain or loss from the sale of an investment property is recognized when title passes to the purchaser (control is
transferred) upon closing at which time all or substantially all of the funds are receivable, or have been received, and the
conditions of the sale have been completed.
(iii) Interest Income
Interest income from a financial asset is recognized when it is probable that the economic benefits will flow to the Trust
and the amount of income can be measured reliably. Interest income is accrued on a time basis when earned, by
reference to the principal outstanding and at the effective interest rate applicable. Interest income is included in
financing costs in the consolidated statement of comprehensive (loss) income.
(iv) Ancillary Rental Income
Ancillary rental income comprises revenue from coin laundry machines located on the Trust’s existing building sites, and
income received from telephone and cable providers and is recorded when earned.
(v) Development Management Fees
Boardwalk has interests in investment properties through joint arrangements 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.
(vi) Property Management Fees
Boardwalk has an interest in an investment property through a joint arrangement whereby the Trust provides residential
property management services to the co-owners for a management fee equal to 3.5% of gross revenue generated from
the residential component of the investment property. The management fees are recorded as services are provided.
(N) FINANCIAL INSTRUMENTS AND DERIVATIVES
Financial instruments and derivatives are accounted for, presented, and disclosed in accordance with IFRS 7 – Financial
Instruments: Disclosures, 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.
59
BOARDWALK REIT MD&A AND FINANCIAL 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 (loss) income.
Financial assets that do not meet the criteria for being
measured at amortized cost or 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 estimated 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.
60
BOARDWALK REIT MD&A AND FINANCIAL 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
Construction loan payable
Classification and Measurement
Amortized cost
FVTPL
Amortized cost
Deferred unit-based compensation
FVTPL
Refundable tenants’ security deposits
Trade and other payables
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.
61
BOARDWALK REIT MD&A AND FINANCIAL 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,
2020 and 2019, the Trust had no embedded derivatives requiring separate recognition.
(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) to the audited annual
consolidated financial statements), that have been made in applying the Trust’s accounting policies and that have the most
significant effect on the reported amounts in the audited annual 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) to the audited annual consolidated
financial statements. 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 assets.
(iii) Investment Property and Internal Capital Program
The Trust’s accounting policy relating to investment property is described in NOTE 2(f) to the audited annual consolidated
financial statements. 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) to the audited annual
consolidated financial statements. 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.
62
BOARDWALK REIT MD&A AND FINANCIAL REPORT (v) Basis of Consolidation
The audited annual 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.
(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.
In addition, beginning in 2020, the COVID-19 pandemic has had a substantial impact on the Canadian economy. As a result of
the uncertainty associated with the unprecedented nature of the COVID-19 pandemic, certain of the Trust’s significant
judgements were impacted. Specifically, significant judgement was required when measuring the Trust’s investment
properties which are carried at fair value using assumptions based on market conditions, which currently have limited
long-term visibility. The full long-term impact of COVID-19 pandemic on the valuation of investment properties is unknown.
Furthermore, judgement was required in assessing the collectability of any outstanding tenant receivable balances and the
consideration of applying an allowance for estimated credit losses to these balances. In response to the spread of the virus,
provincial governments initially limited landlord’s ability to evict tenants for non-payment of rent but have since lifted this
regulation. Social (physical) distancing actions resulted in the temporary closure of many businesses, which has had a
significant impact on unemployment rates across Canada and may adversely impact resident’s ability to pay rent, with the
long-term impact being unknown.
(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 to the audited annual consolidated financial statements.
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 to the audited annual consolidated financial statements 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 to the audited annual consolidated financial statements, 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.
63
BOARDWALK REIT MD&A AND FINANCIAL REPORT (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 21 to the audited annual consolidated financial statements.
Application of New and Revised IFRS 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 audited annual consolidated financial statements and note disclosures.
(A) APPLICATION OF NEW AND REVISED IFRSS
New or Amended Standards
Summary of Requirements
Amendments to IFRS 3
Definition of a business
Amendments to IAS 1 and
IAS 8 Definition of material
Amendment to IFRS 16 COVID-19
Related Rent Concessions
The amendment clarifies 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 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 amendment provides a practical expedient to
lessees, who have received a rent concession as a direct
consequence of the COVID-19 pandemic, an optional
election not to assess if it is a lease modification. A
lessee that makes this election shall account for any
changes in lease payments resulting from the rent
concession the same way it would account for the
change applying IFRS 16 if the change were not a
lease modification.
Possible Impact on Audited Annual
Consolidated Financial statements
This amendment was applied
prospectively on January 1, 2020
and there was no impact on the
audited annual consolidated
financial statements.
This amendment was applied
prospectively on January 1, 2020
and there was no impact on the
audited annual consolidated
financial statements.
Early adoption of this amendment
was applied retrospectively to
January 1, 2020 and there was
no impact on the audited annual
consolidated financial statements.
In addition, the following amended standards did not have any impact on the Trust’s audited annual consolidated
financial statements:
§ Amendments to References to the Conceptual Framework in IFRS Standards.
64
BOARDWALK REIT MD&A AND FINANCIAL 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 the audited annual consolidated financial statements:
New or Amended Standards
Summary of Requirements
IFRS 3 – Business Combinations
Amendments to IFRS 10 and
IAS 28 – Sale or Contribution of
Assets between an Investor and
its Associate or Joint Venture
IAS 1 – Presentation of
Financial Statements
IAS 16 – Property, Plant
and Equipment
The amendment updates reference to the Conceptual
Framework. Specifically, the standard is updated to
refer to the 2018 Conceptual Framework instead of
the 1989 Framework; a new requirement is added that,
for transactions and other events within the scope of
IAS 37 – Provisions, contingent liabilities and contingent
assets or interpretations of the IFRS Committee
(IFRIC) 21 – Levies, an acquirer applies IAS 37 or
IFRIC 21 (instead of the Conceptual Framework) to
identify the liabilities it has assumed in a business
combination; and the addition of an explicit statement
that an acquirer does not recognize contingent assets
acquired in a business combination.
The amendment applied prospectively and is effective
for annual periods beginning on or after January 1, 2022.
Early adoption is permitted.
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 deals with the presentation of liabilities,
not the amount or timing of recognition, or disclosure.
Specifically, the amendment clarifies the classification
of liabilities as current or non-current should be
based on rights that are in existence at the end of the
reporting period and that classification is unaffected by
expectations about whether an entity will exercise its
right to defer settlement of a liability.
The amendment is effective for annual reporting periods
beginning on or after January 1, 2022 and are to be
applied retrospectively, with earlier application permitted.
The amendment covers proceeds from selling items
produced from property, plant and equipment before
its intended use. Specifically, the amendment to the
standard prohibit deducting from the cost of an item of
property, plant and equipment any proceeds from selling
items produced while bringing that asset to the location
and condition necessary for it to be capable of operating
in the manner intended by management. Instead, an
entity recognizes the proceeds from selling such items,
and the cost of producing those items, in profit or loss.
The amendment is applied retrospectively and is
effective for annual periods beginning on or after
January 1, 2022. Early application is permitted.
Possible Impact on Audited Annual
Consolidated Financial Statements
The Trust does not expect this
amendment to have any impact on its
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 any impact on its
consolidated financial statements.
65
BOARDWALK REIT MD&A AND FINANCIAL REPORT New or Amended Standards
Summary of Requirements
IAS 37 – Provisions, Contingent
Liabilities and Contingent Assets
2018-2020 Cycle
IFRS 9 – Financial Instruments
The amendment clarifies what costs an entity considers
in assessing whether a contract is onerous. Specifically,
the cost of fulfilling a contract comprises the costs that
relate directly to the contract. Costs that relate directly to
a contract can either be incremental costs of fulfilling that
contract or an allocation of other costs that relate directly
to fulfilling contracts.
The amendment is applied prospectively to contracts
for which the entity has not yet fulfilled all its obligations
at the beginning of the annual reporting period in which
the entity first applies the amendments or after the first
reporting period beginning on or after January 1, 2022.
The amendment clarifies which fees an entity includes
when it applies the ’10 per cent’ test in assessing
whether to derecognize a financial liability when there is
an exchange between an existing borrower and lender
of debt instruments with substantially different terms or
similarly when a substantial modification of the terms
of an existing financial liability or a part of it occurs.
Specifically, an entity includes only fees paid or received
between the entity (the borrower) and the lender,
including fees paid or received by either the entity or the
lender on the other’s behalf.
The amendment is applied prospectively and is effective
for annual reporting periods beginning on or after
January 1, 2022.
Possible Impact on Audited Annual
Consolidated Financial Statements
The Trust is assessing the potential
impact but does not expect any
significant impact.
The Trust does not expect this
amendment to have any impact on
its audited annual 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
§ 2018-2020 Cycle:
IFRS 1 – First-time Adoption of International Financial Reporting Standards
IAS 41 – Agriculture
International Financial Reporting Standards
The Trust’s audited annual consolidated financial statements have been prepared in accordance with IFRS as issued by the
IASB and IFRIC.
66
BOARDWALK REIT MD&A AND FINANCIAL REPORT Disclosure Controls and Procedures & Internal Control
Over Financial Reporting
DC&P are designed to provide reasonable assurance that all relevant information is gathered and reported to senior
management, including the Chief Executive Officer, President and Chief Financial Officer, as applicable, on a timely basis so
appropriate decisions can be made regarding public disclosure.
The preparation of this information is supported by a set of DC&P implemented by management. In fiscal 2020, 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 DC&P as at December 31, 2020. The evaluation was
performed in accordance with the Committee of Sponsoring Organizations of the Treadway Commission control 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 (“NI 52-109”).
There were no changes made to our DC&P during the year ended December 31, 2020. Boardwalk REIT continues to review the
design of DC&P to provide reasonable assurance that material information relating to Boardwalk REIT is properly communicated
to certifying officers responsible for establishing and maintaining DC&P, as those terms are defined in NI 52-109.
As at December 31, 2020, 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 ICFR during the year ended December 31, 2020, that have materially affected, or are
reasonably likely to materially affect, our ICFR.
2021 FINANCIAL OUTLOOK AND
MARKET GUIDANCE
The financial impact of the COVID-19 pandemic remains uncertain and, as a result, the Trust is suspending financial
guidance for 2021. However, the Trust is committed to providing regular operational updates to is stakeholders in lieu
of financial guidance.
The Board of Trustees has approved the 2021 Capital Budget as follows:
Capital Budget ($000's)
Total Operational Capital
Development/Development JV
Acquisitions
Total Capital Investment
2021 Budget
Per Suite
2020 Actual
Per Suite
$ 132,900 $
3,980 $ 113,616 $
3,260
40,100
-
42,122
65,329
$ 173,000
$ 221,067
In total, the Trust expects to invest $132.9 million (or $3,980 per apartment unit) on operational capital in 2021 as compared
to $113.6 million (or $3,260 per apartment unit) actually spent in 2020. Additionally, for 2021, Boardwalk is estimating
$40.1 million to be spent on development.
Selected Consolidated Financial Information
The following selected financial information should be read in conjunction with this MD&A and the audited annual
consolidated financial statements and accompanying notes for the years ended December 31, 2020 and 2019, and the
applicable unaudited condensed consolidated interim financial statements of the Trust for the various quarterly interim
periods, which are available under the Trust’s profile at www.sedar.com.
The consolidated statements of comprehensive (loss) income and financial position information set forth in the following
tables has been derived from the audited annual consolidated financial statements referred to above and the unaudited
condensed consolidated interim financial statements of the Trust for various quarterly interim periods.
67
BOARDWALK REIT MD&A AND FINANCIAL REPORT Annual Comparative
(Cdn$ Thousands, except per Unit amount)
Total rental revenue
(Loss) profit
Funds from operations
(Loss) 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, 2020
Dec. 31, 2019
$
465,572
$
455,313
(197,279)
139,736
34,781
130,967
$
$
$
$
(4.24)
(4.85)
3.00
2.74
$
$
$
$
2,896,790
6,107,744
33,396
28,879
0.75
0.75
2.82
2.57
2,741,648
6,276,384
33,263
28,674
Quarterly Comparative
(Cdn$ Thousands, except per Unit amount)
Dec. 31,
Sep. 30,
2020
2020
Jun. 30,
2020
Mar. 31,
Dec. 31,
Sep. 30,
2020
2019
2019
Jun. 30,
2019
Mar. 31,
2019
Total rental revenue
$ 116,543 $ 116,207 $ 116,818 $ 116,004 $ 115,378 $ 114,660 $ 113,383 $ 111,892
Three Months Ended
(Loss) profit
Funds from operations
(Loss) profit per unit
– Basic
– Diluted
Funds from operations per unit
– Basic
– Diluted
(188,435)
(31,444)
(35,269)
57,869
(108,636)
34,268
37,785
36,201
31,482
32,156
79,560
35,775
71,601
34,788
(7,744)
28,249
$
(4.05) $
(0.68) $
(0.76) $
1.25 $
(2.34) $
1.71 $
1.54 $
(0.17)
$
(4.05) $
(0.79) $
(0.76) $
1.25 $
(2.34) $
1.71 $
1.35 $
(0.17)
$
$
0.74 $
0.81 $
0.78 $
0.68 $
0.69 $
0.77 $
0.75 $
0.67 $
0.74 $
0.71 $
0.62 $
0.63 $
0.70 $
0.68 $
0.61
0.56
ADDITIONAL INFORMATION
Additional information relating to Boardwalk Equities Inc. and Boardwalk REIT, including the AIF, is available on SEDAR
at www.sedar.com.
Respectfully,
[signed]
Sam Kolias
CHAIRMAN OF THE BOARD
AND CHIEF EXECUTIVE OFFICER
February 25, 2021
[signed]
Lisa Smandych
CHIEF FINANCIAL OFFICER
68
BOARDWALK REIT MD&A AND FINANCIAL 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]
Sam Kolias
CHIEF EXECUTIVE OFFICER
Lisa Smandych
CHIEF FINANCIAL OFFICER
February 25, 2021
69
BOARDWALK REIT MD&A AND FINANCIAL REPORT INDEPENDENT AUDITOR’S REPORT
To the Unitholders and the Board of Trustees 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, 2020 and 2019, and the consolidated
statements of comprehensive (loss) income, changes in unitholders’ 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, 2020 and 2019, 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.
Key Audit Matter
A key audit matter is a matter that, in our professional judgment, was of most significance in our audit of the financial
statements for the year ended December 31, 2020. This matter was addressed in the context of our audit of the financial
statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on this matter.
FAIR VALUE OF INVESTMENT PROPERTIES – REFER TO NOTES 2(F) AND 4 OF THE
FINANCIAL STATEMENTS
Key Audit Matter Description
The Trust has elected the fair value model for all investment properties and accordingly measures all investment properties at
fair value subsequent to initial recognition on the statement of financial position. The Trust uses a combination of internal and
external processes and valuation techniques to estimate fair value based on a number of inputs.
While several inputs are required to determine the fair value of the investment properties, the assumptions with the highest
degree of subjectivity and impact on fair values are the forecast of rental income and capitalization rates. Auditing these
assumptions required a high degree of auditor judgment as the estimations made by management are subject to a high degree
of estimation uncertainty. This resulted in an increased extent of audit effort, including the need to involve fair value specialists.
How the Key Audit Matter Was Addressed in the Audit
Our audit procedures related to the forecast of rental income and capitalization rates used to determine the fair value of the
investment properties included the following, among others:
§ Evaluated the effectiveness of controls over determination of investment properties fair value, including those over the
determination of the forecast of rental income and capitalization rates.
§ Evaluated the reasonableness of management’s forecast of rental income by comparing management’s forecast with
historical results, internal communications to management and the Board of Trustees, contractual information and market
rents at the valuation date, where applicable.
70
BOARDWALK REIT MD&A AND FINANCIAL REPORT § With the assistance of fair value specialists, evaluated the reasonableness of capitalization rates by developing a range of
estimates based on recent market transactions and industry surveys and comparing them to the capitalization rates
selected by management.
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.
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.
71
BOARDWALK REIT MD&A AND FINANCIAL REPORT § 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.
From the matters communicated with those charged with governance, we determine those matters that were of most
significance in the audit of the financial statements of the current period and are therefore the key audit matters. We
describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when,
in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse
consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.
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 24, 2021
72
BOARDWALK REIT MD&A AND FINANCIAL 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
Lease receivable
Mortgage receivable
Deferred tax assets
Current assets
Inventories
Prepaid assets
Lease 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
Construction loan payable
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, 2020
Dec. 31, 2019
4
$ 5,948,955
$
6,147,482
5
6
7
8
9
21
10
11
8
12
13
14
32,189
34,967
2,019
964
2,790
825
36,289
25,751
1,454
-
2,708
751
6,022,709
6,214,435
6,441
6,184
652
11,174
7,624
52,960
85,035
8,263
6,127
-
4,370
8,023
35,166
61,949
$
6,107,744
$ 6,276,384
15
$ 2,452,681
$ 2,366,974
16
17
18
19
21
22
15
17
18
19
22
20
23
150,987
80,030
-
2,242
2
4,506
205,537
110,367
14,720
2,825
-
4,885
2,690,448
2,705,308
444,109
3,842
21,187
973
378
10,797
59,561
540,847
3,231,295
2,876,449
2,876,449
374,674
3,659
-
1,584
378
10,855
61,871
453,021
3,158,329
3,118,055
3,118,055
$
6,107,744
$ 6,276,384
73
BOARDWALK REIT MD&A AND FINANCIAL REPORT
CONSOLIDATED STATEMENTS OF
COMPREHENSIVE (LOSS) INCOME
(CDN $ THOUSANDS)
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
Adjustment to right-of-use asset related to lease receivable
Fair value losses
Other income
(Loss) profit before income tax
Income tax recovery
(Loss) profit for the year
Other comprehensive income
Total comprehensive (loss) income
See accompanying notes to these consolidated financial statements
Note
Year Ended
Dec. 31, 2020
Year Ended
Dec. 31, 2019
24
$
465,572
$
455,313
96,338
48,938
51,152
269,144
91,622
36,069
3,255
8,195
130,003
(1,136)
(159)
101,108
47,883
47,529
258,793
88,198
38,645
2,268
8,809
120,873
(714)
-
(326,134)
(86,132)
75
(197,351)
72
(197,279)
-
-
34,027
754
34,781
-
$
(197,279)
$
34,781
25
19
26
27
8
28
7
21
74
BOARDWALK REIT MD&A AND FINANCIAL REPORT
CONSOLIDATED STATEMENTS OF
CHANGES IN UNITHOLDERS’ EQUITY
(CDN $ THOUSANDS)
Trust Units
Cumulative
Profit (Loss)
Cumulative
Distributions
to Unitholders
Retained
Earnings
Total
Unitholders’
Equity
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
Units issued
Loss for the year
Total comprehensive loss for the year
Distributions declared to Unitholders
2,244
-
-
-
-
(197,279)
(197,279)
-
-
-
-
(46,571)
-
(197,279)
(197,279)
(46,571)
2,244
(197,279)
(197,279)
(46,571)
Balance, December 31, 2020
$ 202,512
$ 4,155,480
$ (1,481,543)
$ 2,673,937
$ 2,876,449
See accompanying notes to these consolidated financial statements
75
BOARDWALK REIT MD&A AND FINANCIAL REPORT
CONSOLIDATED STATEMENTS
OF CASH FLOWS
(CDN $ THOUSANDS)
Operating activities
(Loss) profit for the year
Loss on sale of assets
Adjustment to right-of-use asset related to lease receivable
Financing costs
Interest paid
Deferred unit-based compensation
Fair value losses
Income tax recovery
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
Principal repayments on lease receivable
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 increase (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
76
Note
Year Ended
Dec. 31, 2020
Year Ended
Dec. 31, 2019
$
(197,279)
$
34,781
27
8
25
19
28
21
22
26
35
4
4
4
5
27
6
7
8
35
35
18
9
35
1,136
159
91,622
(85,448)
3,255
326,134
(72)
-
(378)
8,195
147,324
(6,243)
141,081
(65,329)
(108,653)
(32,906)
(4,963)
4,920
(9,216)
(565)
449
(773)
(217,036)
(46,564)
284,395
(63,056)
(69,686)
6,467
-
(14,793)
(3,465)
451
93,749
17,794
35,166
14
$
52,960
$
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
35,166
BOARDWALK REIT MD&A AND FINANCIAL REPORT
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
For the Years Ended, December 31, 2020 and 2019
(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, 2018, 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.
Certain comparative figures have been reclassified to conform to the presentation of the current year. Specifically, ancillary
rental income has been included in rental revenue.
(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.
77
BOARDWALK REIT MD&A AND FINANCIAL 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 statements of financial position and
consolidated statements of comprehensive (loss) 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 generally 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)).
78
BOARDWALK REIT MD&A AND FINANCIAL REPORT 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 de-recognition 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
79
BOARDWALK REIT MD&A AND FINANCIAL REPORT life. IAS 16 also requires that the cost and useful economic life of each significant component of a tangible asset be
determined based on the circumstances of each tangible asset. The method of depreciation, residual values, and estimates
of the useful economic life of a tangible asset, or other property, plant and equipment, are reviewed at each financial
year-end and any changes are accounted for as a change in accounting estimate in accordance with IAS 8 – Accounting
Policies, Changes in Accounting Estimates and Errors (“IAS 8”).
Property, Plant and Equipment (“PP&E”) is valued using the cost model under IAS 16. PP&E is categorized into the following
classes and their respective useful economic life is used to calculate the amount of depreciation or amortization for each
period. Categories of PP&E with the same or similar useful lives are included in the same class.
PP&E Class
PP&E Category (NOTE 5)
Useful Life / Depreciation Rate
Depreciation Method Used
Administrative building
Administrative building
Site equipment
Automobiles
Site equipment and other assets
Site equipment and other assets
Warehouse assets
Site equipment and other assets
Corporate assets
Site equipment and other assets
Computer hardware
Corporate technology assets
Computer software*
Corporate technology assets
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.
80
BOARDWALK REIT MD&A AND FINANCIAL 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 re-measured 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 re-measured at subsequent reporting dates in
accordance with IAS 39 – Financial Instruments: Recognition and Measurement, 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 (loss) income.
When a business combination is achieved in stages, the Trust’s previously held equity interest in the acquiree is re-measured
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 previous page), 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 resell, it is classified
as a non-current asset (or disposal group) held for sale if the disposal is expected to take place within one year of the
acquisition and it is highly likely that the other conditions referred to above will be met within a short period following the
acquisition. Retrospective application is not required; therefore, comparative figures will not be adjusted to reflect
non-current assets held for sale. The gains or losses arising on a sale of assets (or disposal groups) that does not meet the
definition of discontinued operations will be recognized as part of continuing operations, while the gains or losses arising
on a sale of assets (or disposal groups) that meets the definition of discontinued operations will be reported as part of
discontinued operations in the consolidated statement of comprehensive (loss) income.
(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.
81
BOARDWALK REIT MD&A AND FINANCIAL 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 (loss) income. After the recognition of an impairment loss, the depreciation charge
related to that asset is also revised for the adjusted carrying amount on a systematic basis over the remaining useful life of
the asset. Should this impairment loss be determined to have reversed in a future period (with the exception of goodwill), a
reversal of the impairment loss is recorded in profit or loss. However, the reversal of an impairment loss will not increase the
carrying amount that would have been determined (net of amortization) had no impairment loss been recognized.
(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
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.
82
BOARDWALK REIT MD&A AND FINANCIAL REPORT 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 re-measures 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 re-measured 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 re-measured 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 re-measured 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
(loss) 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 2019 and 2020, 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 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 statements of comprehensive (loss) income because of items of
income or expense that are taxable or deductible in other years and items that are never taxable or deductible. The Trust’s
liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the end of the
reporting period.
83
BOARDWALK REIT MD&A AND FINANCIAL 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, 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 Board of 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 Trust 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 (loss) 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.
84
BOARDWALK REIT MD&A AND FINANCIAL 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, and recovery of certain operating costs,
including retirement services and 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 24 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 (loss) income.
(iv) Ancillary Rental Income
Ancillary rental income comprises revenue from coin laundry machines located on the Trust’s existing building sites, and
income received from telephone and cable providers and is recorded when earned.
(v) Development Management Fees
Boardwalk has interests in investment properties through joint arrangements 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.
(vi) Property Management Fees
Boardwalk has an interest in an investment property through a joint arrangement whereby the Trust provides residential
property management services to the co-owners for a management fee equal to 3.5% of gross revenue generated from
the residential component of the investment property. The management fees are recorded as services are provided.
(S) FINANCIAL INSTRUMENTS AND DERIVATIVES
Financial instruments and derivatives are accounted for, presented, and disclosed in accordance with IFRS 7 – Financial
Instruments: Disclosures, 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.
85
BOARDWALK REIT MD&A AND FINANCIAL 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 (loss) income.
Financial assets that do not meet the criteria for being
measured at amortized cost or 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 estimated 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.
86
BOARDWALK REIT MD&A AND FINANCIAL 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
Construction loan payable
Classification and Measurement
Amortized cost
FVTPL
Amortized cost
Deferred unit-based compensation
FVTPL
Refundable tenants’ security deposits
Trade and other payables
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.
87
BOARDWALK REIT MD&A AND FINANCIAL 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,
2020 and 2019, 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 assets.
(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.
88
BOARDWALK REIT MD&A AND FINANCIAL 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
Below 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.
In addition, beginning in 2020, the COVID-19 pandemic has had a substantial impact on the Canadian economy. As a result of
the uncertainty associated with the unprecedented nature of the COVID-19 pandemic, certain of the Trust’s significant
judgements were impacted. Specifically, significant judgement was required when measuring the Trust’s investment
properties which are carried at fair value using assumptions based on market conditions, which currently have limited
long-term visibility. The full long-term impact of COVID-19 pandemic on the valuation of investment properties is unknown.
Furthermore, judgement was required in assessing the collectability of any outstanding tenant receivable balances and the
consideration of applying an allowance for estimated credit losses to these balances. In response to the spread of the virus,
provincial governments initially limited landlord’s ability to evict tenants for non-payment of rent but have since lifted this
regulation. Social (physical) distancing actions resulted in the temporary closure of many businesses, which has had a
significant impact on unemployment rates across Canada and may adversely impact resident’s ability to pay rent, with the
long-term impact being unknown.
(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.
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BOARDWALK REIT MD&A AND FINANCIAL REPORT (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 21.
Note 3: Application of New and Revised IFRS and Future
Accounting Policies
(A) APPLICATION OF NEW AND REVISED IFRS
In the current year, the Trust has applied a number of 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.
New or Amended Standards
Summary of Requirements
Amendments to IFRS 3 Definition
of a business
Amendments to IAS 1 and IAS 8
Definition of material
Amendment to IFRS 16 COVID-19
Related Rent Concessions
The amendment clarifies 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 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 amendment provides a practical expedient to
lessees, who have received a rent concession as a direct
consequence of the COVID-19 pandemic, an optional
election not to assess if it is a lease modification.
A lessee that makes this election shall account for any
changes in lease payments resulting from the rent
concession the same way it would account for the
change applying IFRS 16 if the change were not a
lease modification.
Possible Impact on Consolidated
Financial Statements
This amendment was applied
prospectively on January 1, 2020
and there was no impact on the
consolidated financial statements.
This amendment was applied
prospectively on January 1, 2020
and there was no impact on the
consolidated financial statements.
Early adoption of this amendment was
applied retrospectively to January 1,
2020 and there was no impact on the
consolidated financial statements.
In addition, the following amended standards did not have any impact on the Trust’s consolidated financial statements:
§ Amendments to References to the Conceptual Framework in IFRS Standards
90
BOARDWALK REIT MD&A AND FINANCIAL 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
IFRS 3 – Business Combinations
Amendments to IFRS 10 and
IAS 28 – Sale or Contribution of
Assets between an Investor and
its Associate or Joint Venture
IAS 1 – Presentation of
Financial Statements
IAS 16 – Property, Plant and
Equipment
The amendment updates reference to the Conceptual
Framework. Specifically, the standard is updated to
refer to the 2018 Conceptual Framework instead of the
1989 Framework; a new requirement is added that, for
transactions and other events within the scope of
IAS 37 – Provisions, contingent liabilities and contingent
assets or IRIC 21 – Levies, an acquirer applies
IAS 37 or IFRIC 21 (instead of the Conceptual
Framework) to identify the liabilities it has assumed in
a business combination; and the addition of an explicit
statement that an acquirer does not recognize contingent
assets acquired in a business combination.
The amendment applied prospectively and is effective
for annual periods beginning on or after January 1, 2022.
Early adoption is permitted.
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 deals with the presentation of liabilities,
not the amount or timing of recognition, or disclosure.
Specifically, the amendment clarifies the classification
of liabilities as current or non-current should be
based on rights that are in existence at the end of the
reporting period and that classification is unaffected by
expectations about whether an entity will exercise its
right to defer settlement of a liability.
The amendment is effective for annual reporting periods
beginnng on or after January 1, 2022 and are to be
applied retrospectively, with earlier application permitted.
The amendment covers proceeds from selling items
produced from property, plant and equipment before
its intended use. Specifically, the amendment to the
standard prohibit deducting from the cost of an item of
property, plant and equipment any proceeds from selling
items produced while bringing that asset to the location
and condition necessary for it to be capable of operating
in the manner intended by management. Instead, an
entity recognizes the proceeds from selling such items,
and the cost of producing those items, in profit or loss.
The amendment is applied retrospectively and is
effective for annual periods beginning on or after
January 1, 2022. Early application is permitted.
Possible Impact on Consolidated
Financial Statements
The Trust does not expect this
amendment to have any impact on its
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 any impact on its
consolidated financial statements.
91
BOARDWALK REIT MD&A AND FINANCIAL REPORT Possible Impact on Consolidated
Financial Statements
The Trust is assessing the potential
impact but does not expect any
significant impact.
The Trust does not expect this
amendment to have any impact on its
consolidated financial statements.
New or Amended Standards
Summary of Requirements
IAS 37 – Provisions, Contingent
Liabilities and Contingent Assets
2018-2020 Cycle
IFRS 9 – Financial Instruments
The amendment clarifies what costs an entity considers
in assessing whether a contract is onerous. Specifically,
the cost of fulfilling a contract comprises the costs that
relate directly to the contract. Costs that relate directly to
a contract can either be incremental costs of fulfilling that
contract or an allocation of other costs that relate directly
to fulfilling contracts.
The amendment is applied prospectively to contracts
for which the entity has not yet fulfilled all its obligations
at the beginning of the annual reporting period in which
the entity first applies the amendments or after the first
reporting period beginning on or after January 1, 2022.
The amendment clarifies which fees an entity includes
when it applies the ’10 per cent’ test in assessing
whether to derecognize a financial liability when there is
an exchange between an existing borrower and lender
of debt instruments with substantially different terms or
similarly when a substantial modification of the terms
of an existing financial liability or a part of it occurs.
Specifically, an entity includes only fees paid or received
between the entity (the borrower) and the lender,
including fees paid or received by either the entity or the
lender on the other’s behalf.
The amendment is applied prospectively and is effective
for annual reporting periods beginning on or after
January 1, 2022.
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
§ 2018-2020 Cycle:
IFRS 1 – First-time Adoption of International Financial Reporting Standards
IAS 41 – Agriculture
92
BOARDWALK REIT MD&A AND FINANCIAL REPORT Note 4: Investment Properties
As at
Balance, beginning of year
Additions
Building acquisitions
Building improvements (incl. internal capital program)
Development of investment properties (1)
Dispositions
Fair value losses, unrealized
Balance, end of year
As at
Fair value of investment properties, before building acquisitions valued
at Level 2 inputs, right-of-use assets, and developments
Building acquisitions (valued at Level 2 inputs)
Fair value, right-of-use assets (IFRS 16)
Revenue producing properties
Properties under development (2)
Total
Year Ended
Dec. 31, 2020
Year Ended
Dec. 31, 2019
$
6,147,482
$
6,053,135
81,389
108,653
32,906
(38,504)
(382,971)
36,842
117,645
30,091
(41,371)
(48,860)
$ 5,948,955
$
6,147,482
Dec. 31, 2020
Dec. 31, 2019
$
5,746,471
$ 5,992,479
81,389
77,635
-
107,355
5,905,495
6,099,834
43,460
47,648
$ 5,948,955
$
6,147,482
(1) On September 1, 2020, and November 2, 2020, the Trust purchased adjacent parcels of land in Victoria, British Columbia, for a purchase price of
$3.1 million and $9.8 million, respectively, and on November 23, 2020, purchased an additional parcel of land in Victoria, British Columbia, for a purchase
price of $14.0 million. The acquisitions were funded with cash on hand and are planned for two separate development projects of new rental units.
(2) On February 21, 2020, a 162-unit development project in Calgary, Alberta (where the Trust owns 50%), with costs totaling $36.5 million was transferred
from development to revenue producing properties.
On September 28, 2020, the Trust acquired a portfolio of four properties in Southwestern Ontario, located in the markets of
Kitchener, Waterloo, and Cambridge. The portfolio is comprised of 226 units and had a purchase price of $63.0 million.
The acquisition was funded with cash on hand and the assumption of a mortgage for $7.0 million.
On August 27, 2020, the Trust purchased a property in Cambridge, Ontario. The property is comprised of 56 units and
had a purchase price of $16.2 million. The acquisition was funded with cash on hand and the assumption of a mortgage
for $9.1 million.
On April 1, 2019, the Trust acquired a property in Edmonton, Alberta totaling 124 units with a purchase price of $35.8 million.
The acquisition was funded with cash on hand.
Building Acquisitions
Purchase price
Transaction costs
Total
Allocation of fair value to investment properties
Multi-family units acquired
Purchase price
Transaction costs
Mortgage financing assumed
Net cash paid
Please refer to NOTE 27 for details on the Trust’s dispositions in fiscal 2020 and 2019.
Year Ended
Dec. 31, 2020
Year Ended
Dec. 31, 2019
$
$
$
79,200
$
35,813
2,189
81,389
81,389
282
$
$
1,029
36,842
36,842
124
$
79,200
$
35,813
2,189
(16,060)
1,029
-
$
65,329
$
36,842
93
BOARDWALK REIT MD&A AND FINANCIAL REPORT
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, 2020, there has been no change to the valuation techniques.
In determining the appropriate classes of investment properties in order to determine the fair value measurement, the Trust
has considered the nature, characteristics and risk of its properties. The classification of investment properties is based
primarily on the geographical location of the asset, with the exception of properties situated on land leases. Below is a
continuity schedule based on investment property classes:
Year Ended December 31, 2020
Balance,
Beginning
Building
of Year
Acquisitions
Recurring measurements
Investment properties
Building
Improvements
(incl. Internal
Capital
Program)
Development
of Investment
Properties
Dispositions
(NOTE 27)
Fair Value
(Losses)
Gains
Balance,
End of Year
Calgary
Edmonton
Other Alberta
Victoria
Brampton
Cambridge
Kitchener
London
Mississauga
Waterloo
Montreal
Quebec City
Regina
Saskatoon
Land leases
Total
$ 1,413,661 $
-
$
22,838
$
3,718
$
- $ (123,964) $ 1,316,253
2,314,352
297,793
-
978
-
68,200
407,318
11,631
-
-
-
-
29,550
34,645
-
-
-
17,194
116,351
201,800
323,440
269,356
722,602
-
-
-
-
-
43,841
7,066
-
-
69
1,103
5,991
-
31
2,828
3,891
6,306
7,219
7,470
-
-
27,883
938
-
-
-
362
-
-
-
5
-
-
-
-
-
-
-
-
-
-
-
-
-
(7,426)
-
(192,873)
2,165,320
(26,212)
278,647
-
-
(69)
(688)
(5,441)
-
(31)
1,703
3,689
(27,417)
(12,522)
27,883
1,916
29,550
103,260
407,868
11,993
17,194
120,882
209,380
294,908
264,053
(31,078)
854
699,848
$ 6,147,482 $ 81,389
$ 108,653
$
32,906
$
(38,504) $ (382,971) $ 5,948,955
94
BOARDWALK REIT MD&A AND FINANCIAL REPORT
Year Ended December 31, 2019
Balance,
Beginning
of Year
Building
Acquisitions
Building
Improvements
(incl. Internal
Capital
Program)
Development
of Investment
Properties
Dispositions
(NOTE 27)
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
$ 1,419,191 $
-
$
18,363
$
17,709
$
2,337,898
36,842
311,180
253
52,828
318,767
-
115,367
192,470
320,789
305,889
678,503
-
-
-
-
-
-
-
-
-
-
45,629
7,492
-
1,621
7,978
-
1,250
4,151
9,488
9,514
12,159
(7)
-
725
-
-
11,631
-
-
33
-
-
-
-
-
-
-
-
-
-
-
-
(41,371)
$
(41,602) $ 1,413,661
(106,010)
2,314,352
(20,879)
297,793
-
13,751
80,573
-
(266)
5,179
(6,870)
(4,676)
978
68,200
407,318
11,631
116,351
201,800
323,440
269,356
-
31,940
722,602
$ 6,053,135 $
36,842
$
117,645
$
30,091
$
(41,371) $
(48,860) $ 6,147,482
Investment properties measured at fair value in the consolidated statements 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, 2020, all of the Trust’s investment properties were Level 3
inputs, except the new acquisitions which were Level 2 inputs. There were no transfers into or out of Level 3 fair value
measurements for investment properties held as at December 31, 2020 and December 31, 2019.
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, 2020
September 30, 2020
June 30, 2020
March 31, 2020
December 31, 2019
September 30, 2019
June 30, 2019
March 31, 2019
Number
of Properties
Aggregate
Fair Value
Percentage of
Portfolio as of That Date
4
4
4
4
4
4
4
4
$
$
$
$
$
$
$
$
615,599
158,394
157,212
130,597
610,594
118,379
65,183
185,378
10.3%
2.6%
2.6%
2.2%
10.2%
2.0%
1.1%
3.1%
95
BOARDWALK REIT MD&A AND FINANCIAL REPORT
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 Appraisers. 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.
Four of the Trust’s properties: 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 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, 2020
Dec. 31, 2019
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%
4.76%
5.75%
4.50%
4.50%
4.75%
5.25%
5.65%
5.75%
4.50%
4.50%
7.14%
$
65,745
5.75%
7.50%
4.50%
4.75%
5.75%
5.75%
6.00%
6.00%
114,552
17,981
3,088
18,385
6,093
11,390
17,471
15,687
7.50%
31.78%
$
$
270,392
32,258
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
The overall weighted average Capitalization Rates for fair valuing the Trust’s investment properties at December 31, 2020 and
2019 were 5.27% and 5.27%, respectively.
96
BOARDWALK REIT MD&A AND FINANCIAL REPORT 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 building
acquisitions valued at Level 2 inputs, right-of-use assets, and developments):
As at December 31, 2020
Net Operating Income
Cap Rate
-0.25%
Cap Rate As Reported
+0.25%
-3%
-1% As Forecasted
+1%
+3%
$ 293,571
$ 299,624
$ 302,650
$ 305,677
$ 311,730
5.02%
$ 105,381
$ 226,038
$ 286,366
$ 346,695
$ 467,352
5.27%
5.52%
(172,394)
(424,994)
(57,465)
5,746,471
57,465
(315,273)
(266,484)
(205,551)
172,394
(95,830)
As at December 31, 2019
Net Operating Income
Cap 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
(328,528)
(271,316)
59,925
(214,105)
179,774
(99,681)
Investment properties with a fair value of $622.2 million (December 31, 2019 – $615.2 million) are situated on land held
under land leases.
Investment properties with a fair value of $762.5 million (December 31, 2019 – $895.5 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 $5.7 billion
(December 31, 2019 – $5.8 billion) are pledged as security against the Trust’s mortgages payable. As at December 31, 2020,
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, and the joint venture project to develop two mixed-use towers in Brampton,
Ontario (NOTE 6).
For the years ended December 31, 2020 and 2019, investment properties earned rental revenue (including ancillary rental
income) of $465.6 million and $455.3 million, respectively. Direct operating expenses in relation to investment properties
were $196.4 million and $196.5 million for the years ended December 31, 2020 and 2019, respectively.
Note 5: Property, Plant and Equipment
The carrying amounts of PP&E were as follows:
As at
Dec. 31, 2020
Dec. 31, 2019
Accumulated
Depreciation
Cost
Carrying
Amount
Accumulated
Depreciation
Cost
Carrying
Amount
Administration building
$
6,750
$
(4,045)
$
2,705
$
6,686
$
(3,813)
$
2,873
Site equipment and other
Corporate technology assets
62,702
45,787
(41,076)
(37,929)
21,626
7,858
62,422
42,723
(37,209)
(34,520)
25,213
8,203
Total
$ 115,239
$
(83,050)
$
32,189
$
111,831
$
(75,542)
$
36,289
97
BOARDWALK REIT MD&A AND FINANCIAL REPORT
The following table outlines a reconciliation of the carrying amount of PP&E as at December 31, 2020:
Administration building
Site equipment and other
Corporate technology assets (1)
Balance,
Beginning
of Year
Remove
Right-of-use
Additions
Asset Disposals Depreciation
Balance,
End of Year
$
2,873
$
63 $
-
$
-
$
(231) $
2,705
25,213
8,203
3,269
3,070
(2,260)
-
(46)
(1)
(4,550)
(3,414)
21,626
7,858
Total
$
36,289
$
6,402 $
(2,260) $
(47) $
(8,195) $
32,189
(1) Included in corporate technology assets for the year ended December 31, 2020, was $0.9 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, 2019:
Administration building
Site equipment and other
Corporate technology assets (1)
Total
Balance,
Beginning
of Year
Additions
Disposals
Depreciation
Balance,
End of Year
$
22,965
$
149
$
-
$
(241)
$
2,873
27,877
8,201
2,465
3,489
(47)
(1)
(5,082)
(3,486)
25,213
8,203
$
39,043
$
26,103
$
(48)
$
(8,809)
$
36,289
(1) Included in corporate technology assets 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.
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.”) for a 50% interest in the partnership and the partnership is a joint venture. The principal activity of
the partnership is to develop and operate a mixed-use property in Brampton, Ontario.
For the year ended December 31, 2020, the Trust has contributed $9.2 million (December 31, 2019 – $15.9 million), resulting
in a total investment of $35.0 million as at December 31, 2020. As at December 31, 2020 and 2019, the partnership had the
following assets and liabilities:
As at
Non-current assets
Current assets (1)
Current liabilities
Dec. 31, 2020
Dec. 31, 2019
$
73,147
$
51,685
1,011
4,226
1,519
1,702
(1) Included in current assets, as at December 31, 2020, is cash of $0.3 million (December 31, 2019 – $0.2 million).
Note 7: Investment in Private Technology Venture Fund
For the year ended December 31, 2020, the Trust contributed $0.6 million (December 31, 2019 – $0.8 million) into a private
real estate technology venture fund and received a distribution for $0.2 million from this investment (December 31, 2019 –
$nil), representing a return of capital of $0.1 million and an investment gain of $0.1 million recorded in the consolidated
statement of comprehensive (loss) income as other income. As at December 31, 2020, total investment was $2.0 million
(December 31, 2019 – $1.5 million). The Trust has committed to contribute an additional USD $0.4 million. As a financial
asset, this investment is being carried at fair value through profit and loss. As a December 31, 2020 and 2019, the fair value
was equivalent to the contributed capital.
98
BOARDWALK REIT MD&A AND FINANCIAL REPORT
Note 8: Lease Receivable
In 2020, the Trust entered into a sublease for one of the warehouse spaces it carries as a lease obligation.
As at
Lease receivable
Fixed rate
Total
Current
Non-current
Dec. 31, 2020
Weighted
Dec. 31, 2019
Weighted
Average Interest
Lease Balance
Average Interest
Lease Balance
4.13%
$
$
$
$
1,616
1,616
652
964
1,616
-
$
$
$
$
-
-
-
-
-
In recognizing this lease receivable, the Trust derecognized the right-of-use asset it had recorded as a result of the
lease obligation. The difference between the right-of-use asset and the lease receivable of $0.2 million is recorded in
the consolidated statement of comprehensive (loss) income as an adjustment to the right-of-use asset related to the
lease receivable.
Estimated future principal payments expected to be received for the lease receivable as at December 31, 2020 are as follows:
12 months ending December 31, 2021
12 months ending December 31, 2022
12 months ending December 31, 2023
$
Amount
652
697
267
$
1,616
Note 9: Mortgage Receivable
As part of a 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, 2020
Dec. 31, 2019
Weighted
Average Interest
Receivable
Balance
Weighted
Average Interest
Receivable
Balance
Mortgage receivable
Fixed rate
Total
Current
Non-current
2.19%
$
$
2,790
2,790
-
2,790
$
2,790
2.19%
$
$
$
2,708
2,708
-
2,708
2,708
99
BOARDWALK REIT MD&A AND FINANCIAL REPORT
Note 10: Inventories
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, 2020
Dec. 31, 2019
$
6,441
$
8,263
Note 11: 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, 2020
Dec. 31, 2019
$
363
$
2,856
2,965
$
6,184
$
765
2,856
2,506
6,127
Note 12: 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 $11.2 million at December 31, 2020
(December 31, 2019 – $4.4 million).
As at
Trade and other receivables
Receivable from insurers
Dec. 31, 2020
Dec.31, 2019
$
$
2,395
$
8,779
11,174
$
2,012
2,358
4,370
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 13: 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 $7.6 million at December 31, 2020 and $8.0 million
at December 31, 2019.
Note 14: Cash and Cash Equivalents
Cash and cash equivalents include cash of $38.0 million and term deposits with maturities of 90 days or less of $15.0 million
(December 31, 2019 – cash of $10.2 million and term deposits of $25.0 million).
100
BOARDWALK REIT MD&A AND FINANCIAL REPORT
Note 15: Mortgages Payable
As at
Mortgages payable
Fixed rate
Total
Current
Non-current
Dec. 31, 2020
Weighted
Dec. 31, 2019
Weighted
Average Interest
Debt Balance
Average Interest
Debt Balance
2.58%
$ 2,896,790
2.74%
$ 2,896,790
$
444,109
2,452,681
$ 2,896,790
$
$
$
2,741,648
2,741,648
374,674
2,366,974
$
2,741,648
Estimated future principal payments required to meet mortgage obligations as at December 31, 2020 are as follows:
12 months ending December 31, 2021
12 months ending December 31, 2022
12 months ending December 31, 2023
12 months ending December 31, 2024
12 months ending December 31, 2025
Subsequent
Unamortized deferred financing costs
Unamortized market debt adjustments
Secured By
Investment Properties
$
444,109
463,186
376,075
323,492
527,625
869,599
3,004,086
(107,722)
426
$
2,896,790
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, 2020 and 2019, 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, 2020 (December 31, 2019 – $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, 2025. 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, 2020 (December 31, 2019 – $nil) under this facility, except for Letters
of Credit (“LCs”) issued and outstanding. The LCs totaled $0.3 million as at December 31, 2020 (December 31, 2019 –
$0.3 million). As such, approximately $199.7 million was unused and available from this facility on December 31, 2020
(December 31, 2019 – $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).
101
BOARDWALK REIT MD&A AND FINANCIAL REPORT
Note 16: LP Class B Units
The LP Class B Units, as defined in NOTE 23, representing an aggregate fair value of $151.0 million at December 31, 2020
(December 31, 2019 – $205.5 million), are non-transferable, except under certain circumstances, but are exchangeable, on a
one-for-one basis, into Boardwalk Trust 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 Trust 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 (loss) income and are included in NOTE 28.
As at December 31, 2020 and December 31, 2019 , there were 4,475,000 LP Class B Units issued and outstanding.
Note 17: 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 four 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 4 to 75 years as at
December 31, 2020. Two of the land leases provide for annual rent.
(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, 2020
Weighted
Dec. 31, 2019
Weighted
Average Interest
Lease Balance
Average Interest
Lease Balance
3.26%
$
$
$
$
83,872
83,872
3,842
80,030
83,872
3.25%
$
$
$
114,026
114,026
3,659
110,367
$
114,026
Estimated future principle payments required to meet lease liabilities as at December 31, 2020 are as follows:
12 months ending December 31, 2021
12 months ending December 31, 2022
12 months ending December 31, 2023
12 months ending December 31, 2024
12 months ending December 31, 2025
Subsequent
$
$
Amount
3,842
3,881
2,734
2,112
1,860
69,443
83,872
The Trust had a land lease attributable to a property that was sold on June 25, 2020, (NOTE 27). Under this land lease, the
Trust made variable payments not linked to an index and, as such, these variable payments were excluded from lease
liabilities and included in operating expense. During 2020, up until the date the property was sold, variable lease payments
related to this land lease and included under operating expenses totaled $0.3 million.
102
BOARDWALK REIT MD&A AND FINANCIAL REPORT
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, 2020, lease payments on short-term leases or leases of low value assets totaled
$2.1 million (December 31, 2019 – $2.1 million).
Note 18: Construction Loan Payable
During 2019, the Trust, in conjunction with its joint operation partner, entered into a $50 million revolving construction facility
loan with a third-party financial institution. To date, $42.4 million has been drawn on this loan, of which Boardwalk’s portion
is $21.2 million. The facility is interest payable only and has a maturity date of July 31, 2021. The facility bears interest at
prime plus 0.05%, or 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, 2020, the Trust was in compliance with these covenants.
Note 19: Deferred Unit-based Compensation
Deferred unit-based compensation is comprised of the following:
As at
Current
Non-current
Dec. 31, 2020
Dec. 31, 2019
$
$
973
$
2,242
3,215
$
1,584
2,825
4,409
The total of $3.2 million represents the fair value of the underlying deferred units at December 31, 2020 (December 31, 2019 –
$4.4 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
(loss) 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 the Board of Trustees,
executives and leaders, 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 was most recently amended on February 26, 2020.
103
BOARDWALK REIT MD&A AND FINANCIAL REPORT
As at December 31, 2020 and 2019, 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
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
117,618
March, June & December 2019
1,614
1,771
2,188
4,454
June & December 2022
June & December 2023
March, June & December 2024
March, June & December 2024
2015
2016
2017
2018
2019
2020
Additional deferred
units earned on
units
$
16,186
2,702
6,828
12,602
19,713
29,833
97,557
169,235
7,396
176,631
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, 2018
Deferred units granted
Additional deferred units earned on units
Deferred units converted to Trust Units or cash
Balance, December 31, 2019
Deferred units granted
Additional deferred units earned on units
Deferred units forfeited
Deferred units converted to Trust Units or cash
Balance, December 31, 2020
# of Units Outstanding
# of Units Vested
157,897
51,692
3,606
(69,307)
143,888
117,618
4,623
(1,838)
(87,660)
176,631
-
69,689
7,296
(69,307)
7,678
88,261
5,555
-
(87,660)
13,834
For the year ended December 31, 2020, total costs of $3.3 million (December 31, 2019 – $2.3 million) were recorded in
expenses related to executive bonuses, leader bonuses, and trustee fees under the deferred unit plan.
Note 20: 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
104
Dec. 31, 2020
Dec. 31, 2019
$
49,923
$
52,505
4,255
5,383
4,248
5,118
$
59,561
$
61,871
BOARDWALK REIT MD&A AND FINANCIAL REPORT
As at December 31, 2020 and 2019, 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, 2020 and 2019, the Trust does not have any material contingent liabilities.
Note 21: Income taxes
CURRENT INCOME TAX
For the year ended December 31, 2020 and 2019, 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, 2020
(December 31, 2019 – $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.
DEFERRED INCOME TAX
For fiscal 2020 and 2019, Boardwalk REIT is a “mutual fund trust” as defined under the Tax Act and as a 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 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
Deferred tax assets
Deferred tax liabilities
Net deferred tax assets
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
Deferred tax assets
Deferred tax liabilities
Net deferred tax assets
Dec. 31, 2019
Recognized
in Profit
Dec. 31, 2020
$
751
$
74
$
825
-
-
751
751
-
$
$
-
(2)
72
74
(2)
$
$
751
$
72
$
-
(2)
823
825
(2)
823
$
$
$
Dec. 31, 2018
Recognized
in Profit
Dec. 31, 2019
$
$
$
$
64
$
687
$
751
-
(68)
(4)
64
(68)
$
$
-
68
755
687
68
$
$
(4)
$
755
$
-
-
751
751
-
751
No current income taxes or deferred income taxes were recognized in equity, other than through profit or OCI, for the years
ended December 31, 2020 and 2019.
As at December 31, 2020, wholly-owned Canadian corporate subsidiaries have deferred tax assets of $0.8 million
(December 31, 2019 – $0.8 million) related to operating losses, which expire over the next 12 to 19 years. The Trust believes
that the future income of these entities will be sufficient to utilize these deferred tax assets prior to their expiration.
105
BOARDWALK REIT MD&A AND FINANCIAL REPORT
The major components of income tax recovery include the following:
Current tax expense
Deferred tax recovery
Total income tax recovery
The income tax recovery for the year can be reconciled to the accounting profit as follows:
(Loss) profit before income tax expense
Remove loss from non-taxable entities
Accounting profit subject to tax
Deduct management fee charged to corporate entities
Taxable profit (loss)
Weighted average substantively enacted tax rate
Calculated income tax expense (recovery)
Changes to other deferred tax liabilities
Total income tax recovery
Year Ended
Dec. 31, 2020
Year Ended
Dec. 31, 2019
$
$
-
$
(72)
(72)
$
-
(754)
(754)
Year Ended
Dec. 31, 2020
Year Ended
Dec. 31, 2019
$
(197,351)
$
247,004
49,653
(49,442)
211
26.51%
56
(128)
$
(72)
$
34,027
11,492
45,519
(46,434)
(915)
26.60%
(243)
(511)
(754)
Note 22: 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, 2020, $378,000 was recognized in profit under rental
revenue for this grant (December 31, 2019 – $378,000).
Note 23: 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 Trust 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 “Trust 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 16.
106
BOARDWALK REIT MD&A AND FINANCIAL REPORT
(A) TRUST UNITS
Trust Units represent an undivided beneficial interest in Boardwalk REIT and in distributions made by Boardwalk REIT.
The Trust Units are freely transferable, subject to applicable securities regulatory requirements. Each Trust Unit entitles
the holder to one vote at all meetings of Unitholders. Except as set out under the redemption rights below, the Trust
Units have no conversion, retraction, redemption or pre-emptive rights.
Trust 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 Trust Units tendered
for redemption shall be surrendered and the holder shall be entitled to receive a price per Trust Unit equal to the lesser of:
i) 90% of the “market price” of the Trust Units on the principal market on which the Trust Units are quoted for trading
during the twenty-day period ending on the trading day prior to the day on which the Trust Units were surrendered to
Boardwalk REIT for redemption; and,
ii) 100% of the “closing market price” of the Trust Units on the principal market on which the Trust 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 Board of Trustees without the approval of any Unitholders.
The Trust has the following capital securities outstanding:
As at
Trust Units outstanding, beginning of year
Units issued for vested deferred units
Trust Units outstanding, end of year
Dec. 31, 2020
Dec. 31, 2019
46,461,293
46,391,986
87,655
69,307
46,548,948
46,461,293
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, 2020 and December 31, 2019, 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
Trust 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 Trust 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:
Units Outstanding
Units Outstanding
Dec. 31, 2020 Monthly Distribution
Dec. 31, 2019
Monthly Distribution
Boardwalk Trust Units
Special Voting Units
46,548,948
4,475,000
$0.0834/unit
N/A
46,461,293
4,475,000
$0.0834/unit
N/A
107
BOARDWALK REIT MD&A AND FINANCIAL 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 Trust Units with a record date of January 29, 2021 (paid on February 15, 2021) 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, 2020.
(C) (LOSS) EARNINGS PER UNIT
Numerator
(Loss) profit – basic
Distribution declared on LP Class B Units
Gain on fair value adjustments on LP Class B Units
Gain on fair value adjustment to unexercised deferred units
(Loss) profit – diluted
Denominator
Weighted average units outstanding – basic
Conversion of LP Class B Units
Unexercised deferred units
Weighted average units outstanding – diluted
(Loss) earnings per unit
– basic
– diluted
Year Ended
Dec. 31, 2020
Year Ended
Dec. 31, 2019
$
(197,279)
$
34,781
4,479
(54,550)
(169)
-
-
-
$
(247,519)
$
34,781
46,529,256
46,422,020
4,475,000
5,414
-
-
51,009,670
46,422,020
$
$
(4.24)
(4.85)
$
$
0.75
0.75
All dilutive elements were included in the calculation of diluted per unit amounts. For the year ended December 31, 2020,
both the conversion of LP Class B Units and the exercise of deferred units were dilutive and were included in the calculation
of diluted (loss) earnings per unit. 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.
Note 24: 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. Rental revenue represents all revenue earned from the Trust’s operating leases, as
well as ancillary rental income earned from revenue share service agreements with third parties, and totaled $465.6 million
for the year ended December 31, 2020 (December 31, 2019 – $455.3 million).
Rental revenue is comprised of the following:
Lease revenue
Parking revenue
Recoveries (cable, retirement) and revenue from telephone and cable providers
Revenue from coin laundry machines
Other (fees)
Total
Year Ended
Dec. 31, 2020
Year Ended
Dec. 31, 2019
$
440,831
$
432,546
7,157
7,097
4,189
6,298
7,163
7,241
4,589
3,774
$
465,572
$
455,313
108
BOARDWALK REIT MD&A AND FINANCIAL REPORT
As at December 31, 2020, under its non-cancellable operating leases, Boardwalk REIT was entitled to the following minimum
future payments:
Operating leases
Within 12 months
2 to 5 years
Over 5 years
$
232,219
$
14,024
$
427
Note 25: Financing Costs
Financing costs are comprised of interest on mortgages payable, distributions paid to the holders of LP Class B Units, 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, including interest earned on the lease receivable. Financing costs total $91.6 million
for the year ended December 31, 2020 (December 31, 2019 – $88.2 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, 2020
Year Ended
Dec. 31, 2019
$
77,962
$
75,159
(1,400)
4,479
1,939
3,206
(763)
6,199
(1,433)
4,479
1,478
3,737
(1,342)
6,120
$
91,622
$
88,198
For the year ended December 31, 2020, interest was capitalized to properties under development at a weighted average
effective interest rate of 2.41% (December 31, 2019 – 2.97%).
Note 26: Depreciation
The components of depreciation were as follows:
Depreciation of property, plant and equipment
Year Ended
Dec. 31, 2020
Year Ended
Dec. 31, 2019
$
8,195
$
8,809
Note 27: Loss on Sale of Assets and Net Cash Proceeds
On June 25, 2020, the Trust sold 158 units in Calgary, Alberta, which forms part of the Alberta geographical segment, for the
sale price of $3.0 million. On November 17, 2020, the Trust sold 72 units in Regina, Saskatchewan, which forms part of the
Saskatchewan geographical segment, for the sale price of $7.5 million. The loss on sale of assets and net cash proceeds is
outlined on the following page.
On September 16, 2019, the Trust sold 138 units in Saskatoon, Saskatchewan. Additionally, on May 28, 2019, the Trust
sold 140 units in Saskatoon, Saskatchewan. Both projects formed 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 on the
following page.
109
BOARDWALK REIT MD&A AND FINANCIAL REPORT
Sales price
Costs of disposition
Net proceeds
Net book value
Investment property
Right-of-use-asset (IFRS 16)
Property, plant and equipment
Lease liability
Loss on sale of assets
Sales price
Mortgage discharged on sale
Costs of disposition (cash only)
Net cash proceeds
Note 28: Fair Value (Losses) Gains
The components of fair value (losses) gains were as follows:
Investment properties (NOTE 4)
Financial assets designated as FVTPL
Mortgage receivable
Financial liabilities designated as FVTPL
Deferred unit-based compensation
LP Class B Units
Total fair value losses
Year Ended
Dec. 31, 2020
Year Ended
Dec. 31, 2019
$
$
$
$
10,459
$
41,420
(1,136)
(714)
9,323
$
40,706
10,412
28,092
47
(28,092)
10,459
(1,136)
$
41,372
-
48
-
41,420
(714)
10,459
$
41,420
(4,403)
(1,136)
(18,211)
(714)
$
4,920
$
22,495
Year Ended
Dec. 31, 2020
Year Ended
Dec. 31, 2019
$
(382,971)
$
(48,860)
82
250
2,205
54,550
(1,185)
(36,337)
$
(326,134)
$
(86,132)
Note 29: Guarantees, Contingencies, Commitments
and Other
As discussed in NOTE 17, the Trust has four 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.
110
BOARDWALK REIT MD&A AND FINANCIAL 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
Verdun, Quebec
London, Ontario
Electrical:
Area
Alberta
Alberta
Alberta
Estimated Usage Coverage
Term
Cost
25%
25%
25%
25%
25%
40%
60%
40%
75%
75%
November 1, 2016 to October 31, 2019
$3.17/Gigajoule ("GJ")
November 1, 2017 to October 31, 2020
November 1, 2018 to October 31, 2023
November 1, 2019 to October 31, 2024
November 1, 2020 to October 31, 2025
November 1, 2017 to October 31, 2020
November 1, 2018 to October 31, 2022
November 1, 2020 to October 31, 2025
November 1, 2018 to October 31, 2021
November 1, 2018 to October 31, 2021
$2.75/GJ
$2.08/GJ
$2.21/GJ
$2.78/GJ
$2.84/GJ
$2.56/GJ
$2.99/GJ
$3.40/GJ
$3.45/GJ
Estimated Usage Coverage
Term
Cost
49%
40%
45%
October 1, 2017 to September 30, 2022
$0.05/Kilowatt-hour (“kWh”)
October 1, 2015 to September 30, 2020
November 1, 2020 to October 31, 2024
$0.05/kWh
$0.06/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, 2020 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, Saskatchewan on September 16, 2019,
a mortgage totaling $12.5 million was assumed by the purchaser. As at December 31, 2020, this mortgage had a balance of
$12.1 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, Saskatchewan in 2017, mortgages totaling $24.4 million were assumed by the purchaser. As at December 31, 2020,
these mortgages have a balance of $22.1 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 British Columbia 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 $20.2 million as at December 31, 2020, 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, 2020 is
approximately $54.4 million (December 31, 2019 – $55.9 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, 2020 and 2019, no amounts have been recorded in the consolidated financial
statements with respect to the above noted indirect guarantees.
111
BOARDWALK REIT MD&A AND FINANCIAL 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, 2020
Dec. 31, 2019
$
269,144
$
258,793
(39,324)
229,820
82,345
2.79
1.50
(40,913)
217,880
79,032
2.76
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, 2020, the Trust’s weighted
average cost of capital was calculated to be 4.17%.
The following schedule details the components of the Trust’s capital and the related costs thereof:
As at
Dec. 31, 2020
Dec. 31, 2019
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 Trust Units
Total
2.58%
$
3,029,152
2.74%
$
6.97%
6.97%
6.97%
4.17%
$
150,987
3,215
1,570,562
4,753,916
4.57%
4.57%
4.57%
3.58%
$
2,766,101
205,537
4,409
2,133,967
5,110,014
(1) As a percentage of average carrying value unless otherwise noted.
(2) Underlying value of liabilities represents carrying value or the cost to retire on maturity. Underlying value of equity is based on the closing stock price of the
Trust’s Units.
Mortgages payable – These are the mortgages outstanding on the Trust’s investment properties. The debt is primarily fixed
rate debt and approximately 99% of this debt at December 31, 2020 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 49% of the fair
value of the Trust’s investment properties. This level of indebtedness is considered by the Trust to be within its target.
112
BOARDWALK REIT MD&A AND FINANCIAL REPORT
LP Class B Units – These units are non-transferable, except under certain circumstances, but are exchangeable, on a one-for-
one basis, into Boardwalk Trust 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 (loss) income.
As outlined in NOTE 32(d), Boardwalk REIT’s committed revolving credit facility agreements contain financial covenants.
Available liquidity as at December 31, 2020 included cash and cash equivalents on hand of $53.0 million (December 31, 2019 –
$35.2 million) as well as an unused committed revolving credit facility of $199.7 million (December 31, 2019 – $199.7 million).
The Trust monitors its ratios and as at December 31, 2020 and December 31, 2019, 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)
the carrying amounts of trade and other receivables, segregated tenants’ security deposits, cash and cash
equivalents, refundable tenants’ security deposits, trade and other payables, and construction loan payable
approximate their fair values due to their short-term nature.
the fair value of the Trust’s investment in private technology venture fund is based on information provided from the
organization managing the investments.
iii) 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.
iv) 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 Trust Units listed on the Toronto Stock Exchange.
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, 2020 and December 31, 2019 are as follows:
As at
Dec. 31, 2020
Dec. 31, 2019
Carrying Value
Fair Value
Carrying Value
Fair Value
Financial assets carried at FVTPL
Mortgage receivable
$
2,790
$
2,790
$
2,708
$
Investment in private technology venture fund
2,019
2,019
1,454
Financial liabilities carried at amortized cost
Mortgages payable
Construction loan payable
Financial liabilities carried at FVTPL
LP Class B Units
Deferred unit-based compensation
2,896,790
3,029,152
21,187
21,187
2,741,648
14,720
150,987
3,215
150,987
3,215
205,537
4,409
2,708
1,454
2,766,101
14,720
205,537
4,409
113
BOARDWALK REIT MD&A AND FINANCIAL REPORT
The fair value of the Trust’s mortgages payable was higher than the recorded value by approximately $132.4 million at
December 31, 2020 (December 31, 2019 – higher by $24.5 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, 2020 and December 31, 2019,
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, 2020 and December 31, 2019, 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, 2020
Dec. 31, 2019
Level 1
Level 2
Level 3
Level 1
Level 2
Level 3
$
-
$
81,389
$ 5,867,566
$
-
-
150,987
3,215
-
-
-
-
2,790
2,019
$
-
-
-
-
-
205,537
4,409
-
-
-
-
-
$ 6,147,482
2,708
1,454
-
-
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, 2020 and December 31, 2019, there
were no transfers between Level 1, Level 2, and Level 3 assets and liabilities. As at December 31, 2020, those investment
properties classified as Level 2 use 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.
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.
114
BOARDWALK REIT MD&A AND FINANCIAL REPORT
As at December 31, 2020, the Trust had no amount outstanding on its committed revolving credit facility and its mortgages
payable are fixed-rate debt. However, the Trust had $21.2 million (December 31, 2019 – $14.7 million) extended on its
construction loan payable, which is carried at variable-rate interest. As such, for the year ended December 31, 2020, all else
being equal, the increase or decrease in net earnings for each 1% change in market interest rates would be $0.8 million
(December 31, 2019 – $0.2 million).
B) CREDIT RISK
The Trust is exposed to credit risk as a result of its lease receivable, mortgage receivable, and trade and other receivables.
The trade and other receivables balance is comprised of mortgage holdbacks and refundable mortgage fees, accounts
receivable from significant customers and insurers, and tenant receivables. As at December 31, 2020 and December 31,
2019, no balance relating to mortgage holdbacks, refundable mortgage fees or accounts receivable from significant
customers and insurers was past due. Additionally, the lease receivable and mortgage receivable are in good standing.
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 estimated credit
losses. The amount of the loss is recognized in the consolidated statement of comprehensive (loss) income as part of
operating expenses. As outlined in NOTE 2(v) with respect to the COVID-19 pandemic, provincial governments continue to
regulate social (physical) distancing and this has resulted in the temporary closure of many businesses, which has had a
significant impact on unemployment rates across Canada and may adversely impact resident’s ability to pay rent, with the
long term-term impact being unknown. The Trust evaluated whether an allowance for estimated credit losses was needed
for the year ended December 31, 2020, and one was not applied. 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 the Trust. For the year ended December 31, 2020, bad debt
expense totaled $6.2 million (December 31, 2019 – $5.4 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.
115
BOARDWALK REIT MD&A AND FINANCIAL REPORT 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 Unitholders. Finally, financial assets, such as cash and trade and other receivables, will
be realized within the next twelve months and can be utilized to satisfy the Trust’s financial liabilities. Given the Trust’s
currently available liquid resources (from both financial assets and on-going operations) as compared to its contractual
obligations, management assesses the Trust’s liquidity risk to be low.
The following table details the Trust’s remaining contractual maturity for its non-derivative and derivative (i.e. vested deferred
units) financial liabilities listed by year of maturity date:
Year of
Maturity
2021
2022
2023
2024
2025
Subsequent
Unamortized
deferred
financing
costs
Unamortized
market debt
adjustments
Weighted
Average
Interest
Rate
Mortgage
Principal
Outstanding
Mortgage
Interest (1)
Lease
Liabilities
Principal
Outstanding
Construction
Loan Payable
Tenants’
Security
Deposits
Distribution
Payable (2)
Trades
and Other
Payables
Total
2.40% $ 384,245 $ 71,893 $
3,842 $
21,187 $ 10,797 $
4,255 $ 55,306 $ 551,525
2.72%
2.91%
2.59%
2.15%
2.72%
2.58%
425,275
350,931
314,898
561,108
967,629
60,952
49,438
38,314
30,370
52,475
3,004,086
303,442
(107,722)
426
-
-
3,881
2,734
2,112
1,860
69,443
83,872
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
490,108
403,103
355,324
593,338
1,089,547
21,187
10,797
4,255
55,306
3,482,945
-
-
-
-
-
-
-
-
(107,722)
426
$ 2,896,790 $ 303,442 $
83,872 $
21,187 $ 10,797 $
4,255 $ 55,306 $ 3,375,649
(1) Based on current in-place interest rates for the remaining term to maturity.
(2) Distribution payable includes distributions owed on the Boardwalk Trust Units and the LP Class B Units.
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.
116
BOARDWALK REIT MD&A AND FINANCIAL REPORT
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, 2020 of approximately $762.5 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, 2020 (December 31, 2019 – $199.7 million). The
revolving facility requires monthly interest payments, is for a five-year term maturing on July 27, 2025, 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, 2020, this ratio was 1.48 (December 31, 2019 – 1.45).
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, 2020, this ratio was 1.41 (December 31, 2019 – 1.42).
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, 2020, this ratio was 47.8% (December 31,
2019 – 44.8%).
As at December 31, 2020 and December 31, 2019, 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.
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.
117
BOARDWALK REIT MD&A AND FINANCIAL REPORT Entity
Nun’s Island Trust 1
Nun’s Island Trust 2
Type
Trust
Trust
Relationship
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
Helmcken Rd. Development B.C Ltd.
Corporation
100% owned by BGP
Carlisle Ave Development B.C. 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
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.
118
BOARDWALK REIT MD&A AND FINANCIAL REPORT The following outlines the individuals considered key personnel of the Trust:
(A) BOARD OF TRUSTEES
The Board of Trustees of Boardwalk REIT during the year ended December 31, 2020 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 Board of Trustees was as follows:
Deferred unit-based compensation redeemed for Trust Units
Year Ended
Dec. 31, 2020
Year Ended
Dec. 31, 2019
$
$
19
19
$
$
849
849
(B) KEY MANAGEMENT PERSONNEL
The individuals considered key management personnel of the Trust as at December 31, 2020 have changed since
December 31, 2019. Key management personnel of the Trust for the six months ended June 30, 2020 were as follows:
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
Key management personnel of the Trust subsequent to June 30, 2020 and for the six months ended December 31, 2020 and
up to the date of this report December 31, 2020 were:
James Ha, VP, Finance & Investor Relations
Sam Kolias, Chief Executive Officer
Van Kolias, Senior VP, Quality Control
Helen Mix, VP, Human Resources
Lisa Russell, Senior VP, Corporate Development
Lisa Smandych, Chief Financial Officer
119
BOARDWALK REIT MD&A AND FINANCIAL REPORT
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 redeemed for Trust Units
Year Ended
Dec. 31, 2020
Year Ended
Dec. 31, 2019
$
3,444
$
1,184
51
4
2,135
$
5,634
$
56
4
890
2,134
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 Class 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, 2020,
distributions on the LP Class B Units totaled $4.5 million (December 31, 2019 – $4.5 million). Distributions on the LP Class B
Units are made on terms equal to distributions made on Boardwalk Trust Units.
As at December 31, 2020, there was $373,000 owed to related parties (December 31, 2019 – $ 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, 2020, payments to this provider totaled
$0.2 million (December 31, 2020 – $0.5 million). As at December 31, 2020 and 2019, there was no balance owed to this
related party.
Note 35: Other Information
(A) SUPPLEMENTAL CASH FLOW INFORMATION
Year Ended
Dec. 31, 2020
Year Ended
Dec. 31, 2019
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
120
$
1,822
$
(57)
(6,804)
341
(1,545)
(6,243)
$
1,731
3,036
3,843
92
13,944
22,646
(773)
$
(14,483)
451
$
(405)
(46,571)
$
(46,462)
(3,875)
3,882
(3,869)
3,875
$
(46,564)
$
(46,456)
$
$
$
$
BOARDWALK REIT MD&A AND FINANCIAL REPORT
(B)
Included in administration costs was $2.9 million relating to Registered Retirement Savings Plan (“RRSP”) matching
for the year ended December 31, 2020 (December 31, 2019 – $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. Expiring
leases are either renewed or new tenants are found.
Net debt, interest income and expenses, and income taxes are managed on a group basis. Transfer prices between
locations are set on an arm’s-length basis in a manner similar to transactions with third parties and are eliminated upon
inter-company consolidation.
Corporate represents corporate functions, technology assets, activities incidental to operations, and certain comparative data
for divested assets.
Details of segmented information are as follows:
As at
Assets
Liabilities
As at
Assets
Liabilities
December 31, 2020
Alberta Saskatchewan
Ontario
Quebec
Corporate
Total
$ 3,810,497
$ 560,228
$ 558,374
$ 995,460
$ 183,185
$ 6,107,744
1,942,419
299,506
207,410
580,683
201,277
3,231,295
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
121
BOARDWALK REIT MD&A AND FINANCIAL REPORT
Rental revenue (a)
Rental expenses
Operating expenses
Utilities
Property taxes
Net operating income (loss)
Financing costs (b)
Administration
Deferred unit-based compensation
Depreciation (c)
Profit (loss) before the undernoted
Loss on sale of assets
Adjustment to right-of-use
asset related to lease receivable
Fair value (losses) gains
Other income
Year Ended December 31, 2020
Alberta Saskatchewan
Ontario
Quebec
Corporate
Total
$ 300,031
$
50,956 $ 33,200 $ 80,988 $
397 $ 465,572
62,101
30,825
34,415
172,690
55,595
2,952
-
861
113,282
(604)
-
9,581
7,722
4,830
28,823
9,222
671
-
187
5,451
4,031
3,491
20,227
4,889
15
-
48
13,443
6,009
8,252
53,284
17,602
388
-
148
5,762
351
164
96,338
48,938
51,152
(5,880)
269,144
4,314
32,043
3,255
6,951
91,622
36,069
3,255
8,195
18,743
15,275
35,146
(52,443)
130,003
(532)
-
-
-
-
-
-
(1,136)
(159)
(159)
(349,742)
(39,940)
(6,229)
12,941
56,836
(326,134)
-
-
-
-
75
75
(Loss) profit before income tax
(237,064)
(21,729)
9,046
48,087
4,309
(197,351)
Income tax recovery (d)
(Loss) profit for the year
Other comprehensive income
-
-
-
-
72
72
$ (237,064)
$
(21,729) $
9,046 $ 48,087 $
4,381 $ (197,279)
-
-
-
-
-
-
Total comprehensive (loss) income
$ (237,064)
Additions to non-current assets (e)
$ 73,996
$
$
(21,729) $
9,046 $ 48,087 $
4,381 $ (197,279)
13,682 $ 72,560 $ 12,382 $ 39,231 $ 211,851
Rental revenue (a)
Rental expenses
Operating expenses
Utilities
Property taxes
Net operating income (loss)
Financing costs (b)
Administration
Deferred unit-based compensation
Depreciation (c)
Profit (loss) before the undernoted
Loss on sale of assets
Fair value (losses) gains
(Loss) profit before income tax
Income tax recovery (d)
(Loss) profit for the year
Other comprehensive income
Year Ended December 31, 2019
Alberta
Saskatchewan
Ontario
Quebec
Corporate
Total
$ 295,218
$
51,198 $
29,815 $
78,778 $
304 $ 455,313
65,571
28,952
30,739
169,956
56,652
4,771
-
890
107,643
-
(172,211)
(64,568)
-
9,651
7,844
4,921
28,782
9,220
1,141
-
196
18,225
(714)
(11,546)
5,965
-
5,151
3,708
3,302
17,654
4,291
33
-
40
14,739
7,007
8,399
48,633
14,676
203
-
167
5,996
101,108
372
168
(6,232)
3,359
32,497
2,268
7,516
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
$
(64,568)
$
5,965 $ 107,613 $
74,161 $
(88,390) $
34,781
-
-
-
-
-
-
Total comprehensive (loss) income
$
(64,568)
Additions to non-current assets (e)
$ 110,415
$
$
5,965 $ 107,613 $
74,161 $
(88,390) $
34,781
19,242 $
9,729 $
13,752 $
37,070 $ 190,208
122
BOARDWALK REIT MD&A AND FINANCIAL REPORT
(A) RENTAL REVENUE
Rental revenue was as follows:
Year Ended December 31, 2020
Lease revenue
Parking revenue
Recoveries (cable, retirement) and revenue
from telephone and cable providers
Revenue from coin laundry machines
Other (fees)
Total
Alberta Saskatchewan
Ontario
Quebec
Corporate
Total
$ 283,647
$
47,526 $ 32,542 $ 76,845 $
271 $ 440,831
4,425
3,577
2,777
5,605
517
2,200
278
435
136
95
515
(88)
2,079
1,099
619
346
-
126
-
-
7,157
7,097
4,189
6,298
$ 300,031
$
50,956 $ 33,200 $ 80,988 $
397 $ 465,572
Year Ended December 31, 2019
Alberta
Saskatchewan
Ontario
Quebec
Corporate
Total
$ 280,580
$
47,544 $
29,249 $
75,000 $
173 $ 432,546
4,587
3,854
3,016
3,181
490
2,330
327
507
90
1,995
1
7,163
69
511
(104)
857
735
191
131
-
(1)
7,241
4,589
3,774
$ 295,218
$
51,198 $
29,815 $
78,778 $
304 $ 455,313
Lease revenue
Parking revenue
Recoveries (cable, retirement) and revenue
from telephone and cable providers
Revenue from coin laundry machines
Other (fees)
Total
(B) FINANCING COSTS
Financing costs were as follows:
Alberta Saskatchewan
Ontario
Quebec
Corporate
Total
Year Ended December 31, 2020
Interest on secured debt (mortgages payable)
$ 50,972
$
8,475 $
4,435 $ 14,080 $
- $
77,962
Interest capitalized to properties
under development
LP Class B Unit distribution
Other interest charges
Interest on lease obligations
Interest income
(149)
-
311
435
-
Amortization of deferred financing costs
4,026
-
-
(15)
-
-
762
-
-
53
-
-
401
-
-
8
2,505
-
1,009
(1,251)
(1,400)
4,479
1,582
266
(763)
1
4,479
1,939
3,206
(763)
6,199
Total
$ 55,595
$
9,222 $
4,889 $
17,602 $
4,314 $
91,622
Alberta
Saskatchewan
Ontario
Quebec
Corporate
Total
Year Ended December 31, 2019
Interest on secured debt (mortgages payable)
$
51,683
$
8,532 $
3,916 $
11,027 $
1 $
75,159
Interest capitalized to properties
under development
LP Class B Unit distribution
Other interest charges
Interest on lease obligations
Interest income
-
-
60
909
(7)
-
-
(3)
-
(1)
-
-
43
-
-
Amortization of deferred financing costs
4,007
692
332
-
-
15
2,545
-
1,089
(1,433)
(1,433)
4,479
1,363
283
(1,334)
-
4,479
1,478
3,737
(1,342)
6,120
Total
$
56,652
$
9,220 $
4,291 $
14,676 $
3,359 $
88,198
123
BOARDWALK REIT MD&A AND FINANCIAL REPORT
(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: Subsequent Events
On February 1, 2021, the Trust closed on the purchase of a third parcel of adjacent land in Victoria, British Columbia. The
property, which is planned for the development of new rental units, was purchased using cash on hand for $1.9 million.
Note 38: Approval of Consolidated Financial Statements
The consolidated financial statements were approved by the Board of Trustees and authorized on February 24, 2021.
124
BOARDWALK REIT MD&A AND FINANCIAL REPORT FIVE YEAR SUMMARY
($000’s except per Unit and per square foot)
2016 (IFRS)
2017 (IFRS)
2018 (IFRS)
2019 (IFRS)
2020 (IFRS)
Assets
Investment properties
Other assets
Total assets
Mortgages payable
Other liabilities
Deferred income taxes
Unitholders' equity
$ 5,612,568
$ 5,688,125
$ 5,943,969
$ 6,147,482
$ 5,948,955
156,045
176,950
165,122
128,902
158,789
$ 5,768,613
$ 5,865,075
$ 6,109,091
$ 6,276,384
$ 6,107,744
$ 2,435,666
$ 2,593,980
$ 2,719,195
$ 2,741,648
$ 2,896,790
311,624
293,433
263,143
416,681
334,503
$ 2,747,290
$ 2,887,413
$ 2,982,338
$ 3,158,329
$ 3,231,293
4
55
68
-
2
3,021,319
2,977,607
3,126,685
3,118,055
2,876,449
Total liabilities and unitholders’ equity
$ 5,768,613
$ 5,865,075
$ 6,109,091
$ 6,276,384
$ 6,107,744
Trust unit outstanding (000) (including LP Class B Units)
50,739
50,813
50,867
50,936
51,024
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
$
48.65
$
43.09
$
37.81
$
45.93
$
33.74
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
1,721.5
33,396
178
87
28,924
28,539
28,793
28,674
28,879
194
84
856
199
91
860
206
94
862
214
96
862
206
100
865
L/T debt weighted average interest rate
2.78%
2.61%
2.65%
2.74%
2.58%
125
BOARDWALK REIT MD&A AND FINANCIAL REPORT
FIVE YEAR SUMMARY
($000’s except per Unit)
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
Adjustment to right-of-use asset related to
lease receivable
Fair value (losses) gains
Other income
(Loss) profit before income taxes
Income tax (expense) recovery
(Loss) profit for the year
Other comprehensive income
Total comprehensive (loss) income
(Loss) earnings per unit – diluted
2016 (IFRS)
2017 (IFRS)
2018 (IFRS)
2019 (IFRS)
2020 (IFRS)
$ 438,846
$ 422,926
$ 434,616
$ 455,313
$ 465,572
97,620
44,711
43,416
113,986
47,967
44,890
253,099
216,083
58%
84,634
33,947
-
5,219
129,299
-
-
-
51%
85,763
33,402
-
5,586
91,332
3,162
(1,678)
-
113,615
47,628
45,966
227,407
52%
80,586
37,093
2,095
6,754
101,108
47,883
47,529
96,338
48,938
51,152
258,793
269,144
57%
88,198
38,645
2,268
8,809
58%
91,622
36,069
3,255
8,195
100,879
120,873
130,003
-
(27)
-
-
(714)
-
(1,136)
-
(159)
(186,681)
(35,418)
92,371
(86,132)
(326,134)
-
(57,382)
(58)
(57,440)
-
-
57,398
(140)
57,258
-
-
-
75
193,223
34,027
(197,351)
(23)
754
72
193,200
34,781
(197,279)
-
-
-
$
$
(57,440)
(1.24)
$
$
57,258
$ 193,200
0.84
3.43
$
$
34,781
$ (197,279)
0.75
$
(4.85)
Funds from operations
$ 144,468
$ 106,987
Funds from operations per unit – fully diluted
$
2.84
$
2.11
112,112
$ 130,967
$ 139,736
2.21
$
2.57
$
Interest Coverage Ratio
3.14
2.60
2.68
2.76
2.74
2.79
$
$
$
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.
Years prior to December 31, 2020 have been restated to present rental revenues consolidated with ancillary rental income.
126
BOARDWALK REIT MD&A AND FINANCIAL REPORT
2020 QUARTERLY RESULTS
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
Adjustment to right-of-use asset related to
lease receivable
Fair value gains (losses)
Other income
Profit (loss) before income tax
Income tax recovery (expense)
Profit (loss) for the period
Other comprehensive income
Total comprehensive income (loss)
Loss per unit – diluted
Funds from operations
Funds from operations per unit – fully diluted
Q1
Q2
Q3
Q4
Dec. 31, 2020
$ 116,004
$ 116,818
$ 116,207
$ 116,543
$ 465,572
25,513
13,945
11,891
64,655
22,460
9,282
1,687
1,875
29,351
-
(159)
28,528
-
57,720
149
57,869
22,964
11,359
11,971
70,524
23,129
10,710
787
1,984
33,914
(604)
-
23,541
10,814
13,660
68,192
23,069
7,425
274
2,077
35,347
-
-
24,320
12,820
13,630
65,773
22,964
8,652
507
2,259
31,391
(532)
96,338
48,938
51,152
269,144
91,622
36,069
3,255
8,195
130,003
(1,136)
-
(159)
(68,661)
(66,890)
(219,111)
(326,134)
-
-
75
75
(35,351)
(31,543)
(188,177)
(197,351)
82
99
(258)
72
(35,269)
(31,444)
(188,435)
(197,279)
-
57,869
(0.86)
31,482
0.62
-
(35,269)
(0.76)
36,201
0.71
$
$
$
$
-
(31,444)
(0.79)
37,785
0.74
$
$
$
$
$
$
$
$
-
-
$
$
$
$
(188,435)
$ (197,279)
(4.05)
$
(4.85)
34,268
$ 139,736
0.67
$
2.74
127
BOARDWALK REIT MD&A AND FINANCIAL REPORT
2019 QUARTERLY RESULTS
Q1
Q2
Q3
Q4
Dec. 31, 2019
$
111,892
$ 113,383
$ 114,660
$ 115,378
$ 455,313
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
101,108
47,883
47,529
258,793
88,198
38,645
2,268
8,809
29,192
120,873
-
(137,955)
(108,763)
127
(714)
(86,132)
34,027
754
34,781
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
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
128
BOARDWALK REIT MD&A AND FINANCIAL 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.
800, 324 – 8th Avenue SW
Calgary AB T2P 2Z2
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 General Meeting
The Annual General Meeting of the Unitholders of
Boardwalk REIT will be held on May 13, 2021 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, 2020 to December 31, 2020
High: $51.66
Low: $16.53
Year-end Closing Price: $33.74
MONTHLY DISTRIBUTIONS
Month Per Unit Annualized Record Date
Jan-20
$0.0834
$1.00
Feb-20 $0.0834
$1.00
Mar-20 $0.0834
$1.00
Apr-20
$0.0834
$1.00
31-Jan-20
28-Feb-20
31-Mar-20
30-Apr-20
May-20 $0.0834
$1.00
29-May-20
Jun-20
$0.0834
$1.00
Jul-20
$0.0834
$1.00
Aug-20 $0.0834
$1.00
Sep-20 $0.0834
$1.00
Oct-20
$0.0834
$1.00
Nov-20 $0.0834
$1.00
Dec-20 $0.0834
$1.00
Jan-21
$0.0834
$1.00
Feb-21 $0.0834
$1.00
Mar-21 $0.0834
$1.00
Apr-21
$0.0834
$1.00
30-Jun-20
31-Jul-20
31-Aug-20
30-Sep-20
30-Oct-20
30-Nov-20
31-Dec-20
29-Jan-21
26-Feb-21
31-Mar-21
30-Apr-21
Distribution
Date
17-Feb-20
16-Mar-20
15-Apr-20
15-May-20
15-Jun-20
15-Jul-20
17-Aug-20
15-Sep-20
15-Oct-20
16-Nov-20
15-Dec-20
15-Jan-21
15-Feb-21
15-Mar-21
15-Apr-21
17-May-21
129
BOARDWALK REIT MD&A AND FINANCIAL REPORT